Document:

Exhibit 4.5

                                                                  EXECUTION COPY

                                U.S. $350,000,000

                                CREDIT AGREEMENT

                            Dated as of June 22, 2000

                                      Among

                                 SCHOLASTIC INC.

                                   AS BORROWER

                                       and

                             SCHOLASTIC CORPORATION

                                  AS GUARANTOR

                                       and

                        THE INITIAL LENDERS NAMED HEREIN

                               AS INITIAL LENDERS

                                       and

            SALOMON SMITH BARNEY INC. and CREDIT SUISSE FIRST BOSTON
                             AS JOINT LEAD ARRANGERS

                                       and

                           CREDIT SUISSE FIRST BOSTON
                              AS SYNDICATION AGENT

                                       and

           THE CHASE MANHATTAN BANK, DEUTSCHE BANK, AG NEW YORK BRANCH
                                and SUNTRUST BANK

                                  AS CO-AGENTS

                                       and

                                 CITIBANK, N.A.

                             AS ADMINISTRATIVE AGENT

                                TABLE OF CONTENTS

ARTICLE I....................................................................1

      SECTION 1.01.  CERTAIN DEFINED TERMS...................................1

      SECTION 1.02.  COMPUTATION OF TIME PERIODS............................10

      SECTION 1.03.  ACCOUNTING TERMS.......................................10

ARTICLE II..................................................................10

      SECTION 2.01.  THE REVOLVING CREDIT ADVANCES..........................10

      SECTION 2.02.  MAKING THE REVOLVING CREDIT ADVANCES...................10

      SECTION 2.03.  THE COMPETITIVE BID ADVANCES...........................11

      SECTION 2.04.  FEES...................................................14

      SECTION 2.05. TERMINATION OR REDUCTION OF THE COMMITMENTS.............14

      SECTION 2.06.  REPAYMENT OF REVOLVING CREDIT ADVANCES.................15

      SECTION 2.07.  INTEREST ON REVOLVING CREDIT ADVANCES..................15

      SECTION 2.08.  INTEREST RATE DETERMINATION............................15

      SECTION 2.09.  OPTIONAL CONVERSION OF REVOLVING CREDIT ADVANCES.......16

      SECTION 2.10. PREPAYMENTS OF REVOLVING CREDIT ADVANCES................16

      SECTION 2.11.  INCREASED COSTS........................................17

      SECTION 2.12.  ILLEGALITY.............................................17

      SECTION 2.13.  PAYMENTS AND COMPUTATIONS..............................18

      SECTION 2.14.  TAXES..................................................18

      SECTION 2.15.  SHARING OF PAYMENTS, ETC...............................20

      SECTION 2.17.  USE OF PROCEEDS........................................20

ARTICLE III.................................................................20

      SECTION 3.01.  CONDITIONS PRECEDENT TO EFFECTIVENESS OF SECTIONS
            2.01 AND 2.03...................................................20

      SECTION 3.02.  CONDITIONS PRECEDENT TO EACH REVOLVING CREDIT
            BORROWING.......................................................21

      SECTION 3.03.  CONDITIONS PRECEDENT TO EACH COMPETITIVE BID
            BORROWING.......................................................22

      SECTION 3.04.  DETERMINATIONS UNDER SECTION 3.01......................22

ARTICLE IV..................................................................22

      SECTION 4.01.  REPRESENTATIONS AND WARRANTIES OF THE BORROWER.........22

ARTICLE V...................................................................24

      SECTION 5.01.  AFFIRMATIVE COVENANTS..................................24

      SECTION 5.02.  NEGATIVE COVENANTS.....................................26

      SECTION 5.03.  FINANCIAL COVENANTS....................................28

ARTICLE VI..................................................................29

      SECTION 6.01.  EVENTS OF DEFAULT......................................29

ARTICLE VII.................................................................31

      7.01.  GUARANTY.......................................................31

      7.02.  GUARANTY ABSOLUTE..............................................31

      7.03.  WAIVERS AND ACKNOWLEDGMENTS....................................32

      SECTION 2.20.  SUBROGATION AND CONTRIBUTION...........................33

      7.05.  CONTINUING GUARANTY; ASSIGNMENTS...............................33

ARTICLE VIII................................................................33

      SECTION 8.01.  AUTHORIZATION AND ACTION...............................33

      SECTION 8.02.  AGENT'S RELIANCE, ETC..................................34

      SECTION 8.03.  CITIBANK AND AFFILIATES................................34

      SECTION 8.04.  LENDER CREDIT DECISION.................................34

      SECTION 8.05.  INDEMNIFICATION........................................34

      SECTION 8.06.  SUCCESSOR AGENT........................................35

      SECTION 8.07.  OTHER AGENTS...........................................35

ARTICLE IX..................................................................35

      SECTION 9.01.  AMENDMENTS, ETC........................................35

      SECTION 9.02.  NOTICES, ETC...........................................35

      SECTION 9.03.  NO WAIVER; REMEDIES....................................36

      SECTION 9.04.  COSTS AND EXPENSES.....................................36

      SECTION 9.05.  RIGHT OF SET-OFF.......................................37

      SECTION 9.06.  BINDING EFFECT.........................................37

      SECTION 9.07.  ASSIGNMENTS AND PARTICIPATIONS.........................37

      SECTION 9.08.  CONFIDENTIALITY........................................39

      SECTION 9.10.  GOVERNING LAW..........................................39

      SECTION 9.11.  EXECUTION IN COUNTERPARTS..............................39

      SECTION 9.12.  WAIVER OF JURY TRIAL...................................40

SCHEDULES

Schedule I - List of Applicable Lending Offices

Schedule 4.01(i) - Subsidiaries

Schedule 5.02(a) - Existing Liens

EXHIBITS

Exhibit A-1  -    Form of Committed Note

Exhibit A-2  -    Form of Competitive Bid Note

Exhibit B-1  -    Form of Notice of Committed Borrowing

Exhibit B-2  -    Form of Notice of Competitive Bid Borrowing

Exhibit C    -    Form of Assignment and Acceptance

Exhibit D    -    Form of Opinion of Counsel for the Borrower and the Guarantor

Exhibit E   -     Form of Financial Covenants Compliance Certificate

                                CREDIT AGREEMENT

                          Dated as of June 22, 2000

               This CREDIT AGREEMENT is by and among SCHOLASTIC INC., a New York
corporation (the "OPERATING COMPANY" or the "BORROWER"), SCHOLASTIC CORPORATION,
a Delaware corporation (the "HOLDING COMPANY" or the "Guarantor"), the banks,
financial institutions and other institutional lenders (the "INITIAL LENDERS")
listed on the signature pages hereof, SALOMON SMITH BARNEY INC. and CREDIT
SUISSE FIRST BOSTON ("CSFB"), as joint lead arrangers, CSFB, as syndication
agent, and CITIBANK, N.A. ("CITIBANK"), as administrative agent (the "AGENT")
for the Lenders (as hereinafter defined)

                                  ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

            SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
      following terms shall have the following meanings (such meanings to be
      equally applicable to both the singular and plural forms of the terms
      defined):

            "ADVANCE" means a Committed Advance or a Competitive Bid Advance.

            "AFFILIATE" means, as to any Person, any other Person that, directly
      or indirectly, controls, is controlled by or is under common control with
      such Person or is a director or officer of such Person. For purposes of
      this definition, the term "control" (including the terms "controlling",
      "controlled by" and "under common control with") of a Person means the
      possession, direct or indirect, of the power to vote 5% or more of the
      Voting Stock of such Person or to direct or cause the direction of the
      management and policies of such Person, whether through the ownership of
      Voting Stock, by contract or otherwise.

            "AGENT'S  ACCOUNT"  means the account of the Agent  maintained  by
      the Agent at Citibank at its office at 399 Park  Avenue,  New York,  New
      York 10043, Account No. 36852248, Attention:  Bank Loan Syndications.

            "APPLICABLE LENDING OFFICE" means, with respect to each Lender, such
      Lender's Domestic Lending Office in the case of a Base Rate Advance and
      such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate
      Advance and, in the case of a Competitive Bid Advance, the office of such
      Lender notified by such Lender to the Agent as its Applicable Lending
      Office with respect to such Competitive Bid Advance.

            "APPLICABLE MARGIN" means (a) for Base Rate Advances, 0% per annum
      and (b) for Eurodollar Rate Advances, a percentage per annum determined by
      reference to the Public Debt Rating in effect on such date as set forth
      below:

         -------------------------------------------------------------
                  Public Debt Rating           Applicable Margin for
                     S&P/Moody's                  Eurodollar Rate
                                                     Advances
         -------------------------------------------------------------
         LEVEL 1                                      0.390%
         A-/A3 or above
         -------------------------------------------------------------
         LEVEL 2                                      0.475%
         -------
         Lower than Level 1 but at least
         BBB+/Baa1
         -------------------------------------------------------------
         LEVEL 3                                      0.575%
         -------
         Lower than Level 2 but at least
         BBB/Baa2
         -------------------------------------------------------------
         LEVEL 4                                      0.825%
         -------
         Lower than Level 3 but at least
         BBB-/Baa3
         -------------------------------------------------------------
         LEVEL 5                                      1.100%
         -------
         Lower than Level 4
         -------------------------------------------------------------

            "APPLICABLE PERCENTAGE" means, as of any date a percentage per annum
      determined by reference to the Public Debt Rating in effect on such date
      as set forth below:

         -------------------------------------------------------------
                  Public Debt Rating                Applicable
                     S&P/Moody's                    Percentage
         -------------------------------------------------------------
         LEVEL 1                                      0.085%
         A-/A3 or above
         -------------------------------------------------------------
         LEVEL 2                                      0.100%
         -------
         Lower than Level 1 but at least
         BBB+/Baa1
         -------------------------------------------------------------
         LEVEL 3                                      0.125%
         -------
         Lower than Level 2 but at least
         BBB/Baa2
         -------------------------------------------------------------
         LEVEL 4                                      0.175%
         -------
         Lower than Level 3 but at least
         BBB-/Baa3
         -------------------------------------------------------------
         LEVEL 5                                      0.250%
         -------
         Lower than Level 4
         -------------------------------------------------------------

            "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance
      entered into by a Lender and an Eligible Assignee, and accepted by the
      Agent, in substantially the form of Exhibit C hereto.

            "BASE RATE" means a fluctuating interest rate per annum in effect
      from time to time, which rate per annum shall at all times be equal to the
      highest of:

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

                  (b) the sum (adjusted to the nearest 1/4 of 1% or, if there is
            no nearest 1/4 of 1%, to the next higher 1/4 of 1%) of (i) 1/2 of 1%
            per annum, PLus (ii) the rate obtained by dividing (A) the latest
            three-week moving average of secondary market morning offering rates
            in the United States for three-month certificates of deposit of
            major United States money market banks, such three-week moving
            average (adjusted to the basis of a year of 360 days) being
            determined weekly on each Monday (or, if such day is not a Business
            Day, on the next succeeding Business Day) for the three-week period
            ending on the previous Friday by Citibank on the basis of such rates
            reported by certificate of deposit dealers to and published by the
            Federal Reserve Bank of New York or, if such publication shall be
            suspended or terminated, on the basis of quotations for such rates
            received by Citibank from three New York certificate of deposit
            dealers of recognized standing selected by Citibank, by (B) a
            percentage equal to 100% minus the average of the daily percentages
            specified during such three-week period by the Board of Governors of
            the Federal Reserve System (or any successor) for determining the
            maximum reserve requirement (including, but not limited to, any
            emergency, supplemental or other marginal reserve requirement) for
            Citibank with respect to liabilities consisting of or including
            (among other liabilities) three-month U.S. dollar non-personal time
            deposits in the United States, PLUS (iii) the average during such
            three-week period of the annual assessment rates estimated by
            Citibank for determining the then current annual assessment payable
            by Citibank to the Federal Deposit Insurance Corporation (or any
            successor) for insuring U.S. dollar deposits of Citibank in the
            United States; and

                  (c) 1/2 of one percent per annum above the Federal Funds Rate.

            "BASE RATE ADVANCE" means a Committed Advance that bears interest as
      provided in Section 2.07(a)(i).

                                       2

            "BORROWING" means a Committed Borrowing or a Competitive Bid
      Borrowing.

            "BUSINESS DAY" means a day of the year on which banks are not
      required or authorized by law to close in New York City and, if the
      applicable Business Day relates to any Eurodollar Rate Advances or LIBO
      Rate Advances, on which dealings are carried on in the London interbank
      market.

            "COMMITTED ADVANCE" means an advance by a Lender to the Borrower as
      part of a Committed Borrowing and refers to a Base Rate Advance or a
      Eurodollar Rate Advance (each of which shall be a "TYPE" of Committed
      Advance).

            "COMMITTED BORROWING" means a borrowing consisting of simultaneous
      Committed Advances of the same Type made by each of the Lenders pursuant
      to Section 2.01.

            "COMMITTED FACILITY" means, at any time, the aggregate amount of the
      Lenders' Commitments at such time.

            "COMMITTED NOTE" means a promissory note of the Borrower payable to
      the order of any Lender, delivered pursuant to a request made under
      Section 2.19 in substantially the form of Exhibit A-1 hereto, evidencing
      the aggregate indebtedness of the Borrower to such Lender resulting from
      the Committed Advances made by such Lender.

            "COMMITMENT" means, with respect to any Lender at any time (a) the
      amount set forth opposite such Lender's name on Schedule I hereto under
      the caption "Commitment" or (b) if such Lender has entered into any
      Assignment and Acceptance, the amount set forth for such Lender in the
      Register maintained by the Agent pursuant to Section 9.07(f), as such
      amount may be reduced pursuant to Section 2.05.

            "COMPETITIVE BID ADVANCE" means an advance by a Lender to the
      Borrower as part of a Competitive Bid Borrowing resulting from the
      competitive bidding procedure described in Section 2.03 and refers to a
      Fixed Rate Advance or a LIBO Rate Advance.

            "COMPETITIVE BID BORROWING" means a borrowing consisting of
      simultaneous Competitive Bid Advances from each of the Lenders whose offer
      to make one or more Competitive Bid Advances as part of such borrowing has
      been accepted under the competitive bidding procedure described in Section
      2.03.

            "COMPETITIVE BID NOTE" means a promissory note of the Borrower
      payable to the order of any Lender, in substantially the form of Exhibit
      A-2 hereto, evidencing the indebtedness of the Borrower to such Lender
      resulting from a Competitive Bid Advance made by such Lender.

            "CONFIDENTIAL INFORMATION" means information that the Borrower or
      the Guarantor furnishes to the Agent or any Lender in a writing or orally
      designated as confidential, but does not include any such information that
      is or becomes generally available to the public or that is or becomes
      available to the Agent or such Lender from a source other than the
      Borrower or the Guarantor not known to such Lender to be bound by a
      confidentiality obligation.

            "CONSOLIDATED" refers to the consolidation of accounts in accordance
      with GAAP.

            "CONSOLIDATED DEBT RATIO" shall mean, at any time, the ratio of (a)
      Total Consolidated Debt to (b) the sum of: (i) consolidated short-term
      debt for borrowed money of the Guarantor, (ii) consolidated long-term debt
      of the Guarantor, (iii) the aggregate value of stockholders' equity (as
      set forth in the most current consolidated balance sheet of the
      Guarantor), and (iv) the aggregate value of all preferred stock (as set
      forth in the most current consolidated balance sheet of the Guarantor).

                                       3

            "CONSOLIDATED INTEREST COVERAGE RATIO" shall mean, for any period of
      the most recent four consecutive fiscal quarters of the Guarantor and its
      Subsidiaries ending on or before any date of determination, the ratio of
      (a) the sum of (i) net income (or net loss), (ii) any extraordinary
      non-cash losses, (iii) income tax expense, (iv) depreciation expense, (v)
      amortization expense (but excluding any amortization of prepublication
      costs and expenses) and (vi) gross interest expense, LESS (vii) any
      extraordinary non-cash gains, to (b) gross interest expense, all as
      recorded for such period.

            "CONVERT", "CONVERSION" and "CONVERTED" each refers to a conversion
      of Committed Advances of one Type into Committed Advances of the other
      Type pursuant to Section 2.08 or 2.09.

            "DEBT" of any Person means, without duplication, (a) all
      indebtedness of such Person for borrowed money, (b) all obligations of
      such Person for the deferred purchase price of property or services (other
      than trade payables incurred in the ordinary course of such Person's
      business), (c) all obligations of such Person evidenced by notes, bonds,
      debentures or other similar instruments, (d) all obligations of such
      Person as lessee under leases that have been or should be, in accordance
      with GAAP, recorded as capital leases, (e) all obligations, contingent or
      otherwise, of such Person in respect of acceptances, letters of credit or
      similar extensions of credit (other than obligations in respect of letters
      of credit issued to provide for the payment of goods or services, to
      backstop worker's compensation obligations or as rental security deposits,
      in each case incurred in the ordinary course of business), (f) all Debt of
      others referred to in clauses (a) through (e) above or clause (g) below
      guaranteed directly or indirectly in any manner by such Person, or in
      effect guaranteed directly or indirectly by such Person through an
      agreement (1) to pay or purchase such Debt or to advance or supply funds
      for the payment or purchase of such Debt, (2) to purchase, sell or lease
      (as lessee or lessor) property, or to purchase or sell services, primarily
      for the purpose of enabling the debtor to make payment of such Debt or to
      assure the holder of such Debt against loss, (3) to supply funds to or in
      any other manner invest in the debtor (including any agreement to pay for
      property or services irrespective of whether such property is received or
      such services are rendered) or (4) otherwise to assure a creditor against
      loss, and (h) all Debt referred to in clauses (a) through (f) above
      secured by (or for which the holder of such Debt has an existing right,
      contingent or otherwise, to be secured by) any Lien on property
      (including, without limitation, accounts and contract rights) owned by
      such Person, even though such Person has not assumed or become liable for
      the payment of such Debt.

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

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

            "EFFECTIVE DATE" has the meaning specified in Section 3.01.

                                       4

            "ELIGIBLE ASSIGNEE" means (i) a Lender; (ii) a United States
      Affiliate of a Lender; (iii) a commercial bank organized under the laws of
      the United States, or any State thereof, and having total assets in excess
      of $1,000,000,000; (iv) a savings and loan association or savings bank
      organized under the laws of the United States, or any State thereof, and
      having total assets in excess of $1,000,000,000; (v) a commercial bank
      organized under the laws of any other country that is a member of the
      Organization for Economic Cooperation and Development or has concluded
      special lending arrangements with the International Monetary Fund
      associated with its General Arrangements to Borrow or of the Cayman
      Islands, or a political subdivision of any such country, and having total
      assets in excess of $1,000,000,000, so long as such bank is acting through
      a branch or agency located in the United States, in the country in which
      it is organized or another country that is described in this clause (v);
      (vi) the central bank of any country that is a member of the Organization
      for Economic Cooperation and Development; and (vii) a finance company,
      insurance company or other financial institution or fund (whether a
      corporation, partnership, trust or other entity) that is engaged in
      making, purchasing or otherwise investing in commercial loans in the
      ordinary course of its business and having total assets in excess of
      $500,000,000; PROVIDED, HOWEVER, that neither the Borrower nor an
      Affiliate of the Borrower shall qualify as an Eligible Assignee.

            "ENVIRONMENTAL CLAIM" means (a) any unfulfilled responsibility or
      liability or unlawful act or omission under any Environmental Law; (b) any
      tortious act or omission or breach of contract pertaining to any
      Environmental Substance; or (c) any other violation or claim under any
      Environmental Law or in respect of any Environmental Substance.

            "ENVIRONMENTAL LAW" and "ENVIRONMENTAL LAWS" respectively mean any
      one or more of the applicable laws pertaining to: (a) any emission,
      discharge, release, runoff, disposal or presence in the environment of any
      Environmental Substance; (b) any cleanup, containment, manufacturing,
      treatment, handling, transportation, storage or sale of or other activity
      pertaining to any Environmental Substance; or (c) any other peril to
      public or occupational health or safety or to the environment that may be
      posed by an Environmental Substance.

            "ENVIRONMENTAL SUBSTANCE" means any toxic substance, hazardous
      material, contaminant, waste, pollutant or other similar product or
      substance that may pose a threat to public or occupational health or
      safety or to the environment.

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

            "ERISA AFFILIATE" means any Person that for purposes of Title IV of
      ERISA is a member of the Borrower's controlled group, or under common
      control with the Borrower, within the meaning of Section 414 of the
      Internal Revenue Code.

            "ERISA EVENT" means (a) (i) the occurrence of a reportable event,
      within the meaning of Section 4043 of ERISA, with respect to any Plan
      unless the 30-day notice requirement with respect to such event has been
      waived by the PBGC, or (ii) the requirements of subsection (1) of Section
      4043(b) of ERISA (without regard to subsection (2) of such Section) are
      met with a contributing sponsor, as defined in Section 4001(a)(13) of
      ERISA, of a Plan, and an event described in paragraph (9), (10), (11),
      (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur
      with respect to such Plan within the following 30 days; (b) the
      application for a minimum funding waiver with respect to a Plan; (c) the
      provision by the administrator of any Plan of a notice of intent to
      terminate such Plan pursuant to Section 4041(a)(2) of ERISA (including any
      such notice with respect to a plan amendment referred to in Section
      4041(e) of ERISA); (d) the cessation of operations at a facility of the
      Borrower or any ERISA Affiliate in the circumstances described in Section
      4062(e) of ERISA; (e) the withdrawal by either the Borrower or any ERISA
      Affiliate from a Multiple Employer Plan during a plan year for which it
      was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f)
      the conditions for the imposition of a lien under Section 302(f) of ERISA
      shall have been met with respect to any Plan; (g) the adoption of an
      amendment to a Plan requiring the provision of security to such Plan
      pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of
      proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the
      occurrence of any event or condition described in Section 4042 of ERISA
      that constitutes grounds for the termination of, or the appointment of a
      trustee to administer, a Plan.

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

            "EURODOLLAR LENDING OFFICE" means, with respect to any Lender, the
      office of such Lender specified as its "Eurodollar Lending Office"
      opposite its name on Schedule I hereto or in or the Assignment and
      Acceptance pursuant to which it became a Lender (or, if no such office is
      specified, its Domestic Lending Office), or such other office of such
      Lender as such Lender may from time to time specify to the Borrower and
      the Agent.

                                       5

            "EURODOLLAR RATE" means, for any Interest Period for each Eurodollar
      Rate Advance comprising part of the same Committed Borrowing, an interest
      rate per annum equal to the rate per annum obtained by dividing (a) the
      rate per annum (rounded upward to the nearest whole multiple of 1/100 of
      1% per annum) appearing on Telerate Markets Page 3750 (or any successor
      page) as the London interbank offered rate for deposits in U.S. dollars at
      approximately 11:00 A.M. (London time) two Business Days prior to the
      first day of such Interest Period for a term comparable to such Interest
      Period or, if for any reason such rate is not available, the rate per
      annum at which deposits in U.S. dollars are offered by the principal
      office of Citibank in London, England to prime banks in the London
      interbank market at 11:00 A.M. (London time) two Business Days before the
      first day of such Interest Period in an amount substantially equal to
      Citibank's Eurodollar Rate Advance comprising part of such Committed
      Borrowing to be outstanding during such Interest Period and for a period
      equal to such Interest Period by (b) a percentage equal to 100% minus the
      Eurodollar Rate Reserve Percentage for such Interest Period. If the Dow
      Jones Markets Page 3750 (or any successor page) is unavailable, the
      Eurodollar Rate for any Interest Period for each Eurodollar Rate Advance
      comprising part of the same Committed Borrowing shall be determined by the
      Agent on the basis of the applicable rate furnished to and received by the
      Agent from Citibank two Business Days before the first day of such
      Interest Period, SUBJECT, HOWEVER, to the provisions of Section 2.08.

            "EURODOLLAR RATE ADVANCE" means a Committed Advance that bears
      interest as provided in Section 2.07(a)(ii).

            "EURODOLLAR RATE RESERVE PERCENTAGE" for any Interest Period for all
      Eurodollar Rate Advances or LIBO Rate Advances comprising part of the same
      Borrowing means the reserve percentage applicable two Business Days before
      the first day of such Interest Period under regulations issued from time
      to time by the Board of Governors of the Federal Reserve System (or any
      successor) for determining the maximum reserve requirement (including,
      without limitation, any emergency, supplemental or other marginal reserve
      requirement) for a member bank of the Federal Reserve System in New York
      City with respect to liabilities or assets consisting of or including
      Eurocurrency Liabilities (or with respect to any other category of
      liabilities that includes deposits by reference to which the interest rate
      on Eurodollar Rate Advances or LIBO Rate Advances is determined) having a
      term equal to such Interest Period.

            "EVENTS OF DEFAULT" has the meaning specified in Section 6.01.

            "FEDERAL FUNDS RATE" means, for any period, a fluctuating interest
      rate per annum equal for each day during such period to the weighted
      average of the rates on overnight Federal funds transactions with members
      of the Federal Reserve System arranged by Federal funds brokers, as
      published for such day (or, if such day is not a Business Day, for the
      next preceding Business Day) by the Federal Reserve Bank of New York, or,
      if such rate is not so published for any day that is a Business Day, the
      average of the quotations for such day on such transactions received by
      the Agent from three Federal funds brokers of recognized standing selected
      by it.

            "FIXED RATE ADVANCES" has the meaning specified in Section
      2.03(a)(i).

            "GAAP" has the meaning specified in Section 1.03.

            "INFORMATION MEMORANDUM" means the information memorandum dated May
      4, 2000 used by the Agent in connection with the syndication of the
      Commitments.

            "INTEREST PERIOD" means, for each Eurodollar Rate Advance comprising
      part of the same Committed Borrowing and each LIBO Rate Advance comprising
      part of the same Competitive Bid Borrowing, the period commencing on the
      date of such Eurodollar Rate Advance or LIBO Rate Advance or the date of
      the Conversion of any Base Rate Advance into such Eurodollar Rate Advance
      and ending on the last day of the period selected by the Borrower pursuant
      to the provisions below and, thereafter, with respect to Eurodollar Rate
      Advances, each subsequent period commencing on the last day of the
      immediately preceding Interest Period and ending on the last day of the
      period selected by the Borrower

                                       6

      pursuant to the provisions below. The duration of each such Interest
      Period shall be one, two, three or six months, as the Borrower may, upon
      notice received by the Agent not later than 11:00 A.M. (New York City
      time) on the second Business Day prior to the first day of such Interest
      Period, select; PROVIDED, HOWEVER, that:

                  (i) the Borrower may not select any Interest Period that ends
            after the Termination Date or, if the Committed Advances have been
            converted to a term loan pursuant to Section 2.06 prior to such
            selection, that ends after the Maturity Date;

                  (ii) Interest Periods commencing on the same date for
            Eurodollar Rate Advances comprising part of the same Committed
            Borrowing or for LIBO Rate Advances comprising part of the same
            Competitive Bid Borrowing shall be of the same duration;

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

                  (iv) whenever the first day of any Interest Period occurs on a
            day of an initial calendar month for which there is no numerically
            corresponding day in the calendar month that succeeds such initial
            calendar month by the number of months equal to the number of months
            in such Interest Period, such Interest Period shall end on the last
            Business Day of such succeeding calendar month.

            "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
      amended from time to time, and the regulations promulgated and rulings
      issued thereunder.

            "LENDERS" means the Initial Lenders and each Person that shall
      become a party hereto pursuant to Section 9.07.

            "LIBO RATE" means, for any Interest Period for all LIBO Rate
      Advances comprising part of the same Competitive Bid Borrowing, an
      interest rate per annum equal to the rate per annum obtained by dividing
      (a) the rate per annum (rounded upward to the nearest whole multiple of
      1/100 of 1% per annum) appearing on Telerate Markets Page 3750 (or any
      successor page) as the London interbank offered rate for deposits in U.S.
      dollars at approximately 11:00 A.M. (London time) two Business Days prior
      to the first day of such Interest Period for a term comparable to such
      Interest Period or, if for any reason such rate is not available, the rate
      per annum at which deposits in U.S. dollars offered by the principal
      office of Citibank in London, England to prime banks in the London
      interbank market at 11:00 A.M. (London time) two Business Days before the
      first day of such Interest Period in an amount substantially equal to the
      amount that would be Citibank's ratable share of such Borrowing if such
      Borrowing were to be a Committed Borrowing to be outstanding during such
      Interest Period and for a period equal to such Interest Period by (b) a
      percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for
      such Interest Period. If the Telerate Markets Page 3750 (or any successor
      page) is unavailable, the LIBO Rate for any Interest Period for each LIBO
      Rate Advance comprising part of the same Competitive Bid Borrowing shall
      be determined by the Agent on the basis of the applicable rate furnished
      to and received by the Agent from Citibank two Business Days before the
      first day of such Interest Period, SUBJECT, HOWEVER, to the provisions of
      Section 2.08.

            "LIBO RATE ADVANCES" means a Competitive Bid Advance bearing
      interest based on the LIBO Rate.

                                       7

            "LIEN" means any lien, security interest or other charge or
      encumbrance of any kind, or any other type of preferential arrangement,
      including, without limitation, the lien or retained security title of a
      conditional vendor and any easement, right of way or other encumbrance on
      title to real property.

            "LOAN DOCUMENTS" means this Agreement and the Notes, as each may be
      amended, supplemented or otherwise modified from time to time.

            "MATERIAL ADVERSE CHANGE" means any material adverse change in the
      assets, business, operations, property or condition (financial or
      otherwise) of the Guarantor and its Subsidiaries taken as a whole.

            "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
      assets, business, operations, property or condition (financial or
      otherwise) of the Guarantor and its Subsidiaries taken as a whole or (b)
      the ability of the Borrower or the Guarantor to perform their obligations
      under the Loan Documents.

            "MATURITY DATE" means the earlier of (a) the first anniversary of
      the Termination Date and (b) the date of termination in whole of the
      aggregate Commitments pursuant to Section 2.05 or 6.01.

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

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

            "MULTIPLE EMPLOYER PLAN" means a single employer plan, as defined in
      Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
      Borrower or any ERISA Affiliate and at least one Person other than the
      Borrower and the ERISA Affiliates or (b) was so maintained and in respect
      of which the Borrower or any ERISA Affiliate could have liability under
      Section 4064 or 4069 of ERISA in the event such plan has been or were to
      be terminated.

            "NOTE" means a Committed Note or a Competitive Bid Note.

            "NOTICE OF COMPETITIVE BID BORROWING" has the meaning specified in
      Section 2.03(a).

            "NOTICE OF COMMITTED BORROWING" has the meaning specified in Section
      2.02(a).

            "PBGC" means the Pension Benefit Guaranty Corporation (or any
      successor).

            "PERMITTED LIENS" means each of the following: (a) Liens for taxes,
      assessments and governmental charges or levies to the extent not required
      to be paid under Section 5.01(e) hereof; (b) Liens imposed by law, such as
      materialmen's, mechanics', carriers', workmen's and repairmen's Liens and
      other similar Liens arising in the ordinary course of business securing
      obligations that are not overdue for a period of more than 30 days or are
      being contested by good faith by appropriate proceedings and as to which
      appropriate reserves are being maintained; (c) pledges or deposits to
      secure obligations under workers' compensation laws or similar legislation
      or to secure public or statutory obligations; and (d) easements, rights of
      way and other encumbrances on title to real property that do not render
      title to the property encumbered thereby unmarketable or materially
      adversely affect the use of such property for its present purposes.

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

            "PLAN" means a Single Employer Plan or a Multiple Employer Plan.

                                       8

            "PUBLIC DEBT RATING" means, as of any date, the lowest rating that
      has been most recently announced by either S&P or Moody's, as the case may
      be, for any class of non-credit enhanced long-term senior unsecured debt
      issued by the Holding Company. For purposes of the foregoing, (a) if only
      one of S&P and Moody's shall have in effect a Public Debt Rating, the
      Applicable Margin and the Applicable Percentage shall be determined by
      reference to the available rating; (b) if neither S&P nor Moody's shall
      have in effect a Public Debt Rating, the Applicable Margin and the
      Applicable Percentage will be set in accordance with Level 5 under the
      definition of "APPLICABLE MARGIN" or "APPLICABLE PERCENTAGE", as the case
      may be; (c) if the ratings established by S&P and Moody's shall fall
      within different levels, the Applicable Margin and the Applicable
      Percentage shall be based upon the higher rating, unless the lower of such
      ratings is more than one level below the higher of such ratings, in which
      case the applicable level shall be one level higher than the lower of such
      ratings; (d) if any rating established by S&P or Moody's shall be changed,
      such change shall be effective as of the date on which such change is
      first announced publicly by the rating agency making such change; and (e)
      if S&P or Moody's shall change the basis on which ratings are established,
      each reference to the Public Debt Rating announced by S&P or Moody's, as
      the case may be, shall refer to the then equivalent rating by S&P or
      Moody's, as the case may be.

            "REBORROW", "REBORROWED" and "REBORROWING" each refers to a
      borrowing pursuant to which Committed Advances are reborrowed as
      Competitive Bid Advances or Competitive Bid Advances are reborrowed as
      Committed Advances, in each case for a principal amount not more than the
      principal amount of the Advances outstanding at the time of such
      reborrowing.

            "REGISTER" has the meaning specified in Section 9.07(f).

            "REQUIRED LENDERS" means at any time Lenders owed or holding at
      least a majority in interest of the aggregate Commitments at such time or,
      if the Commitments have been terminated, holding at least a majority of
      the aggregate outstanding principal amount of the Advances.

            "ROBINSON FAMILY" means Richard Robinson, Barbara Robinson Buckland,
      Florence R. Ford, Mary Sue Robinson Morrill and William W. Robinson, the
      spouses and descendants of any of them, and any trust or estate whose
      legal representatives (or in the case of a Person with more than one legal
      representative, at least half of whose legal representatives) consist of
      one or more of the foregoing individuals, spouses and descendants; and the
      trusts respectively created under the will of Maurice R. Robinson and the
      will of Florence L. Robinson so long as at least half of their respective
      trustees continue to consist of one or more of the foregoing individuals,
      spouses and descendants.

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

            "SIGNIFICANT SUBSIDIARY" shall mean any Subsidiary that owns 10% or
      more of the total consolidated assets of the Holding Company and its
      subsidiaries or contributes 10% or more of their total consolidated
      revenue from operations; and in any event shall include Scholastic Canada
      Ltd. and Scholastic Australia Pty. Ltd. Each direct and indirect parent
      (other than the Holding Company or the Operating Company) of a Significant
      Subsidiary also shall be deemed a Significant Subsidiary.

            "SINGLE EMPLOYER PLAN" means a single employer plan, as defined in
      Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
      Borrower or any ERISA Affiliate and no Person other than the Borrower and
      the ERISA Affiliates or (b) was so maintained and in respect of which the
      Borrower or any ERISA Affiliate could have liability under Section 4069 of
      ERISA in the event such plan has been or were to be terminated.

            "STOCK PURCHASE AGREEMENT" means the Stock Purchase Agreement dated
      as of April 13, 2000 between Grolier Incorporated and the Borrower.

            "SUBSIDIARY" of any Person means any corporation, partnership, joint
      venture, limited liability company, trust or estate of which (or in which)
      more than 50% of (a) the issued and outstanding capital

                                       9

      stock having ordinary voting power to elect a majority of the Board of
      Directors of such corporation (irrespective of whether at the time capital
      stock of any other class or classes of such corporation shall or might
      have voting power upon the occurrence of any contingency), (b) the
      interest in the capital or profits of such limited liability company,
      partnership or joint venture or (c) the beneficial interest in such trust
      or estate is at the time directly or indirectly owned or controlled by
      such Person, by such Person and one or more of its other Subsidiaries or
      by one or more of such Person's other Subsidiaries.

            "TERM LOAN CONVERSION DATE" means the Termination Date on which all
      Committed Advances outstanding on such date are converted into a term loan
      pursuant to Section 2.06.

            "TERM LOAN ELECTION" has the meaning specified in Section 2.06.

            "TERMINATION DATE" means the earlier of June 21, 2001 and the date
      of termination in whole of the Commitments pursuant to Section 2.05 or
      6.01.

            "TOTAL CONSOLIDATED DEBT" shall mean the consolidated Debt of the
      Guarantor and its Subsidiaries.

            "VOTING STOCK" means capital stock issued by a corporation, or
      equivalent interests in any other Person, the holders of which are
      ordinarily, in the absence of contingencies, entitled to vote for the
      election of a majority of the directors (or persons performing similar
      functions) of such Person, even if the right so to vote has been suspended
      by the happening of such a contingency.

            SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".

            SECTION 1.03. ACCOUNTING TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(f) ("GAAP").

                                   ARTICLE II
                      AMOUNTS AND TERMS OF THE ADVANCES

            SECTION 2.01. THE COMMITTED ADVANCES. Each Lender severally agrees,
on the terms and conditions hereinafter set forth, to make Committed Advances to
the Borrower from time to time on any Business Day during the period from the
Effective Date until the Termination Date in an aggregate amount not to exceed
such Lender's Commitment at such time PROVIDED that the aggregate amount of the
Commitments of the Lenders shall be deemed used from time to time to the extent
of the aggregate amount of the Competitive Bid Advances then outstanding and
such deemed use of the aggregate amount of the Commitments shall be allocated
among the Lenders ratably according to their respective Commitments (such deemed
use of the aggregate amount of the Commitments being a "COMPETITIVE BID
REDUCTION"). Each Committed Borrowing shall be in an aggregate amount of
$1,000,000 or an integral multiple of $500,000 in excess thereof in the case of
Base Rate Advances, or shall be in an aggregate amount of $5,000,000 or an
integral multiple of $1,000,000 in excess thereof in the case of Eurodollar Rate
Advances, and shall consist of Committed Advances of the same Type made on the
same day by the Lenders ratably according to their respective Commitments.
Within the limits of each Lender's Commitment, the Borrower may borrow under
this Section 2.01, prepay pursuant to Section 2.10 and Reborrow under this
Section 2.01.

            SECTION 2.02. MAKING THE COMMITTED ADVANCES. (a) Each Committed
Borrowing shall be made on notice, given not later than (x) 11:00 A.M. (New York
City time) on the second Business Day prior to the date of the proposed
Committed Borrowing in the case of a Committed Borrowing consisting of
Eurodollar Rate Advances or (y) 11:00 A.M. (New York City time) on the date of
the proposed Committed Borrowing in the case of a Committed Borrowing consisting
of Base Rate Advances, by the Borrower to the Agent, which shall give to each
Lender prompt notice thereof by telecopier or telex. Each such notice of a
Committed Borrowing (a "NOTICE OF COMMITTED BORROWING") shall be by telephone,
confirmed immediately in writing, or telecopier or telex in substantially the
form of Exhibit B-1 hereto, specifying therein the requested (i) date of such
Committed Borrowing,

                                       10

(ii) Type of Advances comprising such Committed Borrowing, (iii) aggregate
amount of such Committed Borrowing, and (iv) in the case of a Committed
Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for
each such Committed Advance. Each Lender shall, before 2:00 P.M. (New York City
time) on the date of such Committed Borrowing make available for the account of
its Applicable Lending Office to the Agent at the Agent's Account, in same day
funds, such Lender's ratable portion of such Committed Borrowing. After the
Agent's receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article III, the Agent will make such funds available to the
Borrower at the Agent's address referred to in Section 9.02.

            (b) Anything in subsection (a) above to the contrary
notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for
any Committed Borrowing if the aggregate amount of such Committed Borrowing is
less than $5,000,000 or if the obligation of the Lenders to make Eurodollar Rate
Advances shall then be suspended pursuant to Section 2.08 or 2.12 and (ii) the
Eurodollar Rate Advances may not be outstanding as part of more than twelve
separate Committed Borrowings.

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

            (d) Unless the Agent shall have received notice from a Lender prior
to the date of any Committed Borrowing that such Lender will not make available
to the Agent such Lender's ratable portion of such Committed Borrowing, the
Agent may assume that such Lender has made such portion available to the Agent
on the date of such Committed Borrowing in accordance with subsection (a) of
this Section 2.02 and the Agent may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount. If and to the
extent that such Lender shall not have so made such ratable portion available to
the Agent, such Lender and the Borrower severally agree to repay to the Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to the Borrower until
the date such amount is repaid to the Agent, at (i) in the case of the Borrower,
the interest rate applicable at the time to Committed Advances comprising such
Committed Borrowing and (ii) in the case of such Lender, the Federal Funds Rate.
If such Lender shall repay to the Agent such corresponding amount, such amount
so repaid shall constitute such Lender's Committed Advance as part of such
Committed Borrowing for purposes of this Agreement.

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

            SECTION 2.03. THE COMPETITIVE BID ADVANCES. (a) Each Lender
severally agrees that the Borrower may make Competitive Bid Borrowings under
this Section 2.03 from time to time on any Business Day during the period from
the date hereof until the date occurring 30 days prior to the Termination Date
in the manner set forth below; PROVIDED that, following the making of each
Competitive Bid Borrowing, the aggregate amount of the Advances then outstanding
shall not exceed the aggregate amount of the Commitments of the Lenders
(computed without regard to any Competitive Bid Reduction).

            (i) The Borrower may request a Competitive Bid Borrowing under this
      Section 2.03 by delivering to the Agent, by telecopier or telex, a notice
      of a Competitive Bid Borrowing (a "NOTICE OF COMPETITIVE BID BORROWING"),
      in substantially the form of Exhibit B-2 hereto, specifying therein the
      requested (v) date of such proposed Competitive Bid Borrowing, (w)
      aggregate amount of such proposed Competitive Bid Borrowing, (x) in the
      case of a Competitive Bid Borrowing consisting of LIBO Rate

                                       11

      Advances, Interest Period, or in the case of a Competitive Bid Borrowing
      consisting of Fixed Rate Advances, maturity date for repayment of each
      Fixed Rate Advance to be made as part of such Competitive Bid Borrowing
      (which maturity date may not be earlier than the date occurring 7 days
      after the date of such Competitive Bid Borrowing or later than Termination
      Date), (y) interest payment date or dates relating thereto, and (z) other
      terms (if any) to be applicable to such Competitive Bid Borrowing, not
      later than 10:00 A.M. (New York City time) (A) at least one Business Day
      prior to the date of the proposed Competitive Bid Borrowing, if the
      Borrower shall specify in the Notice of Competitive Bid Borrowing that the
      rates of interest to be offered by the Lenders shall be fixed rates per
      annum (the Advances comprising any such Competitive Bid Borrowing being
      referred to herein as "FIXED RATE ADVANCES") and (B) at least four
      Business Days prior to the date of the proposed Competitive Bid Borrowing,
      if the Borrower shall instead specify in the Notice of Competitive Bid
      Borrowing that the Advances comprising such Competitive Bid Borrowing
      shall be LIBO Rate Advances. Each Notice of Competitive Bid Borrowing
      shall be irrevocable and binding on the Borrower. The Agent shall in turn
      promptly notify each Lender of each request for a Competitive Bid
      Borrowing received by it from the Borrower by sending such Lender a copy
      of the related Notice of Competitive Bid Borrowing.

            (ii) Each Lender may, if, in its sole discretion, it elects to do
      so, irrevocably offer to make one or more Competitive Bid Advances to the
      Borrower as part of such proposed Competitive Bid Borrowing at a rate or
      rates of interest specified by such Lender in its sole discretion, by
      notifying the Agent (which shall give prompt notice thereof to the
      Borrower), (A) before 9:30 A.M. (New York City time) on the date of such
      proposed Competitive Bid Borrowing, in the case of a Competitive Bid
      Borrowing consisting of Fixed Rate Advances and (B) before 10:00 A.M. (New
      York City time) three Business Days before the date of such proposed
      Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing
      consisting of LIBO Rate Advances of the minimum amount and maximum amount
      of each Competitive Bid Advance which such Lender would be willing to make
      as part of such proposed Competitive Bid Borrowing (which amounts of such
      proposed Competitive Bid may, subject to the proviso to the first sentence
      of this Section 2.03(a), exceed such Lender's Commitment, if any), the
      rate or rates of interest therefor and such Lender's Applicable Lending
      Office with respect to such Competitive Bid Advance; PROVIDED that if the
      Agent in its capacity as a Lender shall, in its sole discretion, elect to
      make any such offer, it shall notify the Borrower of such offer at least
      30 minutes before the time and on the date on which notice of such
      election is to be given to the Agent, by the other Lenders. If any Lender
      shall elect not to make such an offer, such Lender shall so notify the
      Agent before 10:00 A.M. (New York City time), and such Lender shall not be
      obligated to, and shall not, make any Competitive Bid Advance as part of
      such Competitive Bid Borrowing; PROVIDED that the failure by any Lender to
      give such notice shall not cause such Lender to be obligated to make any
      Competitive Bid Advance as part of such proposed Competitive Bid
      Borrowing.

            (iii) The Borrower shall, in turn, (A) before 10:30 A.M. (New York
      City time) on the date of such proposed Competitive Bid Borrowing, in the
      case of a Competitive Bid Borrowing consisting of Fixed Rate Advances and
      (B) before 11:00 A.M. (New York City time) three Business Days before the
      date of such proposed Competitive Bid Borrowing, in the case of a
      Competitive Bid Borrowing consisting of LIBO Rate Advances, either:

                  (x) cancel such Competitive Bid Borrowing by giving the Agent
            notice to that effect, or

                  (y) accept one or more of the offers made by any Lender or
            Lenders pursuant to paragraph (ii) above, in its sole discretion, by
            giving notice to the Agent of the amount of each Competitive Bid
            Advance (which amount shall be equal to or greater than the minimum
            amount, and equal to or less than the maximum amount, notified to
            the Borrower by the Agent on behalf of such Lender for such
            Competitive Bid Advance pursuant to paragraph (ii) above) to be made
            by each Lender as part of such Competitive Bid Borrowing, and reject
            any remaining offers made by Lenders pursuant to paragraph (ii)
            above by giving the Agent notice to that effect. The Borrower shall
            accept the offers made by any Lender or Lenders to make Competitive
            Bid Advances in

                                       12

            order of the lowest to the highest rates of interest offered by such
            Lenders. If two or more Lenders have offered the same interest rate,
            the amount to be borrowed at such interest rate will be allocated
            among such Lenders in proportion to the amount that each such Lender
            offered at such interest rate.

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

            (v) If the Borrower accepts one or more of the offers made by any
      Lender or Lenders pursuant to paragraph (iii)(y) above, the Agent shall in
      turn promptly notify (A) each Lender that has made an offer as described
      in paragraph (ii) above, of the date and aggregate amount of such
      Competitive Bid Borrowing and whether or not any offer or offers made by
      such Lender pursuant to paragraph (ii) above have been accepted by the
      Borrower, (B) each Lender that is to make a Competitive Bid Advance as
      part of such Competitive Bid Borrowing, of the amount of each Competitive
      Bid Advance to be made by such Lender as part of such Competitive Bid
      Borrowing, and (C) each Lender that is to make a Competitive Bid Advance
      as part of such Competitive Bid Borrowing, upon receipt, that the Agent
      has received forms of documents appearing to fulfill the applicable
      conditions set forth in Article III. Each Lender that is to make a
      Competitive Bid Advance as part of such Competitive Bid Borrowing shall,
      before 11:00 A.M. (New York City time) on the date of such Competitive Bid
      Borrowing specified in the notice received from the Agent pursuant to
      clause (A) of the preceding sentence or any later time when such Lender
      shall have received notice from the Agent pursuant to clause (C) of the
      preceding sentence, make available for the account of its Applicable
      Lending Office to the Agent at its address referred to in Section 9.02, in
      same day funds, such Lender's portion of such Competitive Bid Borrowing.
      Upon fulfillment of the applicable conditions set forth in Article III and
      after receipt by the Agent of such funds, the Agent will make such funds
      available to the Borrower at the location specified by the Borrower in its
      Notice of Competitive Bid Borrowing. Promptly after each Competitive Bid
      Borrowing the Agent will notify each Lender of the amount of the
      Competitive Bid Borrowing and the dates upon which such Competitive Bid
      Borrowing commenced and will terminate.

            (vi) If the Borrower notifies the Agent that it accepts one or more
      of the offers made by any Lender or Lenders pursuant to paragraph (iii)(y)
      above, such notice of acceptance shall be irrevocable and binding on the
      Borrower. The Borrower shall indemnify each Lender against any loss, cost
      or expense incurred by such Lender as a result of any failure to fulfill
      on or before the date specified in the related Notice of Competitive Bid
      Borrowing for such Competitive Bid Borrowing the applicable conditions set
      forth in Article III, including, without limitation, any loss (including
      loss of anticipated profits), cost or expense incurred by reason of the
      liquidation or reemployment of deposits or other funds acquired by such
      Lender to fund the Competitive Bid Advance to be made by such Lender as
      part of such Competitive Bid Borrowing when such Competitive Bid Advance,
      as a result of such failure, is not made on such date.

            (b) Each Competitive Bid Borrowing shall be in an aggregate amount
of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and,
following the making of each Competitive Bid Borrowing, the Borrower shall be in
compliance with the limitation set forth in the proviso to the first sentence of
subsection (a) above.

            (c) Within the limits and on the conditions set forth in this
Section 2.03, the Borrower may from time to time borrow under this Section 2.03,
repay or prepay pursuant to subsection (d) below, and Reborrow under this
Section 2.03, PROVIDED that a Competitive Bid Borrowing shall not be made on
more than one day within any period of three Business Days.

            (d) The Borrower shall repay to the Agent for the account of each
Lender that has made a Competitive Bid Advance, on the maturity date of each
Competitive Bid Advance (such maturity date being that specified by the Borrower
for repayment of such Competitive Bid Advance in the related Notice of
Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and
provided in the Competitive Bid Note evidencing such

                                       13

Competitive Bid Advance), the then unpaid principal amount of such Competitive
Bid Advance. The Borrower shall not have any right to prepay any principal
amount of any Competitive Bid Advance unless, and then only on the terms,
specified by the Borrower for such Competitive Bid Advance in the related Notice
of Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and
set forth in the Competitive Bid Note evidencing such Competitive Bid Advance.

            (e) The Borrower shall pay interest on the unpaid principal amount
of each Competitive Bid Advance from the date of such Competitive Bid Advance to
the date the principal amount of such Competitive Bid Advance is repaid in full,
at the rate of interest for such Competitive Bid Advance specified by the Lender
making such Competitive Bid Advance in its notice with respect thereto delivered
pursuant to subsection (a)(ii) above, payable on the interest payment date or
dates specified by the Borrower for such Competitive Bid Advance in the related
Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i)
above, as provided in the Competitive Bid Note evidencing such Competitive Bid
Advance. Upon the occurrence and during the continuance of an Event of Default,
the Borrower shall pay interest on the amount of unpaid principal of each
Competitive Bid Advance owing to a Lender, payable in arrears on the date or
dates interest is payable thereon, at a rate per annum equal at all times to 2%
per annum above the rate per annum required to be paid on such Competitive Bid
Advance under the terms of the Competitive Bid Note evidencing such Competitive
Bid Advance unless otherwise agreed in such Competitive Bid Note.

            (f) The indebtedness of the Borrower resulting from each Competitive
Bid Advance as part of a Competitive Bid Borrowing shall be evidenced by a
separate Competitive Bid Note payable to the order of the Lender making such
Competitive Bid Advance.

            SECTION 2.04. FEES. (a) FACILITY FEE. The Borrower agrees to pay to
the Agent for the account of each Lender a facility fee on the aggregate amount
of such Lender's Commitment from the Effective Date in the case of each Initial
Lender and from the effective date specified in the Assignment and Acceptance
pursuant to which it became a Lender in the case of each other Lender until the
later of the Termination Date and, if the Term Loan Election has been exercised,
the Maturity Date at a rate per annum equal to the Applicable Percentage in
effect from time to time, payable in arrears quarterly on the last day of each
February, May, August and November, commencing August 31, 2000, and on the
Termination Date or the Maturity Date, as the case may be.

            (b) UPFRONT FEES. The Borrower agrees to pay to the Agent for the
account of each Lender an upfront fee on the aggregate amount of such Lender's
Commitment (x) on the Effective Date, equal to 0.125% of such Lender's
Commitment on such date and (y) on the date that is six months after the
Effective Date, equal to 0.075% of such Lender's Commitment on such date.

            (c) AGENT'S FEES. The Borrower shall pay to the Agent for its own
account such fees as may from time to time be agreed between the Borrower and
the Agent.

            SECTION 2.05. TERMINATION OR REDUCTION OF THE COMMITMENTS. (a)
OPTIONAL. The Borrower shall have the right, upon at least five Business Days'
notice to the Agent, to terminate in whole or reduce ratably in part the unused
Commitments, PROVIDED that each partial reduction shall be in the aggregate
amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof.

            (b) MANDATORY. (i) On the date of each Committed Borrowing and each
      Competitive Bid Borrowing, the Commitments of the Lenders shall be
      automatically and permanently reduced on a pro rata basis by an amount
      equal to the amount by which the aggregate Commitments exceed the
      aggregate Advances on such date after giving effect to such Borrowing.

            (ii) Upon the issuance by the Guarantor or any of its Subsidiaries
      of any debt security in the capital markets after the date hereof, the
      Commitments shall automatically terminate by an amount equal to the new
      proceeds thereof on the fifth Business Day after the date of receipt by
      the Guarantor or its Subsidiaries of such proceeds.

                                       14

            (iii) On the Termination Date, if the Borrower has made the Term
      Loan Election in accordance with Section 2.06 prior to such date, and from
      time to time thereafter upon each prepayment of the Committed Advances,
      the Commitments of the Lenders shall be automatically and permanently
      reduced on a pro rata basis by an amount equal to the amount by which (A)
      the aggregate Commitments immediately prior to such reduction EXCEEDS (B)
      the aggregate unpaid principal amount of all Committed Advances
      outstanding at such time.

            SECTION 2.06. REPAYMENT OF COMMITTED ADVANCES. The Borrower shall,
subject to the next succeeding sentence, repay to the Agent for the ratable
account of the Lenders on the Termination Date the aggregate principal amount of
the Committed Advances then outstanding. The Borrower may, upon not less than 15
days' notice to the Agent, elect (the "TERM LOAN ELECTION") to convert all of
the Committed Advances outstanding on the Termination Date in effect at such
time into a term loan which the Borrower shall repay in full ratably to the
Lenders on the Maturity Date; PROVIDED that the Term Loan Election may not be
exercised if a Default has occurred and is continuing on the date of notice of
the Term Loan Election or on the date on which the Term Loan Election is to be
effected. All Committed Advances converted into a term loan pursuant to this
Section 2.06 shall continue to constitute Committed Advances except that the
Borrower may not Reborrow pursuant to Section 2.01 after all or any portion of
such Committed Advances have been prepaid pursuant to Section 2.10.

            SECTION 2.07. INTEREST ON COMMITTED ADVANCES. (a) SCHEDULED
INTEREST. The Borrower shall pay interest on the unpaid principal amount of each
Committed Advance owing to each Lender from the date of such Advance until such
principal amount shall be paid in full, at the following rates per annum:

            (i) BASE RATE ADVANCES. During such periods as such Advance is a
      Base Rate Advance, a rate per annum equal at all times to the sum of (x)
      the Base Rate in effect from time to time PLUS (y) the Applicable Margin
      in effect from time to time, payable in arrears quarterly on the last day
      of each February, May, August and November during such periods and on the
      date all Base Rate Advances shall be Converted or paid in full.

            (ii) EURODOLLAR RATE ADVANCES. During such periods as such Advance
      is a Eurodollar Rate Advance, a rate per annum equal at all times during
      each Interest Period for such Advance to the sum of (x) the Eurodollar
      Rate for such Interest Period for such Advance PLUS (y) the Applicable
      Margin in effect from time to time, payable in arrears on the last day of
      such Interest Period and, if such Interest Period has a duration of more
      than three months, on each day that occurs during such Interest Period
      every three months from the first day of such Interest Period and on the
      date such Eurodollar Rate Advance shall be Converted or paid in full.

            (b) DEFAULT INTEREST. Upon the occurrence and during the continuance
of an Event of Default and after notice from the Agent, the Borrower shall pay
interest on the unpaid principal amount of each Committed Advance owing to each
Lender, payable in arrears on the dates referred to in clause (a)(i) or (a)(ii)
above, at a rate per annum equal at all times to 2% per annum above the rate per
annum required to be paid on such Advance pursuant to clause (a)(i) or (a)(ii)
above.

            SECTION 2.08. INTEREST RATE DETERMINATION. (a) The Agent shall give
prompt notice to the Borrower and the Lenders of the applicable interest rate
determined by the Agent for purposes of Section 2.07(a)(i) or (ii).

            (b) If, with respect to any Eurodollar Rate Advances, the Required
Lenders reasonably determine and notify the Agent that the Eurodollar Rate for
any Interest Period for such Advances will not adequately reflect the cost to
such Required Lenders of making, funding or maintaining their respective
Eurodollar Rate Advances for such Interest Period, the Agent shall forthwith so
notify the Borrower and the Lenders, whereupon (i) each Eurodollar Rate Advance
will automatically, on the last day of the then existing Interest Period
therefor, Convert into a Base Rate Advance, and (ii) the obligation of the
Lenders to make, or to Convert Committed Advances into, Eurodollar Rate Advances
shall be suspended until the Agent shall notify the Borrower and the Lenders
that the circumstances causing such suspension no longer exist. Each Lender that
provides a notice as

                                       15

described in this Section 2.08(b) agrees to provide to the Borrower a
certificate in reasonable detail summarizing the basis for such notice.

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

            (d) On the date on which the aggregate unpaid principal amount of
Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment
or prepayment or otherwise, to less than $5,000,000, such Advances shall
automatically Convert into Base Rate Advances.

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

            (f) If Telerate Markets Page 3750 is unavailable and Citibank is
unable to furnish timely information to the Agent for determining the Eurodollar
Rate or LIBO Rate for any Eurodollar Rate Advances or LIBO Rate Advances, as the
case may be,

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

            (ii) with respect to Eurodollar Rate Advances, each such Advance
      will automatically, on the last day of the then existing Interest Period
      therefor, be prepaid by the Borrower or be automatically Converted into a
      Base Rate Advance (or if such Advance is then a Base Rate Advance, will
      continue as a Base Rate Advance), and

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

            SECTION 2.09. OPTIONAL CONVERSION OF COMMITTED ADVANCES. The
Borrower may on any Business Day, upon notice given to the Agent not later than
11:00 A.M. (New York City time) on the second Business Day prior to the date of
the proposed Conversion and subject to the provisions of Sections 2.08 and 2.12,
Convert Committed Advances of one Type comprising the same Borrowing into
Committed Advances of the other Type; PROVIDED, HOWEVER, that any Conversion of
Eurodollar Rate Advances into Base Rate Advances shall be made only on the last
day of an Interest Period for such Eurodollar Rate Advances, any Conversion of
Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less
than the minimum amount specified in Section 2.02(b) and no Conversion of any
Committed Advances shall result in more separate Committed Borrowings than
permitted under Section 2.02(b). Each such notice of a Conversion shall, within
the restrictions specified above, specify (i) the date of such Conversion, (ii)
the Committed Advances to be Converted, and (iii) if such Conversion is into
Eurodollar Rate Advances, the duration of the initial Interest Period for each
such Advance. Each notice of Conversion shall be irrevocable and binding on the
Borrower.

            SECTION 2.10. PREPAYMENTS OF COMMITTED ADVANCES. (a) OPTIONAL. The
Borrower may, upon notice at least one Business Day prior to the date of such
prepayment to the Agent stating the proposed date and aggregate principal amount
of the prepayment, and if such notice is given the Borrower shall, prepay the
outstanding principal amount of the Committed Advances comprising part of the
same Committed Borrowing in whole or ratably in part, together with accrued
interest to the date of such prepayment on the principal amount prepaid;
PROVIDED, HOWEVER, that (x) each partial prepayment shall be in an aggregate
principal amount of $1,000,000 or an integral multiple of $500,000 in excess
thereof in the case of Base Rate Advances and in an aggregate principal amount
of $5,000,000 or an integral multiple of $1,000,000 in excess thereof in the
case of Eurodollar Rate

                                       16

Advances and (y) in the event of any such prepayment of a Eurodollar Rate
Advance, the Borrower shall be obligated to reimburse the Lenders in respect
thereof pursuant to Section 9.04(c).

            (b) MANDATORY. (i) The Borrower shall, on each Business Day, prepay
an aggregate principal amount of the Committed Advances comprising part of the
same Borrowings equal to the amount by which (1) the sum of the aggregate
principal amount of (x) the Committed Advances and (y) the Competitive Bid
Advances then outstanding exceeds (2) the Committed Facility on such Business
Day. Such prepayments of the Committed Facility shall be applied to prepay
Committed Advances then outstanding comprising part of the same Borrowings until
such Advances are paid in full.

            (ii) All prepayments under this subsection (b) shall be made
together with accrued interest to the date of such prepayment on the principal
amount prepaid.

            SECTION 2.11. INCREASED COSTS. (a) If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation after the date hereof or (ii) the compliance with any guideline or
request from any central bank or other governmental authority made after the
date hereof (whether or not having the force of law), there shall be any
increase in the cost to any Lender of agreeing to make or making, funding or
maintaining Eurodollar Rate Advances or LIBO Rate Advances (excluding for
purposes of this Section 2.11 any such increased costs resulting from (i) Taxes
or Other Taxes (as to which Section 2.14 shall govern) and (ii) changes in the
basis of taxation of overall net income or overall gross income by the United
States or by the foreign jurisdiction or state under the laws of which such
Lender is organized or has its Applicable Lending Office or any political
subdivision thereof), then the Borrower shall from time to time, upon demand by
such Lender (with a copy of such demand to the Agent), pay to the Agent for the
account of such Lender additional amounts sufficient to compensate such Lender
for such increased cost; PROVIDED, HOWEVER, that before making any such demand,
each Lender agrees to use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to designate a different
Applicable Lending Office if the making of such a designation would avoid the
need for, or reduce the amount of, such increased cost and would not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.
A certificate in reasonable detail summarizing the basis for and calculating the
amount of such increased cost, submitted to the Borrower and the Agent by such
Lender shall be prima facie evidence of the amount claimed so long as any
underlying determinations and allocations are made on a reasonable basis;
PROVIDED, HOWEVER, that no Lender shall be required to disclose in any such
certificate any confidential proprietary information.

            (b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender or any corporation controlling such Lender and that the amount of such
capital is increased by or based upon the existence of such Lender's commitment
to lend hereunder and other commitments of this type, then, upon demand by such
Lender (with a copy of such demand to the Agent), the Borrower shall pay to the
Agent for the account of such Lender, from time to time as specified by such
Lender, additional amounts sufficient to compensate such Lender or such
corporation in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender's commitment to lend hereunder. A certificate in reasonable
detail summarizing the basis for and calculating such amounts submitted to the
Borrower and the Agent by such Lender shall be prima facie evidence of the
amount claimed so long as any underlying determinations and allocations are made
on a reasonable basis; PROVIDED, HOWEVER, that no Lender shall be required to
disclose in any such certificate any confidential proprietary information.

                                       17

            SECTION 2.12. ILLEGALITY. Notwithstanding any other provision of
this Agreement, if any Lender shall notify the Agent that the introduction of or
any change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority asserts that it is
unlawful, for any Lender or its Eurodollar Lending Office to perform its
obligations hereunder to make Eurodollar Rate Advances or to fund or maintain
Eurodollar Rate Advances hereunder, (a) each Eurodollar Rate Advance will
automatically, upon such demand, Convert into a Base Rate Advance and (b) the
obligation of the Lenders to make Eurodollar Rate Advances or LIBO Rate Advances
or to Convert Committed Advances into Eurodollar Rate Advances shall be
suspended until the Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist; PROVIDED, HOWEVER, that
before making any such demand, each Lender agrees to use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to
designate a different Eurodollar Lending Office if the making of such a
designation would allow such Lender or its Eurodollar Lending Office to continue
to perform its obligations to make Eurodollar Rate Advances or to continue to
fund or maintain Eurodollar Rate Advances and would not, in the judgment of such
Lender, be otherwise disadvantageous to such Lender.

            SECTION 2.13. PAYMENTS AND COMPUTATIONS. (a) The Borrower shall make
each payment hereunder not later than 11:00 A.M. (New York City time) on the day
when due to the Agent at the Agent's Account in same day funds. The Agent will
promptly thereafter cause to be distributed like funds relating to the payment
of principal or interest or facility fees ratably (other than amounts payable
pursuant to Section 2.03, 2.11, 2.14 or 9.04(c)) to the Lenders for the account
of their respective Applicable Lending Offices, and like funds relating to the
payment of any other amount payable to any Lender to such Lender for the account
of its Applicable Lending Office, in each case to be applied in accordance with
the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance
and recording of the information contained therein in the Register pursuant to
Section 9.07(c), from and after the effective date specified in such Assignment
and Acceptance, the Agent shall make all payments hereunder and under the Notes
in respect of the interest assigned thereby to the Lender assignee thereunder,
and the parties to such Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such effective date directly
between themselves.

            (b) The Borrower hereby authorizes each Lender, if and to the extent
payment owed to such Lender is not made when due hereunder or under the Note
held by such Lender, to charge from time to time against any or all of the
Borrower's accounts with such Lender any amount so due.

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

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

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

                                       18

            SECTION 2.14. TAXES. (a) Any and all payments by the Borrower
hereunder or under the Notes shall be made, in accordance with Section 2.13,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, EXCLUDING, in the case of each Lender and the Agent, taxes
imposed on its net income, and franchise taxes imposed on it in lieu of net
income taxes, by the jurisdiction under the laws of which such Lender or the
Agent (as the case may be) is organized or any political subdivision thereof
and, in the case of each Lender, taxes imposed on its net income, and franchise
taxes imposed on it in lieu of net income taxes, by the jurisdiction of such
Lender's Applicable Lending Office or any political subdivision thereof (all
such non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities in respect of payments hereunder or under the Notes being
hereinafter referred to as "TAXES"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note to any Lender or the Agent, (i) the sum payable shall be increased as may
be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.14) such Lender or
the Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.

            (b) In addition, the Borrower shall pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or under the Notes or from the
execution, delivery or registration of, performing under, or otherwise with
respect to, this Agreement or the Notes (hereinafter referred to as "OTHER
TAXES").

            (c) The Borrower shall indemnify each Lender and the Agent for and
hold it harmless against the full amount of Taxes or Other Taxes (including,
without limitation, taxes of any kind imposed by any jurisdiction on amounts
payable under this Section 2.14) imposed on or paid by such Lender or the Agent
(as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto. This indemnification shall
be made within 30 days from the date such Lender or the Agent (as the case may
be) makes written demand therefor.

            (d) Within 30 days after the date of any payment of Taxes, the
Borrower shall furnish to the Agent, at its address referred to in Section 9.02,
the original or a certified copy of a receipt evidencing such payment. In the
case of any payment hereunder or under the Notes by or on behalf of the Borrower
through an account or branch outside the United States or by or on behalf of the
Borrower by a payor that is not a United States person, if the Borrower
determine that no Taxes are payable in respect thereof, the Borrower shall
furnish, or shall cause such payor to furnish, to the Agent, at such address, an
opinion of counsel acceptable to the Agent stating that such payment is exempt
from Taxes. For purposes of this subsection (d) and subsection (e), the terms
"UNITED STATES" and "UNITED STATES PERSON" shall have the meanings specified in
Section 7701 of the Internal Revenue Code.

                                       19

            (e) Each Lender organized under the laws of a jurisdiction outside
the United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Initial Lender and on the date of the Assignment
and Acceptance pursuant to which it becomes a Lender in the case of each other
Lender, and from time to time thereafter as requested in writing by the Borrower
(but only so long as such Lender remains lawfully able to do so), shall provide
each of the Agent and the Borrower with two original Internal Revenue Service
forms W-8BEN or W-8ECI, as appropriate, or any successor or other form
prescribed by the Internal Revenue Service, certifying that such Lender is
exempt from or entitled to a reduced rate of United States withholding tax on
payments pursuant to this Agreement or the Notes. Each Lender organized under
the laws of a jurisdiction outside the United States, on or prior to the date of
execution and delivery of this Agreement, or at the time such Lender first
becomes a party to this Agreement, represents and warrants that it is lawfully
able to provide the Borrower with a valid form W-8BEN or W-8ECI resulting in
exemption form United States withholding tax on payments of interest pursuant to
this Agreement or the Notes. If any form or document referred to in this
subsection (e) requires the disclosure of information, other than information
necessary to compute the tax payable and information required on the date hereof
by Internal Revenue Service form 1001 or 4224, that the Lender reasonably
considers to be confidential, the Lender shall give notice thereof to the
Borrower and shall not be obligated to include in such form or document such
confidential information.

            (f) For any period with respect to which a Lender has failed to
provide the Borrower with the appropriate form described in Section 2.14(e)
(OTHER THAN if such failure is due to a change in law occurring subsequent to
the date on which a form originally was required to be provided, or if such form
otherwise is not required under subsection (e) above), such Lender shall not be
entitled to indemnification under Section 2.14(a) or (c) with respect to Taxes
imposed by the United States by reason of such failure; PROVIDED, HOWEVER, that
should a Lender become subject to Taxes because of its failure to deliver a form
required hereunder, the Borrower shall take such steps as the Lender shall
reasonably request to assist the Lender to recover such Taxes.

            (g) Any Lender claiming any additional amounts payable pursuant to
this Section 2.14 agrees to use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
Eurodollar Lending Office if the making of such a change would avoid the need
for, or reduce the amount of, any such additional amounts that may thereafter
accrue and would not, in the reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender.

            SECTION 2.15. SHARING OF PAYMENTS, ETC. If any Lender shall obtain
any payment (whether voluntary, involuntary, through the exercise of any right
of set-off, or otherwise) on account of the Committed Advances owing to it
(other than pursuant to Section 2.11, 2.14 or 9.04(c)) in excess of its ratable
share of payments on account of the Committed Advances obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such
participations in the Committed Advances owing to them as shall be necessary to
cause such purchasing Lender to share the excess payment ratably with each of
them; PROVIDED, HOWEVER, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and such Lender shall repay to the purchasing Lender the
purchase price to the extent of such recovery together with an amount equal to
such Lender's ratable share (according to the proportion of (i) the amount of
such Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.15 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.

            SECTION 2.16. USE OF PROCEEDS. The proceeds of the Advances shall be
available (and the Borrower agrees that it shall use such proceeds) to finance
the acquisition of Grolier Incorporated, a Delaware corporation.

                                 ARTICLE III
                   CONDITIONS TO EFFECTIVENESS AND LENDING

            SECTION 3.01. CONDITIONS PRECEDENT TO EFFECTIVENESS OF SECTIONS 2.01
AND 2.03. Sections 2.01 and 2.03 of this Agreement shall become effective on and
as of the first date (the "Effective Date") on which the following conditions
precedent have been satisfied:

            (a) There shall have occurred no Material Adverse Change since May
      31, 1999.

            (b) There shall exist no action, suit, investigation, litigation or
      proceeding affecting the Holding Company or any of its Subsidiaries
      pending or threatened before any court, governmental agency or arbitrator
      that (i) would be reasonably likely to have a Material Adverse Effect or
      (ii) purports to affect the legality, validity or enforceability of this
      Agreement or any Note or the consummation of the transactions contemplated
      hereby.

            (c) Nothing shall have come to the attention of the Lenders during
      the course of their due diligence investigation to lead them to believe
      that the Information Memorandum was or has become misleading, incorrect or
      incomplete in any material respect; without limiting the generality of the
      foregoing, the Lenders shall have been given such access to the
      management, records, books of account, contracts and properties of the
      Guarantor and its Subsidiaries as they shall have requested.

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

            (e) The Borrower shall have notified each Lender and the Agent in
      writing as to the proposed Effective Date.

                                       20

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

            (g) On the Effective Date, the following statements shall be true
      and the Agent shall have received for the account of each Lender a
      certificate signed by a duly authorized officer of the Holding Company,
      dated the Effective Date, stating that:

                  (i) The representations and warranties contained in Section
            4.01 are correct on and as of the Effective Date, and

                  (ii) No event has occurred and is continuing that constitutes
            a Default.

            (h) The Agent shall have received on or before the Effective Date
      the following, each dated such day, in form and substance satisfactory to
      the Agent and (except for the Committed Notes) in sufficient copies for
      each Lender:

                  (i) The Committed Notes to the order of the Lenders.

                  (ii) a copy of the certificate of incorporation of each of the
            Borrower and the Guarantor, and all modifications, amendments and
            restatements thereof, certified as of a recent date by the Secretary
            of State of its state of incorporation;

                  (iii) a copy of the by-laws of each of the Borrower and the
            Guarantor, together with all modifications, amendments and
            restatements thereof, certified as of a recent date by its
            Secretary;

                  (iv) a certificate of the Secretary of State of the state of
            incorporation of each of the Borrower and the Guarantor, dated as of
            a recent date, as to its existence and good standing;

                  (v) Certified copies of the resolutions of the Board of
            Directors of each or the Borrower and the Guarantor approving this
            Agreement and, in the case of the Borrower, the Notes, and of all
            documents evidencing other necessary corporate action and
            governmental approvals, if any, with respect to this Agreement and
            the Notes.

                  (vi) A certificate of the Secretary or an Assistant Secretary
            of each of the Borrower and the Guarantor certifying the names and
            true signatures of the officers of the Borrower or the Guarantor, as
            the case may be, authorized to sign this Agreement and, in the case
            of the Borrower, the Notes, and the other documents to be delivered
            hereunder.

                  (vii) A favorable opinion of Charles Deull, Senior Vice
            President, General Counsel of the Guarantor, substantially in the
            form of Exhibit D hereto and as to such other matters as any Lender
            through the Agent may reasonably request.

                  (viii) A favorable opinion of Shearman & Sterling, counsel for
            the Agent, in form and substance satisfactory to the Agent.

            (i) All of the conditions precedent to the Stock Purchase Agreement
      shall have been satisfied, including, without limitation, expiration or
      termination of the applicable waiting period under the Hart-Scott-Rodino
      Act and receipt of all applicable approvals.

            SECTION 3.02. CONDITIONS PRECEDENT TO EACH COMMITTED BORROWING. The
obligation of each Lender to make a Committed Advance on the occasion of each
Committed Borrowing (including the initial Borrowing) shall be subject to the
conditions precedent that the Effective Date shall have occurred and on the date
of such Borrowing (a) the following statements shall be true (and each of the
giving of the applicable Notice of

                                       21

Committed Borrowing and the acceptance by the Borrower of the proceeds of such
Borrowing shall constitute a representation and warranty by the Borrower that on
the date of such Borrowing such statements are true):

            (i) the representations and warranties contained in Section 4.01 are
      correct on and as of such date before and after giving effect to such
      Borrowing and to the application of the proceeds therefrom, as though made
      on and as of such date; and

            (ii) no event has occurred and is continuing, or would result from
      such Borrowing or from the application of the proceeds therefrom, that
      constitutes a Default;

and (b) the Agent shall have received such other approvals, opinions or
documents as any Lender through the Agent may reasonably request.

            SECTION 3.03. CONDITIONS PRECEDENT TO EACH COMPETITIVE BID
BORROWING. The obligation of each Lender that is to make a Competitive Bid
Advance on the occasion of a Competitive Bid Borrowing to make such Competitive
Bid Advance as part of such Competitive Bid Borrowing is subject to the
conditions precedent that (i) the Agent shall have received the written
confirmatory Notice of Competitive Bid Borrowing with respect thereto, (ii) on
or before the date of such Competitive Bid Borrowing, but prior to such
Competitive Bid Borrowing, the Agent shall have received a Competitive Bid Note
payable to the order of such Lender for each of the one or more Competitive Bid
Advances to be made by such Lender as part of such Competitive Bid Borrowing, in
a principal amount equal to the principal amount of the Competitive Bid Advance
to be evidenced thereby and otherwise on such terms as were agreed to for such
Competitive Bid Advance in accordance with Section 2.03, and (iii) on the date
of such Competitive Bid Borrowing the following statements shall be true (and
each of the giving of the applicable Notice of Competitive Bid Borrowing and the
acceptance by the Borrower of the proceeds of such Competitive Bid Borrowing
shall constitute a representation and warranty by the Borrower that on the date
of such Competitive Bid Borrowing such statements are true):

            (a) the representations and warranties contained in Section 4.01 are
      correct on and as of the date of such Competitive Bid Borrowing, before
      and after giving effect to such Competitive Bid Borrowing and to the
      application of the proceeds therefrom, as though made on and as of such
      date, and

            (b) no event has occurred and is continuing, or would result from
      such Competitive Bid Borrowing or from the application of the proceeds
      therefrom, that constitutes a Default.

            SECTION 3.04. DETERMINATIONS UNDER SECTION 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Agent responsible for the transactions contemplated by the Loan Documents
shall have received notice from such Lender prior to the date that the Borrower,
by notice to the Lenders, designates as the proposed Effective Date, specifying
its objection thereto. The Agent shall promptly notify the Lenders of the
occurrence of the Effective Date.

                                   ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES

            SECTION  4.01.  REPRESENTATIONS  AND  WARRANTIES  OF THE BORROWER.
The Borrower represents and warrants as follows:

            (a) Each of the Borrower and the Guarantor is a corporation duly
      organized, validly existing and in good standing under the laws of the
      State of its incorporation.

            (b) The execution, delivery and performance by each of the Borrower
      and the Guarantor of this Agreement and the other Loan Documents to be
      delivered by it, and the consummation of the transactions contemplated
      hereby, are within the Borrower's or the Guarantor's corporate powers,
      have been duly authorized by all necessary corporate action, and do not
      contravene (i) the Borrower's or the

                                       22

      Guarantor's charter or by-laws or (ii) law or any contractual restriction
      binding on or affecting either of the Borrower or the Guarantor.

            (c) This Agreement has been, and each of the other Loan Documents to
      be delivered by it when delivered hereunder will have been, duly executed
      and delivered by the Borrower and the Guarantor. This Agreement is, and
      each of the other Loan Documents when delivered hereunder will be, the
      legal, valid and binding obligation of each of the Borrower and the
      Guarantor party thereto enforceable against the Borrower or the Guarantor,
      as the case may be, in accordance with their respective terms.

            (d) No authorization or approval or other action by, and no notice
      to or filing with, any governmental authority or regulatory body or any
      other third party is required for the due execution, delivery and
      performance by either the Borrower or the Guarantor of this Agreement or
      the other Loan Documents to be delivered by it.

            (e) There is no pending or threatened action, suit, investigation,
      litigation or proceeding, including, without limitation, any Environmental
      Claim, affecting the Holding Company or any of its Subsidiaries before any
      court, governmental agency or arbitrator that (i) would be reasonably
      likely to have a Material Adverse Effect or (ii) purports to affect the
      legality, validity or enforceability of this Agreement or any Note or the
      consummation of the transactions contemplated hereby.

            (f) The Consolidated balance sheet of the Holding Company and its
      Subsidiaries as at May 31, 1999, and the related Consolidated statements
      of income and cash flows of the Holding Company and its Subsidiaries for
      the fiscal year then ended, accompanied by an opinion of Ernst & Young
      LLP, independent public accountants, the consolidating balance sheet of
      the Holding Company and its Subsidiaries as at May 31, 1999, and the
      related consolidating statements of income and cash flows of the Holding
      Company and its Subsidiaries for the fiscal year then ended, duly
      certified by the chief financial officer of the Holding Company, and the
      Consolidated and consolidating balance sheet of the Holding Company and
      its Subsidiaries as at February 29, 2000, and the related Consolidated and
      consolidating statements of income and cash flows of the Holding Company
      and its Subsidiaries for the nine months then ended, duly certified by the
      chief financial officer of the Holding Company, copies of which have been
      furnished to each Lender, fairly present, subject, in the case of said
      balance sheet as at February 29, 2000, and said statements of income and
      cash flows for the nine months then ended, to year-end audit adjustments,
      the Consolidated financial condition of the Holding Company and its
      Subsidiaries as at such dates and the Consolidated results of the
      operations of the Holding Company and its Subsidiaries for the periods
      ended on such dates, all in accordance with generally accepted accounting
      principles consistently applied. Since May 31, 1999, there has been no
      Material Adverse Change.

            (g) Each of the Borrower, the Guarantor and their Subsidiaries has
      good, marketable fee or leasehold title (as applicable) or ownership
      interest to all of the material assets and properties of the Borrower, the
      Guarantor and their Subsidiaries, free and clear of all Liens, other than
      Liens permitted by the Loan Documents.

            (h) The operations and properties of each of the Borrower, the
      Guarantor and each of their Subsidiaries comply in all material respects
      with all applicable Environmental Laws, all past non-compliance with such
      Environmental Laws has been resolved without material ongoing obligations
      or costs, and no circumstances exist that could reasonably be likely to
      (i) form the basis of an Environmental Claim against the Borrower, the
      Guarantor or any of their Subsidiaries or any of their properties that
      could have a Material Adverse Effect or (ii) cause any such property to be
      subject to any restrictions on ownership, occupancy, use or
      transferability under any Environmental Law that could have a Material
      Adverse Effect.

            (i) Set forth on Schedule 4.01(i) hereto is a complete and accurate
      list of all Subsidiaries of each of the Borrower and the Guarantor as of
      the date hereof, showing (as to each such Subsidiary) the jurisdiction of
      its incorporation. All of the outstanding capital stock and other
      ownership interests (other

                                       23

      than directors qualifying shares) in each of the Borrower's and the
      Guarantor's Subsidiaries has been validly issued, are fully paid and
      non-assessable and are owned by the Borrower, the Guarantor or one or more
      of their Subsidiaries free and clear of all Liens and, as of the date
      hereof, free of any outstanding options, warrants, rights of conversion or
      purchase or similar rights.

            (j) Each of the outstanding securities issued by the Holding Company
      was duly authorized and validly issued, is fully paid and non-assessable,
      and is not and will not be subject to any preemptive or similar right or
      restriction. Each of those outstanding securities was acquired from the
      issuer in a transaction in compliance with the Securities Act of 1933, as
      amended, and other applicable laws.

            (k) Neither the Borrower nor the Guarantor is engaged in the
      business of extending credit for the purpose of purchasing or carrying
      margin stock (within the meaning of Regulation U issued by the Board of
      Governors of the Federal Reserve System), and no proceeds of any Advance
      will be used to purchase or carry any margin stock or to extend credit to
      others for the purpose of purchasing or carrying any margin stock.

            (l) Neither the Borrower nor the Guarantor is an "investment
      company", or a company "controlled" by an "investment company", within the
      meaning of the Investment Company Act of 1940, as amended.

                                  ARTICLE V
                           COVENANTS OF THE GUARANTOR

            SECTION 5.01. AFFIRMATIVE COVENANTS. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, the Guarantor
will:

            (a) REPORTING REQUIREMENTS. Provide to the Lenders the following:

                  (i) promptly after the commencement thereof, notice of all
            actions and proceedings before any court, governmental agency or
            arbitrator affecting either the Guarantor or any of its Subsidiaries
            of the type described in Section 4.01(e);

                  (ii) as soon as possible and in any event within five days
            after the occurrence of each Default continuing on the date of such
            statement, a statement of the chief financial officer of the Holding
            Company setting forth details of such Default and the action that
            the Borrower and the Guarantor have taken and proposes to take with
            respect thereto and any other event that would be reasonably likely
            to have or has had a Material Adverse Effect.

                  (iii) as soon as available and in any event within 60 days
            after the end of each of the first three quarters of each fiscal
            year of the Holding Company, the Consolidated balance sheet of the
            Holding Company and its Subsidiaries as of the end of such quarter
            and Consolidated statements of income and cash flows of the Holding
            Company and its Subsidiaries for the period commencing at the end of
            the previous fiscal year and ending with the end of such quarter,
            duly certified (subject to year-end audit adjustments) by the chief
            executive officer, the chief financial officer, the vice-president
            finance and investor relations or the vice-president controller of
            the Holding Company as having been prepared in accordance with
            generally accepted accounting principles and certificates of the
            chief executive officer, the chief financial officer, the
            vice-president finance and investor relations or the vice-president
            controller of the Holding Company in substantially the form of
            Exhibit E as to compliance with the terms of this Agreement and
            setting forth in reasonable detail the calculations necessary to
            demonstrate compliance with Sections 5.02(e) and 5.03, PROVIDED that
            in the event of any change in GAAP used in the preparation of such
            financial statements, the Holding Company shall also provide, if
            necessary for the

                                       24

            determination of compliance with Section 5.03, a statement of
            reconciliation conforming such financial statements to GAAP;

                  (iv) as soon as available and in any event within 90 days
            after the end of each fiscal year of the Holding Company, (A) a copy
            of the annual audit report for such year for the Holding Company and
            its Subsidiaries, containing the Consolidated balance sheet of the
            Holding Company and its Subsidiaries as of the end of such fiscal
            year and Consolidated statements of income and cash flows of the
            Holding Company and its Subsidiaries for such fiscal year, in each
            case accompanied by an opinion by Ernst & Young LLP or other
            independent public accountants of recognized standing regularly
            retained by the Borrower and the Guarantor to audit their books and
            reasonably acceptable to the Required Lenders, (B) the consolidating
            balance sheet of the Holding Company and its Subsidiaries as of the
            end of such fiscal year and consolidating statements of income and
            cash flows of the Holding Company and its Subsidiaries for such
            fiscal year and (C) certificates of the chief executive officer, the
            chief financial officer, the vice-president finance and investor
            relations or the vice-president controller of the Holding Company in
            substantially the form of Exhibit E as to compliance with the terms
            of this Agreement and setting forth in reasonable detail the
            calculations necessary to demonstrate compliance with Sections
            5.02(e) and 5.03, PROVIDED that in the event of any change in GAAP
            used in the preparation of such financial statements, the Holding
            Company shall also provide, if necessary for the determination of
            compliance with Section 5.03, a statement of reconciliation
            conforming such financial statements to GAAP;

                  (v) promptly after the sending or filing thereof, copies of
            all quarterly and annual reports and proxy solicitations that the
            Holding Company sends to its public securityholders generally, and
            copies of all reports on Form 8-K and registration statements for
            the public offering of securities that the Holding Company or any
            Subsidiary files with the Securities and Exchange Commission or any
            national securities exchange; and

                  (vi) such other information respecting the Borrower, the
            Guarantor or any of their Subsidiaries as any Lender through the
            Agent may from time to time reasonably request.

            (b) VISITATION RIGHTS. At any reasonable time and from time to time,
      permit the Agent or any of the Lenders or any agents or representatives
      thereof, to examine and make copies of and abstracts from the records and
      books of account of, and visit the properties of, the Guarantor and any of
      its Subsidiaries, and to discuss the affairs, finances and accounts of the
      Guarantor and any of its Subsidiaries with any of their officers or
      directors and with their independent certified public accountants.

            (c) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain,
      and cause each of its Significant Subsidiaries to preserve and maintain,
      its corporate existence, rights (charter and statutory) and franchises;
      PROVIDED, HOWEVER, that the Guarantor and its Subsidiaries may consummate
      any merger or consolidation permitted under Section 5.02(c) and PROVIDED
      FURTHER that neither the Guarantor nor any of its Significant Subsidiaries
      shall be required to preserve any right or franchise if (x) the Board of
      Directors of the Guarantor or such Significant Subsidiary shall determine
      that the preservation thereof is no longer desirable in the conduct of the
      business of the Guarantor or such Significant Subsidiary, as the case may
      be, and that the loss thereof is not disadvantageous in any material
      respect to the Borrower, the Guarantor or the Lenders or (y) in any
      jurisdiction the failure to do so would not be reasonably likely to have a
      Material Adverse Effect.

            (d) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its
      Subsidiaries to comply, in all material respects, with all applicable
      laws, rules, regulations and orders, such compliance to include, without
      limitation, compliance with ERISA and Environmental Laws other than to the
      extent the noncompliance therewith or violation thereof would not be
      reasonably likely to have a Material Adverse Effect.

                                       25

            (e) PAYMENT OF TAXES, ETC. Pay and discharge, and cause each of its
      Subsidiaries to pay and discharge, before the same shall become
      delinquent, (i) all taxes, assessments and governmental charges or levies
      imposed upon it or upon its property unless such failure to pay or
      discharge would not be reasonably likely to have a significant adverse
      effect on the business of the Guarantor and its Subsidiaries taken as a
      whole and (ii) all lawful claims that, if unpaid, might by law become a
      Lien upon its property unless such failure to pay or discharge would not
      be reasonably likely to have a Material Adverse Effect; PROVIDED, HOWEVER,
      that neither the Guarantor nor any of its Subsidiaries shall be required
      to pay or discharge any such tax, assessment, charge or claim that is
      being contested in good faith and by proper proceedings and as to which
      appropriate reserves are being maintained, unless and until any Lien
      resulting therefrom attaches to its property and becomes enforceable
      against its other creditors.

            (f) MAINTENANCE OF INSURANCE. Maintain, and cause each of its
      Subsidiaries to maintain, insurance with responsible and reputable
      insurance companies or associations in such amounts and covering such
      risks (excluding publisher's liability insurance) as is usually carried by
      companies engaged in similar businesses and owning similar properties in
      the same general areas in which the Guarantor or such Subsidiary operates.

            (g) KEEPING OF BOOKS. Maintain, and cause each of its Subsidiaries
      to maintain, a standard system of accounting in accordance with generally
      accepted accounting principles consistently applied.

            (h) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve, and cause
      each of its Subsidiaries to maintain and preserve, all of its properties
      that are used or useful in the conduct of its business in good working
      order and condition, ordinary wear and tear excepted, other than to the
      extent any such failure to maintain and preserve would not be reasonably
      likely to have a Material Adverse Effect.

            SECTION 5.02. NEGATIVE COVENANTS. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, the Guarantor
will not:

            (a) LIENS, ETC. Create or suffer to exist, or permit any of its
      Subsidiaries to create or suffer to exist, any Lien on or with respect to
      any of its properties, whether now owned or hereafter acquired, or assign,
      or permit any of its Subsidiaries to assign, any right to receive income,
      other than:

                  (i) Permitted Liens,

                  (ii) purchase money Liens (including leases treated as
            security interests) upon or in any real property or equipment
            acquired or held by the Guarantor or any Subsidiary in the ordinary
            course of business to secure the purchase price of such property or
            equipment or to secure Debt incurred solely for the purpose of
            financing the acquisition of such property or equipment, or Liens
            existing on such property or equipment at the time of its
            acquisition (other than any such Liens created in contemplation of
            such acquisition that were not incurred to finance the acquisition
            of such property) or extensions, renewals or replacements of any of
            the foregoing for the same or a lesser amount, PROVIDED, HOWEVER,
            that no such Lien shall extend to or cover any properties of any
            character other than the real property or equipment being acquired,
            and no such extension, renewal or replacement shall extend to or
            cover any properties not theretofore subject to the Lien being
            extended, renewed or replaced;

                  (iii) the Liens existing on the Effective Date and described
            on Schedule 5.02(a) hereto;

                  (iv) Liens on property of a Person existing at the time such
            Person is merged into or consolidated with the Guarantor or any
            Subsidiary of the Guarantor or becomes a Subsidiary of the
            Guarantor; PROVIDED that such Liens were not created in
            contemplation of such merger, consolidation or acquisition and do
            not extend to any assets other than those of the Person so

                                       26

            merged into or consolidated with the Guarantor or such Subsidiary or
            acquired by the Guarantor or such Subsidiary;

                  (v) other Liens securing Debt in an aggregate principal amount
            not to exceed $10,000,000 at any time outstanding;

                  (vi) Liens incurred in respect of judgments and awards
            discharged within 30 days from the making thereof or under review in
            an appropriate forum so long as enforcement thereof is effectively
            stayed;

                  (vii) Liens incurred in respect of rental or security
            deposits; and

                  (viii) the replacement, extension or renewal of any Lien
            permitted by clause (iii) or (iv) above upon or in the same property
            theretofore subject thereto or the replacement, extension or renewal
            (without increase in the amount or change in any direct or
            contingent obligor) of the Debt secured thereby.

            (b) SALES, ETC. OF ASSETS. Sell, lease, transfer or otherwise
      dispose of, or permit any of its Subsidiaries to sell, lease, transfer or
      otherwise dispose of, any assets, or grant any option or other right to
      purchase, lease or otherwise acquire any assets, except (i) sales of
      inventory and equipment in the ordinary course of its business, (ii) in a
      transaction authorized by subsection (c) of this Section, (iii) sales of
      assets for fair value in an aggregate amount not to exceed $35,000,000 and
      (iv) the sale of either (x) the real property located at 557 Broadway, New
      York, New York or (y) the real property comprising the distribution center
      located in Jefferson City, Missouri, in each case, for fair value in
      connection with any sale-leaseback transaction.

            (c) MERGERS, ETC. Merge or consolidate with or into any Person, or
      permit any of its Subsidiaries to do so, except that (i) any Subsidiary of
      the Guarantor (other than the Borrower) may merge or consolidate with or
      into any other Subsidiary of the Guarantor, (ii) any Subsidiary of the
      Guarantor (other than the Borrower) may merge into the Guarantor and (iii)
      either of the Borrower or the Guarantor may merge with any other Person so
      long as the Borrower or the Guarantor, as the case may be, is the
      surviving corporation, PROVIDED, in each case, that no Default shall have
      occurred and be continuing at the time of such proposed transaction or
      would result therefrom.

            (d) CHANGE IN NATURE OF BUSINESS. Make, or permit any of its
      Subsidiaries to make, any material change in the nature of the business of
      the Guarantor and its Subsidiaries, taken as a whole, as carried on at the
      date hereof.

            (e) DIVIDENDS, ETC. Declare or make any dividend payment or other
      distribution of assets, properties, cash, rights, obligations or
      securities on account of any shares of any class of capital stock of the
      Holding Company, or purchase, redeem or otherwise acquire for value (other
      than any redemption or repurchase of the Holding Company's outstanding 5%
      convertible subordinated debentures due August 15, 2005, as in effect on
      the date hereof, pursuant to the application of the change of control
      provision contained therein, or any substantially identical provision
      contained in any subsequent issuance of convertible Debt) (or permit any
      of its Subsidiaries to do so) any shares of any class of capital stock of
      the Holding Company or any warrants, rights or options to acquire any such
      shares, now or hereafter outstanding, except that, so long as no Default
      shall have occurred and be continuing at the time of any action described
      below or would result therefrom, the Holding Company may (i) declare and
      make any dividend payment or other distribution payable in common stock of
      the Holding Company and (ii) declare or pay cash dividends to its
      stockholders and
       purchase, redeem or otherwise acquire shares of its common stock or
      warrants, rights or options to acquire any such shares in an amount equal
      to the sum of (A) the aggregate amount of cash received and net tax
      benefit received from the exercise by employees of the Guarantor and its
      Subsidiaries of stock options or the purchase of shares of stock under the
      employee stock purchase plan after May 31, 1998, (B) 25% of the reduction
      in Debt from the conversion to equity of the

                                       27

      Holding Company's outstanding 5% convertible subordinated debentures due
      August 15, 2005, (C) 25% of the stated value of any preferred stock
      converted to common equity and (D) the lesser of (x) 50% of net income of
      the Holding Company and its Subsidiaries arising after May 31, 1998 and
      computed on a cumulative Consolidated basis and (y) $75,000,000.

            (f) TRANSACTIONS WITH AFFILIATES. Conduct, and cause each of its
      Subsidiaries to conduct, any transactions otherwise permitted under this
      Agreement with any of their unconsolidated Affiliates other than on terms
      that are fair and reasonable and no less favorable to the Guarantor or
      such Subsidiary than it would obtain in a comparable arm's-length
      transaction with a Person not an Affiliate.

            (g) ACCOUNTING CHANGES. Make or permit, or permit any of its
      Subsidiaries to make or permit, any change in accounting policies or
      reporting practices, except as required or permitted by generally accepted
      accounting principles.

            SECTION 5.03. FINANCIAL COVENANTS. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, the Guarantor
will:

            (a) CONSOLIDATED DEBT RATIO. Maintain at all times a Consolidated
      Debt Ratio of not more than the ratio set forth below for each period set
      forth below:

                  --------------------------------------------------
                       FISCAL QUARTER ENDING            RATIO
                  --------------------------------------------------
                  August 31, 2000                 0.690 to 1.00
                  --------------------------------------------------
                  November 30, 2000               0.660 to 1.00
                  --------------------------------------------------
                  February 28, 2001               0.660 to 1.00
                  --------------------------------------------------
                  May 31, 2001                    0.625 to 1.00
                  --------------------------------------------------
                  August 31, 2001                 0.650 to 1.00
                  --------------------------------------------------
                  November 30, 2001               0.625 to 1.00
                  --------------------------------------------------
                  February 28, 2002               0.625 to 1.00
                  --------------------------------------------------
                  May 31, 2002                    0.600 to 1.00
                  --------------------------------------------------

            (b) CONSOLIDATED INTEREST COVERAGE RATIO. Maintain as at the last
      day of each of its fiscal quarters a Consolidated Interest Coverage Ratio
      of not less than the ratio set forth below for each period set forth
      below:

                  --------------------------------------------------
                       FISCAL QUARTER ENDING            RATIO
                  --------------------------------------------------
                  August 31, 2000                 3.50 to 1.00
                  --------------------------------------------------
                  November 30, 2000               3.50 to 1.00
                  --------------------------------------------------
                  February 28, 2001               3.50 to 1.00
                  --------------------------------------------------

                                       28

                  --------------------------------------------------
                  May 31, 2001                    3.30 to 1.00
                  --------------------------------------------------
                  August 31, 2001                 3.30 to 1.00
                  --------------------------------------------------
                  November 30, 2001               3.50 to 1.00
                  --------------------------------------------------
                  February 28, 2002               3.50 to 1.00
                  --------------------------------------------------
                  May 31, 2002                    3.50 to 1.00
                  --------------------------------------------------

                                   ARTICLE VI

                              EVENTS OF DEFAULT

            SECTION 6.01. EVENTS OF DEFAULT. If any of the following events
("EVENTS OF DEFAULT") shall occur and be continuing:

            (a) any representation or warranty made in this Agreement or any
      other Loan Document shall prove to have been false or misleading in any
      material respect when made (or deemed made); or

            (b) any report, statement, certificate, schedule or other document
      or information furnished (whether prior to, on or after the Effective
      Date) in connection with this Agreement or any of the other Loan Documents
      shall prove to have been false or misleading in any material respect when
      furnished (or deemed furnished); or

            (c) any default, whether in whole or in part, shall occur in the
      payment of the principal of the Committed Advances, or shall occur and
      continue for more than three Business Days in the payment of any interest
      on or any other amount respecting the Advances or any of the other
      obligations of the Borrower under the Loan Documents; or

            (d) any default, whether in whole or in part, shall occur in the due
      observance or performance of any covenant, term or provision to be
      performed (i) under Sections 5.01(a)(ii), 5.02(e) or 5.03 of this
      Agreement or (ii) under Sections 5.01(b) or 5.02 of this Agreement (other
      than under Section 5.02(f) hereof) and such default described in this
      clause (ii) shall continue for a period of five Business Days after the
      earlier of notice thereof to or knowledge thereof by either the Borrower
      or the Guarantor; or

            (e) any default, whether in whole or in part, shall occur in the due
      observance or performance of any other covenant, term or provision to be
      performed under this Agreement and the other Loan Documents by either the
      Borrower or the Guarantor or any other party thereto (other than any
      Lender), which default is not described in any other subsection of this
      Section, and such default shall continue for a period of ten days after
      the earlier of notice thereof to or knowledge thereof by either the
      Borrower or the Guarantor; PROVIDED, HOWEVER, that if such default is
      capable of being cured and if the Borrower and the Guarantor shall have
      commenced to cure such default within such period and shall proceed
      continuously in good faith and with due diligence to cure such default,
      then such period instead shall be thirty days; or

            (f) (i) any payment default of $1,000,000 or more shall occur under
      any instrument or agreement (other than a Loan Document) respecting any
      Debt of the Guarantor or any of its Subsidiaries, unless payment shall be
      made or action shall be taken within three Business Days after such
      default in an

                                       29

      amount or manner sufficient to cure it, PROVIDED that such payment or
      action will not result in a breach of any term or provision of this
      Agreement and the other Loan Documents, with the various financial
      measurements and covenants set forth in Section 5.03 of this Agreement
      being recalculated on a pro forma basis (from the then most recent
      quarterly or subsequent pro forma calculations) to include the effect of
      any such payment or (ii) any Debt of the Guarantor or of any of its
      Subsidiaries of $5,000,000 or more in principal or notional amount shall
      be accelerated or otherwise become due or be required to be prepaid,
      repurchased or redeemed (other than pursuant to a regularly scheduled
      mandatory prepayment, repurchase or redemption or the application of the
      change of control provision contained in the Holding Company's outstanding
      5% convertible subordinated debentures due August 15, 2005, as in effect
      on the date hereof, or any substantially identical provision contained in
      any subsequent issuance of debt) prior to its scheduled maturity; or

            (g) the Guarantor or any of its Subsidiaries shall (i) fail or be
      unable to pay its debts generally as they become due, (ii) make a general
      assignment for the benefit of its creditors, (iii) apply for or consent to
      the appointment of a receiver, trustee, assignee, custodian, sequestrator,
      liquidator or similar official for itself or any of its assets and
      properties, (iv) commence a voluntary case for relief as a debtor under
      the United States Bankruptcy Code, (v) file with or otherwise submit to
      any governmental authority any petition, answer or other document seeking
      (A) reorganization, (B) an arrangement with creditors or (C) to take
      advantage of any other present or future applicable law respecting
      bankruptcy, reorganization, insolvency, readjustment of debts, relief of
      debtors, dissolution or liquidation, (vi) file or otherwise submit any
      answer or other document admitting or failing to contest the material
      allegations of a petition or other document filed or otherwise submitted
      against it in any proceeding under any such applicable law, (vii) be
      adjudicated a bankrupt or insolvent, or (viii) take any action for the
      purpose of effecting any of the foregoing; or

            (h) any case, proceeding or other action shall be commenced against
      the Guarantor or any of its Subsidiaries for the purpose of effecting, or
      an order, judgment or decree shall be entered by any court of competent
      jurisdiction approving (in whole or in part), anything specified in
      subsection (g) of this Section, or any receiver, trustee, assignee,
      custodian, sequestrator, liquidator or other official shall be appointed
      with respect to the Guarantor or any of its Subsidiaries, or shall be
      appointed to take or shall otherwise acquire possession or control of all
      or a substantial part of the assets and properties of the Guarantor or any
      of its Subsidiaries, and any of the foregoing shall continue unstayed and
      in effect for any period of sixty days; or

            (i) one or more final judgments for the payment of money in excess
      of an aggregate of $5,000,000 shall be rendered against the Guarantor or
      any of its Subsidiaries and the same shall remain undischarged for a
      period of thirty days during which levy and execution shall not be
      effectively stayed or contested in good faith; or

            (j) the Borrower or any ERISA Affiliate shall, or shall be
      reasonably expected to, incur liability as a result of one or more of the
      following: (i) the occurrence of any ERISA Event; (ii) the partial or
      complete withdrawal of the Borrower or any ERISA Affiliate from a
      Multiemployer Plan; or (iii) the reorganization or termination of a
      Multiemployer Plan; PROVIDED that any such event(s) (individually or in
      the aggregate with any other such event(s)) would be reasonably likely to
      have or has had (in the reasonable judgment of the Required Lenders) a
      Material Adverse Effect; or

            (k) the Holding Company shall own less than all of the outstanding
      securities issued by the Operating Company, or any other Person shall
      acquire any option, warrant or other right to acquire any of those
      securities; or

            (l) the Robinson Family shall cease to own (in the aggregate) at
      least fifty-one percent (51.00%) of the issued and outstanding shares of
      Class A Stock of the Holding Company; or any other Person shall acquire
      any option, warrant or other right to acquire (from the Robinson Family,
      the Holding

                                       30

      Company or otherwise) any securities issued by the Holding Company that,
      if exercised, would result in the Robinson Family holding less than 51% of
      such stock; or

            (m) the Board of Directors of the Holding Company shall submit to
      its shareholders for adoption, or the shareholders of the Holding Company
      shall adopt, any supplement, modification or amendment to or restatement
      of the certificate of incorporation or the by-laws of the Holding Company
      that would in any way directly or indirectly (i) alter the relative voting
      rights or powers of the classes of the capital stock of the Holding
      Company, (ii) add any additional classes of capital stock with any voting
      rights, or (iii) adversely affect the rights, powers, privileges, remedies
      or interests of the Agent or the Lenders under this Agreement or any other
      Loan Document, in any such case without the prior written consent of the
      Required Lenders;

then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the
obligation of each Lender to make Advances to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, (A) by notice to the Borrower, declare the
Notes, all interest thereon and all other amounts payable under this Agreement
to be forthwith due and payable, whereupon the Notes, all such interest and all
such amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower; PROVIDED, HOWEVER, that in the event of an actual or
deemed entry of an order for relief with respect to the Borrower under the
United States Bankruptcy Code, (1) the obligation of each Lender to make
Advances shall automatically be terminated and (2) the Notes, all such interest
and all such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.

                                   ARTICLE VII
                                    GUARANTY

            SECTION 7.01. GUARANTY. The Guarantor hereby absolutely,
unconditionally and irrevocably guarantees the punctual payment when due,
whether at scheduled maturity or on any date of a required prepayment or by
acceleration, demand or otherwise, of all obligations of the Borrower now or
hereafter existing under or in respect of this Agreement and the Notes
(including, without limitation, any extensions, modifications, substitutions,
amendments or renewals of any or all of the foregoing obligations), whether
direct or indirect, absolute or contingent, and whether for principal, interest,
premiums, fees, indemnities, contract causes of action, costs, expenses or
otherwise (such obligations being the "GUARANTEED OBLIGATIONS"), and agrees to
pay any and all expenses (including, without limitation, reasonable fees and
expenses of counsel) incurred by the Agent or any other Lender in enforcing any
rights under this Article VII. Without limiting the generality of the foregoing,
the Guarantor's liability shall extend to all amounts that constitute part of
the Guaranteed Obligations and would be owed by the Borrower to the Agent or any
Lender under or in respect of this Agreement or the Notes but for the fact that
they are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Borrower.

            SECTION 7.02. GUARANTY ABSOLUTE. The Guarantor guarantees that the
Guaranteed Obligations will be paid strictly in accordance with the terms of
this Agreement and the Notes, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of any Lender with respect thereto. The obligations of the Guarantor
under or in respect of this Article VII are independent of the Guaranteed
Obligations or any other obligations of any the Borrower under or in respect of
this Agreement and the Notes, and a separate action or actions may be brought
and prosecuted against the Guarantor to enforce this Article VII, irrespective
of whether any action is brought against the Borrower or whether the Borrower is
joined in any such action or actions. The liability of the Guarantor under this
Article VII shall be irrevocable, absolute and unconditional irrespective of,
and the Guarantor hereby irrevocably waives any defenses it may now have or
hereafter acquire in any way relating to, any or all of the following:

            (a) any lack of validity or enforceability of this Agreement (other
      than this Article VII), the Notes or any agreement or instrument relating
      thereto;

                                       31

            (b) subject to Section 9.01, any change in the time, manner or place
      of payment of, or in any other term of, all or any of the Guaranteed
      Obligations or any other obligations of the Borrower under or in respect
      of this Agreement or the Notes, or any other amendment or waiver of or any
      consent to departure from this Agreement or the Notes, including, without
      limitation, any increase in the Guaranteed Obligations resulting from the
      extension of additional credit to the Borrower or any of its Subsidiaries
      or otherwise;

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

            (d) any manner of application of collateral, or proceeds thereof, to
      all or any of the Guaranteed Obligations, or any manner of sale or other
      disposition of any collateral for all or any of the Guaranteed Obligations
      or any other obligations of the Borrower under this Agreement or the Notes
      or any other assets of the Borrower or any of its Subsidiaries;

            (e) any change, restructuring or termination of the corporate
      structure or existence of the Borrower or any of its Subsidiaries;

            (f) any failure of any Lender or the Agent to disclose to the
      Guarantor any information relating to the business, condition (financial
      or otherwise), operations, performance, properties or prospects of the
      Borrower now or hereafter known to such Lender or the Agent (the Guarantor
      waiving any duty on the part of the Lenders and the Agent to disclose such
      information); or

            (g) any other circumstance or any existence of or reliance on any
      representation by any Lender or the Agent that might otherwise constitute
      a defense available to, or a discharge of, the Borrower or any other
      guarantor or surety.

This Article VII shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by any Lender or the Agent or any other
Person upon the insolvency, bankruptcy or reorganization of the Borrower or
otherwise, all as though such payment had not been made.

            SECTION 7.03. WAIVERS AND ACKNOWLEDGMENTS. (a) The Guarantor hereby
unconditionally and irrevocably waives promptness, diligence, notice of
acceptance, presentment, demand for performance, notice of nonperformance,
default, acceleration, protest or dishonor and any other notice with respect to
any of the Guaranteed Obligations and this Article VII and any requirement that
any Lender or the Agent protect, secure, perfect or insure any Lien or any
property subject thereto or exhaust any right or take any action against the
Borrower or any other Person or any collateral.

            (b) The Guarantor hereby unconditionally and irrevocably waives any
right to revoke this Article VII and acknowledges that the guaranty under this
Article VII is continuing in nature and applies to all Guaranteed Obligations,
whether existing now or in the future.

            (c) The Guarantor hereby unconditionally and irrevocably waives (i)
any defense arising by reason of any claim or defense based upon an election of
remedies by any Lender or the Agent that in any manner impairs, reduces,
releases or otherwise adversely affects the subrogation, reimbursement,
exoneration, contribution or indemnification rights of the Guarantor or other
rights of the Guarantor to proceed against the Borrower, any other guarantor or
any other Person or any collateral and (ii) any defense based on any right of
set-off or counterclaim against or in respect of the obligations of the
Guarantor hereunder.

            (d) The Guarantor hereby unconditionally and irrevocably waives any
duty on the part of any Lender or the Agent to disclose to the Guarantor any
matter, fact or thing relating to the business, condition (financial or
otherwise), operations, performance, properties or prospects of the Borrower or
any of its Subsidiaries now or hereafter known by such Lender or the Agent.

                                       32

            (e) The Guarantor acknowledges that it will receive substantial
direct and indirect benefits from the financing arrangements contemplated by
this Agreement and the Notes and that the waivers set forth in Section 7.02 and
this Section 7.03 are knowingly made in contemplation of such benefits.

            SECTION 7.04. SUBROGATION AND CONTRIBUTION. The Guarantor covenants
and agrees that, until the obligations of the Borrower under this Agreement and
the other Loan Documents have been fully paid and satisfied, any and all
subrogation, contribution and other similar rights of the Borrower against or in
respect of (A) the Borrower, (B) any of the assets and properties of the
Borrower, or (C) any other co-obligor or indemnitor of any of the Borrower's
payments or obligations under any of the Loan Documents, whether now existing or
hereafter acquired or created, and whether resulting from any payment made by
the Borrower or otherwise, shall be subordinate and inferior in dignity and
deferred as to payment to the full payment and satisfaction of all of such
obligations. (However, such subordination of subrogation, contribution and
similar rights is not intended to include, and this Section is not intended to
affect, the intercompany advances and dividends permitted under this Agreement.)
The Guarantor shall not seek any payment or exercise or enforce any right,
power, privilege, remedy or interest that it may have with respect to any such
subrogation, contribution or other similar right except with the prior written
consent of the Agent (with the consent of the Required Lenders, as and if
required) and for the benefit of all of the Lenders. Any payment, asset or
property delivered to or for the benefit of the Guarantor in respect of any such
subrogation, contribution or other similar right shall be accepted in trust for
the benefit of all of the Lenders and shall be promptly paid or delivered to the
Agent (for the benefit of all of the Lenders) to be credited and applied to the
payment and satisfaction of the obligations of the Borrower under this Agreement
and the other Loan Documents, whether contingent, matured or unmatured, or to be
held by the Agent (for the benefit of all of the Lenders) as additional
collateral, as the Agent (with the consent of the Required Lenders, as and if
required) may elect in its sole and absolute discretion. If (i) the Guarantor
shall make payment to any Lender or the Agent of all or any part of the
Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other
amounts payable under this Article VII shall have been paid in full in cash and
(iii) the Termination Date shall have occurred, the Lenders and the Agent will,
at the Guarantor's request and expense, execute and deliver to the Guarantor
appropriate documents, without recourse and without representation or warranty,
necessary to evidence the transfer by subrogation to the Guarantor of an
interest in the Guaranteed Obligations resulting from such payment made by the
Guarantor pursuant to this Article VII.

            SECTION 7.05. CONTINUING GUARANTY; ASSIGNMENTS. The guaranty under
this Article VII is a continuing guaranty and shall (a) remain in full force and
effect until the later of (i) the payment in full of the Guaranteed Obligations
and all other amounts payable under this Article VII and (ii) the Termination
Date, (b) be binding upon the Guarantor, its successors and assigns and (c)
inure to the benefit of and be enforceable by the Lenders and the Agent and
their successors, transferees and assigns. Without limiting the generality of
clause (c) of the immediately preceding sentence, any Lender may assign or
otherwise transfer all or any portion of its rights and obligations under this
Agreement (including, without limitation, all or any portion of its Commitments,
the Advances owing to it and the Note or Notes held by it) to any other Person,
and such other Person shall thereupon become vested with all the benefits in
respect thereof granted to such Lender herein or otherwise, in each case as and
to the extent provided in Section 9.07. The Guarantor shall not have the right
to assign its rights hereunder or any interest herein without the prior written
consent of the Lenders.

                                       33

                                  ARTICLE VIII
                                  THE AGENT

            SECTION 8.01. AUTHORIZATION AND ACTION. Each Lender hereby appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers and discretion under this Agreement and the other Loan
Documents as are delegated to the Agent by the terms hereof, together with such
powers and discretion as are reasonably incidental thereto. As to any matters
not expressly provided for by the Loan Documents (including, without limitation,
enforcement or collection of the Notes), the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding upon all Lenders and all holders of Notes;
PROVIDED, HOWEVER, that the Agent shall not be required to take any action that
exposes the Agent to personal liability or that is contrary to this Agreement or
applicable law. The Agent agrees to give to each Lender prompt notice of each
notice given to it by the Borrower pursuant to the terms of this Agreement.

            SECTION 8.02. AGENT'S RELIANCE, ETC. Neither the Agent nor any of
its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with Loan
Documents, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent: (i) may treat
the Lender that made any Advance as the holder of the Debt resulting therefrom
until the Agent receives and accepts an Assignment and Acceptance entered into
by such Lender, as assignor, and an Eligible Assignee, as assignee, as provided
in Section 9.07; (ii) may consult with legal counsel (including counsel for the
Borrower), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (iii)
makes no warranty or representation to any Lender and shall not be responsible
to any Lender for any statements, warranties or representations (whether written
or oral) made in or in connection with the Loan Documents; (iv) shall not have
any duty (fiduciary or otherwise) to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of the
Loan Documents on the part of the Borrower or the Guarantor or to inspect the
property (including the books and records) of the Borrower or the Guarantor; (v)
shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Documents or any other instrument or document furnished pursuant hereto; (vi)
shall incur no liability under or in respect of any Loan Document by acting upon
any notice, consent, certificate or other instrument or writing (which may be by
telecopier, telegram or telex) believed by it to be genuine and signed or sent
by the proper party or parties; and (vii) shall be deemed not to have knowledge
of any Default unless and until written notice (including facsimile notice)
thereof is given to the Agent by the Borrower, the Guarantor or a Lender.

            SECTION 8.03. CITIBANK AND AFFILIATES. With respect to its
Commitment, the Advances made by it and the Note issued to it, Citibank shall
have the same rights and powers under the Loan Documents as any other Lender and
may exercise the same as though it were not the Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include Citibank in its
individual capacity. Citibank and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, accept investment banking
engagements from and generally engage in any kind of business with, the
Guarantor, any of its Subsidiaries and any Person who may do business with or
own securities of any the Guarantor or any such Subsidiary, all as if Citibank
were not the Agent and without any duty to account therefor to the Lenders.

            SECTION 8.04. LENDER CREDIT DECISION. Each Lender acknowledges that
it has, independently and without reliance upon the Agent or any other Lender
and based on the financial statements referred to in Section 4.01 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.

                                       34

            SECTION 8.05. INDEMNIFICATION. (a) The Lenders agree to indemnify
the Agent (to the extent not reimbursed by the Borrower), from and against such
Lender's ratable share (determined as provided below) of any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Agent in any way relating to or
arising out of the Loan Documents or any action taken or omitted by the Agent
under the Loan Documents (collectively, the "INDEMNIFIED COSTS"), PROVIDED that
no Lender shall be liable for any portion of the Indemnified Costs resulting
from the Agent's gross negligence or willful misconduct. Without limitation of
the foregoing, each Lender agrees to reimburse the Agent promptly upon demand
for its ratable share of any out-of-pocket expenses (including reasonable
counsel fees) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, to the
extent that the Agent is not reimbursed for such expenses by the Borrower. In
the case of any investigation, litigation or proceeding giving rise to any
Indemnified Costs, this Section 8.05 applies whether any such investigation,
litigation or proceeding is brought by the Agent, any Lender or a third party.

            (b) For purposes of this Section 8.05, the Lenders' respective
ratable shares of any amount shall be determined, at any time, according to
their respective Commitments at such time. The failure of any Lender to
reimburse any Agent promptly upon demand for its ratable share of any amount
required to be paid by the Lenders to such Agent as provided herein shall not
relieve any other Lender of its obligation hereunder to reimburse such Agent for
its ratable share of such amount, but no Lender shall be responsible for the
failure of any other Lender to reimburse such Agent for such other Lender's
ratable share of such amount. Without prejudice to the survival of any other
agreement of any Lender hereunder, the agreement and obligations of each Lender
contained in this Section 8.05 shall survive the payment in full of principal,
interest and all other amounts payable hereunder and under the other Loan
Documents.

            SECTION 8.06. SUCCESSOR AGENT. The Agent may resign at any time by
giving written notice thereof to the Lenders and the Borrower and may be removed
at any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days after
the retiring Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or of any State thereof and
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, discretion, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Article VII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.

            SECTION 8.07. OTHER AGENTS. Each Lender hereby acknowledges that
neither the syndication agent nor any other Lender designated as any "Agent" on
the signature pages hereof has any responsibility or liability hereunder other
than in its capacity as a Lender.

                                   ARTICLE IX
                                  MISCELLANEOUS

            SECTION 9.01. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement or the Committed Notes, nor consent to any departure
by the Borrower or the Guarantor therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Required Lenders, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; PROVIDED, HOWEVER, that no amendment,
waiver or consent shall, unless in writing and signed by all the Lenders, do any
of the following: (a) waive any of the conditions specified in Section 3.01, (b)
increase the Commitments of the Lenders or subject the Lenders to any additional
obligations, (c) reduce the principal of, or interest on, the Committed Advances
or any fees or other amounts payable hereunder, (d) postpone any date fixed for
any payment of principal of, or interest on, the Committed Advances or any fees
or other amounts payable hereunder, (e) change the percentage of the Commitments
or of the aggregate unpaid principal amount of the Committed Advances, or the
number of Lenders, that shall be required for the Lenders or any of them to take
any action hereunder or (f) amend this Section 9.01; and PROVIDED further that
no amendment, waiver or consent shall, unless in writing and signed by the Agent
in addition to the Lenders required above to take such action, affect the rights
or duties of the Agent under this Agreement or any Note.

            SECTION 9.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic or
telex communication) and mailed, telecopied, telegraphed, telexed or delivered,
if to the Holding Company or to the Operating Company, at its address at 555
Broadway, New York, New York 10012, Attention: Kevin McEnery, Chief Financial
Officer, and Charles Deull, Senior Vice President General Counsel. if to any
Initial Lender, at its Domestic Lending Office specified opposite its name on
Schedule I hereto; if to any other Lender, at its Domestic Lending Office
specified in the Assignment and Acceptance pursuant to which it became a Lender;
and if to the Agent, at its address at Two Penns Way, New Castle, Delaware
19720, Attention: Bank Loan Syndications Department; or, as to the Borrower, the
Guarantor or the Agent, at such other address as shall be designated by such
party in a written notice to the other parties and, as to each other party, at
such other address as shall be designated by such party in a written notice to
the Borrower and the Agent. All such notices and communications shall, when
mailed, telecopied, telegraphed or telexed, be effective when deposited in the
mails, telecopied, delivered to the telegraph company or confirmed by telex
answerback, respectively, except that notices and communications to the Agent
pursuant to Article II, III or VII shall not be effective until received by

                                       35

the Agent. Delivery by telecopier of an executed counterpart of any amendment or
waiver of any provision of this Agreement or the Notes or of any Exhibit hereto
to be executed and delivered hereunder shall be effective as delivery of a
manually executed counterpart thereof.

            SECTION 9.03. NO WAIVER; REMEDIES. No failure on the part of any
Lender or the Agent to exercise, and no delay in exercising, any right hereunder
or under any Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.

            SECTION 9.04. COSTS AND EXPENSES. (a) The Borrower agrees to pay on
demand all reasonable costs and expenses of the Agent in connection with the
preparation, execution, delivery, administration, modification and amendment of
the Loan Documents to be delivered hereunder, including, without limitation, the
reasonable fees and expenses of counsel for the Agent with respect thereto and
with respect to advising the Agent as to its rights and responsibilities under
the Loan Documents. The Borrower further agrees to pay on demand all reasonable
costs and expenses of the Agent and the Lenders, if any (including, without
limitation, reasonable counsel fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement, the Notes and the other Loan Documents to be delivered
hereunder, including, without limitation, reasonable fees and expenses of
counsel for the Agent and each Lender in connection with the enforcement of
rights under this Section 9.04(a).

            (b) The Borrower agrees to indemnify and hold harmless the Agent and
each Lender and each of their Affiliates and their officers, directors,
employees, agents and advisors (each, an "INDEMNIFIED PARTY") from and against
any and all claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and expenses of counsel) incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of (including, without limitation, in
connection with any investigation, litigation or proceeding or preparation of a
defense in connection therewith) (i) the Loan Documents, any of the transactions
contemplated herein or the actual or proposed use of the proceeds of the
Advances or (ii) the actual or alleged presence of Environmental Substances on
any property of the Guarantor or any of its Subsidiaries or any Environmental
Claim relating in any way to the Guarantor or any of its Subsidiaries, except to
the extent such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct. In the
case of an investigation, litigation or other proceeding to which the indemnity
in this Section 9.04(b) applies, such indemnity shall be effective whether or
not such investigation, litigation or proceeding is brought by the Borrower, its
directors, shareholders or creditors or an Indemnified Party or any other Person
or any Indemnified Party is otherwise a party thereto and whether or not the
transactions contemplated hereby are consummated. The Borrower also agrees that
no Indemnified Party shall have any liability (whether direct or indirect, in
contract, tort or otherwise) to the Borrower, the Guarantor or any of their
shareholders or creditors for or in connection with the transactions
contemplated hereby, except to the extent such liability is found in a final
nonappealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct.

                                       36

            (c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance or LIBO Rate Advance is made by the Borrower to or for the account
of a Lender other than on the last day of the Interest Period for such Advance,
as a result of a payment or Conversion pursuant to Section 2.08(d) or (e), 2.10
or 2.12, acceleration of the maturity of the Notes pursuant to Section 6.01 or
for any other reason, or by an Eligible Assignee to a Lender other than on the
last day of the Interest Period for such Advance upon an assignment of rights
and obligations under this Agreement pursuant to Section 9.07 as a result of a
demand by the Borrower pursuant to Section 9.07(a), the Borrower shall, upon
demand by such Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender any amounts required to compensate such
Lender for any additional losses, costs or expenses that it may reasonably incur
as a result of such payment or Conversion, including, without limitation, any
loss (including loss of anticipated profits), cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by any
Lender to fund or maintain such Advance.

            (d) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
Sections 2.11, 2.14 and 9.04 shall survive the payment in full of principal,
interest and all other amounts payable hereunder and under the other Loan
Documents.

            SECTION 9.05. RIGHT OF SET-OFF. Upon (i) the occurrence and during
the continuance of any Event of Default and (ii) the making of the request or
the granting of the consent specified by Section 6.01 to authorize the Agent to
declare the Notes due and payable pursuant to the provisions of Section 6.01,
each Lender and each of its Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender or such
Affiliate to or for the credit or the account of the Borrower or the Guarantor
against any and all of the obligations of the Borrower or the Guarantor, as the
case may be, now or hereafter existing under this Agreement and the Note held by
such Lender, whether or not such Lender shall have made any demand under this
Agreement or such Note and although such obligations may be unmatured. Each
Lender agrees promptly to notify the Borrower or the Guarantor, as the case may
be, after any such set-off and application, PROVIDED that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of each Lender and its Affiliates under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) that such Lender and its Affiliates may have.

            SECTION 9.06. BINDING EFFECT. This Agreement shall become effective
(other than Sections 2.01 and 2.03, which shall only become effective upon
satisfaction of the conditions precedent set forth in Section 3.01) when it
shall have been executed by the Borrower, the Guarantor and the Agent and when
the Agent shall have been notified by each Initial Lender that such Initial
Lender has executed it and thereafter shall be binding upon and inure to the
benefit of the Borrower, the Guarantor, the Agent and each Lender and their
respective successors and assigns, except that the Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Lenders.

            SECTION 9.07. ASSIGNMENTS AND PARTICIPATIONS. (a) Each Lender may
and, if demanded by the Borrower (following a demand by such Lender pursuant to
Section 2.11 or 2.14) upon at least five Business Days' notice to such Lender
and the Agent, will assign to one or more Persons all or a portion of its rights
and obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Committed Advances owing to it and the Committed
Note or Notes held by it) with the consent of the Borrower, which consent shall
not be unreasonably withheld or delayed; PROVIDED, HOWEVER, that (i) each such
assignment shall be of a constant, and not a varying, percentage of all rights
and obligations under this Agreement (other than any right to make Competitive
Bid Advances, Competitive Bid Advances owing to it and Competitive Bid Notes),
(ii) except in the case of an assignment to a Person that, immediately prior to
such assignment, was a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $5,000,000, (iii) each such assignment shall be to an
Eligible Assignee, (iv) each such assignment made as a result of a demand by the
Borrower pursuant to this Section 9.07(a) shall be arranged by the Borrower
after consultation with the Agent and shall be either an assignment of all of
the rights and obligations of the assigning Lender under this Agreement or an
assignment of a portion of such rights and obligations made concurrently with
another such assignment or other such assignments that together cover all of the
rights and obligations of the assigning Lender under this Agreement, (v) no
Lender shall be obligated to make any such assignment as a result of a demand by
the Borrower pursuant to this Section 9.07(a) unless and until such Lender shall
have received one or more payments from either the Borrower or one or more
Eligible Assignees in an aggregate amount at least equal to the aggregate
outstanding principal amount of the Advances owing to such Lender, together with
accrued interest thereon to the date of payment of such principal amount and all
other amounts payable to such Lender under this Agreement, and (vi) the parties
to each such assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register, an Assignment and Acceptance, together
with any Committed Note subject to such assignment and a processing and
recordation fee of $3,000.

                                       37

            (b) Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in each Assignment and Acceptance, (x)
the assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such Assignment
and Acceptance, have the rights and obligations of a Lender hereunder and (y)
the Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto).

            (c) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any other instrument or document furnished
pursuant hereto; (ii) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower or the Guarantor of
any of its obligations under the Loan Documents or any other instrument or
document furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in Section 4.01 and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent, such assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee confirms that it is an
Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under this Agreement as are delegated to the Agent by the terms hereof, together
with such powers and discretion as are reasonably incidental thereto; and (vii)
such assignee agrees that it will perform in accordance with their terms all of
the obligations that by the terms of this Agreement are required to be performed
by it as a Lender.

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

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

            (g) Each Lender may sell participations to one or more banks or
other entities (other than the Guarantor or any of its Affiliates) in or to all
or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment, the Advances owing to it
and any Note or Notes held by it); PROVIDED, HOWEVER, that (i) such Lender's
obligations under this Agreement (including, without limitation, its Commitment
to the Borrower hereunder) shall remain unchanged and such Lender agrees that it
will not raise (and hereby expressly waives) any defense relating to any such
participation, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) such Lender shall
remain the holder of any such Note for all purposes of this Agreement, (iv) the
Borrower, the Guarantor, the Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, (v) no participant under any such
participation shall have any right to approve any amendment or waiver of any
provision of this Agreement or any Note, or any consent to any departure by the
Borrower or the Guarantor therefrom, except to the extent that such amendment,
waiver or consent would reduce the principal of, or interest on, the Notes or
any fees or other amounts payable hereunder, in each case to the extent subject
to such participation, or postpone any date fixed for any payment of principal
of, or interest on, the Notes or any fees or other amounts payable hereunder, in
each case to the extent subject to such participation and (vi) such Lender shall
not permit its direct or indirect participants to further assign or participate
its interest.

                                       38

            (h) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower or the Guarantor furnished
to such Lender by or on behalf of the Borrower or the Guarantor; PROVIDED that,
prior to any such disclosure, the assignee or participant or proposed assignee
or participant shall agree to preserve the confidentiality of any Confidential
Information relating to the Borrower or the Guarantor received by it from such
Lender.

            (i) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion of
its rights under this Agreement (including, without limitation, the Advances
owing to it and any Note or Notes held by it) in favor of any Federal Reserve
Bank in accordance with Regulation A of the Board of Governors of the Federal
Reserve System.

            SECTION 9.08. CONFIDENTIALITY. Neither the Agent nor any Lender
shall disclose any Confidential Information to any other Person without the
consent of the Borrower, other than (a) to the Agent's or such Lender's
Affiliates and their officers, directors, employees, agents and advisors and, as
contemplated by Section 9.07(h), to actual or prospective assignees and
participants, and then only on a confidential basis, (b) as required by any law,
rule or regulation or judicial process and (c) as requested or required by any
state, federal or foreign authority or examiner regulating banks or banking.

            SECTION 9.10. GOVERNING LAW. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.

            SECTION 9.11. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.

                                       39

            SECTION 9.12. WAIVER OF JURY TRIAL. Each of the Borrower, the
Guarantor, the Agent and the Lenders hereby irrevocably waives all right to
trial by jury in any action, proceeding or counterclaim (whether based on
contract, tort or otherwise) arising out of or relating to this Agreement or the
Notes or the actions of the Agent or any Lender in the negotiation,
administration, performance or enforcement thereof.

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

                                          SCHOLASTIC INC.,
                                               as Borrower

                                             By /s/
                                               ---------------------------------
                                              Title:

                                          SCHOLASTIC CORPORATION
                                                as Guarantor

                                             By /s/
                                               ---------------------------------
                                              Title:

                                          CITIBANK, N.A.,
                                              as Agent

                                             By /s/
                                               ---------------------------------
                                              Title:

                               INITIAL LENDERS

                                          CITIBANK, N.A.

                                             By /s/
                                               ---------------------------------
                                              Title:

                                          THE CHASE MANHATTAN BANK

                                             By /s/
                                               ---------------------------------
                                              Title:

                                          CREDIT SUISSE FIRST BOSTON

                                             By /s/
                                               ---------------------------------
                                              Title:

                                       40

                                          FLEET BANK, N.A.

                                             By /s/
                                               ---------------------------------
                                              Title:

                                          SUMMIT BANK

                                             By /s/
                                               ---------------------------------
                                              Title:

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

                                             By /s/
                                               ---------------------------------
                                              Title:

                                             By /s/
                                               ---------------------------------
                                              Title:

                                          SUNTRUST BANK

                                             By /s/
                                               ---------------------------------
                                              Title:

                                       41

                                   SCHEDULE I

                  COMMITMENTS AND APPLICABLE LENDING OFFICES

-------------------------------------------------------------------------------
NAME OF          COMMITMENT    DOMESTIC LENDING OFFICE EURODOLLAR LENDING
INITIAL LENDER                                         OFFICE
-------------------------------------------------------------------------------
Citibank, N.A.  $82,500,000    399 Park Avenue         399 Park Avenue
                               New York, NY 10043      New York, NY 10043
                               Attn: Diane Pockaj      Attn: Diane Pockaj
                               T: (212) 559-4649       T: (212) 559-4649
                               F: (212) 793-0289       F: (212) 793-0289
-------------------------------------------------------------------------------
The Chase       $50,000,000    E. 36 Midland Avenue    E. 36 Midland Avenue
Manhattan Bank                 Paramus, NJ 07652       Paramus, NJ 07652
                               Attn: Carmen Mendoza    Attn: Carmen Mendoza
                               T: (201) 599-6681       T: (201) 599-6681
                               F: (201) 599-6672       F: (201) 599-6672
-------------------------------------------------------------------------------
Credit Suisse   $82,500,000    5 World Trade Center    5 World Trade Center
First Boston                   New York, NY  10048     New York, NY  10048
                               Attn:  Nilsa Ware       Attn:  Nilsa Ware
                               T:  (212) 322-5094      T:  (212) 322-5094
                               F:  (212) 355-0593      F:  (212) 355-0593
-------------------------------------------------------------------------------
Deutsche Bank   $50,000,000    31 W 52nd Street        31 W 52nd Street
AG, New York                   New York, NY  10019     New York, NY  10019
and/or Cayman                  Attn: Nicole Vipperman  Attn: Nicole Vipperman
Islands Branch                 T:  (212) 469-4101      T:  (212) 469-4101
                               F:  (212) 469-4138      F:  (212) 469-4138
-------------------------------------------------------------------------------
Fleet Bank      $25,000,000    1185 Avenue of the      1185 Avenue of the
(FKA                           Americas                Americas
BankBoston,                    New York, NY 10036      New York, NY 10036
N.A.)                          Attn: Christopher       Attn: Christopher
                               Mayrose                 Mayrose
                               T: (212) 819-5727       T: (212) 819-5727
                               F: (212) 819-4120       F: (212) 819-4120
-------------------------------------------------------------------------------
Summit Bank     $10,000,000    750 Walnut Avenue       750 Walnut Avenue
                               Cranford, NJ 07016      Cranford, NJ 07016
                               Attn: Carter Evans      Attn: Carter Evans
                               T: (908) 709-6421       T: (908) 709-6421
                               F: (908) 709-6433       F: (908) 709-6433
-------------------------------------------------------------------------------
SunTrust Bank   $50,000,000    200 South Orange Avenue 200 South Orange Avenue
                               Mail Code:              Mail Code:
                               FL-Orlando-1106         FL-Orlando-1106
                               Orlando, FL  32801      Orlando, FL  32801
                               Attn:  William Barr     Attn:  William Barr
                               T:  (407) 237-4636      T:  (407) 237-4636
                               F:  (407) 237-4076      F:  (407) 237-4076
-------------------------------------------------------------------------------

                                       42

                                SCHEDULE 5.02(a)

                         EXISTING LIENS AND ENCUMBRANCES

1)    An Operating Overdraft Agreement was entered into on September 12, 1994
      between Scholastic Canada Ltd. ("SCL") and Canadian Imperial Bank of
      Commerce has a negative pledge that SCL cannot give security over any of
      its assets to any other lender.

2)    In 1983, the City of Jefferson, Missouri provided financing to Scholastic
      Inc. through the issuance of Industrial Revenue bonds to complete a
      substantial addition to its national distribution center in Jefferson
      City, Missouri. These Bonds were renegotiated in March 1992. Scholastic
      has issued to the Bond Trustee an unconditional guarantee of principal and
      interest. Land acquired in Jefferson City, Missouri, during f/y 1982, a
      building at Scholastic's national distribution center and certain
      equipment are pledged as security.

3)    In December 1993, Scholastic entered into an agreement pursuant to which
      the IDA provides Scholastic with financial assistance through the issuance
      of IDA Bonds in connection with the purchase of furniture, fixtures and
      equipment for use at Scholastic's headquarters at 555 Broadway, New York,
      New York. In connection with such financial assistance, Scholastic has
      granted the IDA a security interest in such furniture, fixtures and
      equipment.

4)    Liens given to the Screen Actors Guild ("SAG") in connection with the
      production of The Magic School Bus property

                                       43

Schedule 4.01(i)

                              SCHOLASTIC CORPORATION
                               LIST OF SUBSIDIARIES
                                    MAY 31, 2000

DOMESTIC SUBSIDIARIES                                    STATE OF
---------------------                                    INCORPORATION
                                                         -------------

Scholastic Inc.                                          New York
Scholastic Book Services, Inc.                           Delaware
Scholastic Book Clubs, Inc.                              Missouri
Scholastic Entertainment Inc.                            New York
SE Distribution Inc. (SUBSIDIARY OF SCHOLASTIC           Delaware
ENTERTAINMENT)
Scholastic UK Group Ltd.                                 Delaware
Weston Woods Studios, Inc.                               Delaware
Georgetown Studios, Inc. (SUBSIDIARY OF WESTON WOODS     Connecticut
STUDIOS, INC.)
Lectorum Publications, Inc.                              New York
The Electronic Bookshelf, Inc.                           Indiana
Quality Education Data, Inc.                             Delaware
The Scholastic Store, Inc.                               New York

FOREIGN SUBSIDIARIES                                     JURISDICTION
---------------------                                    ------------

Scholastic Australia Pty. Ltd.                           Australia
Bookshelf Publishing Australia Pty. Ltd.                 Australia
Troll School Book Clubs and Fairs Australia Pty. Ltd.    Australia
Scholastic Australia Superannuation Pty. Ltd.            Australia
Scholastic Executive Superannuation Pty. Ltd.            Australia
Oldmeadow Booksellers (Aust.) Pty. Ltd.                  Australia
Scholastic (Barbados), Inc.                              Barbados
Scholastic Canada Ltd.                                   Canada
Scholastic Productions Canada Ltd.                       Canada
Scholastic Bookfairs Canada Inc.                         Canada
Scholastic Ltd.                                          England
School Book Fairs Ltd.                                   England
Scholastic Book Clubs Ltd.                               England
Red House Books Ltd.                                     England
Scholastic Publication Ltd.                              England
Scholastic Educational Magazines Ltd.                    England
Red House Book Clubs Ltd.                                England
Scholastic Hong Kong Limited                             Hong Kong
School Book Fairs Ltd.                                   Ireland
Scholastic India Private Limited                         India
Scholastic Mexico, S.A. de C.V.                          Mexico
Scholastic New Zealand Ltd.                              New Zealand
Scholastic Argentina S.A.                                Argentina

                                                           EXHIBIT A-1 - FORM OF
                                                                       COMMITTED
                                                                 PROMISSORY NOTE

                                                    Dated: _______________, 200_

            FOR VALUE RECEIVED, the undersigned, SCHOLASTIC INC., a New York
corporation (the "BORROWER"), HEREBY PROMISES TO PAY to the order of
_________________________ (the "LENDER") for the account of its Applicable
Lending Office on the later of the Termination Date and the date designated
pursuant to Section 2.06 of the Credit Agreement (each as defined in the Credit
Agreement referred to below) the aggregate principal amount of the Committed
Advances made by the Lender to the Borrower pursuant to the Credit Agreement
dated as of June 22, 2000 among the Borrower, Scholastic Corporation, the Lender
and certain other lenders parties thereto, Salomon Smith Barney Inc. and Credit
Suisse First Boston, as joint lead arrangers, Credit Suisse First Boston, as
syndication agent, and Citibank, N.A. as Agent for the Lender and such other
lenders (as amended or modified from time to time, the "CREDIT AGREEMENT"; the
terms defined therein being used herein as therein defined) outstanding on such
date.

            The Borrower promises to pay interest on the unpaid principal amount
of each Committed Advance from the date of such Committed Advance until such
principal amount is paid in full, at such interest rates, and payable at such
times, as are specified in the Credit Agreement.

            Both principal and interest are payable in lawful money of the
United States of America to Citibank, as Agent, at 399 Park Avenue, New York,
New York 10043, in same day funds. Each Committed Advance owing to the Lender by
the Borrower pursuant to the Credit Agreement, and all payments made on account
of principal thereof, shall be recorded by the Lender and, prior to any transfer
hereof, endorsed on the grid attached hereto which is part of this Promissory
Note.

            This Promissory Note is one of the Committed Notes referred to in,
and is entitled to the benefits of, the Credit Agreement. The Credit Agreement,
among other things, (i) provides for the making of Committed Advances by the
Lender to the Borrower from time to time, the indebtedness of the Borrower
resulting from each such Committed Advance being evidenced by this Promissory
Note and (ii) contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.

            The Borrower hereby waives presentment, demand, protest and notice
of any kind. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.

                                          SCHOLASTIC INC.

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

                       ADVANCES AND PAYMENTS OF PRINCIPAL

--------------------------------------------------------------------------------
                                     AMOUNT OF
     DATE           AMOUNT OF      PRINCIPAL PAID  UNPAID PRINCIPAL     NOTATION
                     ADVANCE         OR PREPAID         BALANCE         MADE BY
--------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

                                       2

                                                           EXHIBIT A-2 - FORM OF
                                                                 COMPETITIVE BID
                                                                 PROMISSORY NOTE

U.S.$_______________                                 Dated:_______________, 200_

            FOR VALUE RECEIVED, the undersigned, SCHOLASTIC INC., a New York
corporation (the "BORROWER"), HEREBY PROMISES TO PAY to the order of
_________________________ (the "LENDER") for the account of its Applicable
Lending Office (as defined in the Credit Agreement dated as of June 22, 2000
among the Borrower, Scholastic Corporation, the Lender and certain other lenders
parties thereto, Salomon Smith Barney Inc. and Credit Suisse First Boston, as
joint lead arrangers, Credit Suisse First Boston, as syndication agent, and
Citibank, N.A., as Agent for the Lender and such other lenders (as amended or
modified from time to time, the "CREDIT AGREEMENT"; the terms defined therein
being used herein as therein defined)), on _______________, 200_, the principal
amount of U.S.$_______________].

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

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

            Both principal and interest are payable in lawful money of the
United States to Citibank, as agent, for the account of the Lender at the office
of Citibank, at 399 Park Avenue, New York, New York 10043 in same day funds.

            This Promissory Note is one of the Competitive Bid Notes referred to
in, and is entitled to the benefits of, the Credit Agreement. The Credit
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events.

            The Borrower hereby waives presentment, demand, protest and notice
of any kind. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.

            This Promissory Note shall be governed by, and construed in
accordance with, the laws of the State of New York.

                                          SCHOLASTIC INC.

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

                                                 EXHIBIT B-1 - FORM OF NOTICE OF
                                                             COMMITTED BORROWING

Citibank, N.A., as Agent
  for the Lenders parties
  to the Credit Agreement
  referred to below
  Two Penns Way
  New Castle, Delaware 19720

                                          [Date]

            Attention: Bank Loan Syndications Department

Ladies and Gentlemen:

            The undersigned, Scholastic Inc., refers to the Credit Agreement,
dated as of June 22, 2000 (as amended or modified from time to time, the "CREDIT
AGREEMENT", the terms defined therein being used herein as therein defined),
among the undersigned, Scholastic Corporation, certain Lenders parties thereto,
Salomon Smith Barney Inc. and Credit Suisse First Boston, as joint lead
arrangers, Credit Suisse First Boston, as syndication agent, and Citibank, N.A.,
as Agent for said Lenders, and hereby gives you notice, irrevocably, pursuant to
Section 2.02 of the Credit Agreement that the undersigned hereby requests a
Committed Borrowing under the Credit Agreement, and in that connection sets
forth below the information relating to such Committed Borrowing (the "PROPOSED
COMMITTED BORROWING") as required by Section 2.02(a) of the Credit Agreement:

            (i) The Business Day of the Proposed Committed Borrowing is
      _______________, 200_.

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

            (iii) The aggregate amount of the Proposed Committed Borrowing is
      $---------------.

            [(iv) The initial Interest Period for each Eurodollar Rate Advance
      made as part of the Proposed Committed Borrowing is _____ month[s].]

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

            (A) the representations and warranties contained in Section 4.01 of
      the Credit Agreement are correct, before and after giving effect to the
      Proposed Committed Borrowing and to the application of the proceeds
      therefrom, as though made on and as of such date; and

            (B) no event has occurred and is continuing, or would result from
      such Proposed Committed Borrowing or from the application of the proceeds
      therefrom, that constitutes a Default.

                                          Very truly yours,

                                          SCHOLASTIC INC.

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

                                                 EXHIBIT B-2 - FORM OF NOTICE OF
                                                       COMPETITIVE BID BORROWING

Citibank, N.A., as Agent
  for the Lenders parties
  to the Credit Agreement
  referred to below
  Two Penns Way
  New Castle, Delaware 19720

                                                [Date]

            Attention: Bank Loan Syndications Department

Ladies and Gentlemen:

            The undersigned, Scholastic Inc., refers to the Credit Agreement,
dated as of June 22, 2000 (as amended or modified from time to time, the "CREDIT
AGREEMENT", the terms defined therein being used herein as therein defined),
among the undersigned, Scholastic Corporation, certain Lenders parties thereto,
Salomon Smith Barney Inc. and Credit Suisse First Boston, as joint lead
arrangers, Credit Suisse First Boston, as syndication agent, and Citibank, N.A.,
as Agent for said Lenders, and hereby gives you notice, irrevocably, pursuant to
Section 2.03 of the Credit Agreement that the undersigned hereby requests a
Competitive Bid Borrowing under the Credit Agreement, and in that connection
sets forth the terms on which such Competitive Bid Borrowing (the "PROPOSED
COMPETITIVE BID BORROWING") is requested to be made:

            (A)   Date of Competitive Bid Borrowing    ________________________

            (B)   Amount of Competitive Bid Borrowing  ________________________

            (C)   [Maturity Date] [Interest Period]    ________________________

            (D)   Interest Rate Basis                  ________________________

            (E)   Interest Payment Date(s)             ________________________

            (F)   ___________________                  ________________________

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

            (a) the representations and warranties contained in Section 4.01 are
      correct, before and after giving effect to the Proposed Competitive Bid
      Borrowing and to the application of the proceeds therefrom, as though made
      on and as of such date;

            (b) no event has occurred and is continuing, or would result from
      the Proposed Competitive Bid Borrowing or from the application of the
      proceeds therefrom, that constitutes a Default; and

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

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

                                          Very truly yours,

                                          SCHOLASTIC INC.

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

                                       2

                                                             EXHIBIT C - FORM OF
                                                       ASSIGNMENT AND ACCEPTANCE

            Reference is made to the Credit Agreement dated as of June 22, 2000
(as amended or modified from time to time, the "CREDIT AGREEMENT") among and
Scholastic Inc., a New York corporation (the "BORROWER"), Scholastic
Corporation, a Delaware corporation (the "GUARANTOR"), the Lenders (as defined
in the Credit Agreement), Salomon Smith Barney Inc. and Credit Suisse First
Boston, as joint lead arrangers, Credit Suisse First Boston, as syndication
agent, and Citibank, N.A., as administrative agent for the Lenders (the
"AGENT"). Terms defined in the Credit Agreement are used herein with the same
meaning.

            The "Assignor" and the "Assignee" referred to on Schedule I hereto
agree as follows:

            1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, an interest in and to
the Assignor's rights and obligations under the Credit Agreement as of the date
hereof (other than in respect of Competitive Bid Advances and Competitive Bid
Notes) equal to the percentage interest specified on Schedule 1 hereto of all
outstanding rights and obligations under the Credit Agreement (other than in
respect of Competitive Bid Advances and Competitive Bid Notes). After giving
effect to such sale and assignment, the Assignee's Commitment and the amount of
the Committed Advances owing to the Assignee will be as set forth on Schedule 1
hereto.

            2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit Agreement
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
Guarantor or the performance or observance by the Borrower or the Guarantor of
any of its obligations under any Loan Document or any other instrument or
document furnished pursuant thereto; and (iv) attaches the Committed Note, if
any held by the Assignor [and requests that the Agent exchange such Committed
Note for a new Committed Note payable to the order of [the Assignee in an amount
equal to the Commitment assumed by the Assignee pursuant hereto or new Committed
Notes payable to the order of the Assignee in an amount equal to the Commitment
assumed by the Assignee pursuant hereto and] the Assignor in an amount equal to
the Commitment retained by the Assignor under the Credit Agreement,
[respectively,] as specified on Schedule 1 hereto.

            3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
in Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under the Loan Documents as are delegated
to the Agent by the terms thereof, together with such powers and discretion as
are reasonably incidental thereto; (v) agrees that it will perform in accordance
with their terms all of the obligations that by the terms of the Credit
Agreement are required to be performed by it as a Lender; and (vi) attaches any
U.S. Internal Revenue Service forms required under Section 2.14 of the Credit
Agreement.

            4. Following the execution of this Assignment and Acceptance, it
will be delivered to the Agent for acceptance and recording by the Agent. The
effective date for this Assignment and Acceptance (the "EFFECTIVE DATE") shall
be the date of acceptance hereof by the Agent, unless otherwise specified on
Schedule 1 hereto.

            5. Upon such acceptance and recording by the Agent, as of the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.

            6. Upon such acceptance and recording by the Agent, from and after
the Effective Date, the Agent shall make all payments under the Credit Agreement
and the Committed Notes in respect of the interest assigned hereby (including,
without limitation, all payments of principal, interest and facility fees with
respect thereto) to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments under the Credit Agreement and the Committed
Notes for periods prior to the Effective Date directly between themselves.

            7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.

            8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.

            IN WITNESS WHEREOF, the Assignor and the Assignee have caused
Schedule 1 to this Assignment and Acceptance to be executed by their officers
thereunto duly authorized as of the date specified thereon.

                                       2

                                   Schedule 1
                                       to
                            Assignment and Acceptance

            Percentage interest assigned:                                 _____%

            Assignee's Commitment:                                    $_________

            Aggregate outstanding principal amount of Revolving

            Credit Advances assigned:                                 $_________

            Principal amount of Committed Note payable to Assignee: $_________

            Principal amount of Committed Note payable to Assignor: $_________

            Effective Date*:  _______________, 200_

                                          [NAME OF ASSIGNOR], as Assignor

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

                                          Dated: _______________, 200_

                                          [NAME OF ASSIGNEE], as Assignee

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

                                          Dated: _______________, 200_

                                          Domestic Lending Office:
                                                [Address]

                                          Eurodollar Lending Office:
                                                [Address]

----------
*     This date should be no earlier than five Business Days after the delivery
      of this Assignment and Acceptance to the Agent.

                                       3

Accepted this

____ day of _______________, 200_

CITIBANK, N.A., as Agent

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

Approved this ___ day

of _______________, 200_

SCHOLASTIC INC.

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

                                       4

                                                             EXHIBIT D - FORM OF
                                                              OPINION OF COUNSEL
                                                                 TO THE BORROWER
June __, 2000

To each of the Lenders parties to the Credit Agreement dated as of the date
  hereof among Scholastic Corporation, Scholastic Inc., said Lenders and
  Citibank, N.A., as Agent for said Lenders, and to Citibank, N.A., as Agent

SCHOLASTIC CORPORATION AND SCHOLASTIC INC.

Ladies and Gentlemen:

            This opinion is furnished to you pursuant to Section 3.01(h)(iv) of
the Credit Agreement, dated as of the date hereof (the "CREDIT Agreement"), by
and among Scholastic Inc. (the "BORROWER"), Scholastic Corporation (the
"GUARANTOR") and the Lenders parties thereto, Salomon Smith Barney Inc. and
Credit Suisse First Boston, as joint lead arrangers, Credit Suisse First Boston,
as syndication agent, and Citibank, N.A., as Agent for said Lenders. Terms
defined in the Credit Agreement are used herein as therein defined.

            I have acted as counsel for the Borrower and the Guarantor in
connection with the preparation, execution and delivery of the Credit Agreement.

            In that connection, I have examined:

            (1) The Credit Agreement.

            (2) The documents furnished by the Borrower and the Guarantor
      pursuant to Article III of the Credit Agreement.

            (3) The Certificate of Incorporation of each of the Borrower and the
      Guarantor and all amendments thereto (the "CHARTER").

            (4) The by-laws of each of the Borrower and the Guarantor and all
      amendments thereto (the "BY- LAWS").

            (5) A certificate of the Secretary of State of Delaware, dated
      _______________, 2000, attesting to the continued corporate existence and
      good standing of the Guarantor in that State.

            (6) A certificate of the Secretary of State of New York, dated
      _______________, 2000 attesting to the continued corporate existence and
      good standing of the Borrower in that State.

I also examined the originals, or copies certified to our satisfaction, of the
documents listed in certificates of the chief financial officers of the Borrower
and the Guarantor, dated the date hereof (the "CERTIFICATES"), certifying that
the documents listed in such certificate are all of the indentures, loan or
credit agreements, leases, guarantees, mortgages, security agreements, bonds,
notes and other agreements or instruments, and all of the orders, writs,
judgments, awards, injunctions and decrees, that affect or purport to affect the
Borrower's right to borrow money or the Borrower's or the Guarantor's
obligations under the Credit Agreement or the Notes. In addition, I have
examined the originals, or copies certified to our satisfaction, of such other
corporate records of the Borrower and the Guarantor, certificates of public
officials and of officers of the Borrower and the Guarantor, and agreements,
instruments and other documents, as I have deemed necessary as a basis for the
opinions expressed below. As to questions of fact material to such opinions, I
have, when relevant facts were not independently established by us,

relied upon certificates of the Borrower and the Guarantor or their officers or
of public officials. I have assumed the due execution and delivery, pursuant to
due authorization, of the Credit Agreement by the Initial Lenders and the Agent.

            My opinions expressed below are limited to the law of the State of
New York, the General Corporation Law of the State of Delaware and the Federal
law of the United States.

            Based upon the foregoing and upon such investigation as I have
deemed necessary, I am of the following opinion:

            1. Each of the Borrower and the Guarantor is a corporation duly
      organized, validly existing and in good standing under the laws of the
      State of its incorporation.

            2. The execution, delivery and performance by each of the Borrower
      and the Guarantor of the Credit Agreement and, in the case of the
      Borrower, the Notes, and the consummation of the transactions contemplated
      thereby, are within the Borrower's and the Guarantor's corporate powers,
      have been duly authorized by all necessary corporate action, and do not
      contravene (i) the Charter or the By- laws of the Borrower or the
      Guarantor, as applicable, or (ii) any law, rule or regulation applicable
      to the Borrower or the Guarantor (including, without limitation,
      Regulation X of the Board of Governors of the Federal Reserve System) or
      (iii) any contractual or legal restriction contained in any indentures,
      loan or credit agreements, leases, guarantees, mortgages, security
      agreements, bonds, notes and other agreements or instruments, or any
      orders, writs, judgments, awards, injunctions and decrees, that affect or
      purport to affect the Borrower's right to borrow money or the Borrower's
      or the Guarantor's obligations under the Credit Agreement or, in the case
      of the Borrower, the Notes. The Credit Agreement and the Notes have been
      duly executed and delivered on behalf of the Borrower. The Credit
      Agreement has been duly executed and delivered on behalf of the Guarantor.

            3. No authorization, approval or other action by, and no notice to
      or filing with, any governmental authority or regulatory body or any other
      third party is required for the due execution, delivery and performance by
      the Borrower and the Guarantor of the Credit Agreement and, in the case of
      the Borrower, the Notes.

            4. The Credit Agreement is, and after giving effect to the initial
      Borrowing, the Notes to which it is a party will be, legal, valid and
      binding obligations of the Borrower enforceable against the Borrower in
      accordance with their respective terms. The Credit Agreement is the legal,
      valid and binding obligation of the Guarantor enforceable against the
      Guarantor in accordance with its terms.

            5. To the best of my knowledge, there are no pending or overtly
      threatened actions or proceedings against the Guarantor or any of its
      Subsidiaries before any court, governmental agency or arbitrator that
      purport to affect the legality, validity, binding effect or enforceability
      of the Credit Agreement or any of the Notes or the consummation of the
      transactions contemplated thereby or that are likely to have a Material
      Adverse Effect.

            The opinions set forth above are subject to the following
qualifications:

            (a) My opinion in paragraph 4 above as to enforceability is subject
      to the effect of any applicable bankruptcy, insolvency (including, without
      limitation, all laws relating to fraudulent transfers), reorganization,
      moratorium or similar law affecting creditors' rights generally.

            (b) My opinion in paragraph 4 above as to enforceability is subject
      to the effect of general principles of equity, including, without
      limitation, concepts of materiality, reasonableness, good faith and fair
      dealing (regardless of whether considered in a proceeding in equity or at
      law).

                                       2

            (c) I express no opinion as to (i) Section 2.14 of the Credit
      Agreement insofar as it provides that any Lender purchasing a
      participation from another Lender pursuant thereto may exercise set-off or
      similar rights with respect to such participation and (ii) the effect of
      the law of any jurisdiction other than the State of New York wherein any
      Lender may be located or wherein enforcement of the Credit Agreement or
      the Notes may be sought that limits the rates of interest legally
      chargeable or collectible.

                                          Very truly yours,

                                       3

                                                   EXHIBIT E - FORM OF FINANCIAL
                                                COVENANTS COMPLIANCE CERTIFICATE

                   FINANCIAL COVENANTS COMPLIANCE CERTIFICATE

                                   respecting

                             SCHOLASTIC CORPORATION

                                       and

                                 SCHOLASTIC INC.

                              [MONTH AND DATE], 200

            Pursuant to the Credit Agreement dated as of June 22, 2000 (as the
same may be supplemented, modified, amended or restated from time to time in the
manner provided therein, the "CREDIT AGREEMENT"), the undersigned, being
respectively, the [PRINT TITLE] of Scholastic Corporation (the "GUARANTOR") and
the [PRINT TITLE] of Scholastic Inc. (the "BORROWER "), hereby certify to
Citibank, N.A., as Agent (the "AGENT"), and to each of the Lenders, as of the
date hereof that:

            (a) the representations and warranties contained in Section 4.01 are
      correct as though made on and as of the date hereof;

            (b) no event has occurred and is continuing that constitutes a
      Default; and

            (c) attached hereto are the calculations of, and the confirmations
      of the Guarantor's compliance with, the financial covenants set forth in
      Sections 5.02(e) and 5.03 of the Credit Agreement.

            Capitalized terms and non-capitalized words and phrases used and not
otherwise defined in this Certificate shall have the meanings respectively
assigned to them in the Lender and by counsel to the Agent in giving any opinion
or advice requested of such counsel.

                                                      (SIGNATURE)

                                          DATE SIGNED:_____________________, 19

                                                      (SIGNATURE)

                                          DATE SIGNED:_____________________, 19Exhibit 10.12

                              EMPLOYMENT AGREEMENT

      This AGREEMENT is made as of May 25, 2000, effective October 1, 1999, by
and between SCHOLASTIC INC., its affiliates and subsidiaries ("Scholastic" or
the "Company") and JEAN FEIWEL ("Feiwel").

                              W I T N E S S E T H:

      WHEREAS, Feiwel is currently employed by Scholastic; and

      WHEREAS, Scholastic wishes to continue the employment of Feiwel as set
forth in this Agreement; and

      WHEREAS, Feiwel is willing to serve in the employ of Scholastic upon the
terms and conditions set forth below.

      NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements set forth below, Scholastic and Feiwel agree as follows:

      1. TERM OF AGREEMENT. The term of this Agreement shall be three (3) years
in duration, commencing on October 1, 1999, and ending September 30, 2002,
unless otherwise terminated in accordance with Section 4 of this Agreement.

      2. EMPLOYMENT. During the term of this Agreement, Scholastic shall employ
Feiwel, and Feiwel shall be employed by Scholastic as Senior Vice President,
Scholastic Inc., Publisher, Scholastic Children's Book Publishing at
Scholastic's offices in New York City. Feiwel will report directly to Barbara
Marcus ("Marcus"), Executive Vice President of Scholastic Inc. and President,
Scholastic Children's Book Publishing. In the event that Marcus shall cease to
function as the individual to whom Feiwel reports, and Feiwel shall not approve,
in writing, of the choice of any successor of Marcus to whom she shall have
direct reporting responsibilities, Feiwel shall be entitled to terminate her
employment in accordance with the provisions of paragraph 4(f), below.

      3. COMPENSATION.

            (a) BASE SALARY. Scholastic shall pay to Feiwel an annual salary of
Four Hundred Seventy-Five Thousand Dollars ($475,000) through September 30,
2000, Four Hundred Eighty Five Thousand Dollars ($485,000) as of October 1, 2000
and Five Hundred Thousand Dollars ($500,000) as of October 1, 2001, payable in
equal bi-monthly installments in accordance with Scholastic's customary payroll
and withholding practices.

            (b) SIGNING BONUS. Scholastic shall pay to Feiwel a signing bonus of
Two Hundred Fifty Thousand Dollars ($250,000) upon the execution of this
Agreement.

            (c) BONUS OPPORTUNITY. During each year of the term of this
Agreement, Feiwel will be eligible for a bonus of 35% of her base salary, in
accordance with Scholastic's bonus program in effect for each such period.
Feiwel shall receive one- half of such bonus unconditionally on an annual basis.
The remaining one-half of such bonus shall be subject to reasonable personal
goals set by Richard Robinson, CEO and/or Marcus or, if not Marcus, such
President of Scholastic Children's Book Publishing as may have been appointed to
replace Marcus, which goals shall be subject to Feiwel's approval, and will be
subject only to Feiwel's performance and not to performance of the Book Group or
the Company. The bonus shall be payable no later than September 15th of each
year during the term of this Agreement.

            (d) STOCK OPTIONS. During fiscal 2000-01, Scholastic will award
Feiwel options to purchase 25,000 shares of Scholastic Corporation Common Stock
on the date of the regular meeting of the Board of Directors next following the
execution of this Agreement, or no later than May 31, 2000. Feiwel shall be
entitled to exercise such options pursuant to the "cashless exercise" program
provided by Goldman, Sachs & Co. or the equivalent of such program. The options
shall become vested one year from the award date. The exercise price of the
options shall be the average of the high and low price of the Scholastic
Corporation Common Stock on the award date.

            (e) HEALTH INSURANCE. During each year of the term of this
Agreement, Scholastic shall provide health insurance coverage to Feiwel in
accordance with Scholastic's health insurance program in effect of each such
period.

            (f) VACATION. Feiwel shall be entitled to five (5) weeks' vacation
during each year of the term of this Agreement. In the event that Feiwel shall
not have fully used the allotted vacation time for any year during the term of
this Agreement, upon the termination of her employment with Scholastic, Feiwel
and Scholastic shall discuss and mutually agree upon the amount of compensation
due her with respect to such unused vacation time. Feiwel shall be entitled to
be compensated for the time not used in accordance with her base salary for the
applicable time period.

            (g) TRAVEL AND ENTERTAINMENT EXPENSES. Feiwel shall be entitled to
be reimbursed for all reasonable travel and entertainment expenses according to
the same terms and conditions as have been provided throughout Feiwel's
employment by Scholastic.

            (h) CAR LEASE. Scholastic shall continue to lease a car for Feiwel
throughout the term of this Agreement according to the same terms and conditions
as have been provided throughout Feiwel's prior employment by Scholastic.

                                       2

      4. TERMINATION OF AGREEMENT. This Agreement shall be terminated under the
following circumstances:

            (a) Automatically on the date of Feiwel's death; provided, however,
that in the event of Feiwel's death Scholastic shall pay to Feiwel's husband, if
he is then living, or to her estate if he has predeceased her, a lump sum
payment equivalent to six (6) month's base salary under this Agreement. The
foregoing payment shall not in any way affect Feiwel's husband's ongoing
entitlements under any Scholastic program in effect with respect to death or
retirement benefits.

            (b) Immediately upon written notice by Scholastic of a termination
for Disability. For purposes of this Agreement, Disability shall mean Feiwel's
failure to regularly perform her material duties and responsibilities hereunder
by reason of mental or physical illness or incapacity, as determined by a
physician mutually acceptable to Feiwel and Scholastic, for 180 days (whether
continuous or not) during any period of 360 consecutive days.

            (c) Upon the expiration of thirty (30) days prior written notice,
and opportunity to cure, by Scholastic to Feiwel of termination for Cause. For
purposes of this Agreement, Cause shall mean gross negligence or malfeasance in
the performance of her duties; a willful and continuing material failure or
refusal, after the aforesaid notice and opportunity to cure, to perform
substantially all of her duties and responsibilities under this Agreement; any
action or conduct which could reasonably be expected by Feiwel to injure
materially the reputation, business or business relationships of Scholastic;
conviction of Feiwel for commission of a felony or any crime involving moral
turpitude, fraud or misrepresentation; or breach of any material obligation
under this Agreement. A notice of termination for Cause shall set forth in
detail the specific basis, facts and circumstances which provide the basis for
the termination for Cause. The date of the termination for Cause shall be the
date indicated in the notice of termination for Cause .

            (d) Immediately upon written notice by Scholastic of a termination
without Cause, provided, however, that in the event of a termination without
Cause Scholastic shall pay severance to Feiwel as set forth at paragraph 5(b)
below:

            (e) Within three (3) weeks after written notice by Feiwel of her
intent to resign for any reason (other than for Good Reason as provided at
paragraph 4(f) below), or for no reason. Under such circumstance, Feiwel shall
forfeit all benefits under this Agreement and shall be subject to paragraph 7 of
this Agreement.

            (f) Upon the expiration of thirty (30) days prior written notice,
and opportunity to cure, by Feiwel to Scholastic of a termination for Good
Reason. For purposes of this Agreement, Good Reason shall mean any reduction in
or failure to pay Base Salary; a failure by Scholastic to provide participation
in employee benefits plans on terms at least as good as generally available to
other employees of Scholastic; failure of

                                       3

any successor to assume, in writing, the obligations of Scholastic under this
Agreement; the hiring of a new Group Head of Scholastic Children's Book
Publishing & Distribution to whom Feiwel would report, without Feiwel's
agreement; a material change in Feiwel's job title or responsibilities, without
her prior approval; a material change in Scholastic's publishing goals, which
results in new goals inconsistent with prior goals and unacceptable to Feiwel. A
notice of termination for Good Reason shall set forth in detail the specific
basis, facts and circumstances which provide the basis for the termination for
Good Reason, and must be given within thirty (30) days of Feiwel's actual
knowledge of the triggering event. In the event of a termination for Good Reason
Scholastic shall pay severance to Feiwel as set forth at paragraph 5(b) below.

      5. CONSEQUENCES OF TERMINATION.

            (a) Upon the termination of Feiwel's employment in accordance with
Section 4 above, and subject to the provisions set forth at paragraph 5(b)
below, Scholastic shall pay and provide Feiwel (or her surviving spouse or
estate, if applicable) the following amounts and benefits: any unpaid Base
Salary or bonus earned through the date of termination, unpaid accrued vacation
and business expenses through the date of termination, and any benefits due
under any benefit plan, in accordance with the terms of the plan, for the period
prior to termination (collectively the "Accrued Obligations").

            (b) In the event Feiwel is terminated without Cause or Feiwel
terminates her employment for Good Reason, Scholastic shall pay and provide in
full settlement of all amounts owed Feiwel under this Agreement, in addition to
the Accrued Obligations, a lump sum payment equal to 135 percent of Feiwel's
annual base salary under this Agreement, as in effect for the year during which
such termination occurs, such amount to be paid within 10 days of Feiwel's
termination. The payment of the foregoing amounts shall be contingent upon both
parties signing a mutual release of all claims arising out of Feiwel's
employment with Scholastic or termination thereof, in such form as mutually,
reasonably agreed upon by both parties.

            (c) The terms of any termination under Section 4(d), (e) or (f)
above shall be kept confidential by the parties and both Scholastic and Feiwel
shall mutually agree upon the form, substance and timing of any press release
regarding same.

            (d) In the event Feiwel is terminated on account of her Disability,
Scholastic shall pay and provide, in addition to the Accrued Obligations, a lump
sum payment equal to the annual base salary under this Agreement, as in effect
for the year during which such disability occurs, such amount to be paid within
10 days of Feiwel's termination, reduced by any disability benefits or Workers
Compensation salary replacement she received from any program sponsored by
Scholastic or a governmental entity. Scholastic and its affiliated entities
shall have no further obligations to Feiwel under this Agreement.

                                       4

      6. CONFIDENTIAL INFORMATION. Feiwel agrees that upon the conclusion of the
term of this Agreement, she will not (except on behalf of Scholastic), without
the express written consent of Scholastic, retain in any form any customer list
or other confidential or proprietary written or otherwise recorded information,
trade secrets or innovations of any kind relating to Scholastic's business,
clients, plans, proposals or financial condition. Feiwel also will not use for
her own benefit or divulge at any time any such customer lists or other
confidential or proprietary information to persons other than directors,
officers or employees of Scholastic, unless pursuant to good faith use in
furtherance of her obligations hereunder or her compliance with lawful legal
process requiring her testimony on, or disclosure of such matters.
Notwithstanding the foregoing restrictions, Feiwel shall be entitled to retain
her own Rolodex and her correspondence, provided, however, that such
correspondence shall not contain sales figures or financial information related
to Scholastic's business.

      7. NON-COMPETE/NON-SOLICITATION.

            (a) During the term of the Agreement, without regard to any
termination hereof, except where Feiwel is terminated without Cause or Feiwel
terminates for Good Reason (the "Restriction Period"), Feiwel shall not enter
into competition with Scholastic Book Group, provided however, that competition
shall not include Feiwel's employment by a non-competitive division or business
unit of a company which is in competition with Scholastic Book Group, provided
Feiwel is not involved with the division or business unit of such company that
is in competition.

            (b) During the Restriction Period, Feiwel shall not directly or
indirectly solicit for competitive products or induce any customer of Scholastic
Book Group to terminate, or otherwise to cease, reduce, or diminish in any way
its relationship with Scholastic Book Group.

            (c) During the Restriction Period, Feiwel shall not recruit, solicit
or induce any nonclerical employees of Scholastic Book Group to terminate their
employment with, or otherwise cease their relationship with Scholastic Book
Group, or hire or assist another person or entity to hire any then-current
nonclerical employee of Scholastic Book Group.

            (d) If at the time of enforcement of this Section a court holds that
the restrictions stated herein are unreasonable under the circumstances then
existing, the parties hereto agree that the maximum period or scope reasonable
under such circumstances shall be substituted for the stated period or scope and
that the court shall be allowed to revise the restrictions contained herein to
cover the maximum period and scope permitted by law.

      8. NOTICES. All notices which a party is required or may desire to give to
the other party under this Agreement shall be given in writing and shall be
either delivered

                                       5

personally or sent by certified or registered mail, return receipt requested, to
the addresses below. Notices shall be deemed given when received or two (2) days
after mailing, whichever is earlier.

      Richard Robinson                    Jean Feiwel
      President and CEO                   Senior Vice President
      Scholastic Inc.                     Scholastic Inc.
      555 Broadway                        555 Broadway
      New York, NY 10012                  New York, NY 10012

      9. ASSIGNMENT. This Agreement shall not be assigned by Feiwel. This
Agreement shall not be assigned by Scholastic, except in connection with a
merger or transfer by Scholastic of all or substantially all of its assets.

      10. WAIVER. The waiver of any breach of any term of this Agreement, which
waiver must be in writing, shall not be deemed to constitute waiver of any
subsequent breach of the previously waived term or of any other term or
condition.

      11. SEVERABILITY. Should any provision of this Agreement be held invalid,
illegal or unenforceable, it shall be deemed to be modified so that its purpose
can be lawfully effectuated and enforced and the balance of the Agreement shall
remain in full force and effect.

      12. ARBITRATION. Except as provided in Section 7 above, any dispute or
controversy arising out of or relating to this Agreement or the breach hereof
shall be resolved exclusively by arbitration in New York City before a 3-judge
panel of the American Arbitration Association under its then-pertaining rules,
and judgment upon the award rendered may be entered in any court having
jurisdiction thereof. The arbitrator's decision shall be final, conclusive and
binding on the parties.

      13. ENTIRE AGREEMENT; AMENDMENT; GOVERNING LAW. This Agreement shall
supersede any and all existing agreements, understandings and arrangements
between Feiwel and Scholastic relating to the terms of her employment. This
Agreement may not be amended except by a written agreement signed by both
parties. This

                                       6

Agreement shall be governed by and construed in accordance with the laws of the
State of New York without reference to rules relating to conflicts of laws.

/s/                                       SCHOLASTIC INC.
------------------------------
JEAN FEIWEL
                                          By: /s/
                                             --------------------------------
Dated: May 25, 2000                       Richard Robinson
                                          President and CEO

                                          Dated: May 25, 2000

                                       7

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