Document:

<PAGE>   1

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

                                CREDIT AGREEMENT

                                   DATED AS OF

                                  May 30, 2000

                                  by and among

                                   BELK, INC.

                                  as Borrower,

                                       and

                              WACHOVIA BANK, N.A.,

                                     as Bank

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

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                               Page
                                                                                                               ----
<S>                                                                                                            <C>
ARTICLE I DEFINITIONS.............................................................................................1
         SECTION 1.01.     Definitions............................................................................1
         SECTION 1.02.     Accounting, Terms and Determinations..................................................10
         SECTION 1.03.     References............................................................................11

ARTICLE II REVOLVING CREDIT FACILITY.............................................................................11
         SECTION 2.01.     Revolving Credit Loans................................................................11
         SECTION 2.02.     Procedure for Advances of Loans.......................................................11
                  (a)   Requests for Borrowing...................................................................11
                  (b)   Disbursement of Loans....................................................................11
                  (c)   FMA/Commercial Loan Access Agreement.....................................................12
         SECTION 2.03.     Repayment of Loans....................................................................12
                  (a)   Repayment on Termination Date............................................................12
                  (b)   Mandatory Repayment of Excess Loans......................................................12
                  (c)   Prepayment under FMA/Commercial Loan Access Agreement....................................12
         SECTION 2.04.     Note..................................................................................12
         SECTION 2.05.     Termination of Credit Facility........................................................12
         SECTION 2.06.     Use of Proceeds.......................................................................12
         SECTION 2.07.     Interest..............................................................................13
                  (a)   Interest Rate Options....................................................................13
                  (b)   Default Rate.............................................................................13
                  (c)   Interest Payment and Computation.........................................................13
                  (d)   Maximum Rate.............................................................................13
         SECTION 2.08.     Notice and Manner of Conversion or Continuation of Loans..............................14
         SECTION 2.09.     Manner of Payment.....................................................................14
         SECTION 2.10.     Crediting of Payments and Proceeds....................................................14

ARTICLE III CHANGE IN CIRCUMSTANCES; COMPENSATION................................................................14
         SECTION 3.01.     Basis for Determining Interest Rate Inadequate or Unfair..............................14
         SECTION 3.02.     Illegality............................................................................15
         SECTION 3.03.     Increased Cost and Reduced Return.....................................................15
         SECTION 3.04.     Base Rate Loan Substituted for Affected LIBOR Rate Loan...............................16
         SECTION 3.05.     Compensation..........................................................................17

ARTICLE IV CONDITIONS TO LOAN CLOSING............................................................................17
         SECTION 4.01.     Conditions to Loan Closing............................................................17
         SECTION 4.02.     Conditions to all Loans...............................................................18
                  (a)   Continuation of Representations and Warranties...........................................18
                  (b)   No Existing Default......................................................................18
                  (c)   Officer's Compliance Certificate.........................................................18
</TABLE>

<PAGE>   3

<TABLE>
<S>                                                                                                              <C>
ARTICLE V REPRESENTATIONS AND WARRANTIES.........................................................................19
         SECTION 5.01.     Corporate Existence and Power.........................................................19
         SECTION 5.02.     Corporate and Governmental Authorization, Contravention...............................19
         SECTION 5.03.     Binding Effect........................................................................19
         SECTION 5.04.     Financial Information.................................................................19
         SECTION 5.05.     Litigation............................................................................20
         SECTION 5.06.     Compliance with ERISA.................................................................20
         SECTION 5.07.     Taxes.................................................................................20
         SECTION 5.08.     Subsidiaries..........................................................................20
         SECTION 5.09.     Not an Investment Company.............................................................20
         SECTION 5.10.     Ownership of Property; Liens..........................................................20
         SECTION 5.11.     No Default............................................................................21
         SECTION 5.12.     Full Disclosure.......................................................................21
         SECTION 5.13.     Environmental Matters.................................................................21
         SECTION 5.14.     Compliance with Laws..................................................................21
         SECTION 5.15.     Capital Stock.........................................................................21
         SECTION 5.16.     Margin Stock..........................................................................22
         SECTION 5.17.     Insolvency............................................................................22
         SECTION 5.18.     Survival of Representations and Warranties, Etc.......................................22

ARTICLE VI COVENANTS.............................................................................................22
         SECTION 6.01.     Information...........................................................................22
         SECTION 6.02.     Notice of Certain Events..............................................................24
         SECTION 6.03.     Corporate Existence...................................................................24
         SECTION 6.04.     Payment of Indebtedness; Performance of Other Obligations.............................24
         SECTION 6.05.     Maintenance of Books and Records; Inspection..........................................25
         SECTION 6.06.     Comply with ERISA.....................................................................25
         SECTION 6.07.     Maintenance of Properties; Conduct of Business. ......................................25
         SECTION 6.08.     Insurance.............................................................................26
         SECTION 6.09.     Observe all Laws......................................................................26
         SECTION 6.10.     [Intentionally omitted.]..............................................................26
         SECTION 6.11.     Subsidiary Guaranties.................................................................26
         SECTION 6.12.     Merger and Dissolution; Sale of Assets................................................26
         SECTION 6.13.     Acquisitions..........................................................................27
         SECTION 6.14.     Indebtedness..........................................................................27
         SECTION 6.15.     Liens and Encumbrances................................................................27
         SECTION 6.16.     Transactions With Related Persons.....................................................27
         SECTION 6.17.     Sale and Leaseback....................................................................28
         SECTION 6.18.     New Business..........................................................................28
         SECTION 6.19.     Subsidiaries..........................................................................28
         SECTION 6.20.     Guaranties............................................................................28
         SECTION 6.21.     Restrictive Transactions..............................................................28
         SECTION 6.22.     Hazardous Wastes......................................................................28
</TABLE>

<PAGE>   4

<TABLE>
<S>                                                                                                              <C>
         SECTION 6.23.     Change in Fiscal Year.................................................................29
         SECTION 6.24.     Amendments............................................................................29
         SECTION 6.25.     Leverage-Ratio........................................................................29
         SECTION 6.26.     Fixed Charge Coverage Ratio...........................................................29
         SECTION 6.27.     Net Worth.............................................................................29
         SECTION 6.28.     Additional Covenants..................................................................29
         SECTION 6.29.     Use of Proceeds.......................................................................30

ARTICLE VII DEFAULTS.............................................................................................30
         SECTION 7.01.     Events of Default.....................................................................30
         SECTION 7.02.     Remedies on Default...................................................................32
         SECTION 7.03.     Security Interest, Offset, Sharing of Offsets.........................................32

ARTICLE VIII MISCELLANEOUS.......................................................................................33
         SECTION 8.01.     Notices...............................................................................33
         SECTION 8.02.     No Waivers............................................................................33
         SECTION 8.03.     Expenses; Documentary Taxes...........................................................34
         SECTION 8.04.     Amendments and Waivers................................................................34
         SECTION 8.05.     Successors and Assigns................................................................34
         SECTION 8.06.     Confidentiality.......................................................................36
         SECTION 8.07.     Governing Law.........................................................................36
         SECTION 8.08.     Counterparts..........................................................................36
         SECTION 8.09.     Severability..........................................................................36
         SECTION 8.10.     Captions..............................................................................37
</TABLE>

<PAGE>   5

SCHEDULES

Schedule 1.1      Existing Liens
Schedule 6.12     Purchases, Mergers and Exchanges
Schedule 6.13     Acquisitions
Schedule 6.14     Existing Indebtedness
Schedule 6.19     Creation of Subsidiaries

EXHIBITS

Exhibit A         Form of Promissory Note
Exhibit B         Form of Notice of Borrowing
Exhibit C         Form of Notice of Conversion/Continuation
Exhibit D         Form of Officer's Compliance Certificate
Exhibit E         Form of Assignment and Acceptance
Exhibit F         Form of Notice of Account Designation
Exhibit G         Form of Borrower Opinion

<PAGE>   6

                                CREDIT AGREEMENT

         THIS CREDIT AGREEMENT, made as of the 30th day of May, 2000 (this
"Agreement"), by and among BELK, INC., a Delaware corporation (together with its
successors, the "Borrower"), and WACHOVIA BANK, N.A., a national banking
association (together with its endorsees, successors and assigns, the "Bank").

                                   BACKGROUND

         The Borrower desires to borrow from the Bank loans in the aggregate
principal amount of up to $175,000,000, the proceeds of which will be used to
finance seasonal working capital requirements, and the Bank is willing to make
such loans on the terms and conditions hereinafter set forth.

         NOW, THEREFORE, in consideration of the premises and the promises
herein contained, and each intending to be legally bound hereby, the parties
agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

         SECTION 1.01.     Definitions. The terms as defined in this Section
1.01 shall, for all purposes of this Agreement and any amendment hereto (except
as herein otherwise expressly provided or unless the context otherwise
requires), have the meanings set forth herein (terms defined in the singular to
have the same meanings when used in the plural and vice versa):

         "Affiliate" means, with respect to any Person, any other Person (i)
directly or indirectly controlling (including, but not limited to, all directors
and officers of such Person), controlled by, or under direct or indirect common
control with, such Person or (ii) that directly or indirectly owns more than 5%
of the voting securities of such Person. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract or
otherwise.

         "Alternate Rate" means for any Alternate Rate Loan for any day, (i) the
rate per annum offered by the Bank in its discretion and agreed to by the
Borrower, or (ii) in the event the Borrower and the Bank do not agree on such
offered rate, three-quarters of one percent above the Federal Funds Rate for
such day per annum.

         "Alternate Rate Loans" means the Loans or any portion of the Loans
during periods which the Loans or such portion of the Loans bears interest
calculated by reference to the Alternate Rate.

<PAGE>   7

         "Applicable Law" means all applicable provisions of constitutions,
laws, statutes, ordinances, rules, treaties, regulations, permits, licenses,
approvals, interpretations and orders of all Governmental Authorities and all
orders and decrees of all courts and arbitrators.

         "Assignee" has the meaning set forth in Section 8.05(c).

         "Assignment and Acceptance" means an Assignment and Acceptance executed
in accordance with Section 8.05(c) in the form attached hereto as Exhibit E.

         "Base Rate" means for any Base Rate Loan for any day, the rate per
annum equal to the higher as of such day of (i) the Prime Rate, or (ii) one-half
of one percent above the Federal Funds Rate for such day. For purposes of
determining the Base Rate for any day, changes in the Prime Rate shall be
effective on the date of each such change.

         "Base Rate Loans" means the Loans or any portion of the Loans during
periods in which the Loans or such portion of the Loans bears interest
calculated by reference to the Base Rate.

         "Big Five" means the listing of the largest certified public accounting
firms currently comprised of Arthur Andersen, Ernst & Young, KPMG, Deloitte and
Touche, and PriceWaterhouseCoopers, or any similar listing as may be expanded
or reduced in the future.

         "Business Day" means (i) for all purposes other than as set forth in
clause (ii) below, any day other than a Saturday, Sunday or legal holiday on
which banks in Charlotte, North Carolina are open for the conduct of their
commercial banking business, and (ii) with respect to all notices and
determinations in connection with, and payments and interest on, any LIBOR Rate
Loan, any day that is a Business Day described in clause (i) and that is also a
day for trading by and between banks in Dollar deposits in the London interbank
market.

         "Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests or equivalents in capital stock
(whether voting or nonvoting, and whether common or preferred) of such
corporation, and (ii) with respect to any Person that is not a corporation, any
and all partnership, membership, limited liability company or other equity
interests of such Person; and in each case, any and all warrants, rights or
options to purchase any of the foregoing.

         "CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act, 42 U.S.C. ' 9601 et seq. and its implementing regulations and
amendments.

         "CERCLIS" means the Comprehensive Environmental Response Compensation
and Liability Inventory System established pursuant to CERCLA.

         "Change of Law" shall have the meaning set forth in Section 3.02.

         "Closing Date" means the date of this Agreement.

                                       2
<PAGE>   8

         "Code" means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code.

         "Commitment" means the obligation of the Bank to make Loans to the
Borrower hereunder in an aggregate principal amount at any time outstanding not
to exceed $175,000,000.00, as the same may be reduced or modified at any time or
from time to time pursuant to the terms hereof.

         "Comprehensive Income" means comprehensive income of Borrower and its
Subsidiaries on a consolidated basis determined in accordance with Generally
Accepted Accounting Principles.

         "Consistent Basis" means, in reference to the application of Generally
Accepted Accounting Principles, that the accounting principles observed in the
period referred to are comparable in all material respects to those applied in
the preceding period, except as to any changes consented to by the Bank or
required by Generally Accepted Accounting Principles.

         "Consolidated Net Income" means, for any period of computation thereof,
the net income of the Borrower and its Subsidiaries (excluding extraordinary
items) as determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles applied on a Consistent Basis.

         "Consolidated Tangible Net Worth" means, at any date of determination,
the total stockholders' equity (including Capital Stock, additional paid-in
capital and retained earnings after deducting treasury stock), less any
intangible assets (excluding Lease Intangibles) of the Borrower and its
Subsidiaries and calculated on a consolidated basis in accordance with Generally
Accepted Accounting Principles.

         "Contingent Obligation" means, with respect to any Person, any direct
or indirect liability of such Person with respect to any Indebtedness, liability
or other obligation (the Aprimary obligation") of another Person (the Aprimary
obligor"), whether or not contingent, (a) to purchase, repurchase or otherwise
acquire such primary obligation or any property constituting direct or indirect
security therefor, (b) to advance or provide funds (i) for the payment or
discharge of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, (c) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor in respect thereof to make payment of such
primary obligation or (d) otherwise to assure or hold harmless the owner of any
such primary obligation against loss or failure or inability to perform in
respect thereof, provided, however, that, with respect to the Borrower and its
Subsidiaries, the term Contingent Obligation shall not include endorsements for
collection or deposit in the ordinary course of business.

         "Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.

         "Credit Facility" means the revolving credit facility established
pursuant to Article II hereof.

                                       3
<PAGE>   9

         "Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.

         "Dollars" or "$" means dollars in lawful currency of the United States
of America.

         "EBITDA" means, for any period, the aggregate of (i) Consolidated Net
Income for such period, plus (ii) the sum of the following: (a) interest
expense, (b) federal, state, local and other income taxes, and (c) depreciation,
amortization and non-cash charges incurred solely in compliance with FASB
Statement of Financial Accounting Standards No. 121, all to the extent taken
into account in the calculation of such Consolidated Net Income for such period
and determined on a consolidated basis in accordance with Generally Accepted
Accounting Principles applied on a Consistent Basis.

         "Environmental Authorizations" means all licenses, permits, orders,
approvals, notices, registrations or other legal prerequisites, for conducting
the business of the Borrower or any Subsidiary required by any Environmental
Requirement.

         "Environmental Requirements" means any legal requirement relating to
health, safety or the environment and applicable to the Borrower, any Subsidiary
or the Properties, including but not limited to any such requirement under
CERCLA or similar state legislation and all federal, state and local laws,
ordinances, regulations, orders, writs, decrees and common law.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law, including any rules or
regulations promulgated thereunder. Any reference to any provision of ERISA
shall also be deemed to be a reference to any successor provision or provisions
thereof.

         "Event of Default" shall have the meaning assigned to such term in
Section 7.01.

         "Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day; provided, that (i) if the day for which such rate is to be
determined is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate charged to the Bank on such day on such transactions.

         "Financing Charges" means those charges owed and allocated to third
parties with respect to any on or off balance sheet asset financing transaction
to which the Borrower or any Subsidiary of

                                       4
<PAGE>   10

the Borrower is a party, such transactions to include, without limitation,
securitizations, sales to commercial paper conduits, synthetic leases, or other
similar financing techniques.

         "Fiscal Quarter" means any fiscal quarter of the Borrower.

         "Fiscal Year" means any fiscal year of the Borrower.

         "Fixed Charge Coverage Ratio" means, as of the last day of any Fiscal
Quarter of the Borrower and its Subsidiaries, commencing April 29, 2000, for the
consecutive four-quarter period ending on such date, the ratio of (i) EBITDA for
such period plus, to the extent deducted in arriving at EBITDA, lease, rental
and all other payments made in respect of or in connection with operating
leases, to (ii) Fixed Charges for such period.

         "Fixed Charges" means, for any period, the aggregate (without
duplication) of the following, all determined on a consolidated basis for the
Borrower and its Subsidiaries in accordance with Generally Accepted Accounting
Principles for such period: (a) interest expense for such period, (b) to the
extent deducted in arriving at EBITDA, lease, rental and all other payments made
in respect of or in connection with operating leases, (c) Financing Charges, and
(d) the aggregate (without duplication) of all scheduled payments of principal
on Funded Debt with an original maturity of more than one year required to have
been made by the Borrower and its Subsidiaries during such period (whether or
not such payments are actually made).

         "FMA/Commercial Loan Access Agreement" means that certain Financial
Management Account agreement dated September 11, 1998 between the Borrower and
the Bank and that certain Financial Management Account Investment/Commercial
Loan Access Agreement dated May 30, 2000 between the Borrower and the Bank, as
the same may be amended or supplemented from time to time.

         "Funded Debt" means all Indebtedness for borrowed money of the Borrower
and its Subsidiaries on a consolidated basis (including, without limitation, all
current maturities and borrowings under short term loans) plus all indebtedness
incurred in connection with or arising from any on or off balance sheet asset
financing transaction to which the Borrower or any Subsidiary of the Borrower is
a party, such transactions to include, without limitation, securitizations,
sales to commercial paper conduits, synthetic leases, or other similar financing
techniques.

         "Generally Accepted Accounting Principles" means those principles of
accounting set forth in pronouncements of the Financial Accounting Standards
Board and its predecessors or Pronouncements of the American Institute of
Certified Public Accountants or those principles of accounting which have other
substantial authoritative support and are applicable in the circumstances as of
the date of application, as such principles are from time to time supplemented
or amended.

         "Governmental Approval" means all authorizations, consents, approvals,
licenses, and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.

                                       5
<PAGE>   11

         "Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any central bank thereof, any municipal,
local, city or county government, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.

         "Guarantee" means, with respect to any Person, any obligation,
contingent or otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness or other obligation of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to secure, purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or other obligation
(whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to provide
collateral security, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Indebtedness against loss in respect thereof
(in whole or in part); provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.

         "Guarantors" means Belk Stores of Virginia LLC, Belk Stores Services,
Inc., Belk-Simpson Company, Greenville, South Carolina, The Belk Center, Inc.,
Belk Administration Company, Belk International, Inc., United Electronic
Services, Inc., Belk Accounts Receivable LLC and any other Subsidiary of the
Borrower executing a Guaranty Agreement or guaranty supplement in accordance
with this Agreement.

         "Guaranty Agreements" means the Guaranty Agreements or guaranty
supplements executed by any Guarantor.

         "Hazardous Substances" means any substances or materials (i) that are
or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants or toxic substances under any Environmental Law, (ii) that are
defined by any Environmental Law, as toxic, explosive, corrosive, ignitable,
infectious, radioactive, mutagenic or otherwise hazardous (iii) the presence of
which require investigation or response under any Environmental Law, (iv) that
constitute a nuisance, trespass or health or safety hazard to Persons or
neighboring properties, (v) that consist of underground or aboveground storage
tanks, whether empty, filled or partially filled with any substance or (vi) that
contain, without limitation, asbestos, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived
substances or wastes, crude oil, nuclear fuel, natural gas or synthetic gas.

         "Indebtedness" means, with respect to any Person (without duplication),
(i) all indebtedness and obligations of such Person for borrowed money or in
respect of loans or advances of any kind, (ii) all obligations of such Person
evidenced by notes, bonds, debentures or similar instruments, (iii) all
reimbursement obligations of such Person with respect to surety bonds, letters
of credit and bankers' acceptances (in each case, whether or not drawn or
matured and in the stated amount thereof), (iv) all obligations of such Person
to pay the deferred purchase price of property or services,

                                       6
<PAGE>   12

(v) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person, (vi)
all obligations of such Person as lessee under leases that are or are required
to be, in accordance with Generally Accepted Accounting Principles, recorded as
capital leases, (vii) all Contingent Obligations of such Person and (viii) all
indebtedness referred to in clauses (i) through (vii) above secured by any Lien
on any property or asset owned or held by such Person regardless of whether the
indebtedness secured thereby has been assumed by such Person or is nonrecourse
to the credit of such Person.

         "Lease Intangibles" means the amount of lease intangibles appearing on
the balance sheet of the Borrower determined in accordance with Generally
Accepted Accounting Principles.

         "Leverage Ratio" means, as of the last day of any Fiscal Quarter, the
ratio of (i) Funded Debt as of such date to (ii) EBITDA for the period of four
consecutive Fiscal Quarters then ending.

         "Lending Office" means the Bank's office located at its address set
forth on the signature pages hereof (or identified on the signature pages hereof
as its Lending Office) or such other office as the Bank may hereafter designate
as its Lending Office by notice to the Borrower.

         "LIBOR Market Index Rate" means, as determined each Business Day, the
rate per annum (rounded upward, if necessary, to the next higher 1/100th of 1%)
which is equal to:

                  (i)      the rate for deposits in Dollars which appears on the
                  Telerate Page 3750 at approximately 11:00 a.m. (London time)
                  on such day for a term equal to one month, from time to time,
                  with each change in such rate to be effective as of the
                  opening of business on the effective date of the change in
                  such rate; provided, that if the day for which such rate is to
                  be determined is not a Business Day, the LIBOR Market Index
                  Rate for such day shall be such rate for the next preceding
                  Business Day; provided further, that if such rate is not
                  reported on Telerate Page 3750, such rate shall be the rate
                  determined by the Bank from another recognized source or
                  interbank quotation, divided by (ii) 1.00 minus the reserve
                  requirement (expressed as a percentage) with respect to
                  eurocurrency liabilities prescribed for member banks of the
                  Federal Reserve System by the Board of Governors of the
                  Federal Reserve System from time to time (if and only to the
                  extent that the Banks have eurocurrency liabilities subject
                  thereto) and any other similar reserve requirements imposed
                  against a category of liabilities which includes eurocurrency
                  deposits or a category of assets which includes eurocurrency
                  loans.

                  (ii)     If, for any reason, the rate described in clause (i)
                  is not available, such rate shall be the rate per annum at
                  which, in the reasonable opinion of the Bank, Dollars in an
                  amount substantially equal to the amount of the applicable
                  Loan are being offered by leading reference banks for
                  settlement in the London interbank

                                       7
<PAGE>   13

                  market at approximately 11:00 a.m. (London time), on the
                  second Business Day next preceding the applicable date for a
                  term equal to one month.

         "LIBOR Rate Loan" means the Loans or any portion of the Loans during
periods in which the Loans or such portion of the Loans bears interest
calculated by reference to the LIBOR Market Index Rate.

         "Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, the Borrower or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.

         "Loan" means any Revolving Credit Loan made to the Borrower under
Section 2.01, and all such Loans collectively as the context requires.

         "Loan Documents" means this Agreement, the Note, the Guaranty
Agreements and any other document guaranteeing, evidencing or securing the
Loans.

         "Margin Stock" means "margin stock" as defined in Regulations T, U or X
of the Board of Governors of the Federal Reserve System, as in effect from time
to time, together with all official rulings and interpretations issued
thereunder.

         "Material Adverse Effect" means, with respect to the Borrower or any of
its Subsidiaries, a material adverse effect on the properties, business,
prospects, operations or condition (financial or otherwise) of any such Person
or the ability of any such Person to perform its obligations under this
Agreement or the other Loan Documents, in each case to which it is a party.

         "Multiemployer Plan" shall have the meaning set forth in Section
4001(a)(3) of ERISA.

         "Note" means the Promissory Note made by the Borrower payable to the
order of the Bank, substantially in the form of Exhibit A attached hereto.

         "Notice of Account Designation" shall have the meaning assigned thereto
in Section 2.02(b).

         "Notice of Borrowing" shall have the meaning assigned thereto in
Section 2.02(a).

         "Notice of Conversion/Continuation" shall have the meaning assigned
thereto in Section 2.08.

         "Officer's Compliance Certificate" shall have the meaning assigned
thereto in Section 6.01(d).

                                       8
<PAGE>   14

         "Participant" has the meaning set forth in Section 8.05(b).

         "PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

         "Permitted Liens" means any of the following liens securing any
indebtedness of the Borrower and its Subsidiaries on their property, real or
personal, whether now owned or hereafter acquired:

                  (i)      Liens of carriers, warehousemen, mechanics,
         contractors and materialmen incurred in the ordinary course of business
         for sums not yet due and payable or that are being contested in good
         faith and in appropriate proceedings and for which bonds have been
         posted or other security acceptable to the Bank provided, such bonds or
         other security to be in amounts sufficient to pay off the liens during
         the pendency of any controversies relating to them;

                  (ii)     Liens incurred in the ordinary course of business in
         connection with worker's compensation, unemployment insurance or other
         forms of governmental insurance or benefits, or liens to secure the
         performance of letters of credit, bids, tenders, statutory obligations,
         leases and contracts (other than for borrowed funds) entered into in
         the ordinary course of business or to secure obligations on surety or
         appeal bonds,

                  (iii)    Liens of suppliers of inventory purchased on credit
         in the ordinary course of business;

                  (iv)     Liens for current taxes, assessments or other
         governmental charges that are not delinquent or remain payable without
         any penalty or that are being contested in good faith and by
         appropriate proceedings and if reasonably requested by the Bank, the
         Borrower shall establish reserves satisfactory to the Bank with respect
         thereto;

                  (v)      Liens securing Indebtedness as permitted by the Bank
         from time to time; and

                  (vi)     Liens set forth on Schedule 1.1.

         "Person" means an individual, partnership, corporation, limited
liability company, trust unincorporated organization, association, joint venture
or a government or agency or political subdivision or instrumentality thereof.

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

                                       9
<PAGE>   15

         "Prime Rate" means, at any time, the rate of interest per annum
publicly announced from time to time by the Bank as its prime rate. Each change
in the Prime Rate shall be effective as of the opening of business on the day
such change in the Prime Rate occurs. The parties hereto acknowledge that the
rate announced publicly by the Bank as its Prime Rate is an index or base rate
and shall not necessarily be the lowest or best rate charged to its customers or
other banks.

         "Properties" means all real property owned, leased or otherwise used or
occupied by the Borrower or any Subsidiary, wherever located.

         "Reportable Event" has the meaning given such term in Section 4043(b)
of Title V of ERISA.

         "Subsidiary" means, as to any Person, (i) any corporation more than 50%
of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person has more than a 50% equity interest at the time. Unless the context
indicates otherwise, all references herein to Subsidiaries are references to
Subsidiaries of the Borrower.

         "Termination Date" means the earliest of the dates referred to in
Section 2.05.

         "Transferee" has the meaning set forth in Section 8.05(d).

         "Wholly Owned Subsidiary" means any Subsidiary all of the shares of
capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the Borrower.

         SECTION 1.02.     Accounting, Terms and Determinations. Unless
otherwise specified herein, all terms of an accounting character used herein
shall be interpreted, all accounting determinations hereunder shall be made, and
all financial statements required to be delivered hereunder shall be prepared
substantially in accordance with Generally Accepted Accounting Principles as in
effect from time to time, applied on a Consistent Basis.

         SECTION 1.03.     References. Except as otherwise expressly provided in
this Agreement: the words "herein," "hereof," "hereunder" and other words of
similar import refer to this Agreement as a whole, including the Schedules
hereto which are a part hereof, and not to any particular Section, Article,
paragraph or other subdivision; the singular includes the plural and the plural
includes the singular; "or" is not exclusive; the words "include," "includes"
and "including" are not limiting; a reference to any agreement or other contract
includes past and future permitted supplements, amendments, modifications and
restatements thereto or thereof, a reference to an Article, Section, paragraph
or other subdivision is a reference to an Article, Section, paragraph or other
subdivision of

                                       10
<PAGE>   16

this Agreement; a reference to any law includes any amendment or modification to
such law and any rules and regulations promulgated thereunder; a reference to a
Person includes its permitted successors and assigns; any right may be exercised
at any time and from time to time; and, except as otherwise expressly provided
therein, all obligations under any agreement or other contract are continuing
obligations throughout the term of such agreement or contract.

                                   ARTICLE II
                            REVOLVING CREDIT FACILITY

         SECTION 2.01.     Revolving Credit Loans. Subject to the terms and
conditions of this Agreement, the Bank agrees to make Loans to the Borrower from
time to time from the Closing Date through the Termination Date as requested by
the Borrower in accordance with the terms of Section 2.02; provided, that the
aggregate principal amount of all outstanding Loans (after giving effect to any
amount requested) shall not exceed the Commitment. Subject to the terms and
conditions hereof, the Borrower may borrow, repay and reborrow Loans hereunder
until the Termination Date. Partial repayments hereunder shall be in an
aggregate amount of $100,000 or a whole multiple of $100,000 in excess thereof.

         SECTION 2.02.     Procedure for Advances of Loans.

         (a)      Requests for Borrowing. The Borrower shall give the Bank
irrevocable prior written notice in the form attached hereto as Exhibit B (a
"Notice of Borrowing") not later than 1:00 p.m. (Charlotte time) on the same
Business Day as each Loan of its intention to borrow specifying (i) the date of
such borrowing, which shall be a Business Day, (ii) the amount of such
borrowing, which shall be in an aggregate principal amount of $100,000 or a
whole multiple of $100,000 in excess thereof, and (iii) whether the Loans are to
be LIBOR Rate Loans or Base Rate Loans. Notices received after 1:00 p.m.
(Charlotte time) shall be deemed received on the next Business Day.

         (b)      Disbursement of Loans. Not later than 2:00 p.m. (Charlotte
time) on the proposed borrowing date, the Bank will make available to the
Borrower the Loans to be made on such borrowing date. The Borrower hereby
irrevocably authorizes the Bank to disburse the proceeds of each borrowing
requested pursuant to this Section 2.02 in immediately available funds by
crediting or wiring such proceeds to the deposit account of the Borrower
identified in the most recent Notice of Account Designation substantially in the
form of Exhibit F hereto (a "Notice of Account Designation") delivered by the
Borrower to the Bank or as may be otherwise agreed upon by the Borrower and the
Bank from time to time.

         (c)      FMA/Commercial Loan Access Agreement. The Borrower and the
Bank agree that so long as no Default or Event of Default shall have occurred
and be continuing, proceeds of the Loans shall also be disbursed from time to
time pursuant to the FMA/Commercial Loan Access Agreement, provided that the
aggregate amount of all Loans outstanding at any time pursuant to Section
2.02(b) and this Section 2.02(c) shall not exceed the Commitment.

                                       11
<PAGE>   17

         SECTION 2.03.     Repayment of Loans.

         (a)      Repayment on Termination Date. The Borrower shall repay the
outstanding principal amount of all Loans in full on the Termination Date,
together with all accrued but unpaid interest thereon.

         (b)      Mandatory Repayment of Excess Loans. If at any time the
outstanding principal amount of all Loans exceeds the Commitment, the Borrower
shall repay immediately upon notice from the Bank, Loans in an amount equal to
such excess. Each such repayment shall be accompanied by any amount required to
be paid pursuant to Section 3.05 hereof.

         (c)      Prepayment under FMA/Commercial Loan Access Agreement. The
Loans shall be prepaid from time to time in accordance with the provisions of
the FMA/Commercial Loan Access Agreement.

         SECTION 2.04.     Note. The Bank's Loans and the obligation of the
Borrower to repay such Loans shall be evidenced by the Note executed by the
Borrower payable to the order of the Bank representing the Borrower's obligation
to pay the Bank's Commitment or, if less, the aggregate unpaid principal amount
of all Loans made and to be made by the Bank to the Borrower hereunder, plus
interest and all other fees, charges and other amounts due thereon. The Note
shall be dated the date hereof and shall bear interest on the unpaid principal
amount thereof at the applicable interest rate per annum specified in Section
2.07.

         SECTION 2.05.     Termination of Credit Facility. The Credit Facility
shall terminate on the earliest of (a) May 29, 2001, (b) the date of termination
by the Bank pursuant to Section 7.02 and (c) the date on which the Bank shall
give the Borrower notice of the termination of the Credit Facility and make
demand for payment of the Credit Facility. It is the intention of the Borrower
and the Bank that the Credit Facility be immediately due and payable in full on
demand of the Bank at its option notwithstanding the inclusion in this Agreement
of provisions regarding Defaults and Events of Default, the occurrence and
continuation of which would permit the Bank to declare the Note and the Loans
immediately due and payable as provided in Section 7.02.

         SECTION 2.06.     Use of Proceeds. The Borrower shall use the proceeds
of the Loans to finance its seasonal working capital needs.

         SECTION 2.07.     Interest.

         (a)      Interest Rate Options. Subject to the provisions of this
Section 2.07, at the election of the Borrower, the principal balance of the Note
or any portion thereof shall bear interest per annum at (i) the Base Rate or
(ii) the LIBOR Market Index Rate plus 0.60% or (iii) under the circumstances
specified in Section 3.04 only, the Alternate Rate. The Borrower shall select
the rate of interest applicable to any Loan at the time a Notice of Borrowing is
given pursuant to Section 2.02 or at the time a Notice of
Conversion/Continuation is given pursuant to Section 2.08. Each Loan or portion
thereof bearing interest based on the Base Rate shall be a "Base Rate Loan,"
each Loan or portion thereof bearing interest based on the LIBOR Market Index
Rate shall be a "LIBOR Rate Loan" and

                                       12
<PAGE>   18

each Loan or portion thereof bearing interest based on the Alternate Rate shall
be an "Alternate Rate Loan." Any Loan or any portion thereof as to which the
Borrower has not duly specified an interest rate as provided herein shall be
deemed a Base Rate Loan. The Borrower is deemed to have elected the LIBOR Market
Index Rate plus 0.60% as the interest rate for all Loans funded pursuant to
Section 2.02(c).

         (b)      Default Rate. Upon the occurrence and during the continuance
of an Event of Default, (i) the Borrower shall no longer have the option to
request LIBOR Rate Loans, (ii) all outstanding LIBOR Rate Loans shall be
converted to Base Rate Loans and (iii) all outstanding Loans shall bear interest
at a rate per annum equal to two percent (2%) in excess of the rate then
applicable to Base Rate Loans. Interest shall continue to accrue on the Note
after the filing by or against the Borrower of any petition seeking any relief
in bankruptcy or under any act or law pertaining to insolvency or debtor relief,
whether state, federal or foreign.

         (c)      Interest Payment and Computation. Notwithstanding the
provisions of the FMA/Commercial Loan Access Agreement, interest on each Loan
shall be payable in arrears on the last Business Day of each Fiscal Quarter of
the Borrower commencing July 29, 2000. All interest rates, fees and commissions
provided hereunder shall be computed on the basis of a 360-day year and assessed
for the actual number of days elapsed.

         (d)      Maximum Rate. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under the Note charged or
collected pursuant to the terms of this Agreement or pursuant to the Note exceed
the highest rate permissible under any Applicable Law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In the
event that such a court determines that the Bank has charged or received
interest hereunder in excess of the highest applicable rate, the rate in effect
hereunder shall automatically be reduced to the maximum rate permitted by
Applicable Law and the Bank shall at its option promptly refund to the Borrower
any interest received by the Bank in excess of the maximum lawful rate or shall
apply such excess to the principal balance of the Loans. It is the intent hereof
that the Borrower not pay or contract to pay, and that the Bank not receive or
contract to receive, directly or indirectly in any manner whatsoever, interest
in excess of that which may be paid by the Borrower under Applicable Law.

         SECTION 2.08.     Notice and Manner of Conversion or Continuation of
Loans. Provided that no Event of Default has occurred and is then continuing,
the Borrower shall have the option to (a) convert at any time all or any portion
of its outstanding Base Rate Loans in a principal amount equal to $100,000 or
any whole multiple of $100,000 in excess thereof into one or more LIBOR Rate
Loans, (b) convert all or any part of its outstanding LIBOR Rate Loans in a
principal amount equal to $100,000 or a whole multiple of $100,000 in excess
thereof into Base Rate Loans, or (c) continue such LIBOR Rate Loans as LIBOR
Rate Loans. Whenever the Borrower desires to convert or continue Loans as
provided above, the Borrower shall give the Bank irrevocable prior written
notice in the form attached as Exhibit C (a "Notice of Conversion/Continuation")
not later than 1:00 p.m. (Charlotte time) on the Business Day on which a
proposed conversion or continuation of such Loan is to be effective specifying
(i) the Loans to be converted or continued, (ii) the effective date of such

                                       13
<PAGE>   19

conversion or continuation (which shall be a Business Day), and (iii) the
principal amount of such Loans to be converted or continued.

         SECTION 2.09.     Manner of Payment. Each payment by the Borrower on
account of the principal of or interest on the Loans or of any fee, commission
or other amounts payable to the Bank under this Agreement or the Note (other
than payments made pursuant to the FMA/Commercial Loan Access Agreement, which
payments shall be made as therein provided) shall be made not later than 1:00
p.m. (Charlotte time) on the date specified for payment under this Agreement to
the Bank at the Bank's Lending Office in Dollars, in immediately available funds
and shall be made without any set-off, counterclaim or deduction whatsoever. Any
payment received after such time but before 2:00 p.m. (Charlotte time) on such
day shall be deemed a payment on such date for the purposes of Section 7.01, but
for all other purposes shall be deemed to have been made on the next succeeding
Business Day. Any payment received after 2:00 p.m. (Charlotte time) shall be
deemed to have been made on the next succeeding Business Day for all purposes.

         SECTION 2.10.     Crediting of Payments and Proceeds. In the event that
the Borrower shall fail to pay any of the Loans when due and the Loans have been
accelerated pursuant to Section 7.02 or Bank demands payment of the Loans, all
payments received by the Bank upon the Note and the other Loans and all net
proceeds from the enforcement of the Loans shall be applied first to all
expenses then due and payable by the Borrower hereunder, then to all indemnity
obligations then due and payable by the Borrower hereunder, then to all fees, if
any, then due and payable, then to accrued and unpaid interest on the Note, then
to the principal amount of the Note.

                                   ARTICLE III
                      CHANGE IN CIRCUMSTANCES; COMPENSATION

         SECTION 3.01.     Basis for Determining Interest Rate Inadequate or
Unfair. If:

         (a)      the Bank determines that deposits in Dollars (in the
applicable amounts) are not being offered in the London interbank market, or

         (b)      the Bank determines that the LIBOR Market Index Rate as
determined by the Bank will not adequately and fairly reflect the cost to the
Bank of funding LIBOR Rate Loans,

the Bank shall forthwith give notice thereof to the Borrower, whereupon until
the Bank notifies the Borrower that the circumstances giving rise to such
suspension no longer exist, the obligations of the Bank to make or maintain
LIBOR Rate Loans shall be suspended.

         SECTION 3.02.     Illegality. If, after the date hereof, the adoption
of any Applicable Law, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority (any such
event being referred to as a "Change of Law"), or compliance by the Bank (or its
Lending Office) with any request or directive (whether or not having the force
of law) of any Governmental Authority shall make it unlawful or impossible for
the Bank (or its

                                       14
<PAGE>   20

Lending Office) to make, maintain or fund any LIBOR Rate Loan the Bank shall
forthwith give notice thereof to the Borrower, whereupon until the Bank notifies
the Borrower that the circumstances giving rise to such suspension no longer
exist, the obligation of the Bank to make any LIBOR Rate Loan shall be
suspended. If the Bank shall determine that it may not lawfully continue to
maintain and fund any outstanding LIBOR Rate Loan to maturity and shall so
specify in such notice, such Loan shall immediately become a Base Rate Loan.

         SECTION 3.03.     Increased Cost and Reduced Return.

         (a)      If after the date hereof, a Change of Law or compliance by the
Bank (or its Lending Office) with any request or directive (whether or not
having the force of law) of any Governmental Authority:

                  (i)      shall subject the Bank (or its Lending Office) to any
         tax, duty or other charge with respect to any LIBOR Rate Loan, the Note
         or its obligation to make or maintain any LIBOR Rate Loan, or shall
         change the basis of taxation of payments to the Bank (or its Lending
         Office) of the principal of or interest on any LIBOR Rate Loan or any
         other amounts due under this Agreement in respect of any LIBOR Rate
         Loan or its obligation to make or maintain any LIBOR Rate Loan (except
         for changes in the rate of tax on the overall net income of the Bank or
         its Lending Office imposed by the jurisdiction in which the Bank's
         principal executive office or Lending Office is located); or

                  (ii)     shall impose, modify or deem applicable any reserve,
         special deposit or similar requirement (including, without limitation,
         any such requirement imposed by the Board of Governors of the Federal
         Reserve System, but excluding with respect to any LIBOR Rate Loan any
         applicable eurodollar reserve requirement included in the definition of
         LIBOR Market Index Rate) against assets of, deposits with or for the
         account of, or credit extended by, the Bank (or its Lending Office); or

                  (iii)    shall impose on the Bank (or its Lending Office) or
         the London interbank market any other condition affecting any LIBOR
         Rate Loan, the Note or its obligation to make or maintain any LIBOR
         Rate Loan;

and the result of any of the foregoing is to increase the cost to the Bank (or
its Lending Office) of making or maintaining any LIBOR Rate Loan, or to reduce
the amount of any sum received or receivable by the Bank (or its Lending Office)
under this Agreement or under the Note with respect thereto, by an amount deemed
by Bank to be material, then, within 15 days after demand by the Bank, the
Borrower shall pay to the Bank, such additional amount or amounts as will
compensate the Bank for such increased cost or reduction.

         (b)      If the Bank shall have determined that after the date hereof
the adoption of any Applicable Law regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof, or
compliance by the Bank (or its Lending Office) with any request or directive
regarding capital adequacy (whether or not having the force of law) of any

                                       15
<PAGE>   21

Governmental Authority, has or would have the effect of reducing the rate of
return on the Bank's capital as a consequence of its obligations under this
Agreement with respect to its Loans to a level below that which the Bank could
have achieved but for such adoption, change or compliance (taking into
consideration the Bank's policies with respect to capital adequacy) by an amount
deemed by the Bank to be material, then from time to time, within 15 days after
demand by the Bank, the Borrower shall pay to the Bank such additional amount or
amounts as will compensate the Bank for such reduction.

         (c)      The Bank will promptly notify the Borrower of any event of
which it has knowledge, occurring after the date hereof, which will entitle the
Bank to compensation pursuant to this Section. A certificate of the Bank
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it and the calculation (with reasonable detail) of such
amount or amounts hereunder shall be conclusive in the absence of manifest
error. In determining, such amount, the Bank may use any reasonable averaging
and attribution methods.

         (d)      The provisions of this Section shall be applicable with
respect to any Participant in, or Assignee or other Transferee of, the
obligations of the Borrower hereunder to the Bank, and any calculations required
by such provision shall be made based upon the circumstances of such
Participant, Assignee or other Transferee.

         SECTION 3.04.     Base Rate Loan Substituted for Affected LIBOR Rate
Loan. If (a) the obligation of the Bank to make or maintain any LIBOR Rate Loan
has been suspended pursuant to Section 3.01 or Section 3.02 or (b) the Bank has
demanded compensation under Section 3.03, and if in either case the Borrower, by
at least one Business Day's prior notice to the Bank shall have elected that the
provisions of this Section shall apply, then, unless and until the Bank notifies
the Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer apply:

         (i)      the Loan or any portion thereof which would otherwise be a
LIBOR Rate Loan shall be instead an Alternate Rate Loan, and

         (ii)     after each LIBOR Rate Loan has been repaid, all payments of
principal which would otherwise be applied to repay any such LIBOR Rate Loan
shall be applied to repay an Alternate Rate Loan or Base Rate Loan instead.

         SECTION 3.05.     Compensation. Upon the request of the Bank, delivered
to the Borrower, the Borrower shall pay to the Bank, such amount or amounts as
shall compensate the Bank for any loss, cost or expense incurred by the Bank as
a result of:

         (a)      any optional or mandatory payment, prepayment or conversion
(pursuant to Section 3.02 or otherwise) of a LIBOR Rate Loan; or

         (b)      any failure by the Borrower to borrow on a date specified
therefor in a Notice of Borrowing or Notice of Conversion/Continuation;

                                       16
<PAGE>   22

such compensation to include, without limitation, an amount equal to the excess,
if any, of (x) the amount of interest which would have accrued on the amount so
paid or prepaid or not prepaid or borrowed, minus (y) the amount of interest (as
reasonably determined by the Bank) the Bank would have paid on deposits in
Dollars of comparable amounts having terms comparable to such period placed with
it by leading banks in the London interbank market.

                                   ARTICLE IV
                           CONDITIONS TO LOAN CLOSING

         SECTION 4.01.     Conditions to Loan Closing. The obligation of the
Bank to make the Loans is subject to the satisfaction of the following
conditions:

         (a)      receipt by the Bank from the Borrower of a duly executed
counterpart of this Agreement signed by the Borrower;

         (b)      receipt by the Bank of the duly executed Note complying with
the provisions of Section 2.04;

         (c)      receipt by the Bank of an opinion of counsel of Luther T.
Moore, Esq., counsel for the Borrower and the Guarantors, substantially in the
form of Exhibit G hereto, and covering such additional matters relating to the
transactions contemplated hereby as the Bank may reasonably request;

         (d)      receipt by the Bank of a certificate from the chief executive
officer or chief financial officer of the Borrower, in form and substance
satisfactory to the Bank, to the effect that all representations and warranties
of the Borrower contained in this Agreement and the other Loan Documents are
true, correct and complete; that the Borrower is not in violation of any of the
covenants contained in this Agreement and the other Loan Documents; that, after
giving effect to the transactions contemplated by this Agreement, no Default or
Event of Default has occurred and is continuing; and that the Borrower has
satisfied each of the closing conditions;

         (e)      receipt by the Bank of all documents which the Bank may
reasonably request relating to the existence of the Borrower and the Guarantors,
the corporate or other authority for and the validity of this Agreement, the
Note, the Guaranty Agreements and any other matters relevant hereto, all in form
and substance satisfactory to the Bank, including without limitation a
certificate of incumbency of the Borrower and each Guarantor, signed by the
Secretary or an Assistant Secretary or other appropriate officer or
representative of the Borrower and each Guarantor, as applicable, certifying as
to the names, and incumbency of the officer or officers of the Borrower and the
Guarantors authorized to execute and deliver the Loan Documents, and certified
copies of the following items as to the Borrower and each Guarantor: (i) the
Certificate of Incorporation or Articles of Organization, (ii) the Bylaws or
Operating Agreement, (iii) a certificate of the Secretary of State (or other
appropriate office) of the state of its incorporation or organization as to its
good standing as a corporation or limited liability company of such
jurisdiction, and (iv) the action taken by the Board of Directors or members
authorizing the execution, delivery and performance of this

                                       17
<PAGE>   23

Agreement, the Note and the other Loan Documents to which the Borrower and each
Guarantor is a party; and

         (f)      The Credit Agreement dated as of September 11, 1998 between
the Borrower and the Bank shall have terminated.

         SECTION 4.02.     Conditions to all Loans. The obligations of the Bank
to make any Loan is subject to the satisfaction of the following conditions
precedent on the relevant borrowing date:

         (a)      Continuation of Representations and Warranties. The
representations and warranties contained in Article V shall be true and correct
on and as of such borrowing date with the same effect as if made on and as of
such date; except for any representation and warranty made as of an earlier
date, which representation and warranty shall remain true and correct as of such
earlier date.

         (b)      No Existing Default. No Default or Event of Default shall have
occurred and be continuing hereunder on the borrowing date with respect to such
Loan or after giving effect to the Loans to be made on such date.

         (c)      Officer's Compliance Certificate; Additional Documents. The
Bank shall have received the current Officer's Compliance Certificate and each
additional document, instrument, legal opinion or other item of information
reasonably requested by it.

                                    ARTICLE V
                         REPRESENTATIONS AND WARRANTIES

         To induce the Bank to enter into this Agreement and to make the Loans,
the Borrower hereby represents and warrants to the Bank as follows:

         SECTION 5.01.     Corporate Existence and Power. The Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, is duly qualified to transact business
in every jurisdiction where, by the nature of its business, such qualification
is necessary, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted.

         SECTION 5.02.     Corporate and Governmental Authorization,
Contravention. The execution, delivery and performance by the Borrower of this
Agreement, the Note and the other Loan Documents (a) are within the Borrower's
corporate powers, (b) have been duly authorized by all necessary corporate
action, (c) require no action by or in respect of, or filing with, any
governmental body, agency or official, (d) do not contravene, or constitute a
default under, any provision of Applicable Law or of the certificate of
incorporation or by-laws of the Borrower or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the Borrower or any
of its Subsidiaries, and (e) do not result in the creation or imposition of any
Lien on any asset of the Borrower or any of its Subsidiaries.

                                       18
<PAGE>   24

         SECTION 5.03.     Binding Effect. This Agreement constitutes a valid
and binding agreement of the Borrower enforceable in accordance with its terms,
and the Note and the other Loan Documents, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations of
the Borrower enforceable in accordance with their respective terms; provided,
that the enforceability hereof and thereof is subject in each case to general
principles of equity and to bankruptcy, insolvency and similar laws affecting
the enforcement of creditors' rights generally.

         SECTION 5.04.     Financial Information.

         (a)      The financial statements of the Borrower and its Consolidated
Subsidiaries dated as of January 29, 2000, reflecting its operation during the
Fiscal Year then ended, including a balance sheet, profit and loss statement and
statement of cash flows, with supporting schedules, copies of which have been
delivered to the Bank, and the unaudited management-prepared quarterly financial
statements of the Borrower and its Consolidated Subsidiaries for the interim
period ended January 29, 2000, copies of which have been delivered to the Bank,
fairly present, in substantial conformity with Generally Accepted Accounting
Principles, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such dates and their consolidated results of
operations and cash flows for such periods stated.

         (b)      Since January 29, 2000 there has been no material adverse
change in the business, financial position, results of operations or prospects
of the Borrower and its Consolidated Subsidiaries.

         SECTION 5.05.     Litigation. There is no action, suit or proceeding
pending, or to the knowledge of the Borrower threatened, against or affecting
the Borrower or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official which could reasonably be expected to have
a Material Adverse Effect, or which in any manner draws into question the
validity of, or could reasonably be expected to impair the ability of the
Borrower to perform its obligations under, this Agreement, the Note or any of
the other Loan Documents.

         SECTION 5.06.     Compliance with ERISA.

         (a)      The Borrower and each member of the Controlled Group have
fulfilled their obligations under the minimum funding standards of ERISA and the
Code with respect to each Plan and are in compliance in all material respects
with the presently applicable provisions of ERISA and the Code, and have not
incurred any liability to the PBGC or a Plan under Title IV of ERISA.

         (b)      Neither the Borrower nor any member of the Controlled Group is
or ever has been obligated to contribute to any Multiemployer Plan.

         SECTION 5.07.     Taxes. There have been filed on behalf of the
Borrower and its Subsidiaries all Federal, state and local income, excise,
property and other tax returns which are required to be filed by them and all
taxes due pursuant to such returns or pursuant to any assessment

                                       19
<PAGE>   25

received by or on behalf of the Borrower or any Subsidiary have been paid. The
charges, accruals and reserves on the books of the Borrower and its Subsidiaries
in respect of taxes or other governmental charges are, in the opinion of the
Borrower, adequate.

         SECTION 5.08.     Subsidiaries. Each of the Borrower's Subsidiaries is
a corporation or limited liability company duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation or
organization, as the case may be, and has all corporate or limited liability
company powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.

         SECTION 5.09.     Not an Investment Company. The Borrower is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.

         SECTION 5.10.     Ownership of Property; Liens. Each of the Borrower
and its Consolidated Subsidiaries has title to its properties sufficient for the
conduct of its business. None of the properties of the Borrower or any
Subsidiary thereof is subject to any Lien except for Permitted Liens.

         SECTION 5.11.     No Default. Neither the Borrower nor any of its
Consolidated Subsidiaries is in default under or with respect to any agreement,
instrument or undertaking to which it is a party or by which it or any of its
property is bound which could reasonably be expected to have or cause a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.

         SECTION 5.12.     Full Disclosure. All information heretofore furnished
by the Borrower to the Bank for purposes of or in connection with this Agreement
or any transaction contemplated hereby is, and all such information hereafter
furnished by the Borrower to the Bank will be, true, accurate and complete in
every material respect or based on reasonable estimates on the date as of which
such information is stated or certified. The Borrower has disclosed to the Bank
in writing any and all facts which could reasonably be expected to have or cause
a Material Adverse Effect.

         SECTION 5.13.     Environmental Matters. To the best of the Borrower's
knowledge:

         (a)      neither the Borrower nor any of its Subsidiaries is subject to
any Environmental Liability and neither the Borrower nor any Subsidiary thereof
has been designated as a potentially responsible party under CERCLA or under any
state statute similar to CERCLA. None of the Properties have been identified on
any current or proposed (i) National Priorities List under 40 C.F.R. ' 300, (ii)
CERCLIS list or (iii) any list arising from a state statute similar to CERCLA.

         (b)      no Hazardous Substances have been or are being used, produced,
manufactured, processed, generated, stored, disposed of, managed at, or shipped
or transported to or from the Properties or are otherwise present at, on, in or
under the Properties, or, to the best of the knowledge of the Borrower, at or
from any adjacent site or facility, except for Hazardous Substances, such as
cleaning solvents, pesticides and other materials used, produced, manufactured,
processed,

                                       20
<PAGE>   26

generated, stored, disposed of, and managed in the ordinary course of business
in compliance with all applicable Environmental Requirements.

         (c)      the Borrower, and each of its Subsidiaries and Affiliates, has
procured all Environmental Authorizations necessary for the conduct of its
business, and is in compliance with all Environmental Requirements in connection
with the operation of the Properties and the Borrower's, and each of its
Subsidiary's and Affiliate's, respective businesses.

         SECTION 5.14.     Compliance with Laws. The Borrower and each
Subsidiary thereof is in compliance with all Applicable Law, including, without
limitation, all Environmental Requirements, except where any failure to comply
with any such laws could not reasonably be expected to, alone or in the
aggregate, have a Material Adverse Effect.

         SECTION 5.15.     Capital Stock. All Capital Stock, debentures, bonds,
notes and all other securities of the Borrower and its Subsidiaries presently
issued and outstanding are validly and properly issued in accordance with all
Applicable Law, including, but not limited to, the "Blue Sky" laws of all
applicable states and the federal securities laws. The issued shares of Capital
Stock of the Borrower's Wholly Owned Subsidiaries are owned by the Borrower free
and clear of any Lien or adverse claim. At least a majority of the issued shares
of capital stock of each of the Borrower's other Subsidiaries (other than Wholly
Owned Subsidiaries) is owned by the Borrower free and clear of any Lien or
adverse claim.

         SECTION 5.16.     Margin Stock. Neither the Borrower nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of purchasing or carrying any Margin Stock, and no part of the
proceeds of any Loan 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, or be used for any purpose which violates, or which is inconsistent with,
the provisions of Regulation X.

         SECTION 5.17.     Insolvency. After giving effect to the execution and
delivery of the Loan Documents and the making of each Loan under this Agreement,
the Borrower will not be "insolvent," within the meaning of such term as used in
North Carolina General Statutes ' 23-3 or as defined in ' 101 of Title 11 of the
United States Code or Section 2 of the Uniform Fraudulent Transfer Act, or any
other applicable state law pertaining to fraudulent transfers, as each may be
amended from time to time, or be unable to pay its debts generally as such debts
become due, or have an unreasonably small capital to engage in any business or
transaction, whether current or contemplated.

         SECTION 5.18.     Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this Article V and all
representations and warranties contained in any certificate, or any of the Loan
Documents (including but not limited to any such representation or warranty made
in or in connection with any amendment thereto) shall constitute representations
and warranties made under this Agreement. All representations and warranties
made under this Agreement shall be made or deemed to be made at and as of the
Closing Date, shall survive the

                                       21
<PAGE>   27

Closing Date and shall not be waived by the execution and delivery of this
Agreement, any investigation made by or on behalf of the Bank or any borrowing
hereunder.

                                   ARTICLE VI
                                    COVENANTS

         Until all of the Loans have been finally and indefeasibly paid in full
and the Commitment terminated, unless consent has been obtained in the manner
provided for in Section 8.04, the Borrower hereby covenants and agrees that:

         SECTION 6.01.     Information. The Borrower will deliver to the Bank at
its address set forth on the signature pages hereto, or such other office as may
be designated by the Bank from time to time:

         (a)      As soon as practicable and in any event within 45 days after
the close of each Fiscal Quarter, beginning with the close of the current Fiscal
Quarter for the Borrower and its Subsidiaries on a consolidated basis, balance
sheets and statements of income and cash flows for or relating to the Fiscal
Quarter then ended, all prepared in accordance with Generally Accepted
Accounting Principles (subject to normal year-end adjustments), applied on a
Consistent Basis, and certified by the chief financial officer of the Borrower.
The requirements of this paragraph shall be fully satisfied upon the delivery to
the Bank within the time period specified above of the Borrower's quarterly
report on form 10-Q with respect to any Fiscal Quarter, provided, that the
financial statements and accompanying notes are fully disclosed within such
filing;

         (b)      As soon as practicable and in any event within 90 days after,
the close of each Fiscal Year, beginning with the close of the current Fiscal
Year, an audited consolidated balance sheet of Borrower and its Subsidiaries as
of the close of such Fiscal Year and audited consolidated statements of income
and cash flows for the Fiscal Year then ended prepared by a Big Five independent
certified public accounting firm in accordance with Generally Accepted
Accounting Principles, applied on a Consistent Basis, and accompanied by a
report thereon by such certified public accountants and, with respect to such
audited financial statements, containing an opinion that is not qualified with
respect to scope limitations imposed by Borrower, as to going concern or with
respect to accounting principles followed by Borrower not in accordance with
Generally Accepted Accounting Principles;

         (c)      Concurrently with the delivery of the financial statements
described in subsection (b) above, a certificate from the independent certified
public accountants stating that in making their examination of the financial
statements of the Borrower and its Subsidiaries, they obtained no knowledge of
the occurrence or existence of any condition or event which constitutes or would
constitute, upon the giving of notice or lapse of time or both, an Event of
Default, or a statement specifying the nature and period of existence of any
such condition or event disclosed by their examination;

                                       22
<PAGE>   28

         (d)      Concurrently with the delivery of the financial statements
described in subsections (a) and (b) above or at such other times as the Bank
may reasonably request, a certificate from the chief financial officer of the
Borrower certifying to the Bank that to the best of their knowledge after review
of this Agreement and appropriate inquiry, the Borrower has kept, observed,
performed and fulfilled each and every covenant, obligation and agreement
binding upon the Borrower contained in this Agreement, accompanied by a
worksheet completed in accordance with Generally Accepted Accounting Principles
detailing the Borrower's compliance with the financial covenants contained in
Sections 6.25, 6.26 and 6.27 hereto in form satisfactory to the Bank, and that
no Default or Event of Default has occurred or specifying any such Default or
Event of Default;

         (e)      Immediately upon issuance, each report to the Securities and
Exchange Commission and each notice, financial report or proxy statement
rendered to its shareholders;

         (f)      Immediately upon the Borrower's receipt thereof, copies of any
management letter or other written communications from certified public
accountants the effect of which would have a Material Adverse Effect on the
business of the Borrower or any Subsidiary; and

         (g)      Upon the Bank's request such other information about the
financial condition, business or operations of the Borrower and its Subsidiaries
as the Bank may from time to time reasonably request.

         SECTION 6.02.     Notice of Certain Events. The Borrower shall
promptly, after any officer of the Borrower learns or obtains knowledge of the
occurrence thereof, give written notice to the Bank of:

         (a)      any litigation or proceedings brought against the Borrower or
any of its Subsidiaries or any attachments, judgments, liens, levies or orders
(other than Permitted Liens) that may be placed on or assessed against or
threatened against the Borrower or any of its Subsidiaries which are (i) not
otherwise covered by insurance or are contested by the insurer and (ii) in the
aggregate exceed $5,000,000 in uninsured exposure and the Borrower shall set up
such reserves as required by Generally Accepted Accounting Principles.

         (b)      any written notice of a violation received by the Borrower or
any of its Subsidiaries from any governmental regulatory body or law enforcement
authority which, if such violation were established, might have a Material
Adverse Effect on the business of the Borrower or any of its Subsidiaries;

         (c)      any other matter that has resulted in a Material Adverse
Effect on the Borrower or any of its Subsidiaries;

         (d)      any breach or violation of or noncompliance with any covenant
or condition of this Agreement or any Event of Default hereunder; and

         (e)      any change in the name of the Borrower or any Subsidiary.

                                       23
<PAGE>   29

         SECTION 6.03.     Corporate Existence. Except as provided in Section
6.12, the Borrower will, and will cause each of its Subsidiaries to, maintain
and preserve its corporate or limited liability company existence and all
rights, privileges and franchises now enjoyed.

         SECTION 6.04.     Payment of Indebtedness; Performance of Other
Obligations. The Borrower will, and will cause each of its Subsidiaries to pay,
all material Indebtedness before such Indebtedness shall become past due, all
material taxes, assessments and other governmental charges that may be levied or
assessed upon it when due and all other material obligations in accordance with
customary trade practices, and comply in all material respects with all acts,
rules, regulations and orders of any legislative, administrative or judicial
body or official applicable to any part thereof or to the operation of its
business; provided, however, that the Borrower or any Subsidiary may in good
faith by appropriate proceedings and with due diligence contest any such
Indebtedness, taxes, assessments, governmental charges, acts, rules,
regulations, orders and directions that do not in the Bank's reasonable judgment
materially and adversely affect the Borrower's business and if requested by the
Bank, shall establish reserves reasonably satisfactory to the Bank. The Borrower
will, and will cause each of its Subsidiaries to, observe and remain in
compliance in all material respects with all laws, ordinances, governmental
rules and regulations to which it is subject and obtain all licenses, permits,
franchises or other governmental authorizations necessary to the ownership of
its properties or the conduct of its business, and observe and perform all
covenants and conditions of all material agreements and instruments to which it
is a party, where failure to comply would have a Material Adverse Effect on the
business of the Borrower or any Subsidiary.

         SECTION 6.05.     Maintenance of Books and Records; Inspection. The
Borrower will, and will cause each of its Subsidiaries to, (i) maintain adequate
books, accounts and records, and prepare all financial statements required under
this Agreement in accordance with Generally Accepted Accounting Principles
(subject, in the case of unaudited interim statements, to normal year-end
adjustments) and in material compliance with the regulations of any governmental
regulatory body having jurisdiction over it; and (ii) permit employees or agents
of the Bank at any time during normal business hours and upon reasonable notice
to inspect the properties of the Borrower and its Subsidiaries, and to examine
or audit the books of the Borrower and its Subsidiaries, accounts and records
and make copies and memoranda of them, and to discuss the affairs, finances and
accounts of the Borrower with its executive officers, and independent public
accountants (and by this provision the Borrower and its Subsidiaries authorize
said accountants to discuss the finances and affairs of the Borrower and its
Subsidiaries), all at such reasonable times and as often as may be reasonably
requested, but in any event at least twice during each fiscal year of the
Borrower.

         SECTION 6.06.     Comply with ERISA. The Borrower will, and will cause
each of its Subsidiaries to, (i) at all times make prompt payment of
contributions required to meet the minimum funding standards set forth in ERISA
with respect to any Plan, except to the extent that failure to make such payment
would not have a Material Adverse Effect on the business of the Borrower or any
Subsidiary; (ii) not withdraw from participation in, permit the termination or
partial termination of, or permit the occurrence of any other event with respect
to any Plan that could result in liability to the PBGC, except to the extent
that such withdrawal, termination, partial termination or occurrence

                                       24
<PAGE>   30

would not have a Material Adverse Effect on the business of the Borrower or any
Subsidiary; (iii) notify the Bank as soon as practicable of any Reportable Event
and of any additional act or condition arising in connection with any Plan which
the Borrower or any of its Subsidiaries believe might constitute grounds for the
termination thereof by the PBGC or for the appointment by the appropriate United
States district court of a trustee to administer such Plan, and (iv) furnish to
the Bank upon the Bank=s request, such additional information about any Plan as
may be reasonably requested. Neither the Borrower nor any of its Subsidiaries
will permit the occurrence of any "prohibited transaction" (as defined in
ERISA).

         SECTION 6.07.     Maintenance of Properties; Conduct of Business. The
Borrower will, and will cause each of its Subsidiaries to, conduct its business
in an orderly, efficient and customary manner, keep its properties used in the
operations of its business in good working order and condition (normal wear and
tear excepted), and from time to time make all needed repairs to, renewals of or
replacements of its properties (except where failure to make such repairs,
renewals or replacements would not have a Material Adverse Effect on the
business of the Borrower or any of its Subsidiaries or to the extent that any of
such properties is obsolete or is being replaced) so that the efficiency of such
property shall be fully maintained and preserved. The Borrower and its
Subsidiaries shall file or cause to be filed in a timely manner all reports,
applications, estimates and licenses that shall be required by any Governmental
Authority and which, if not timely filed, would have a Material Adverse Effect
on the Borrower or any of its Subsidiaries.

         SECTION 6.08.     Insurance. The Borrower will, and will cause each of
its Subsidiaries to, maintain insurance with financially sound and reputable
insurance companies against such risks and in such amounts as are customarily
maintained by similar businesses as that of the Borrower and its Subsidiaries.

         SECTION 6.09.     Observe all Laws. The Borrower will conform to and
duly observe all laws, regulations and other valid requirements of any
regulatory authority with respect to the conduct of its business, except to the
extent that failure to do so would not have a Material Adverse Effect on the
business of the Borrower or any of its Subsidiaries.

         SECTION 6.10.     [Intentionally omitted.]

         SECTION 6.11.     Subsidiary Guaranties. Any Subsidiary created or
acquired subsequent to the Closing Date (excluding any Subsidiary operating as
an insurance or banking entity) shall, within thirty (30) days of the date of
creation or acquisition, execute a guaranty agreement supplement in form
reasonably acceptable to the Bank and the Borrower. Each Subsidiary delivering a
guaranty or guaranty agreement supplement hereunder shall at the same time
deliver to the Bank all documents which the Bank may reasonably request relating
to the existence of the Subsidiary, the authority for and the validity of the
guaranty or guaranty agreement supplement and any other matters relevant
thereto, all in form and substance satisfactory to the Bank, including without
limitation a certificate of incumbency of the Subsidiary, signed by the
Secretary or an Assistant Secretary or other appropriate representative of the
Subsidiary, as applicable, certifying as to the names, and

                                       25
<PAGE>   31

incumbency of the officer or other representative of the Subsidiary authorized
to execute and deliver the guaranty or guaranty agreement supplement, and
certified copies of the following items as to the Subsidiary: (i) the
certificate of incorporation or article of organization, (ii) the bylaws or
operating agreement, (iii) a certificate of the Secretary of State (or other
appropriate office) of the state of its incorporation as to its good standing as
a corporation or limited liability company of such jurisdiction, and (iv) the
action taken by the board of directors or members authorizing the execution,
delivery and performance of the guaranty or guaranty agreement supplement to
which the Subsidiary is a party.

         SECTION 6.12.     Merger and Dissolution; Sale of Assets. Except for
the transactions contained on Schedule 6.12, the Borrower shall not, and shall
not permit any Subsidiary to, liquidate, windup or dissolve, or enter into any
consolidation, merger, share exchange, syndicate or other combination, or sell,
lease, transfer or otherwise dispose of, in a single transaction or a series of
related transactions, all or substantially all of its business or assets or any
portion thereof if such portion of its business or assets represents ten percent
(10%) or more of the net revenues, profits or assets of the Borrower or such
Subsidiary (except for sales of inventory in the ordinary course of business);
provided, that (i) subject to the requirements of Section 6.11 hereof, any
Subsidiary may be wound up and dissolved if the proceeds of the dissolution are
transferred to the Borrower or another Subsidiary of the Borrower, and (ii) any
Subsidiary may be merged into another Subsidiary or into the Borrower.

         SECTION 6.13.     Acquisitions. Except for the transactions contained
on Schedule 6.13, the Borrower shall not, and shall not permit any Subsidiary
to, acquire the business or all or a substantial portion of the assets of any
Person, unless the effect of such acquisition on a pro forma basis measured over
a period commencing four (4) Fiscal Quarters prior to the effective date of the
acquisition and continuing thereafter until such acquisition has been effective
for a total period of four (4) Fiscal Quarters would not result in an Event of
Default.

         SECTION 6.14.     Indebtedness. The Borrower shall not, and shall not
permit any Subsidiary to, create, incur or suffer to exist any Indebtedness or
the equivalent (including any Indebtedness incurred as a general partner or as a
venturer) except for: (a) the obligations owed to the Bank under this Agreement
and the Note; (b) the obligations owed by the Borrower under any other Loan
Document; (c) current trade accounts payable or accrued by the Borrower or any
of its Subsidiaries in the ordinary course of its business, provided that the
same shall be paid when due in accordance with customary trade terms unless
contested by appropriate proceedings; (d) Indebtedness secured by Permitted
Liens; (e) unsecured Indebtedness, provided that the effect of such unsecured
Indebtedness on a pro forma basis measured over a period commencing four (4)
Fiscal Quarters prior to the date the unsecured Indebtedness is incurred would
not result in an Event of Default; (f) purchase money Indebtedness of the
Borrower and its Subsidiaries in an aggregate amount not to exceed $5,000,000 on
any date of determination; (g) Indebtedness existing on the Closing Date and not
otherwise permitted under this Section 6.14, as set forth on Schedule 6.14; and
(h) any other Indebtedness specifically permitted by the Bank.

                                       26
<PAGE>   32

         SECTION 6.15.     Liens and Encumbrances. The Borrower shall not, and
shall not permit any Subsidiary to, create, assume or suffer to exist any Lien
except for (a) Permitted Liens and (b) Liens necessary to secure purchase money
Indebtedness, subject to the dollar limitation contained in Section 6.14(f).

         SECTION 6.16.     Transactions With Related Persons. Except as
otherwise permitted hereunder, the Borrower shall not, and shall not permit any
Subsidiary to, make any loan or advance to, purchase, assume or guarantee any
note to or from, or enter into any transaction with, any of its officers,
directors, shareholders or Affiliates, or any member of the immediate family of
any of its officers, directors, shareholders or Affiliates, or subcontract any
operations to any Affiliate, except (a) as otherwise permitted hereunder; (b)
for transactions with its officers, directors, shareholders or Affiliates in an
aggregate amount not to exceed $2,000,000 in any Fiscal Year; and (c) in the
ordinary course of and pursuant to the reasonable requirements of its business,
consistent with past practices and upon fair and reasonable terms that are fully
disclosed to the Bank and are no less favorable to it than would obtain in a
comparable arm's length transaction with a Person not an Affiliate of the
Borrower or such Subsidiary, as the case may be, provided, however, that the
restrictions contained in this Section 6.16 shall not prohibit the Borrower or
any Subsidiary from entering into any such transactions with another Subsidiary
of the Borrower.

         SECTION 6.17.     Sale and Leaseback. Subsequent to the Closing Date,
the Borrower shall not, and shall not permit any Subsidiary to, enter into any
arrangement with any Person providing for the leasing by the Borrower or any of
its Subsidiaries of any asset that has been sold or transferred by the Borrower
or any of its Subsidiaries to such Person, if the book value of the assets of
the Borrower and its Subsidiaries which have been sold and leased back,
including the transaction currently being contemplated, in the aggregate
represent more than 10% of the book value of the assets of the Borrower and its
Subsidiaries as of the Borrower's last Fiscal Quarter end.

         SECTION 6.18.     New Business. The Borrower shall not, and shall not
permit any Subsidiary to, engage in any business other than the business in
which it is currently engaged or a business reasonably related thereto.

         SECTION 6.19.     Subsidiaries. Unless the requirements of Section 6.11
have been satisfied, the Borrower shall not, and shall not permit any Subsidiary
to, create any new Subsidiary or transfer any assets to a Subsidiary if the
formation of such new Subsidiary or the transfer of assets to such Subsidiary
would cause any one of the aggregate of net revenues or profits or assets of all
the Subsidiaries on a consolidated basis to exceed five percent (5%) of any one
of the net revenues or profits or assets of the Borrower and its Subsidiaries on
a consolidated basis, unless such new Subsidiary or Subsidiary to which assets
are transferred executes and delivers a guaranty agreement supplement in form
reasonably acceptable to the Bank and the Borrower, unconditionally guaranteeing
the obligations under this Agreement and the Note.

         SECTION 6.20.     Guaranties. The Borrower shall not, and shall not
permit any Subsidiary to, guarantee or otherwise, in any way, become liable with
respect to the obligations or liabilities of any Person, except for (a)
guaranties issued in favor of the Bank; (b) guaranties which do not exceed

                                       27
<PAGE>   33

$10,000,000 in the aggregate at any time; (c) endorsements for collection or
deposit in the ordinary course of business; (d) the guaranty by the Borrower of
certain letter of credit obligations of Belk International, Inc.; (e) the
guaranties by the Subsidiaries pursuant to Sections 6.11 and 6.19 hereof; and
(f) any guaranty by the Borrower or any Subsidiary of any Indebtedness or
obligation of the Borrower or any Subsidiary to the extent such Indebtedness or
obligation is permitted hereunder.

         SECTION 6.21.     Restrictive Transactions. The Borrower shall not, and
shall not permit any Subsidiary to, enter into any transaction that materially
and adversely affects the Borrower's ability to repay any Indebtedness or the
obligations hereunder.

         SECTION 6.22.     Hazardous Wastes. Permit, in violation of any
federal, state or local laws, regulations or orders, any hazardous or toxic
wastes, contaminants, oil, radioactive or other materials the removal of which
is required or the maintenance of which is restricted, prohibited or penalized
by any federal, state or local agency, authority or governmental unit to be
brought on to any real property owned by the Borrower or any Subsidiary, or if
so brought or found located thereon, the same shall be immediately removed, if
required by Applicable Law, with proper disposal, and all required environmental
cleanup procedures shall be diligently undertaken pursuant to all such laws,
ordinances and regulations.

         SECTION 6.23.     Change in Fiscal Year. The Borrower will not change
its Fiscal Year end without the consent of the Bank.

         SECTION 6.24.     Amendments. The Borrower shall not, and shall not
permit any Subsidiary to, amend, modify or change in any manner the Borrower's
articles of incorporation or bylaws, or any agreement entered into by the
Borrower with respect to its Capital Stock, or enter into any new agreement with
respect to its Capital Stock if such amendment or new agreement would have an
adverse effect on the enforcement of this Agreement or would otherwise have a
Material Adverse Effect on the business of the Borrower or any of its
Subsidiaries.

         SECTION 6.25.     Leverage-Ratio. The Borrower shall not permit the
Leverage Ratio (i) as of the last day of the first Fiscal Quarter of any Fiscal
Year to be greater than 3.25 to 1.0; (ii) as of the last day of the second
Fiscal Quarter of any Fiscal Year to be greater than 3.25 to 1.0; (iii) as of
the last day of the third Fiscal Quarter of any Fiscal Year to be greater than
3.7 to 1.0; and (iv) as of the last day of any Fiscal Year to be greater than
3.0 to 1.0.

         SECTION 6.26.     Fixed Charge Coverage Ratio. The Borrower shall not
permit the Fixed Charge Coverage Ratio as of the last day of any Fiscal Quarter
to be less than 1.5 to 1.0.

         SECTION 6.27.     Net Worth. The Borrower shall not permit Consolidated
Tangible Net Worth as of the last day of any Fiscal Quarter to be less than the
sum of (i) $650,000,000, plus (ii) 50% of Comprehensive Income for each Fiscal
Year, beginning as of the Fiscal Year ending on January 30, 1999, provided that
Comprehensive Income for any such Fiscal Year shall be taken into account for
purposes of this calculation only if positive, plus (iii) 100% of the increase
in the stated capital and additional paid in capital accounts of the Borrower
and its Subsidiaries resulting from the

                                       28
<PAGE>   34

issuance or purchase of equity securities (including pursuant to the exercise of
options, rights or warrants or pursuant to the conversion of convertible
securities) or other Capital Stock, excluding any stock issuance and stock
purchase, where the proceeds of the issuance are used to purchase stock from
other shareholders or their estates, all determined as of the end of each Fiscal
Year on a consolidated basis in accordance with Generally Accepted Accounting
Principles.

         SECTION 6.28.     Additional Covenants. In the event that at any time
this Agreement is in effect the Borrower or any Subsidiary shall enter into any
agreement, guarantee, indenture or other instrument (each a "Financing
Agreement") governing, relating to or guaranteeing any Financing or to amend any
terms and conditions applicable to any Financing, which Financing Agreement
includes covenants concerning or limiting the Borrower or any Subsidiary with
respect to the matters addressed in Sections 6.01, 6.11, 6.25, 6.26 or 6.27 of
this Agreement, which are more favorable to the lender or other counterparty
thereunder with respect to such matters, than Sections 6.01, 6.11, 6.25, 6.26 or
6.27 of this Agreement, the Borrower shall promptly so notify the Bank.
Thereupon, if the Bank shall request by written notice to the Borrower (after a
determination has been made by the Bank that any such Financing Agreement
contains any provisions which either individually or in the aggregate are more
favorable than one of Sections 6.01, 6.11, 6.25, 6.26 or 6.27 of this
Agreement), the Borrower and the Bank shall enter into an amendment to this
Agreement providing for substantially the same such covenants as those provided
for in such Financing Agreement, to the extent required and as may be selected
by the Bank, such amendment to remain in effect, unless otherwise specified in
writing by the Bank, for the entire duration of the stated term to maturity of
such Financing (to and including the date to which the same may be extended at
the Borrower's option), notwithstanding that such Financing might be earlier
terminated by prepayment, refinancing, acceleration or otherwise, provided that
if any such Financing Agreement shall be modified, supplemented, amended or
restated so as to modify, amend or eliminate from such Financing Agreement any
such covenant so made a part of this Agreement, then unless required by the Bank
pursuant to this Section, such modification, supplement or amendment shall not
operate to modify, amend or eliminate such covenant as so made a part of this
Agreement. As used in this Section, "Financing" means (i) any transaction or
series of transactions for the incurrence by the Borrower or any Subsidiary of
any Indebtedness or for the establishment of a commitment to make advances which
would constitute Indebtedness of the Borrower or any Subsidiary, which
Indebtedness is not by its terms subordinate and junior to other Indebtedness of
the Borrower or such Subsidiary, (ii) any obligation incurred in a transaction
or series of transactions in which assets of the Borrower or any Subsidiary are
sold and leased back, or (iii) a sale of accounts or other receivables or any
interest therein.

         SECTION 6.29.     Use of Proceeds. No portion of the proceeds of the
Loan will be used by the Borrower or any Subsidiary (a) in connection with,
either directly or indirectly, any tender offer for, or other acquisition of,
stock of any corporation with a view towards obtaining control of such other
corporation, (b) directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any Margin Stock, or (c) for
any purpose in violation of any Applicable Law.

                                       29
<PAGE>   35

                                   ARTICLE VII
                                    DEFAULTS

         SECTION 7.01.     Events of Default. The occurrence of any one or more
of the following events shall constitute an Event of Default by the Borrower
under this Agreement:

         (a)      the Borrower shall fail to pay any principal of the Loans
within five days after such principal shall become due or shall fail to pay any
interest on the Loans within ten days after such interest shall become due, or
shall fail to pay any other amount payable hereunder within ten days after such
other amount becomes due; or

         (b)      the Borrower or any Guarantor shall fail to observe or perform
any covenant or agreement contained in this Agreement or any Loan Document
(other than those covered by clause (a) above) for thirty days after the earlier
of (i) the first day on which a responsible officer of the Borrower has
knowledge of such failure, or (ii) written notice thereof has been given to the
Borrower by the Bank; or

         (c)      any representation, warranty, certification or statement made
by the Borrower or any Guarantor in Article V or in any certificate, financial
statement or other document delivered pursuant to this Agreement shall prove to
have been incorrect in any material respect when made (or deemed made); or

         (d)      the Borrower or any Subsidiary shall fail to make any payment
in respect of Indebtedness outstanding (other than the Note) when due or within
any applicable grace period; or

         (e)      any event or condition shall occur which results in the
acceleration of the maturity of Indebtedness outstanding of the Borrower or any
Subsidiary or the purchase of such Indebtedness by the Borrower (or its
designee) or such Subsidiary (or its designee) prior to the scheduled maturity
thereof or would enable (or, with the giving of notice or lapse of time or both,
would enable) the holders of such Indebtedness or any Person acting on such
holders' behalf to accelerate the maturity thereof or require the purchase
thereof by the Borrower (or its designee) or such Subsidiary (or its designee)
prior to the scheduled maturity thereof, without regard to whether such holders
or other Person shall have exercised or waived their right to do so; or

         (f)      the Borrower or any Subsidiary of the Borrower shall commence
a voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail generally, or
shall admit in writing its inability, to pay its debts as they become due, or
shall take any corporate action to authorize any of the foregoing; or

                                       30
<PAGE>   36

         (g)      an involuntary case or other proceeding shall be commenced
against the Borrower or any Subsidiary of the Borrower seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of 60 days; or an order for relief shall be entered against the Borrower
or any Subsidiary of the Borrower under the federal bankruptcy laws as now or
hereafter in effect; or

         (h)      the Borrower or any member of the Controlled Group shall fail
to pay when due any material amount which it shall have become liable to pay to
the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate
a Plan or Plans shall be filed under Title IV of ERISA by the Borrower, any
member of the Controlled Group, any plan administrator or any combination of the
foregoing, or the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any such Plan or
Plans or a proceeding shall be instituted by a fiduciary of any such Plan or
Plans to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall
not have been dismissed within 30 days thereafter; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree adjudicating that
any such Plan or Plans must be terminated; or the Borrower or any other member
of the Controlled Group shall enter into, contribute or be obligated to
contribute to, terminate or incur any withdrawal liability with respect to, a
Multiemployer Plan; or

         (i)      one or more judgments or orders for the payment of money in an
aggregate amount in excess of $100,000 shall be rendered against the Borrower or
any Subsidiary and such judgment or order shall continue without discharge or
stay for a period of 30 days; or

         (j)      a federal tax lien shall be filed against the Borrower under
Section 6323 of the Code or a lien of the PBGC shall be filed against the
Borrower or any Subsidiary under Section 4068 of ERISA and in either case such
lien shall remain undischarged for a period of 60 days after the date of filing;
or

         (k)      any default or event of default shall occur under any Loan
Document.

         SECTION 7.02.     Remedies on Default. Upon the occurrence of an Event
of Default, the Bank may by notice to the Borrower, declare the Note and the
Loans (together with accrued interest thereon), and the Note and the Loans
(together with accrued interest thereon) shall thereupon become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower and terminate the Credit
Facility; provided, that if any Event of Default specified in clause (f) or (g)
of Section 7.01 above occurs with respect to the Borrower, without any notice to
the Borrower or any other act by the Bank, the Note and the Loans (together with
accrued interest thereon) shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower and the Credit Facility shall be automatically
terminated.

                                       31
<PAGE>   37

         SECTION 7.03.     Security Interest, Offset, Sharing of Offsets.

         (a)      In addition to, and not in limitation of, all rights of offset
that the Bank or other holder of the Note may have under Applicable Law, the
Borrower hereby grants to the Bank, as security for the full and punctual
payment and performance of the obligations to pay to the Bank the principal of
and interest on the Loans and other amounts due hereunder, a continuing lien on
and security interest in all deposits and other sums credited by or due from the
Bank to the Borrower or subject to withdrawal by the Borrower; and regardless of
the adequacy of any collateral or other means of obtaining repayment of the
Loans, the Bank may, at any time after the occurrence of an Event of Default and
without notice to the Borrower, set off the whole or any portion or portions of
any or all such deposits and other sums against the amounts owing under this
Agreement and the Note, whether or not any other Person or Persons could also
withdraw money therefrom.

         (b)      The Borrower agrees, to the fullest extent it may effectively
do so under Applicable Law, that any holder of a participation in a Note may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.

                                  ARTICLE VIII
                                  MISCELLANEOUS

         SECTION 8.01.     Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
transmission or similar writing) and shall be given to such party at its address
referenced below or such other address as such party may hereafter specify for
the purpose by notice to the other party:

         (a)      If to the Borrower:

                  Belk, Inc.
                  2801 West Tyvola Road
                  Charlotte, North Carolina 28217-4500
                  Attention: Executive Vice President Finance
                  Fax number: (704) 357-1883

         (b)      If to the Bank, to its address set forth on the signature
                  pages hereof.

Each such notice, request or other communication shall be effective (i) if given
by mail, 72 hours after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or (ii) if given by any other
means, when delivered at the address specified in this Section; provided, that
notices to the Bank under Article II or Article III shall not be effective until
received.

         SECTION 8.02.     No Waivers. No failure or delay by the Bank or
Borrower in exercising any right, power or privilege hereunder or under the Note
shall operate as a waiver thereof nor shall

                                       32
<PAGE>   38

any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.

         SECTION 8.03.     Expenses; Documentary Taxes.

         (a)      The Borrower shall pay (i) all out-of-pocket expenses of the
Bank, including reasonable fees and disbursements of counsel for the Bank, in
connection with the preparation of this Agreement and the other Loan Documents,
any waiver or consent hereunder or any amendment hereof or any actual or alleged
Default hereunder; provided, that the Borrower shall not be liable for the
expenses of the Bank in connection with the preparation of this Agreement and
the other Loan Documents to the extent such expenses exceed $2,500, and (ii) if
an Event of Default occurs, all out-of-pocket expenses incurred by the Bank,
including fees and disbursements of outside counsel, in connection with such
Event of Default and collection and other enforcement proceedings resulting
therefrom, including out-of-pocket expenses incurred in enforcing this Agreement
and the other Loan Documents.

         (b)      The Borrower shall indemnify the Bank against any transfer
taxes, documentary taxes, assessments or charges made by any Governmental
Authority by reason of the execution and delivery of this Agreement or the other
Loan Documents.

         (c)      The Borrower shall indemnify the Bank and its directors,
officers, employees and agents from, and hold each of them harmless against, any
and all losses, liabilities, claims or damages to which any of them may become
subject, insofar as such losses, liabilities, claims or damages arise out of or
result from any actual or proposed use by the Borrower of the proceeds of any
extension of credit by the Bank hereunder or breach by the Borrower of this
Agreement or any other Loan Document or from investigation, litigation
(including, without limitation, any actions taken by the Bank to enforce this
Agreement or any of the other Loan Documents) or other proceeding (including,
without limitation, any threatened investigation or proceeding) relating to the
foregoing, and the Borrower shall reimburse the Bank and its directors,
officers, employees and agents, upon demand for any expenses (including, without
limitation, legal fees) incurred in connection with any such investigation or
proceeding; but excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence, willful misconduct or bad
faith of the Person to be indemnified.

         SECTION 8.04.     Amendments and Waivers. Any provision of this
Agreement, the Note or any other Loan Documents may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed by the Borrower
and the Bank.

                                       33
<PAGE>   39

         SECTION 8.05.     Successors and Assigns.

         (a)      The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, that the Borrower may not assign or otherwise transfer any of
its rights under this Agreement.

         (b)      The Bank may at any time sell to one or more Persons (each a
"Participant") participating interests in the Loans, the Note or any other
interest of the Bank hereunder; provided, that no participating interests in the
Loans, the Note or any other interest of the Bank may be sold pursuant to this
paragraph (b) to a Person not an Affiliate of the Bank without the prior written
consent of the Borrower. In the event of any such sale by the Bank of a
participating interest the Bank's obligations under this Agreement shall remain
unchanged, the Bank shall remain solely responsible for the performance thereof,
the Bank shall remain the holder of the Note for all purposes under this
Agreement, and the Borrower shall continue to deal solely and directly with the
Bank in connection with the Bank's rights and obligations under this Agreement.
In no event shall the Bank be obligated to the Participant to take or refrain
from taking any action hereunder except that the Bank may agree that it will not
(except as provided below), without the consent of the Participant, agree to (i)
the change of any date fixed for the payment of principal of or interest on the
Loan, (ii) the change of the amount of any principal, interest or fees due on
any date fixed for the payment thereof with respect to the Loan, (iii) the
change of the principal of the Loan, (iv) any change in the rate at which
interest is payable thereon from the rate at which the Participant is entitled
to receive interest in respect of such participation, (v) the release or
substitution of all or any substantial part of the collateral (if any) held as
security for the Loan, or (vi) the release of any guaranty given to support
payment of the Loan. The Bank shall, within ten Business Days after selling a
participating interest in the Loan, the Note or other interest under this
Agreement, provide the Borrower with written notification stating that such sale
has occurred and identifying the Participant and the interest purchased by such
Participant. The Borrower agrees that each Participant shall be entitled to the
benefits of Article III and Section 7.03 with respect to its participation in
the Loans.

         (c)      The Bank may at any time assign to one or more banks or
financial institutions (each an "Assignee") all, or a proportionate part of all,
of its rights and obligations under this Agreement and the Note and the other
Loan Documents, and the Assignee shall assume all such rights and obligations,
pursuant to an Assignment and Acceptance in the form attached hereto as Exhibit
E executed by such Assignee, the Bank and the Borrower; provided, that no
interest may be sold by the Bank pursuant to this paragraph (c) to any Assignee
which is not an Affiliate of the Bank without the consent of the Borrower. Upon
(i) execution of the Assignment and Acceptance by the Bank, such Assignee, and
the Borrower (if required), (ii) delivery of an executed copy of the Assignment
and Acceptance to the Borrower, and (iii) payment by such Assignee to the Bank
of an amount equal to the purchase price agreed between Bank and such Assignee,
such Assignee shall for all purposes be a Bank party to this Agreement and shall
have all the rights and obligations of a Bank under this Agreement to the same
extent as if it were an original party hereto, and the Bank shall be released
from its obligations hereunder to a corresponding extent, and no further consent
or action by the Borrower or the Bank shall be required. Upon the consummation
of any transfer to an Assignee

                                       34
<PAGE>   40

pursuant to this paragraph (c), the Bank and the Borrower shall make appropriate
arrangements so that, if required, new Notes are issued to such Assignee and the
Bank.

         (d)      Subject to the provisions of Section 8.06, the Borrower
authorizes the Bank to disclose to any Participant, Assignee or other transferee
(each a "Transferee") and any prospective Transferee any and all financial
information in the Bank's possession concerning the Borrower which has been
delivered to the Bank by the Borrower pursuant to this Agreement or which has
been delivered to the Bank by the Borrower in connection with the Bank's credit
evaluation prior to entering into this Agreement.

         (e)      No Transferee shall be entitled to receive any greater payment
under Section 3.03 than the Bank would have been entitled to receive with
respect to the rights transferred, unless such transfer is made with the
Borrower's prior written consent.

         (f)      Anything in this Section to the contrary notwithstanding, the
Bank may assign and pledge all or any portion of the Loan and/or obligations
owing to it to any Federal Reserve Bank or the United States Treasury as
collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and Operating Circular issued by such Federal Reserve
Bank; provided, that any payment in respect of such assigned Loan and/or
obligations made by the Borrower to the Bank in accordance with the terms of
this Agreement shall satisfy the Borrower's obligations hereunder in respect of
such assigned Loans and/or obligations to the extent of such payment. No such
assignment shall release the Bank from its obligations hereunder.

         SECTION 8.06.     Confidentiality. The Bank agrees to exercise its best
efforts to keep any information delivered or made available by the Borrower to
it which is clearly indicated to be confidential information, confidential from
any one other than persons employed or retained by the Bank who are or are
expected to become engaged in evaluating, approving, structuring or
administering the Loan; provided, however, that nothing herein shall prevent the
Bank from disclosing such information (a) upon the order of any court or
administrative agency, (b) upon the request or demand of any regulatory agency
or authority having jurisdiction over the Bank, (c) which has been publicly
disclosed, (d) to the extent reasonably required in connection with any
litigation to which the Bank or its respective Affiliates may be a party, (e) to
the extent reasonably required in connection with the exercise of any remedy
hereunder, (f) to the Bank's affiliates, legal counsel and independent auditors
and (g) to any actual or proposed Participant, Assignee or other Transferee of
all or part of its rights hereunder which has agreed in writing to be bound by
the provisions of this Section.

         SECTION 8.07.     Governing Law. This Agreement, the Note and the other
Loan Documents shall be construed in accordance, with and governed by the law of
the State of North Carolina. This Agreement, the Note and the other Loan
Documents are intended to be effective as instruments executed under seal.

                                       35
<PAGE>   41

         SECTION 8.08.     Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.

         SECTION 8.09.     Severability. If any provisions of this Agreement
shall be held invalid under any Applicable Law, such invalidity shall not affect
any other provision of this Agreement that can be given effect without the
invalid provision, and, to this end, the provisions hereof are severable.

         SECTION 8.10.     Captions. Captions in this Agreement are for the
convenience of reference only and shall not affect the meaning or interpretation
of the provisions hereof.

                [Remainder of this page intentionally left blank]

                                       36
<PAGE>   42

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

                                            BORROWER:

                                            BELK, INC.

[CORPORATE SEAL]
                                            By:
                                               ---------------------------------
                                               Title:

                                       37
<PAGE>   43

                                            BANK:

Lending Office                              WACHOVIA BANK, N.A.
Wachovia Bank, N.A.
400 South Tryon Street
Charlotte, North Carolina 28202             By:
                                               ---------------------------------
                                            Title:
                                                  ------------------------------

                                            ADDRESS:

                                            Wachovia Bank, N.A.
                                            400 South Tryon Street
                                            Charlotte, North Carolina 28202
                                            Attn: David W. Shore
                                            Telephone: (704) 378-5144
                                            Fax: (704) 378-5181

                                       38
<PAGE>   44

                                    Exhibit A
                                    ---------
                               to Credit Agreement
                            dated as of May 30, 2000
                             by and among Belk, Inc.
                                       and
                               Wachovia Bank, N.A.

                                 PROMISSORY NOTE
                                 ---------------

$175,000,000.00                                                     May 30, 2000

         FOR VALUE RECEIVED, the undersigned BELK, INC., a Delaware corporation
(the "Borrower"), hereby promises to pay to the order of WACHOVIA BANK, N.A.
(together with its endorsees, successors and assigns, the "Bank"), the principal
sum of One Hundred Seventy-Five Million and No/100 Dollars ($175,000,000.00) on
the dates provided for in the Credit Agreement. The Borrower promises to pay
interest on the unpaid principal amount of this Note on the dates and at the
rate or rates provided for in the Credit Agreement. Interest on any overdue
principal of and, to the extent permitted by law, overdue interest on the
principal amount hereof shall bear interest at the rate or rates as provided for
in the Credit Agreement. All such payments of principal and interest shall be
made in lawful money of the United States in Federal or other funds immediately
available at the Bank's office set forth in the Credit Agreement.

         This Note evidences the Loans made by the Bank under, is the Note
referred to in and issued pursuant to, and is subject to the terms and
provisions of, the Credit Agreement, dated as of May 30, 2000, between the
Borrower and the Bank (as the same may be modified, amended, supplemented or
restated, the "Credit Agreement") to which Agreement reference is hereby made
for a statement of said terms and provisions. This Note is entitled to the
benefits of the Credit Agreement. Any term used herein that is defined in the
Credit Agreement shall have the meaning afforded it in the Credit Agreement when
used herein.

         The Bank may, but shall not be obligated to, record on the schedule
attached to and made a part hereof, or on a continuation of such schedule, Loans
extended by the Bank to the Borrower, the effective interest rates for the Loans
evidenced hereby, and the principal payments and prepayments of this Note;
provided, that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.

         Upon the occurrence and during the continuation of any Event of
Default, the Bank may declare the entire unpaid principal balance hereof and all
accrued interest hereon to be immediately due and payable in the manner and with
the effect provided in the Credit Agreement, and may thereafter exercise any of
the remedies referred to in the Credit Agreement or existing under Applicable
Law.

                                      A-1

<PAGE>   45

         This Note may be prepaid in whole or in part only on the terms and
conditions set forth in the Credit Agreement.

         TIME IS OF THE ESSENCE OF THIS CONTRACT. In addition and not in
limitation of the foregoing and the provisions of the Credit Agreement, the
Borrower further agrees to pay all expenses of collection, including reasonable
attorneys' fees, if this Note shall be collected by law or through an attorney
at law, or in bankruptcy, receivership or other court proceedings.

         This Note shall be governed by and construed under the internal laws of
the State of North Carolina, without giving effect to principles of conflicts of
laws. This Note is intended to be effective as an instrument executed under
seat.

         PRESENTMENT, DEMAND, PROTEST AND NOTICE OF DISHONOR ARE HEREBY WAIVED
BY THE BORROWER.

         IN WITNESS WHEREOF, the Borrower has caused this Note to be executed
under seal by a duly authorized officer as of the day and year first above
written.

                                            BELK, INC.
ATTEST:

                                            By:
                                               ---------------------------------
Assistant Secretary                         Title:
                                                  ------------------------------
[CORPORATE SEAL]

                                      A-2

<PAGE>   46

                                Note (continued)
                              PAYMENTS OF PRINCIPAL
                              ---------------------

                                         Amount
                                           of           Unpaid
            Type of       Interest      Principal      Principal     Notation
  Date       Loan*          Rate         Repaid         Amount       Made by

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

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

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

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

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

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

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

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

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

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

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

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

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

*  I.e., a Base Rate Loan or LIBOR Rate Loan.

                                      A-3

<PAGE>   47

                                   Exhibit B
                                   ---------
                               to Credit Agreement
                            dated as of May 30, 2000
                                  by and among
                                   Belk, Inc.
                                       and
                               Wachovia Bank, N.A.

                               NOTICE OF BORROWING
                               -------------------

Wachovia Bank, N.A.
400 South Tryon Street
Charlotte, North Carolina 28202
Attn: David W. Shore

Ladies and Gentlemen:

         This irrevocable Notice of Borrowing is delivered to you under Section
2.02 (a) of the Credit Agreement dated as of May 30, 2000 (as amended, restated
or otherwise modified, the "Credit Agreement"), by and among Belk, Inc. ("the
Borrower") and Wachovia Bank, N.A.

         1. The Borrower hereby requests that the Bank make a Loan in the
aggregate principal amount of $___________ (the "Loan").(1)

         2. The Borrower hereby requests that the Loan be made on the following
Business Day: _______________________.(2)

         3. The Borrower hereby requests that the Loan bear interest at the
following interest rate, as set forth below:

Principal Component
of                             Interest
Loan                           Rate
--------------------           ----

-----------

    1    Complete with an amount in accordance with Section 2.02 of the Credit
         Agreement.

    2    Complete with a Business Day in accordance with Section 2.02 of the
         Credit Agreement.

                                      B-1

<PAGE>   48

Wachovia Bank, N.A.
Page 2

         4. The principal amount of all Loans outstanding as of the date hereof
(including the requested Loan) does not exceed the maximum amount permitted to
be outstanding pursuant to the terms of the Credit Agreement.

         5. All of the conditions applicable to the Loan requested herein as set
forth in the Credit Agreement have been satisfied as of the date hereof and will
remain satisfied to the date of such Loan.

         6. All capitalized undefined terms used herein has the meanings
assigned thereto in the Credit Agreement.

         IN WITNESS WHEREOF, the undersigned has executed this Notice of
Borrowing this _____day of ______________, _____.

                                            BELK, INC.

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

                                      B-2

<PAGE>   49

                                   Exhibit C
                                   ---------
                               to Credit Agreement
                            dated as of May 30, 2000
                                  by and among
                                   Belk, Inc.
                                       and
                               Wachovia Bank, N.A.

                        NOTICE OF CONVERSION/CONTINUATION
                        ---------------------------------

Wachovia Bank, N.A.
400 South Tryon Street
Charlotte, North Carolina 28202
Attn: David W. Shore

Ladies and Gentlemen:

         This irrevocable Notice of Conversion/Continuation (the "Notice") is
delivered to you under Section 2.08 of the Credit Agreement dated as of May 30,
2000 (as amended, restated or otherwise modified, the "Credit Agreement"), by
and among Belk, Inc. ("the Borrower") and Wachovia Bank, N.A.

         1. This Notice of Conversion/Continuation is submitted for the purpose
of: (Complete applicable information.)

         (a) [Converting] [continuing] a _____________ Loan [into] [as] a
             ___________ Loan.(1)

         (b) The aggregate outstanding principal balance of such Loan is
             $____________.

         (c) The principal amount of such Loan to be [converted] [continued]
             is $_________.(2)

         (d) The requested effective date of the [conversion] [continuation] of
             such Loan is __________.

         2. No Default or Event of Default exists, and none will exist upon the
conversion or continuation of the Loan requested herein.

         3. All capitalized undefined terms used herein have the meanings
assigned thereto in the Credit Agreement.

                                      C-1

<PAGE>   50

Wachovia Bank, N.A.
Page 2

         IN WITNESS WHEREOF, the undersigned have executed this Notice of
Conversion/Continuation this ______ day of ________________, 20__.

                                            BELK, INC.

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

1. Delete the bracketed language and insert "Base Rate" or "LIBOR Rate",
   as applicable, in each blank.

2. Complete with an amount in compliance with Section 2.08 of the Credit
   Agreement.

                                       C-2

<PAGE>   51

                                    Exhibit D
                                    ---------
                               to Credit Agreement
                            dated as of May 30, 2000
                                  by and among
                                   Belk, Inc.
                                       and
                               Wachovia Bank, N.A.

                        OFFICER'S COMPLIANCE CERTIFICATE
                        --------------------------------

         The undersigned, on behalf of Belk, Inc. (the "Borrower"), hereby
certifies to Wachovia Bank, N.A. (the "Bank"), as follows:

         1. This Certificate is delivered to you pursuant to Section 6.01 of the
Credit Agreement dated as of May 30, 2000 (as amended, restated or otherwise
modified, the "Credit Agreement"), by and among the Borrower and the Bank.
Capitalized terms used herein and not defined herein shall have the meanings
assigned thereto in the Credit Agreement.

         2. I have reviewed the financial statements of the Borrower and its
Subsidiaries dated as of __________________ and for the ______________ period[s]
then ended and such statements fairly present the financial condition of the
Borrower and its Subsidiaries as of the dates indicated and the results of its
operations and cash flows for the period[s] indicated.

         3. I have reviewed the terms of the Credit Agreement, the Note and the
related Loan Documents and have made, or caused to be made under my supervision,
a review in reasonable detail of the transactions and the condition of the
Borrower and its Subsidiaries during the accounting period covered by the
financial statements referred to in Paragraph 2 above. Such review has not
disclosed the existence during or at the end of such accounting period of any
condition or event that constitutes a Default or an Event of Default, nor do I
have any knowledge of the existence of any such condition or event as at the
date of this Certificate [except, [if such condition or event existed or exists,
describe the nature and period of existence thereof and what action the Borrower
has taken, is taking and proposes to take with respect thereto]].

         4. The Borrower and its Subsidiaries are in compliance within the
covenants and restrictions contained in Article VI of the Credit Agreement.

                                      D-1

<PAGE>   52

         WITNESS the following signatures as of the ____ day of _____________,
____.

                                            BELK, INC.

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

                                      D-2

<PAGE>   53

                                    Exhibit E
                                    ---------
                               to Credit Agreement
                            dated as of May 30, 2000
                             by and among Belk, Inc.
                                       and
                               Wachovia Bank, N.A.

                            ASSIGNMENT AND ACCEPTANCE
                            -------------------------
                             Dated ________________,

         Reference is made to the Credit Agreement dated as of May 30, 2000 (the
"Credit Agreement") between, Belk, Inc. (the "Borrower") and Wachovia Bank, N.A.
(the "Bank"). Terms defined in the Credit Agreement are used herein with the
same meaning.

         Wachovia Bank, N.A. (the "Assignor") and ___________________________
(the Assignee") agree as follows:

         1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, a _________% interest
in and to all of the Assignor's rights and obligations under the Credit
Agreement as of the Effective Date (as defined below) (including, without
limitation, a _________% interest (which on the Effective Date hereof is
$____________) in the Loans owing to the Assignor and a ______% interest in the
Note held by the Assignor (which on the Effective Date hereof is $____________).

         2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant thereto, other
than that it is the legal and beneficial owner of the interest being assigned by
it hereunder, that such interest is free and clear of any adverse claim and that
as of the date hereof the aggregate outstanding principal amount of the Loans
owing to it (without giving effect to assignments thereof which have not yet
become effective) is $___________; (ii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under the Credit Agreement or any other instrument or document
furnished pursuant thereto; and (iii) attaches the Note referred to in paragraph
1 above and requests that the Borrower exchange such Note for [a new Note dated
____________________, _____ in the principal amount of ________________ payable
to the order of the Assignee] [new Notes as follows: a Note dated __________,
____ in the principal amount of $_______________ payable to the order of the
Assignee and a Note dated ___________, ____ in the principal amount of
$______________ payable to the order of such Assignor].

                                      E-1

<PAGE>   54

         3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 5.04(a) thereof (or any more recent financial statements of the Borrower
delivered pursuant to Section 6.01 (a) or (b) 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 Assignor 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 a bank or financial institution; (iv) agrees that it
will perform in accordance with their terms all of the obligations which by the
terms of the Credit Agreement are required to be performed by it as a Bank; (v)
specifies as its Lending Office (and address for notices) the office set forth
beneath its name on the signature pages hereof, (vi) represents and warrants
that the execution, delivery and performance of this Assignment and Acceptance
are within its corporate powers and have been duly authorized by all necessary
corporate action [, and (vii) attaches the forms prescribed by the Internal
Revenue Service of the United States certifying as to the Assignee's status for
purposes of determining exemption from United States withholding taxes with
respect to all payments to be made to the Assignee under the Credit Agreement
and the Notes or such other documents as are necessary to indicate that all such
payments are subject to such taxes at a rate reduced by an applicable tax
treaty].(1)

         4. The Effective Date for this Assignment and Acceptance shall be
_________________ (the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Borrower for execution by
the Borrower (if required by the Credit Agreement).

         5. Upon such execution and acceptance by the Borrower (if required),
from and after the Effective Date, (i) the Assignee shall be a party to the
Credit Agreement and, to the extent rights and obligations have been transferred
to it by this Assignment and Acceptance, have the rights and obligations of a
Bank thereunder and (ii) the Assignor shall, to the extent its rights and
obligations have been transferred to the Assignee by this Assignment and
Acceptance, relinquish its rights (other than under Section 3.03 of the Credit
Agreement) and be released from its obligations under the Credit Agreement.

         6. Upon such execution by the Borrower (if required), from and after
the Effective Date, the Borrower shall make all payments in respect of the
interest assigned hereby to the Assignee. The Assignor and Assignee shall make
all appropriate adjustments in payments for periods prior to such execution by
the Borrower directly between themselves.

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

    1    If the Assignee is organized under the laws of a jurisdiction outside
         the United States.

                                      E-2

<PAGE>   55

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

                                            WACHOVIA BANK, N.A.

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

                                            [NAME OF ASSIGNEE]

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

                                            Lending Office:
                                            [Address]

                                            BELK, INC.

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

                                      E-3

<PAGE>   56

                                    Exhibit F
                                    ---------
                               to Credit Agreement
                            dated as of May 30, 2000
                                  by and among
                                   Belk, Inc.
                                       and
                               Wachovia Bank, N.A.

                          NOTICE OF ACCOUNT DESIGNATION
                          -----------------------------

                                      Dated

Wachovia Bank, N.A.
400 South Tryon Street
Charlotte, North Carolina 28202
Attn: David W. Shore

Ladies and Gentlemen:

         This Notice of Account Designation is delivered to you by Belk, Inc.
(the "Borrower") under Section 2.02(b) of the Credit Agreement dated as of May
30, 2000 (as amended, restated or otherwise modified, the "Credit Agreement") by
and among the Borrower and Wachovia Bank, N.A. (the "Bank").

         The Bank is hereby authorized to disburse all Loan proceeds into the
following account(s):

          [Insert name of bank/ ABA Routing Number/ and Account Number]

         IN WITNESS WHEREOF, the undersigned has executed this Notice of Account
Designation this ____ day of _______________, 20__.

[CORPORATE SEAL]                    BELK, INC.

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

<PAGE>   57

                                    Exhibit G
                                    ---------
                               to Credit Agreement
                            dated as of May 30, 2000
                                  by and among
                                   Belk, Inc.
                             and Wachovia Bank, N.A.

                          OPINION OF BORROWER'S COUNSEL
                          -----------------------------

                       [Letterhead of Borrower's Counsel]

                                     [Date]

Wachovia Bank, N.A.
400 South Tryon Street
Charlotte, North Carolina 28202

Gentlemen:

         We have acted as counsel to BELK, INC., a Delaware corporation (the
"Borrower"), in connection with that certain Credit Agreement, dated as of May
30, 2000 (the "Credit Agreement"), between the Borrower and Wachovia Bank, N.A.
(the "Bank"). Terms defined in the Credit Agreement are used herein as therein
defined.

         We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and other instruments and have conducted such other
investigations of fact and law as we have deemed necessary or advisable for
purposes of this opinion. We have assumed for purposes of our opinions set forth
below that the execution and delivery of the Credit Agreement by the Bank have
been duly authorized by the Bank. As to questions of fact relating to the
Borrower material to such opinions, we have relied upon representations of
appropriate officers of the Borrower, as appropriate.

         Upon the basis of the foregoing, we are of the opinion that:

         1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware and has all corporate powers
required to carry on its business as now conducted.

         2. The execution, delivery and performance by the Borrower of the
Credit Agreement, the Note and the other Loan Documents (i) are within the
Borrower's corporate powers, (ii) have

                                      G-1

<PAGE>   58

Wachovia Bank, N.A.
Page 2

been duly authorized by all necessary corporate action, (iii) require no action
by or in respect of, or filing with, any governmental body, agency or official,
(iv) do not contravene, or constitute a default under, any provision of
Applicable Law or of the certificate of incorporation or bylaws of the Borrower
or of any agreement, judgment, injunction, order, decree or other instrument
which is binding upon the Borrower and (v) except as provided in the Credit
Agreement and the other Loan Documents, do not result in the creation or
imposition of any Lien on any asset of the Borrower or any of its Subsidiaries.

         3. The Credit Agreement, the Note and the other Loan Documents
constitute valid and binding agreements of the Borrower, enforceable against the
Borrower in accordance with their respective terms, except as such
enforceability may be limited by: (i) bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity.

         4. There is no action, suit or proceeding pending, or threatened,
against or affecting the Borrower or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could materially adversely
affect the business, consolidated financial position or consolidated results of
operations of the Borrower and its Consolidated Subsidiaries, considered as a
whole, or which in any manner questions the validity or enforceability of the
Credit Agreement, the Note or any other Loan Documents.

         5. Neither the Borrower nor any of its subsidiaries is an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.

         I am qualified to practice in the State of North Carolina and do not
purport to be expert on any laws other than the laws of the United States and
the State of North Carolina, and this opinion is rendered only with respect to
such laws. I have made no independent investigation of the laws of any other
jurisdiction.

         We express no opinion as to the laws of any jurisdiction wherein the
Bank may be located which limits rates of interest which may be charged or
collected by the Bank other than in paragraph 4 with respect to the State of
North Carolina.

         This opinion is delivered to you in connection with the transaction
referenced above and may only be relied upon by you or any Assignee, Participant
or other Transferee under the Credit Agreement, without our prior written
consent.

                                  Very truly yours,

                                      G-2<PAGE>   1
                                                              EXHIBIT 10.1

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

                      AMENDED AND RESTATED CREDIT AGREEMENT

                                      among

                             WILLIAMS-SONOMA, INC.,
                                as the Borrower,

                     BANK OF AMERICA, NATIONAL ASSOCIATION,
                            as administrative agent,

                              FLEET NATIONAL BANK,
                              as syndication agent,

                              THE BANK OF NEW YORK,
                             as documentation agent,

                           FIRST UNION NATIONAL BANK,
                             WELLS FARGO BANK, N.A.,
                                       and
                                  BNP PARIBAS,
                                  as co-agents,

                                       and

                            the Lenders party hereto

                                   dated as of
                                 August 23, 2000

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

                         BANC OF AMERICA SECURITIES LLC
                    Sole Lead Arranger and Sole Book Manager

                             [BANK OF AMERICA LOGO]

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<S>     <C>                                                                                <C>
ARTICLE 1 - Definitions......................................................................1
        Section 1.1   Definitions............................................................1
        Section 1.2   Other Interpretive Provisions.........................................19
        Section 1.3   Accounting Terms and Determinations...................................19
        Section 1.4   Time of Day...........................................................20

ARTICLE 2 - Credit Facility.................................................................20
        Section 2.1   Commitments...........................................................20
        Section 2.2   Notes.................................................................21
        Section 2.3   Repayment of Loan.....................................................22
        Section 2.4   Use of Proceeds.......................................................22
        Section 2.5   Termination or Reduction of Commitments...............................22
        Section 2.6   Increase of Commitments...............................................22

ARTICLE 3 - Interest and Fees...............................................................23
        Section 3.1   Interest Rate.........................................................23
        Section 3.2   Determinations of Margins and Commitment Fee Rate.....................23
        Section 3.3   Payment Dates.........................................................24
        Section 3.4   Default Interest......................................................24
        Section 3.5   Conversions and Continuations of Balances.............................25
        Section 3.6   Commitment Fee........................................................25
        Section 3.7   Administrative Fee....................................................25
        Section 3.8   Computations..........................................................25

ARTICLE 4 - Administrative Matters..........................................................26
        Section 4.1   Borrowing Procedure...................................................26
        Section 4.2   Minimum Amounts.......................................................26
        Section 4.3   Certain Notices.......................................................26
        Section 4.4   Prepayments...........................................................28
        Section 4.5   Method of Payment.....................................................29
        Section 4.6   Pro Rata Treatment....................................................29
        Section 4.7   Sharing of Payments...................................................30
        Section 4.8   Non Receipt of Funds by the Agent.....................................30

ARTICLE 5 - Change in Circumstances.........................................................31
        Section 5.1   Increased Cost and Reduced Return.....................................31
        Section 5.2   Limitation on Libor Balances and IBOR Balances........................32
        Section 5.3   Illegality............................................................33
        Section 5.4   Treatment of Affected Balances........................................33
        Section 5.5   Compensation..........................................................34
        Section 5.6   Taxes.................................................................35
</TABLE>

<PAGE>   3

<TABLE>
<S>     <C>                                                                                <C>
ARTICLE 6 - Guaranties......................................................................36
        Section 6.1   Guaranties............................................................36
        Section 6.2   New Guarantors........................................................36

ARTICLE 7 - Conditions Precedent............................................................36
        Section 7.1   Initial Advance.......................................................36
        Section 7.2   All Advances..........................................................40

ARTICLE 8 - Representations and Warranties..................................................40
        Section 8.1   Existence, Power and Authority........................................40
        Section 8.2   Financial Condition...................................................41
        Section 8.3   Corporate and Similar Action; No Breach...............................41
        Section 8.4   Operation of Business.................................................42
        Section 8.5   Litigation and Judgments..............................................42
        Section 8.6   Rights in Properties; Liens...........................................42
        Section 8.7   Enforceability........................................................42
        Section 8.8   Approvals.............................................................42
        Section 8.9   Debt..................................................................42
        Section 8.10  Taxes.................................................................42
        Section 8.11  Margin Securities.....................................................43
        Section 8.12  ERISA.................................................................43
        Section 8.13  Disclosure............................................................43
        Section 8.14  Subsidiaries; Capitalization..........................................43
        Section 8.15  Material Agreements...................................................44
        Section 8.16  Compliance with Laws..................................................44
        Section 8.17  Investment Company Act................................................44
        Section 8.18  Public Utility Holding Company Act....................................44
        Section 8.19  Environmental Matters.................................................44
        Section 8.20  Broker's Fees.........................................................45
        Section 8.21  Employee Matters......................................................45
        Section 8.22  Solvency..............................................................46

ARTICLE 9 - Affirmative Covenants...........................................................46
        Section 9.1   Reporting Requirements................................................46
        Section 9.2   Maintenance of Existence; Conduct of Business.........................48
        Section 9.3   Maintenance of Properties.............................................48
        Section 9.4   Taxes and Claims......................................................48
        Section 9.5   Insurance.............................................................49
        Section 9.6   Inspection Rights.....................................................50
        Section 9.7   Keeping Books and Records.............................................50
        Section 9.8   Compliance with Laws..................................................50
        Section 9.9   Compliance with Agreements............................................50
        Section 9.10  Further Assurances....................................................51
        Section 9.11  ERISA.................................................................51
</TABLE>

<PAGE>   4

<TABLE>
<S>     <C>                                                                                <C>
ARTICLE 10 - Negative Covenants.............................................................51
        Section 10.1  Debt..................................................................51
        Section 10.2  Limitation on Liens and Restrictions on Subsidiaries..................53
        Section 10.3  Mergers, Etc..........................................................54
        Section 10.4  Restricted Payments...................................................55
        Section 10.5  Investments...........................................................55
        Section 10.6  Limitation on Issuance of Capital Stock of Subsidiaries...............57
        Section 10.7  Transactions with Affiliates..........................................57
        Section 10.8  Disposition of Assets.................................................57
        Section 10.9  Lines of Business.....................................................57
        Section 10.10 Limitations on Restrictions Affecting the Borrower and its
                      Subsidiaries..........................................................57
        Section 10.11 Environmental Protection..............................................58
        Section 10.12 ERISA.................................................................58

ARTICLE 11 - Financial Covenants............................................................58
        Section 11.1  Leverage Ratio........................................................58
        Section 11.2  Fixed Charge Coverage Ratio...........................................59
        Section 11.3  Minimum Tangible Net Worth............................................59
        Section 11.4  Capital Expenditures..................................................59

ARTICLE 12 - Default........................................................................60
        Section 12.1  Events of Default.....................................................60
        Section 12.2  Remedies..............................................................62
        Section 12.3  Performance by the Agent..............................................63
        Section 12.4  Set-off...............................................................63
        Section 12.5  Continuance of Default................................................63

ARTICLE 13 - The Agent......................................................................64
        Section 13.1  Appointment and Authorization of the Agent............................64
        Section 13.2  Delegation of Duties..................................................64
        Section 13.3  Liability of the Agent................................................64
        Section 13.4  Reliance by the Agent.................................................65
        Section 13.5  Notice of Default.....................................................65
        Section 13.6  Credit Decision; Disclosure of Information by the Agent...............65
        Section 13.7  Indemnification of the Agent..........................................66
        Section 13.8  The Agent in Individual Capacity......................................66
        Section 13.9  Resignation of the Agent..............................................67
        Section 13.10 Co-Agents; Lead Managers..............................................67

ARTICLE 14 - Miscellaneous..................................................................67
        Section 14.1  Expenses..............................................................67
        Section 14.2  Indemnity by the Borrower.............................................68
        Section 14.3  Limitation of Liability...............................................68
        Section 14.4  No Duty...............................................................68
        Section 14.5  No Fiduciary Relationship.............................................69
        Section 14.6  Equitable Relief......................................................69
</TABLE>

<PAGE>   5

<TABLE>
<S>     <C>                                                                                <C>
        Section 14.7  No Waiver; Cumulative Remedies........................................69
        Section 14.8  Binding Effect; Successors; Assignment................................69
        Section 14.9  Survival..............................................................72
        Section 14.10 Entire Agreement......................................................72
        Section 14.11 Amendments and Waivers................................................72
        Section 14.12 Maximum Interest Rate.................................................73
        Section 14.13 Notices...............................................................73
        Section 14.14 Governing Law; Venue; Service of Process..............................74
        Section 14.15 Counterparts..........................................................75
        Section 14.16 Severability..........................................................75
        Section 14.17 Headings..............................................................75
        Section 14.18 Construction..........................................................75
        Section 14.19 Independence of Covenants.............................................75
        Section 14.20 Waiver of Jury Trial..................................................75
        Section 14.21 Confidentiality.......................................................75
        Section 14.22 Foreign Lenders.......................................................76
        Section 14.23 Amendment and Restatement.............................................77
</TABLE>

<PAGE>   6

                                INDEX TO EXHIBITS

EXHIBIT A             Form of Revolving Note
EXHIBIT B             Form of Swingline Note
EXHIBIT C             Form of Assignment and Acceptance
EXHIBIT D             Form of Compliance Certificate
EXHIBIT E             Form of Subsidiary Guaranty
EXHIBIT F             Form of Notice of Borrowings, Conversions, Continuations,
                      or Prepayments
EXHIBIT G             Form of Joinder Agreement
EXHIBIT H             Form of Acknowledgment of Intercreditor Agreement

                               INDEX TO SCHEDULES

Schedule 7.1          Governmental Certificates
Schedule 8.4          Operation of Business
Schedule 8.5          Litigation and Judgments
Schedule 8.9          Debt
Schedule 8.10         Taxes
Schedule 8.12         ERISA Matters
Schedule 8.14         Subsidiaries; Capitalization
Schedule 8.15         Material Agreements
Schedule 8.19         Environmental Matters
Schedule 8.20         Broker's Fees
Schedule 8.21         Employee Matters
Schedule 10.2         Permitted Liens
Schedule 10.5         Investments
Schedule 14.13        Addresses for Notices

<PAGE>   7

                     AMENDED AND RESTATED CREDIT AGREEMENT

        THIS AMENDED AND RESTATED CREDIT AGREEMENT ("Agreement"), dated as of
August 23, 2000, is among WILLIAMS-SONOMA, INC., a corporation duly organized
and validly existing under the laws of the State of California (the "Borrower"),
each of the banks or other lending institutions which is (or which may from time
to time become) a party hereto or any successor or assignee thereof pursuant to
Section 14.8(b) (individually, a "Lender" and, collectively, the "Lenders"), and
BANK OF AMERICA, NATIONAL ASSOCIATION, a national banking association, as
administrative agent for the Lenders (in its capacity as administrative agent,
together with its successors in such capacity, the "Agent").

                                R E C I T A L S:

        A. The Borrower has requested that the Lenders extend a $200,000,000
unsecured credit facility to the Borrower in the form of a revolving credit
facility to refinance existing debt of the Borrower, finance capital
expenditures, provide working capital to the Borrower and its Subsidiaries, and
for other general corporate purposes.

        B. The Lenders are willing to extend such credit to the Borrower upon
the terms and conditions set forth in this Agreement and the other Loan
Documents.

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

                                    ARTICLE 1

                                   Definitions

        Section 1.1 Definitions. Wherever used in this Agreement, the following
terms have the following meanings:

        "Acknowledgment of Intercreditor Agreement" means an agreement, in
substantially the form of Exhibit H, entered into by a Lender pursuant to
Section 7.1(a)(vii) or an Eligible Assignee pursuant to Section 14.8(b).

        "Affected Balances" has the meaning specified in Section 5.4.

        "Affected Libor/IBOR Balances" has the meaning specified in Section 5.5.

        "Affiliate" means, with respect to any Person, any other Person (a) that
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such Person; (b) that directly
or indirectly beneficially owns or holds ten percent (10.0%) or more of any
class of Capital Stock of such Person; or (c) ten percent (10.0%) or more of the
Capital Stock of which is directly or indirectly beneficially owned or held by
the Person in question. As used in this definition, the term "control" means the
possession, directly or indirectly, of the power to direct

                                     Page 1
<PAGE>   8

or cause direction of the management and policies of a Person, whether through
the ownership of Capital Stock, by contract, or otherwise; provided, however, in
no event shall the Agent or any Lender be deemed an Affiliate of the Borrower or
any Subsidiary of the Borrower.

        "Agent" has the meaning specified in the introductory paragraph of this
Agreement.

        "Agent-Related Persons" means the Agent (including any successor
administrative agent), each of the Agent's Affiliates (including, in the case of
Bank of America in its capacity as the Agent, the Arranger), and the officers,
directors, employees, agents, and attorneys-in-fact of such Persons and
Affiliates.

        "Agent's Letter" means the certain letter agreement dated as of the
Closing Date among the Borrower, the Arranger, and Bank of America.

        "Agreement" has the meaning specified in the introductory paragraph of
this Agreement, as the same may be amended, restated, or otherwise modified.

        "Applicable Lending Office" means, for each Lender and for each Type of
Balance, the "Lending Office" of such Lender (or of an Affiliate of such Lender)
designated for such Type of Balance in Schedule 14.13 (or, with respect to a
Lender that becomes a party to this Agreement pursuant to an assignment made in
accordance with Section 14.8(b), in the Assignment and Acceptance executed by
it) or such other office of such Lender (or an Affiliate of such Lender) as such
Lender may from time to time specify to the Agent and the Borrower by written
notice in accordance with the terms hereof as the office by which advances of
such Type of Balance are to be made and maintained.

        "Applicable Rate" has the meaning specified in Section 3.1.

        "Arranger" means Banc of America Securities LLC, in its capacity as sole
lead arranger and sole book manager.

        "Asset Disposition" means, with respect to any Person, the disposition,
whether a sale (including, without limitation, any sale/lease-back arrangement),
lease, assignment, transfer, or other voluntary disposition of any asset of such
Person (including, without limitation, the sale or other disposition of any
Capital Stock of any Subsidiary of such Person, but excluding any transaction
among any of the Borrower and any Guarantor or any Subsidiary that concurrently
therewith becomes a Guarantor) other than (a) sales of inventory in the ordinary
course of business, (b) asset dispositions which constitute an Investment
permitted by Section 10.5, (c) Permitted Sale-Leasebacks, and (d) sales of
equipment that is obsolete or no longer useful in the business of such Person
for an amount not in excess of $10,000,000.

        "Assignment and Acceptance" means an assignment and acceptance, in
substantially the form of Exhibit C, entered into by a Lender and an Eligible
Assignee pursuant to Section 14.8(b) and accepted by the Borrower (if required)
and the Agent.

                                     Page 2
<PAGE>   9

        "Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel and the allocated cost
of internal legal services and all disbursements of internal counsel.

        "Balance" means the any of the Base Rate Balance, a Libor Balance, or an
IBOR Balance.

        "Bank of America" means Bank of America, National Association, and its
successors and assigns.

        "Bankruptcy Code" has the meaning specified in Section 12.1(e).

        "Base Rate" means for any day a fluctuating rate per annum equal to the
higher of (a) the Federal Funds Rate plus one-half of one percent (0.50%) and
(b) the rate of interest in effect for such day as publicly announced from time
to time by Bank of America as its "prime rate." Such rate is a rate set by Bank
of America based upon various factors including Bank of America's costs and
desired return, general economic conditions, and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate. Any change in such rate announced by Bank of America shall
take effect at the opening of business on the day specified in the public
announcement of such change.

        "Base Rate Balance" means the portion of the Loan that bears interest at
a rate based upon the Base Rate.

        "Base Rate Margin" has the meaning specified in Section 3.2.

        "Borrower" has the meaning specified in the introductory paragraph of
this Agreement.

        "Business Day" means any day other than a Saturday, Sunday, or other day
on which commercial banks are authorized to close under the Laws of, or are in
fact closed in, the state of Washington and, if such day relates to any Libor
Balance or IBOR Balance, means any such day on which dealings in Dollar deposits
are conducted by and between banks in the offshore Dollar interbank market.

        "Capital Expenditures" means, for any period, all expenditures of the
Borrower and its Subsidiaries which are classified as capital expenditures in
accordance with GAAP, including, without limitation, the aggregate amount of all
such expenditures incurred during such period which constitute Capital Lease
Obligations.

        "Capital Lease Obligations" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal Property, which obligations are
classified and accounted for as a capital lease on a balance sheet of such
Person in accordance with GAAP. For purposes of this Agreement, the amount of
such Capital Lease Obligations shall be the capitalized amount thereof,
determined in accordance with GAAP.

                                     Page 3
<PAGE>   10

        "Capital Stock" means corporate stock and any and all shares,
partnership interests, limited liability company interests, membership
interests, equity interests, participations, rights, securities (excluding debt
securities), or other equivalent evidences (however designated) of ownership, or
any options, warrants, voting trust certificates, or other instruments
evidencing an ownership interest or a right to acquire an ownership interest in
a Person (however designated) issued by any entity (whether a corporation,
partnership, limited liability company, or other type of entity).

        "Change of Control" means, with respect to any Person, an event or
series of events by which: (a) any "person" or "group" (as such terms are used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but
excluding any employee benefit plan of such Person or its Subsidiaries, or any
Person acting in its capacity as trustee, agent or other fiduciary, or
administrator of any such plan), becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a
Person shall be deemed to have "beneficial ownership" of all securities that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of fifty
percent (50.0%) or more of the membership interests of such Person; or (b)
during any period of twelve (12) consecutive months, a majority of the members
of the board of directors or other equivalent governing body of such Person
cease to be composed of individuals (i) who were members of that board or
equivalent governing body on the first day of such period, (ii) whose election
or nomination to that board or equivalent governing body was approved by
individuals referred to in clause (i) preceding constituting at the time of such
election or nomination at least a majority of that board or equivalent governing
body, or (iii) whose election or nomination to that board or other equivalent
governing body was approved by individuals referred to in clause (i) and clause
(ii) preceding constituting at the time of such election or nomination at least
a majority of that board or equivalent governing body.

        "Closing Date" means the date of this Agreement.

        "Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.

        "Commitment" means, as to each Lender, the obligation of such Lender to
make advances of funds in an aggregate principal amount at any one time
outstanding up to but not exceeding the amount set forth opposite the name of
such Lender on the signature pages hereto (or if applicable, the most recent
Assignment and Acceptance executed by such Lender) under the heading
"Commitment", as the same may be reduced or terminated pursuant to Section 2.5
or Section 12.2. The aggregate amount of the Commitments as of the Closing Date
equals two hundred million Dollars ($200,000,000).

        "Commitment Fee Rate" has the meaning specified in Section 3.2.

        "Commitment Percentage" means, with respect to each Lender, the
percentage equivalent (carried to nine (9) decimal places) of a fraction, the
numerator of which is the aggregate amount of the Commitment of such Lender (or
if such Commitment has terminated or expired, the outstanding principal amount
of the Revolving Loan of such Lender with respect thereto), and the denominator

                                     Page 4
<PAGE>   11

of which is the aggregate amount of the Commitments of all of the Lenders (or if
such Commitments have terminated or expired, the outstanding principal amount of
the Revolving Loans of all of the Lenders with respect thereto).

        "Compliance Certificate" means a certificate in substantially the form
of Exhibit D, properly completed and executed by the chief financial officer or
Vice President, Finance of the Borrower.

        "Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 3.5, from one Interest Period to the next
Interest Period, of a Libor Balance as a Libor Balance or of an IBOR Balance as
an IBOR Balance.

        "Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to Section 3.5 or Article 5 of (a) Balances of one Type under the
Revolving Loan into Balances of the other Type under the Revolving Loan and (b)
Balances of one Type under the Swingline Advances into Balances of the other
Type under the Swingline Advances.

        "Debt" means, with respect to any Person at any time (without
duplication): (a) all obligations of such Person for borrowed money; (b) all
obligations of such Person evidenced by bonds, notes, debentures, or other
similar instruments; (c) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable of such
Person arising in the ordinary course of business that are not past due by more
than ninety (90) days or that are being contested in good faith by appropriate
proceedings diligently pursued and for which adequate reserves have been
established in accordance with GAAP; (d) all Capital Lease Obligations of such
Person; (e) Guarantees by such Person of indebtedness, liabilities, or
obligations of the kinds described in the clauses (a), (b), (c), (d), (f), (g),
(h), (i), (j), (k), and (l) of this definition; (f) all indebtedness,
liabilities, and obligations of the types described in the foregoing clauses (a)
through (e) secured by a Lien existing on Property owned by such Person, whether
or not the indebtedness, liabilities, and obligations secured thereby have been
assumed by such Person or are non-recourse to such Person; provided, however,
that the amount of such Debt of any Person described in this clause (f) shall,
for purposes of this Agreement, be deemed to be equal to the lesser of (i) the
aggregate unpaid amount of such Debt or (ii) the fair market value of the
Property encumbered, as determined by the Agent in its discretion; (g) all
reimbursement obligations of such Person (whether contingent or otherwise) in
respect of letters of credit, bankers' acceptances, surety or other bonds, and
similar instruments; (h) all liabilities of such Person in respect of unfunded
vested benefits under any Plan (excluding obligations to deliver stock in
respect of stock options or stock ownership plans); (i) all vested obligations
of such Person for the payment of money under any earn-out, noncompete,
consulting, or similar arrangements providing for the deferred payment of the
purchase price for any property to the extent that any such obligations are,
according to GAAP, reflected as a capitalized liability on a balance sheet of
such Person; (j) all obligations of such Person to redeem or retire shares of
Capital Stock of such Person; (k) all indebtedness, liabilities, and obligations
of such Person under any Hedge Agreement; and (l) the principal balance
outstanding under any synthetic lease, tax retention operating lease, off
balance sheet loan, or similar off balance sheet financing product to which such
Person is a party, where such transaction is considered borrowed money
indebtedness for tax purposes but is classified as an operating lease in
accordance with GAAP. The Debt of any Person shall include the Debt of any
partnership or joint venture in which

                                     Page 5
<PAGE>   12

such Person is a general partner or a joint venturer, but only to the extent to
which there is recourse to such Person for payment of such Debt.

        "Default" means an Event of Default or the occurrence of an event or
condition which with notice or lapse of time or both would become an Event of
Default.

        "Default Rate" means, in respect of any principal of the Loan or any
other amount payable by the Borrower under any Loan Document, a rate per annum
equal to the sum of two percent (2.00%), plus the Applicable Rate for the Base
Rate Balance as in effect from time to time (provided that for amounts
outstanding as Libor Balances or IBOR Balances, the "Default Rate" for such
principal shall be two percent (2.00%), plus the Applicable Rate for each Libor
Balance or IBOR Balance, as applicable, for the remainder of the applicable
Interest Period as provided in Section 3.1, and, thereafter, the rate provided
for above in this definition).

        "Dollars" and "$" mean lawful money of the U.S.

        "EBITDAR" means, for any period, the total of the following calculated
for the Borrower, without duplication, on a consolidated basis for such period:
(a) Net Income; plus (b) any provision for (or less any benefit from) income or
franchise taxes to the extent included in the determination of Net Income; plus
(c) Interest Expense to the extent included in the determination of Net Income;
plus (d) amortization and depreciation expense to the extent included in the
determination of Net Income; plus (e) other non-cash, non-recurring charges to
the extent included in the determination of Net Income; minus (f) other
non-recurring gains to the extent included in the determination of Net Income;
plus (g) all lease and rent expense for any real Property or personal Property
to the extent included in the determination of Net Income.

        "Eligible Assignee" means (a) a financial institution organized under
the laws of the U.S., or any state thereof, and having a combined capital and
surplus of at least $100,000,000, (b) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000; provided that
such bank is acting through a branch or agency located in the U.S., (c) a Person
that is primarily engaged in the business of commercial banking and that is (i)
a Subsidiary of a Lender, (ii) a Subsidiary of a Person of which a Lender is a
Subsidiary, or (iii) a Person of which a Lender is a Subsidiary, (d) another
Lender, (e) any other entity which is an "accredited investor" (as defined in
Regulation D under the Securities Act of 1933, as amended) which extends credit
or buys loans as one of its businesses, including, but not limited to, insurance
companies, mutual funds, and lease financing companies, or (f) other lenders or
institutional investors consented to in writing in advance by the Agent and the
Borrower. Neither the Borrower nor any Affiliate of the Borrower shall be an
Eligible Assignee. Without the Borrower's written consent, no Person whose
non-lending businesses compete with those of the Borrower and its Subsidiaries
shall be an Eligible Assignee.

        "Environmental Laws" means any and all federal, state, and local laws,
regulations, and requirements regulating health, safety, or the environment, as
such laws, regulations, and requirements may be amended or supplemented from
time to time.

                                     Page 6
<PAGE>   13

        "Environmental Liabilities" means, as to any Person, all indebtedness,
liabilities, obligations, responsibilities, Remedial Actions, losses, damages,
punitive damages, consequential damages, treble damages, costs, and expenses
(including, without limitation, all reasonable fees, disbursements, and expenses
of counsel, expert and consulting fees, and costs of investigation and
feasibility studies), fines, penalties, sanctions, and interest incurred as a
result of any claim or demand, by any Person, whether based in contract, tort,
implied or express warranty, strict liability, or criminal or civil statute,
including, without limitation, any Environmental Law, Permit, order, or
agreement with any Governmental Authority or other Person, arising from
environmental, health, or safety conditions, or the Release or threatened
Release of a Hazardous Material into the environment.

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

        "ERISA Affiliate" means any corporation or trade or business which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower or any Subsidiary of the Borrower or
is under common control (within the meaning of Section 414(c) of the Code) with
the Borrower or any Subsidiary of the Borrower.

        "Eurodollar Reserve Percentage" means, for any day during any Interest
Period, the reserve percentage (expressed as a decimal, rounded upward to the
next 1/100th of 1%) in effect on such day, whether or not applicable to any
Lender, under regulations issued from time to time by the Board of Governors of
the Federal Reserve System for determining the maximum reserve requirement
(including any emergency, supplemental, or other marginal reserve requirement)
with respect to Eurocurrency funding (currently referred to as "Eurocurrency
liabilities"). The Libor Rate for each outstanding Libor Balance and the IBOR
Rate for each outstanding IBOR Balance shall be adjusted automatically as of the
effective date of any change in the Eurodollar Reserve Percentage. The
determination of the Eurodollar Reserve Percentage by the Agent with respect to
the Libor Rate and by Bank of America with respect to the IBOR Rate shall be
conclusive in the absence of manifest error.

        "Event of Default" has the meaning specified in Section 12.1.

        "Federal Funds Rate"means, for any day, the rate per annum (rounded
upwards to the nearest 1/100 of 1%) equal to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank on the Business Day next succeeding such day; provided that
(a) if such day is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, (b) if no such rate is so
published on such next succeeding Business Day, the Federal Funds Rate for such
day shall be the average rate charged to Bank of America on such day on such
transactions as determined by the Agent, and (c) with respect to determination
of the IBOR Rate as of any day and for any Interest Period, the rate for Federal
funds transactions of a duration of such Interest Period as determined in
accordance with clause (a) and clause (b) preceding by Bank of America.

                                     Page 7
<PAGE>   14

        "Fiscal Period" means one of the three fiscal periods in a Fiscal
Quarter each of which is approximately one calendar month in duration. There are
twelve (12) Fiscal Periods in a Fiscal Year.

        "Fiscal Quarters" means one of four thirteen (13) week or, if
applicable, fourteen (14) week quarters in a Fiscal Year, with the first of such
quarters beginning on the first day of a Fiscal Year and ending on the Sunday of
the thirteenth (or fourteenth, if applicable) week in such quarter.

        "Fiscal Year" means the Borrower's fiscal year for financial accounting
purposes beginning on the Monday following the Sunday nearest January 31 of each
year and ending on the Sunday nearest January 31 of the following year. The
current Fiscal Year of the Borrower will end on January 28, 2001.

        "Fixed Charge Coverage Ratio" means, for any period and determined on a
consolidated basis for the Borrower and its Subsidiaries, the ratio of (a)
EBITDAR for such period to (b) the sum of each of the following for such period
(i) Interest Expense to the extent included in the determination of Net Income,
plus (ii) lease and rent expense for any real Property or personal Property,
plus (iii) scheduled principal payments on long term Debt (including Capital
Leases) arising during such period.

        "Foreign Lender" means any Lender that is a "foreign corporation,
partnership, or trust" within the meaning of the Code.

        "Funded Debt" means, with respect to any Person (the "subject Person")
at any time (without duplication): (a) Debt described in clauses (a), (b), (c),
(d), (f), (g) other than Debt consisting of Undrawn Letters of Credit, and (j)
of the definition of Debt; and (b) Guarantees by the subject Person of Funded
Debt (as described in clause (a) preceding) of any other Person.

        "GAAP" means generally accepted accounting principles, applied on a
"consistent basis" (as such phrase is interpreted in accordance with Section
1.3), as set forth in Opinions of the Accounting Principles Board of the
American Institute of Certified Public Accountants and/or in statements of the
Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question.

        "Governmental Authority" means any nation or government, any federal,
state, county, municipal, parish, provincial, township, or other political
subdivision thereof, and any department, commission, board, court, agency, or
other instrumentality or entity exercising executive, legislative, judicial,
regulatory, or administrative functions of or pertaining to government.

        "Guarantee" means any indebtedness, liability, or obligation, contingent
or otherwise, of any Person directly or indirectly guaranteeing any Debt or
other obligation of any other Person or indemnifying such other Person for any
Debt or other obligation and, without limiting the generality of the foregoing,
any obligation, direct or indirect, contingent or otherwise, of such Person (a)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt or other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities
or services, to take-or-pay, or to maintain financial statement

                                     Page 8
<PAGE>   15

conditions or otherwise) or (b) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment thereof
or to protect the obligee against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include endorsements for collection
or deposit in the ordinary course of business. The amount of any Guarantee shall
be deemed to be equal to the lesser of (y) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
is made or (z) the maximum amount for which such guaranteeing Person may be
liable pursuant to the terms of the instrument embodying such Guarantee, unless
such primary obligation and the maximum amount for which such guaranteeing
Person may be liable are not stated or determinable, in which case the amount of
such Guarantee shall be such guaranteeing Person's maximum reasonably
anticipated liability in respect thereof as mutually determined by the Borrower
and the Agent in good faith. The term "Guarantee" used as a verb has a
corresponding meaning.

        "Guarantor" means any Person who is or becomes a party to any Guaranty
of the Obligations or any part thereof, including each Subsidiary of the
Borrower who is a party to the Subsidiary Guaranty pursuant to the terms of
Article 6.

        "Guaranty" means the Subsidiary Guaranty or any other guaranty agreement
executed and delivered by a Person in favor of the Agent, for the benefit of the
Agent and the Lenders, and any and all amendments, restatements, or other
modifications thereof, and "Guaranties" means all of such agreements,
collectively.

        "Hazardous Material" means any substance, product, waste, pollutant,
chemical, contaminant, insecticide, pesticide, constituent, or material which is
or becomes listed, regulated, or addressed under any Environmental Law as a
result of its hazardous or toxic nature.

        "Hedge Agreement" means any agreement, device, or arrangement designed
to protect a Person from the fluctuations of interest rates, exchange rates, or
forward rates applicable to its assets, liabilities, or exchange transactions,
including, but not limited to, dollar-denominated or cross-currency interest
rate exchange agreements, forward currency exchange agreements, interest rate
cap, swap, or collar protection agreements, and forward rate currency or
interest rate options, as the same may be amended or modified and in effect from
time to time, and any cancellation, buy-back, reversal, termination, or
assignment of any of the foregoing.

        "IBOR Balance" means any portion of the Swingline Advances that bears
interest at a rate based upon the IBOR Rate.

        "IBOR Base Rate" means the interest rate at which Bank of America's
Grand Cayman Banking Center, Grand Cayman, British West Indies, would offer
Dollar deposits for the applicable Interest Period to other major banks in the
offshore Dollar interbank market.

        "IBOR Interest Period" means with respect to any IBOR Balance, each
period commencing on the date such Balance is established or Continued, or
Converted from the Base Rate Balance under the Swingline Advances to an IBOR
Balance, or the last day of the next preceding Interest Period with respect to
such IBOR Balance, and ending one, two, three, four, five, six, or seven days

                                     Page 9
<PAGE>   16

thereafter, as the Borrower may select as provided in Section 3.5 or Section
4.3. Notwithstanding the foregoing: (a) each IBOR Interest Period shall end on a
Business Day; (b) no Interest Period may extend beyond the Maturity Date; and
(c) no more than three (3) IBOR Interest Periods shall be in effect at the same
time.

        "IBOR Rate"means, with respect to any IBOR Balance for the relevant
Interest Period, a rate per annum determined by Bank of America pursuant to the
following formula:

     IBOR Rate =                     IBOR Base Rate
                          ------------------------------------
                          1.00 - Eurodollar Reserve Percentage

        "IBOR Rate Margin" has the meaning specified in Section 3.2.

        "Indemnified Liabilities" has the meaning specified in Section 14.2.

        "Intellectual Property" means any U.S. or foreign patents, patent
applications, trademarks, trade names, service marks, brand names, logos and
other trade designations (including, without limitation, unregistered names and
marks), trademark and service mark registrations and applications, copyrights
and copyright registrations and applications, inventions, invention disclosures,
protected formulae, formulations, processes, methods, trade secrets, computer
software, computer programs and source codes, manufacturing research and similar
technical information, engineering know-how, customer and supplier information,
assembly and test data drawings, or royalty rights.

        "Interest Expense" means, for any period and for any Person, the sum of
(a) interest expense of such Person calculated without duplication on a
consolidated basis for such period in accordance with GAAP, plus (b) interest
expenses paid under Hedge Agreements during such period, minus (c) interest
payments received under Hedge Agreements during such period.

        "Interest Period" means a Libor Interest Period or an IBOR Interest
Period, as applicable.

        "Investments" has the meaning specified in Section 10.5.

        "Joinder Agreement" means an agreement to be executed by a Person
pursuant to the terms of Section 6.2, in substantially the form of Exhibit G.

        "Lender" has the meaning specified in the introductory paragraph of this
Agreement.

        "Leverage Ratio" means, as of any period end and determined on a
consolidated basis for the Borrower and its Subsidiaries, the ratio of (a) Total
Adjusted Funded Debt to (b) EBITDAR.

        "Libor Balance" means any portion of the Revolving Loan that bears
interest at a rate based upon the Libor Rate.

                                    Page 10
<PAGE>   17

        "Libor Base Rate" means, for such Interest Period (a) the rate per annum
equal to the rate determined by the Agent to be the offered rate that appears on
page 3750 of the Telerate screen or such other page that displays an average
British Bankers Association Interest Settlement Rate for deposits in Dollars
(for delivery on the first day of such Interest Period) with a term equivalent
to such Interest Period, determined as of approximately 11:00 a.m. (London time)
two (2) Business Days prior to the first day of such Interest Period, (b) in the
event the rate referenced in the preceding clause (a) does not appear on such
page or service or such page or service shall cease to be available, the rate
per annum equal to the rate determined by the Agent to be the offered rate on
such other page or other service that displays an average British Bankers
Association Interest Settlement Rate for deposits in Dollars (for delivery on
the first day of such Interest Period) with a term equivalent to such Interest
Period, determined as of approximately 11:00 a.m. (London time) two (2) Business
Days prior to the first day of such Interest Period, or (c) in the event the
rates referenced in clause (a) or clause (b) preceding are not available, the
rate per annum determined by the Agent as the rate of interest (rounded upward
to the next 1/100th of 1%) at which deposits in Dollars for delivery on the
first day of such Interest Period in same day funds in the approximate amount of
the Libor Balance being advanced, Continued, or Converted by the Agent (or its
Affiliate) in its capacity as a Lender and with a term equivalent to such
Interest Period would be offered by Bank of America's London Branch to major
banks in the offshore Dollar market at their request at approximately 11:00 a.m.
(London time) two (2) Business Days prior to the first day of such Interest
Period. The determination of the Libor Base Rate by the Agent shall be
conclusive in the absence of manifest error.

        "Libor Interest Period" means with respect to any Libor Balance, each
period commencing on the date such Balance is established or Continued, or
Converted from the Base Rate Balance to a Libor Balance, or the last day of the
next preceding Libor Interest Period with respect to such Libor Balance, and
ending one week thereafter or on the numerically corresponding day in the first,
second, third, or sixth calendar month thereafter, as the Borrower may select as
provided in Section 3.5 or Section 4.3, except that each such Libor Interest
Period which commences on the last Business Day of a calendar month (or on any
day for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month. Notwithstanding the foregoing: (a) each Libor
Interest Period which would otherwise end on a day which is not a Business Day
shall end on the next succeeding Business Day (or if such succeeding Business
Day falls in the next succeeding calendar month, on the next preceding Business
Day); (b) any Libor Interest Period which would otherwise extend beyond the
Maturity Date shall end on the Maturity Date; (c) no more than ten (10) Libor
Interest Periods shall be in effect at the same time; and (d) no Libor Interest
Period for any Libor Balance shall have a duration of less than one (1) week
and, if the Libor Interest Period would otherwise be a shorter period, the
related Libor Balance shall not be available hereunder.

        "Libor Rate"means, with respect to any Libor Balance for the relevant
Interest Period, a rate per annum determined by the Agent pursuant to the
following formula:

     Libor Rate =                    Libor Base Rate
                          ------------------------------------
                          1.00 - Eurodollar Reserve Percentage

                                    Page 11
<PAGE>   18

        "Libor Rate Margin" has the meaning specified in Section 3.2.

        "Lien" means any lien, mortgage, security interest, tax lien, pledge,
charge, hypothecation, assignment, preference, priority, or other encumbrance of
any kind or nature whatsoever (including, without limitation, any conditional
sale or title retention agreement), whether arising by contract, operation of
law, or otherwise.

        "Loan" means the Revolving Loan and the Swingline Advances.

        "Loan Documents" means this Agreement, the Notes, the Subsidiary
Guaranty, any Joinder Agreement, any Hedge Agreement between the Borrower and
any Lender with respect to the Loan, and all other agreements, documents, and
instruments now or hereafter executed and/or delivered pursuant to or in
connection with any of the foregoing, and any and all amendments, modifications,
supplements, renewals, extensions, or restatements thereof (excluding any
commitment letter, term sheet, or other agreement entered into prior to the
Closing Date).

        "Margin Adjustment Date" has the meaning specified in Section 3.2.

        "Material Adverse Effect" means any material adverse effect, or the
occurrence of any event or the existence of any condition that could reasonably
be expected to have a material adverse effect, on (a) the business or financial
condition, prospects, performance, or operations of the Borrower individually or
the Borrower and its Subsidiaries taken as a whole, (b) the ability of the
Borrower individually or the Borrower and its Subsidiaries taken as a whole to
pay and perform the obligations for which it or they, as applicable, are
responsible when due, or (c) the validity or enforceability of (i) any of the
Loan Documents or (ii) the rights and remedies of the Agent or the Lenders under
any of the Loan Documents.

        "Maturity Date" means the day which is the third anniversary of the
Closing Date.

        "Maximum Rate" has the meaning specified in Section 14.12.

        "Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by the Borrower or
any ERISA Affiliate at any time within the six (6) year period preceding the
date hereof or hereafter and which is covered by Title IV of ERISA.

        "Net Income" means, for any period and any Person, such Person's
consolidated net income (or loss) determined in accordance with GAAP, but
excluding the income of any other Person (other than Subsidiaries) in which such
Person or any Subsidiary of such Person has an ownership interest, unless
received by such Person or a Subsidiary of such Person in a cash distribution.

        "Net Proceeds" means (a) in connection with any disposition of Property
of the Borrower or any of its Subsidiaries, the cash proceeds received by such
Person from such disposition (including, without limitation, payments under
notes or other debt Securities received in connection with any such disposition,
but only as and when received) net of (i) the costs of such disposition
(including

                                    Page 12
<PAGE>   19

reasonable, out-of-pocket professional fees and expenses, investment banking
fees, financial advisory fees, taxes, notarial fees, survey costs, title
insurance premiums, required escrow deposits, and purchase price adjustments and
other customary fees and expenses, in each case attributable to and actually
paid in connection with such disposition), and (ii) amounts applied to repayment
of Debt (other than the Obligations) secured by a Lien on the Property disposed
of and (b) in connection with issuance of any Securities, the cash proceeds
received from such issuance, net of all costs of such issuance (including,
without limitation, reasonable, out-of-pocket professional fees and expenses,
notarial fees, underwriting discounts and commissions, placement, underwriting,
or arrangement fees, and other customary fees and expenses) actually paid.

        "Note Agreement" means that certain Note Agreement Re: $40,000,000 7.20%
Senior Notes Due August 8, 2005, dated as of August 1, 1995, entered into by the
Borrower and the "Purchasers" party thereto and each other agreement, document,
or instrument entered into or delivered in connection therewith, as such
agreements, documents, and instruments may be amended, restated, or otherwise
modified from time to time.

        "Notes" means the Revolving Notes and the Swingline Note.

        "Obligations" means any and all (a) obligations, indebtedness, and
liabilities of the Borrower to the Agent and the Lenders, or any of them,
arising pursuant to this Agreement or any other Loan Document, whether now
existing or hereafter arising, whether direct, indirect, fixed, contingent,
liquidated, unliquidated, joint, several, or joint and several, including,
without limitation, the obligation of the Borrower to repay the Loan, interest
on the Loan, and all fees, costs, and expenses (including, without limitation,
Attorney Costs) provided for in the Loan Documents, and (b) indebtedness,
liabilities, and obligations of the Borrower under any Hedge Agreement that the
Borrower may enter into with the Agent, any Lender, or any of their respective
Affiliates if and to the extent that such Hedge Agreement is permitted in
accordance with Section 10.1(i).

        "Offering Memorandum" means the certain Confidential Offering Memorandum
dated July 2000, prepared and distributed by the Arranger with respect to the
syndication of the Commitments and the Loan evidenced by this Agreement.

        "Original Agreement" means that certain Credit Agreement, dated as of
June 1, 1997, among the Borrower, Bank of America National Trust and Savings
Association (now known as Bank of America, National Association), as agent, and
the "Banks" party thereto which originally provided for credit facilities in an
aggregate principal amount of $90,000,000 and each of the other agreements,
documents, or instruments executed or delivered in connection therewith.

        "Other Taxes" has the meaning specified in Section 5.6(b).

        "PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.

        "Permit" means any permit, certificate, approval, order, license, or
other authorization.

                                    Page 13
<PAGE>   20

        "Permitted Acquisition" means any acquisition of the Capital Stock of a
Person or any acquisition of Property which constitutes a significant or
material portion of an existing business of a Person, in each case, in a
transaction that satisfies each of the following requirements:

               (a) No Default; Certificate of Compliance. Both before and after
        giving effect to such acquisition and any advance of the Loan requested
        to be made in connection therewith, no Default exists or will exist or
        would result therefrom, and, not less than five (5) Business Days prior
        to the date of such acquisition, the Borrower shall provide the Agent
        and the Lenders with a certificate duly executed by the chief financial
        officer or Vice President, Finance of the Borrower which represents and
        warrants pro forma compliance with each of the terms and covenants of
        this Agreement as of the date of and after giving effect to such
        acquisition;

               (b) Consideration. The purchase price to be paid by the Borrower
        or its applicable Subsidiary in connection with any such acquisition
        shall not (i) with respect to cash consideration paid (whether
        classified as purchase price, noncompete payments, or otherwise and
        without regard to whether such amount is paid at closing or paid over
        time and the Dollar value of all other assets, including Capital Stock
        of the Borrower, to be transferred by the purchaser in connection with
        such acquisition to the seller or sellers, all valued in accordance with
        the applicable agreement entered into between the Target and/or the
        seller and the purchaser) and the amount of any Debt incurred, assumed,
        or acquired by the Borrower or a Subsidiary of the Borrower in
        connection with such acquisition, exceed fifteen percent (15.0%) of the
        Borrower's Tangible Net Worth at the time of such acquisition, (ii) with
        respect to consideration paid in Capital Stock of the Borrower or any
        Subsidiary of the Borrower, exceed twenty percent (20.0%) of the
        Borrower's Tangible Net Worth at the time of such acquisition, or (iii)
        with respect to acquisitions for a combination of cash and non-cash
        consideration exceed the limits set forth in clause (i) and clause (ii),
        preceding respectively, and the purchase price to be paid by the
        Borrower or its applicable Subsidiary in connection with all such
        acquisitions shall not exceed $100,000,000 in the aggregate whether paid
        in cash, constituting Debt incurred, assumed, or acquired, or paid in
        Capital Stock of the Borrower or any Subsidiary of the Borrower;

               (c) Diligence. The Borrower has completed due diligence to its
        satisfaction on the Target or the Property to be acquired and has
        provided the Agent and the Lenders with copies of all agreements and
        information (including, without limitation, due diligence materials)
        entered into or received by the Borrower or requested by the Agent or
        any Lender, as the Agent or any Lender may reasonably request;

               (d) Structure. If the proposed acquisition is an acquisition of
        the Capital Stock of a Target, the acquisition will be structured so
        that the Target will become a Wholly-Owned Subsidiary; and, if the
        proposed acquisition is an acquisition of assets, the acquisition will
        be structured so that the Borrower or a Wholly-Owned Subsidiary shall
        acquire such assets;

                                    Page 14
<PAGE>   21

               (e) Material Adverse Effect. Neither the Borrower nor any of its
        Subsidiaries shall, as a result of or in connection with any such
        acquisition, assume or incur any contingent liabilities (whether
        relating to environmental, tax, litigation or other matters) that could
        reasonably be expected, as of the date of such acquisition, to result in
        the existence or occurrence of a Material Adverse Effect; and

               (f) Lines of Business. The Target shall be engaged in
        substantially the same line or lines of business, or a business
        reasonably related or complementary thereto, as the Borrower and its
        Subsidiaries.

        "Permitted Liens" means the Liens permitted by Section 10.2.

        "Permitted Sale-Leaseback" means a transaction designed to reduce state
tax liability whereby the Borrower or one of its Subsidiaries sells Property to
another Person which finances the purchase price of such Property by selling
notes to, or otherwise borrowing from, the Borrower or one of its Subsidiaries
and leases such Property to the seller in an operating lease transaction.

        "Person" means any individual, corporation, limited liability company,
business trust, association, company, partnership, joint venture, Governmental
Authority, or other entity.

        "Plan" means any employee benefit plan established or maintained by the
Borrower or any ERISA Affiliate and which is subject to Title IV of ERISA.

        "Principal Office" means the office of the Agent, located at 701 Fifth
Avenue, Seattle, Washington 98104.

        "Prohibited Transaction" means any transaction described in Section 406
or 407 of ERISA or Section 4975(c)(1) of the Code for which no statutory or
administrative exemption applies.

        "Projections" means the Borrower's forecasted consolidated (a) balance
sheets, (b) profit and loss statements, (c) cash flow statements, and (d)
capitalization statements, all materially consistent with the Borrower's
historical financial statements, together with appropriate supporting details
and a statement of underlying assumptions.

        "Property" means, for any Person, property or assets of all kinds, real,
personal, or mixed, tangible or intangible (including, without limitation, all
rights relating thereto), whether owned or acquired on or after the Closing
Date.

        "Quarterly Payment Date" means the last Business Day of each March,
June, September, and December of each year, the first of which shall be
September 29, 2000.

        "Register" has the meaning specified in Section 14.8(f).

                                    Page 15
<PAGE>   22

        "Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended, modified, or supplemented
from time to time or any successor regulation therefor.

        "Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as the same may be amended, modified, or supplemented
from time to time or any successor regulation therefor.

        "Regulatory Change" means, with respect to any Lender, any change after
the date of this Agreement (other than with respect to taxes excluded by the
first sentence of Section 5.6(a)) in U.S. federal, state, or foreign laws or
regulations (including, without limitation, Regulation D) or the adoption or
making after such date of any interpretations, directives, or requests (other
than with respect to taxes excluded by the first sentence of Section 5.6(a))
applying to a class of lenders including such Lender of or under any U.S.
federal or state, or any foreign, laws or regulations (whether or not having the
force of law) by any Governmental Authority or monetary authority charged with
the interpretation or administration thereof.

        "Release" means, as to any Person, any release, spill, emission,
leaking, pumping, injection, deposit, disposal, disbursement, leaching, or
migration of Hazardous Materials into the indoor or outdoor environment or into
or from Property owned or leased by such Person, including, without limitation,
the migration of Hazardous Materials through or in the air, soil, surface water,
ground water, or property, in violation of Environmental Laws.

        "Remedial Action" means all actions required under applicable
Environmental Laws to (a) cleanup, remove, treat, or otherwise address Hazardous
Materials in the indoor or outdoor environment, (b) prevent the Release or
threat of Release or minimize the further Release of Hazardous Materials, or (c)
perform pre-remedial studies and investigations and post-remedial monitoring and
care; provided that "Remedial Action" shall not include such actions taken in
the normal course of business and in material compliance with Environmental
Laws.

        "Reportable Event" means any of the events set forth in Section 4043 of
ERISA for which the 30-day notice requirement has not been waived by the PBGC.

        "Required Lenders" means any combination of Lenders having more than
fifty percent (50.0%) of the sum of the Commitments or, if the Commitments have
terminated, the outstanding principal amount of the Revolving Loan.

        "Revolving Loan" means, as to any Lender, the advances made by such
Lender pursuant to Section 2.1 (other than Swingline Advances), and, as to all
Lenders, all such advances made or held by the Lenders pursuant to Section 2.1.

        "Revolving Notes" means the promissory notes provided for by Section 2.2
(other than the Swingline Note) and all amendments, restatements, or other
modifications thereof.

                                    Page 16
<PAGE>   23

        "Securities" means any stock, shares, options, warrants, voting trust
certificates, or other instruments evidencing an ownership interest or a right
to acquire an ownership interest in a Person or any bonds, debentures, notes, or
other evidences of indebtedness for borrowed money, secured or unsecured.

        "Solvent" means, with respect to any Person as of the date of any
determination, that on such date (a) the fair value of the Property of such
Person (both at fair valuation and at present fair saleable value) is greater
than the total liabilities, including, without limitation, contingent
liabilities, of such Person, (b) the present fair saleable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its assets and pay its debts
and other liabilities, contingent obligations, and other commitments as they
mature in the normal course of business, (d) such Person does not intend to, and
does not believe that it will, incur debts or liabilities beyond such Person's
ability to pay as such debts and liabilities mature, and (e) such Person is not
engaged in business or a transaction, and is not about to engage in business or
a transaction, for which such Person's property would constitute unreasonably
small capital after giving due consideration to current and anticipated future
capital requirements and current and anticipated future business conduct and the
prevailing practice in the industry in which such Person is engaged. In
computing the amount of contingent liabilities at any time, such liabilities
shall be computed at the amount which, in light of the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.

        "Subsidiary" means, (a) when used to determine the relationship of a
Person (the "parent") to another Person, a Person (the "subsidiary") of which an
aggregate of more than fifty percent (50.0%) or more of the Capital Stock is
owned of record or beneficially by the parent, or by one or more Subsidiaries of
the parent, or by the parent and one or more Subsidiaries of the parent, (i) if
the holders of such Capital Stock (A) are ordinarily, in the absence of
contingencies, entitled to vote for the election of a majority of the directors
(or other individuals performing similar functions) of the subsidiary, even
though the right so to vote has been suspended by the happening of such a
contingency, or (B) are entitled, as such holders, to vote for the election of a
majority of the directors (or individuals performing similar functions) of the
subsidiary, whether or not the right so to vote exists by reason of the
happening of a contingency, or (ii) in the case of Capital Stock which is not
issued by a corporation, if such ownership interests constitute a majority
voting interest, and (b) when used with respect to a Plan, ERISA, or a provision
of the Code pertaining to employee benefit plans, means, with respect to the
parent, any corporation, trade, or business (whether or not incorporated) which
is under common control with the parent and is treated as a single employer with
the parent under Section 414(b) or Section 414(c) of the Code and the
regulations thereunder.

        "Subsidiary Guarantor" means a Subsidiary of the Borrower which is a
Guarantor hereunder.

        "Subsidiary Guaranty" means a guaranty agreement executed and delivered
by a Subsidiary of the Borrower in favor of the Agent, for the benefit of the
Agent and the Lenders, in substantially the form of Exhibit E, as such guaranty
agreement may be amended, restated, or otherwise modified from time to time.

                                    Page 17
<PAGE>   24

        "Swingline Advance" has the meaning specified in Section 2.1.

        "Swingline Note" means the swingline promissory note provided for by
Section 2.2 and all amendments, restatements, or other modifications thereof.

        "Tangible Net Worth" means the Borrower's (a) shareholder's equity
(including, without limitation, Capital Stock, additional paid-in capital, and
retained earnings) minus (b) all intangible assets, each as determined in
accordance with GAAP.

        "Target" means the Person who is to be acquired or whose assets are to
be acquired by the Borrower or a Wholly-Owned Subsidiary in connection with a
Permitted Acquisition.

        "Taxes" has the meaning specified in Section 5.6.

        "Termination Event" means (a) a Reportable Event, or (b) the filing of a
notice of intent to terminate a Plan or the treatment of a Plan amendment as a
termination under Section 4041 of ERISA, or (c) the institution of proceedings
to terminate a Plan by the PBGC under Section 4042 of ERISA, or the appointment
of a trustee to administer any Plan.

        "Total Adjusted Funded Debt" means, as of any date of determination,
with respect to the Borrower and its Subsidiaries, (a) the average outstanding
principal balance of all Funded Debt of such Persons as of the end of each of
the immediately preceding twelve (12) Fiscal Periods, plus (b) without
duplication, all lease and rent expense for any real Property for the preceding
four (4) Fiscal Quarters multiplied by eight (8), plus (c) without duplication,
all lease and rent expense for any personal Property for the preceding four (4)
Fiscal Quarters multiplied by three (3).

        "Type" means any type of Balance (i.e., a Base Rate Balance, a Libor
Balance, or an IBOR Balance).

        "UCC" means the Uniform Commercial Code as in effect from time to time
in the State of California.

        "Undrawn Letter of Credit" means any outstanding standby, commercial, or
documentary letter of credit issued for the account of the Borrower or any
Subsidiary of the Borrower under which (a) a drawing for payment has not been
made by the beneficiary, (b) a drawing for payment has been made by the
beneficiary and was timely paid by the Borrower or such Subsidiary in accordance
with the terms thereof and a balance remains undrawn pursuant to the terms
thereof, or (c) a drawing has been made and remains unpaid by the Borrower or
such Subsidiary and such drawing has been outstanding for a period not in excess
of three (3) Business Days.

        "Unfunded Vested Accrued Benefits" means with respect to any Plan at any
time, the amount (if any) by which (a) the present value of all vested
nonforfeitable benefits under such Plan exceeds, (b) the fair market value of
all Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan.

                                    Page 18
<PAGE>   25

        "U.S." means the United States of America.

        "Voting Stock" means Capital Stock of a Person having by the terms
thereof ordinary voting power to elect a majority of the board of directors (or
similar governing body) of such Person (irrespective of whether or not at the
time Capital Stock of any other class or classes of such Person shall have or
might have voting power by reason of the happening of any contingency).

        "Wholly-Owned Subsidiary" means any Subsidiary of the Borrower that is
owned 100% by the Borrower and/or a Subsidiary of the Borrower.

        Section 1.2 Other Interpretive Provisions.

               (a) The meanings of defined terms are equally applicable to the
        singular and plural forms of the defined terms.

               (b)    (i) The words "hereof", "herein", "hereunder" and words of
               similar import referring to this Agreement refer to this
               Agreement as a whole and not to any particular provision of this
               Agreement. Unless otherwise specified, all Article, Exhibit,
               Section, and Schedule references pertain to Articles, Exhibits,
               Sections, and Schedules of this Agreement.

                      (ii) The term "including" is not limiting and means
               "including without limitation."

                      (iii) In the computation of periods of time from a
               specified date to a later specified date, the word "from" means
               "from and including"; the words "to" and "until" each mean "to
               but excluding", and the word "through" means "to and including."

               (c) Unless otherwise expressly provided herein, (i) references to
        agreements (including this Agreement) and other contractual instruments
        shall be deemed to include all subsequent amendments and other
        modifications thereto, but only to the extent such amendments and other
        modifications are not prohibited by the terms of any Loan Document, and
        (ii) references to any statute or regulation are to be construed as
        including all statutory and regulatory provisions consolidating,
        amending, replacing, supplementing, or interpreting the statute or
        regulation.

               (d) This Agreement and other Loan Documents may use several
        different limitations, tests, or measurements to regulate the same or
        similar matters. All such limitations, tests, and measurements are
        cumulative and shall each be performed in accordance with their terms.
        Unless otherwise expressly provided, any reference to any action of the
        Agent or any Lender by way of consent, approval, or waiver shall be
        deemed modified by the phrase "in its/their sole discretion."

                                    Page 19
<PAGE>   26

               (e) Terms used herein that are defined in the UCC, unless
        otherwise defined herein, shall have the meanings specified in the UCC.

        Section 1.3 Accounting Terms and Determinations. Except as otherwise
expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Agent and the Lenders
hereunder shall be prepared, in accordance with GAAP, on a "consistent basis"
with those used in the preparation of the financial statements referred to in
Section 8.2. All calculations made for the purposes of determining compliance
with the provisions of this Agreement shall be made by application of GAAP, on a
"consistent basis" with those used in the preparation of the financial
statements referred to in Section 8.2. Accounting principles are applied on a
"consistent basis" when the accounting principles applied in a current period
are comparable in all material respects to those accounting principles applied
in a preceding period. Changes in the application of accounting principles which
do not have a material impact on calculating the financial covenants herein
shall be deemed comparable in all material respects to accounting principles
applied in a preceding period. To enable the ready and consistent determination
of compliance by the Borrower with its obligations under this Agreement, the
Borrower will not, nor will it permit any of its Subsidiaries to, change the
manner in which either the last day of its Fiscal Year or the last day of each
of the first three Fiscal Quarters of its Fiscal Year is determined without the
prior written consent of the Required Lenders. In the event any changes in
accounting principles required by GAAP, recommended by the Borrower's or any of
its Subsidiaries's certified public accountants, or requested by the Borrower
(or that the Borrower otherwise requests and the Agent and the Required Lenders
agree to accept, such agreement not unreasonably to be denied) and implemented
by the Borrower or any of its Subsidiaries occur and such changes result in a
change in the method of the calculation of financial covenants under this
Agreement, then the Borrower, the Agent, and the Required Lenders agree to enter
into negotiations in order to amend such provisions of this Agreement so as to
equitably reflect such changes with the desired result that the criteria for
evaluating such covenants shall be the same after such changes as if such
changes had not been made. Until such time as such an amendment shall have been
executed and delivered by the Borrower, the Agent, and the Required Lenders, all
financial covenants, standards, and terms in this Agreement shall continue to be
calculated or construed as if such changes had not occurred.

        Section 1.4 Time of Day. Unless otherwise indicated, all references in
this Agreement to times of day shall be references to San Francisco, California
time.

                                    ARTICLE 2

                                 Credit Facility

        Section 2.1 Commitments. Subject to the terms and conditions of this
Agreement, each Lender severally agrees to make advances to the Borrower from
time to time, subject to the provisions of Section 2.4, from and including the
Closing Date to but excluding the Maturity Date in an aggregate principal amount
at any time outstanding up to but not exceeding the amount of such Lender's
Commitment as then in effect; provided, however, (a) the aggregate principal
amount of (i) the Revolving Loan outstanding applicable to a Lender shall not at
any time exceed such Lender's

                                    Page 20
<PAGE>   27

Commitment and (ii) the Loan (inclusive of such Lender's obligation to make
advances under the Revolving Loan to pay Swingline Advances) outstanding
applicable to a Lender shall not at any time exceed such Lender's Commitment,
and (b) the aggregate principal amount of the Revolving Loan outstanding
applicable to all of the Lenders shall not at any time exceed the aggregate
Commitments. Subject to the foregoing limitations, and the other terms and
provisions of this Agreement, the Borrower may borrow, prepay, and reborrow
hereunder the amount of the Commitments and may establish a Base Rate Balance
and Libor Balances thereunder and, until the Maturity Date, the Borrower may
Continue Libor Balances established under the Revolving Loan or Convert Balances
established under the Revolving Loan as either Libor Balances or Base Rate
Balances into Base Rate Balances or Libor Balances, as applicable.
Notwithstanding anything to the contrary contained in this Agreement, the
Borrower may from time to time request, and Bank of America may in its
discretion from time to time advance (but shall in no event be obligated to
advance), revolving loans which are to be funded solely by Bank of America (the
"Swingline Advances"); provided, however, that (i) the aggregate principal
amount of the Swingline Advances outstanding at any time shall not exceed ten
million Dollars ($10,000,000) and the aggregate principal amount of the Loan
outstanding at any time (inclusive of the Swingline Advances) shall not exceed
the aggregate principal amount of the Commitments and (ii) Bank of America shall
give the Agent and each Lender written notice of the aggregate outstanding
principal amount of the Swingline Advances upon the written request of the Agent
or any Lender (but no more often than once every calendar quarter). Furthermore,
upon one (1) Business Day prior written notice given by Bank of America to the
Agent and the other Lenders at any time and from time to time (including,
without limitation, at any time following the occurrence of a Default or an
Event of Default) and, in any event, without notice on the Business Day
immediately preceding the Maturity Date, each Lender (including, without
limitation, Bank of America) severally agrees, irrevocably and unconditionally,
as provided in the first sentence of this Section 2.1, and notwithstanding
anything to the contrary contained in this Agreement, any Default or Event of
Default, or the inability or failure of the Borrower or any of its Subsidiaries
to satisfy any condition precedent to funding any advance under the Loan
contained in Article 7 (which conditions precedent shall not apply to this
sentence), to make an advance under the Revolving Loan, in the form of a Base
Rate Balance, in an amount equal to its Commitment Percentage of the aggregate
principal amount of the Swingline Advances then outstanding, and the proceeds of
such advance under the Revolving Loan shall be promptly paid by the Agent to
Bank of America and applied as a repayment of the aggregate principal amount of
the Swingline Advances then outstanding. Subject to the other terms and
provisions of this Agreement, the Borrower may borrow, prepay, and reborrow
hereunder the Swingline Advances and may establish a Base Rate Balance and IBOR
Balances thereunder and, until the Maturity Date, the Borrower may Continue IBOR
Balances established under the Swingline Advances or Convert Balances
established under the Swingline Advances as either IBOR Balances or Base Rate
Balances into Base Rate Balances or IBOR Balances, as applicable. Each Type of
Balance under the Loan advanced by each Lender shall be established and
maintained at such Lender's Applicable Lending Office for such Type of Balance.

        Section 2.2 Notes. The portion of the Revolving Loan made by each Lender
shall be evidenced by a single promissory note of the Borrower, in substantially
the form of Exhibit A (a "Revolving Note"), payable to the order of such Lender,
in the maximum principal amount equal to such Lender's Commitment as originally
in effect (or, if greater, its Commitment as thereafter

                                    Page 21
<PAGE>   28

increased) and otherwise duly completed, and the Swingline Advances made by Bank
of America shall be evidenced by a single promissory note of the Borrower in the
maximum original principal amount of ten million Dollars ($10,000,000) payable
to the order of Bank of America in substantially the form of Exhibit B (the
"Swingline Note"), dated the Closing Date.

        Section 2.3 Repayment of Loan. The Borrower shall pay to the Agent, for
the account of the Lenders, (a) the prepayments of the Loan required pursuant to
Section 4.4(a) and (b) the outstanding principal amount of the Loan on the
Maturity Date.

        Section 2.4 Use of Proceeds. Subject to the terms of this Agreement, the
proceeds of the Loan shall be used by the Borrower (a) to renew the Borrower's
existing indebtedness due under the Original Agreement, (b) to finance Capital
Expenditures by the Borrower, and (c) for general corporate purposes, including,
without limitation, to finance working capital requirements of the Borrower and
its Subsidiaries, arising in the ordinary course of business.

        Section 2.5 Termination or Reduction of Commitments. The Borrower shall
have the right to terminate fully or to reduce in part the unused portion of the
Commitments at any time and from time to time, provided that: (a) the Borrower
shall not have the right to terminate or reduce in part any unused portion of
the Commitments that could or may be required to be advanced by the Lenders to
refinance Swingline Advances then outstanding; (b) the Borrower shall give the
Agent at least three (3) Business Days notice of each such termination or
reduction as provided in Section 4.3; and (c) each partial reduction shall be in
an aggregate amount at least equal to $10,000,000 or any multiple $5,000,000 in
excess thereof. The Commitments may not be reinstated after they have been
terminated or reduced.

        Section 2.6 Increase of Commitments.

               (a) Upon notice to the Agent (who shall promptly notify the
        Lenders), the Borrower may, from time to time prior to the day which is
        the second anniversary of the Closing Date, request an increase in the
        combined Commitments up to an aggregate of $250,000,000; provided that
        in the event the Borrower has reduced the Commitments pursuant to
        Section 2.5, the amount of any increase in the Commitments pursuant to
        this Section 2.6 shall not exceed $50,000,000. At the time of sending
        such notice, the Borrower (in consultation with the Agent) shall specify
        the time period within which each Lender is requested to respond to such
        request. Each Lender shall respond within such time period to the Agent
        by whether or not it agrees to increase its Commitment and, if so,
        whether by an amount equal to or less than its Commitment Percentage of
        such requested increase. Any Lender not responding within such time
        period shall be deemed to have declined to increase its Commitment. The
        Agent shall notify the Borrower and each Lender of the Lenders'
        responses to each request made hereunder. To achieve the full amount of
        a requested increase, the Borrower may also (i) request that one or more
        other Lenders, in their sole and absolute discretion, nonratably
        increase their Commitment(s), (ii) and/or invite additional Eligible
        Assignees to become Lenders under the terms of this Agreement.

                                    Page 22
<PAGE>   29

               (b) If any Commitments are increased in accordance with this
        Section, the Agent and the Borrower shall determine the effective date
        of such increase (the "Increase Effective Date"). The Agent and the
        Borrower shall promptly confirm in writing to the Lenders the final
        allocation of such increase and the Increase Effective Date. As a
        condition precedent to such increase, the Borrower shall deliver to the
        Agent a certificate dated as of the Increase Effective Date (in
        sufficient copies for each Lender) signed by a responsible officer of
        the Borrower (i) certifying and attaching the resolutions adopted by the
        Borrower and each Guarantor approving or consenting to such increase,
        (ii) including a Compliance Certificate demonstrating pro forma
        compliance with Section 11.1 after giving effect to such increase, and
        (iii) certifying that before and after giving effect to such increase,
        the representations and warranties contained in Article 8 are true and
        correct on and as of the Increase Effective Date and no Default exists.
        The Borrower shall deliver new or amended Notes reflecting the new or
        increased Commitment of each new or affected Lender as of the Increase
        Effective Date. The Borrower shall prepay any Libor Balances outstanding
        on the Increase Effective Date (and pay any costs incurred in connection
        with such prepayment pursuant to Section 5.5) to the extent necessary to
        keep outstanding Balances ratable with any revised Commitment
        Percentages arising from any nonratable increase in the Commitments
        under this Section.

               (c) This section shall supercede any provisions in Section 14.11
        to the contrary.

                                    ARTICLE 3

                                Interest and Fees

        Section 3.1 Interest Rate. The Borrower shall pay to the Agent, for the
account of each Lender (including Bank of America with respect to the Swingline
Advances), interest on the unpaid principal amount of the Loan made by such
Lender for the period commencing on the date of the initial advance under the
Loan to but excluding the date the Loan is due, at a fluctuating rate per annum
equal to the Applicable Rate. The term "Applicable Rate" means:

               (a) during the period that the Loan or any portion thereof is
        outstanding as a Base Rate Balance, the Base Rate, plus the Base Rate
        Margin;

               (b) during the period that the Revolving Loan or any portion
        thereof is outstanding as a Libor Balance or as Libor Balances, the
        Libor Rate, plus the Libor Rate Margin; and

               (c) during the period that the Swingline Advances or any portion
        thereof is outstanding as an IBOR Balance or as IBOR Balances, the IBOR
        Rate, plus the IBOR Rate Margin.

        Section 3.2 Determinations of Margins and Commitment Fee Rate. From the
Closing Date until the first Margin Adjustment Date, the margins identified in
Section 3.1 shall be as follows: (a) the margin of interest payable with respect
to the Base Rate Balance (the "Base Rate Margin") shall be zero percent (0.00%);
(b) the margin of interest payable with respect to the Libor Balance

                                    Page 23
<PAGE>   30
(the "Libor Rate Margin") shall be one percent (1.00%); and (c) the margin of
interest payable with respect to the IBOR Balance (the "IBOR Rate Margin") shall
be one percent (1.00%). From the Closing Date until the first Margin Adjustment
Date, the percentage used to determine fees payable under Section 3.6 (the
"Commitment Fee Rate") shall be two tenths of one percent (0.20%). Upon delivery
of the certificate required pursuant to Section 9.1(c) after the end of each
Fiscal Quarter commencing with such certificate delivered for the Fiscal Quarter
ending January 28, 2001, the Commitment Fee Rate, the Base Rate Margin, the
Libor Rate Margin, and the IBOR Rate Margin shall automatically be adjusted to
the fee or rate, as applicable, corresponding to the Leverage Ratio (determined
for the preceding twelve (12) Fiscal Periods then ending) of the Borrower set
forth in the following table, such automatic adjustment to take effect as of the
first day of the calendar month following the date on which such certificate is
delivered (the "Margin Adjustment Date").

<TABLE>
<CAPTION>
=============================================================================================
                                               LIBOR
                             BASE RATE          RATE          IBOR RATE        COMMITMENT
      LEVERAGE RATIO           MARGIN          MARGIN          MARGIN           FEE RATE
=============================================================================================
<S>                          <C>               <C>            <C>              <C>
Greater than or equal to       0.00%           1.50%            1.50%            0.225%
3.75 to 1.00
---------------------------------------------------------------------------------------------
Greater than or equal to       0.00%           1.25%            1.25%            0.20%
3.25 to 1.00 but less than
3.75 to 1.00
---------------------------------------------------------------------------------------------
Greater than or equal to       0.00%           1.00%            1.00%            0.20%
2.75 to 1.00 but less than
3.25 to 1.00
---------------------------------------------------------------------------------------------
Greater than or equal to       0.00%           0.875%          0.875%            0.175%
2.25 to 1.00 but less than
2.75 to 1.00
---------------------------------------------------------------------------------------------
Less than 2.25 to 1.00         0.00%           0.75%            0.75%            0.15%
=============================================================================================
</TABLE>

If the Borrower fails to deliver such certificate with respect to any Fiscal
Quarter which sets forth the Leverage Ratio within the period of time required
by Section 9.1(c): (y) each of the Libor Rate Margin and the IBOR Rate Margin
(each for Interest Periods commencing after the applicable Margin Adjustment
Date) shall automatically be adjusted to one and one-half of one percent (1.50%)
per annum and (z) the Commitment Fee Rate shall automatically be adjusted to
nine-fortieths of one percent (0.225%) per annum. The automatic adjustments
provided for in the preceding sentence shall take effect as of the date on which
the referenced certificate is due and shall remain in effect until otherwise
adjusted on the date such certificate is actually received in accordance
herewith.

        Section 3.3 Payment Dates. Accrued interest on the Loan shall be due and
payable as follows: (a) in the case of the Base Rate Balance, on each Quarterly
Payment Date and on the Maturity Date; and (b) in the case of each Libor Balance
and each IBOR Balance, on (i) the last day of the Interest Period with respect
thereto, (ii) in the case of an Interest Period greater than three (3)

                                    Page 24
<PAGE>   31

months, at three (3) month intervals after the first day of such Interest
Period, and (iii) on the Maturity Date.

        Section 3.4 Default Interest. Notwithstanding anything to the contrary
contained in this Agreement, during the existence of an Event of Default, the
Borrower will pay to the Agent for the account of each Lender interest at the
applicable Default Rate on any principal of the Loan made by such Lender and (to
the fullest extent permitted by law) any other amount payable by the Borrower
under any Loan Document to or for the account of the Agent or such Lender.

        Section 3.5 Conversions and Continuations of Balances. Subject to
Section 4.2,

               (a) with respect to Balances under the Revolving Loan, the
        Borrower shall have the right from time to time to Convert all or part
        of either the Base Rate Balance or the Libor Balance into a Balance of
        the other Type or to Continue Libor Balances in existence as Libor
        Balances, provided that: (i) the Borrower shall give the Agent notice of
        each such Conversion or Continuation as provided in Section 4.3; (ii)
        subject to Article 5, a Libor Balance may only be Converted on the last
        day of the Interest Period therefor; and (iii) except for Conversions
        into the Base Rate Balance, no Conversions or Continuations shall be
        made without the consent of the Agent and the Required Lenders at any
        time during the existence of a Default and

               (b) with respect to Balances under the Swingline Advances, the
        Borrower shall have the right from time to time to Convert all or part
        of either the Base Rate Balance or the IBOR Balance into a Balance of
        the other Type or to Continue IBOR Balances in existence as IBOR
        Balances, provided that: (i) the Borrower shall give the Agent notice of
        each such Conversion or Continuation as provided in Section 4.3; (ii)
        subject to Article 5, an IBOR Balance may only be Converted on the last
        day of the Interest Period therefor; and (iii) except for Conversions
        into the Base Rate Balance, no Conversions or Continuations shall be
        made without the consent of the Agent and Bank of America at any time
        during the existence of a Default.

        Section 3.6 Commitment Fee. For the period from and including the
Closing Date to and including the Maturity Date, the Borrower agrees to pay to
the Agent for the account of each Lender, pro rata according to its Commitment
Percentage, a commitment fee equal to the Commitment Fee Rate (determined
according to the provisions of Section 3.2) multiplied by the actual daily
amount by which the Commitments exceed the outstanding principal amount of the
Revolving Loan. Accrued commitment fees under this Section shall be payable in
arrears on each Quarterly Payment Date and on the Maturity Date. Notwithstanding
anything to the contrary contained in this Agreement, any and all Swingline
Advances outstanding from time to time shall be wholly excluded, and shall not
count as used or funded amounts, for purposes of determining the unused or
unfunded amount of each Lender's Commitment in accordance with this Section.

        Section 3.7 Administrative Fee. The Borrower agrees to pay to the Agent
on the Closing Date and on each anniversary thereof the administrative fee
described in the Agent's Letter.

                                    Page 25
<PAGE>   32

        Section 3.8 Computations. Interest and fees payable by the Borrower
hereunder and under the other Loan Documents shall be computed on the basis of a
year of 360 days and the actual number of days elapsed (including the first day
but excluding the last day) in the period for which interest is payable unless
such calculation would result in a rate that exceeds the Maximum Rate, in which
case interest shall be calculated on the basis of a year of 365 or 366 days, as
the case may be. Notwithstanding anything to the contrary contained in this
Section, interest payable by the Borrower hereunder and under the other Loan
Documents with respect to the Base Rate Balance shall be computed on the basis
of a year of 365 or 366 days, as the case may be, and the actual number of days
elapsed (including the first day but excluding the last day) in the period for
which interest is payable. Each determination of an interest rate by the Agent
shall be conclusive and binding on the Borrower and the Lenders in the absence
of manifest error. The Agent will, at the request of the Borrower or any Lender,
deliver to the Borrower or such Lender, as the case may be, a statement showing
the quotations used by the Agent in determining any interest rate and the
resulting interest rate.

                                    ARTICLE 4

                             Administrative Matters

        Section 4.1 Borrowing Procedure. The Borrower shall give the Agent, and
the Agent will give the Lenders, notice of each borrowing under the Commitments
in accordance with Section 4.3. Not later than 10:00 a.m. on the date specified
for each borrowing under the Commitment, each Lender will make available the
amount of the Loan to be advanced by it on such date to the Agent, at the
Principal Office, in immediately available funds, for the account of the
Borrower. The amounts received by the Agent shall, subject to the terms and
conditions of this Agreement, be made available to the Borrower by 1:00 p.m. at
the Borrower's direction by transferring the same, in immediately available
funds by wire transfer, automated clearinghouse transfer, or interbank transfer
to (a) a bank account of the Borrower designated by the Borrower in writing or
(b) a Person or Persons designated by the Borrower in writing.

        Section 4.2 Minimum Amounts. Each borrowing under the Commitment shall
be in an amount equal to $5,000,000 or an integral multiple of $1,000,000 in
excess thereof except that in the case of a Swingline Advance such borrowing may
be in an amount equal to $250,000 or any integral multiple of $250,000 in excess
thereof. Except for Conversions and prepayments pursuant to Section 4.4(a) and
Article 5, each Conversion and prepayment of principal of the Loan shall be in
an amount equal to the minimum amounts set forth in the preceding sentence.
Notwithstanding the foregoing, each borrowing or Continuation under the
Commitments as a Libor Balance or an IBOR Balance (as applicable) and each
Conversion of amounts outstanding as all or a portion the Base Rate Balance to a
Libor Balance or an IBOR Balance (as applicable) shall be in an amount equal to
the minimum amounts set forth for borrowings in this Section.

        Section 4.3 Certain Notices.

               (a) Notices by the Borrower to the Agent of terminations or
        reductions of Commitments, of borrowings, Conversions, Continuations,
        and prepayments of the Loan,

                                    Page 26
<PAGE>   33

        and of the duration of Interest Periods shall be irrevocable and shall
        be effective only if received by the Agent not later than 10:00 a.m. on
        the Business Day prior to the date of the relevant termination,
        reduction, borrowing, Conversion, Continuation, or prepayment as
        specified below:

<TABLE>
<CAPTION>
================================================================================
                                                                 Number of
                                                               Business Days
                          Notice                                   Prior
================================================================================
<S>                                                            <C>
Borrowing, Conversions, Continuations, and prepayment of             0
Swingline Advances
--------------------------------------------------------------------------------
Borrowing of the Revolving Loan as all or a portion of the           1
Base Rate Balance
--------------------------------------------------------------------------------
Borrowing of the Revolving Loan as a Libor Balance                   3
--------------------------------------------------------------------------------
Conversions or Continuations of Balances under the                   3
Revolving Loan and termination or reduction of Commitments
--------------------------------------------------------------------------------
Prepayment of the Revolving Loan which is all or a portion of        1
the Base Rate Balance
--------------------------------------------------------------------------------
Prepayment of the Revolving Loan which is a Libor Balance            3
================================================================================
</TABLE>

        Any notices of the type described in this Section which are received by
        the Agent after the applicable time set forth above on a Business Day
        shall be deemed to be received and shall be effective on the next
        Business Day. Each such notice of termination or reduction shall specify
        the amount of the Commitments to be terminated or reduced. Each such
        notice of borrowing, Conversion, Continuation, or prepayment shall be in
        the form of Exhibit F, appropriately completed by an authorized
        representative of the Borrower, and shall specify (i) the amount of the
        Loan to be borrowed or prepaid or the Balances to be Converted or
        Continued; (ii) the amount (subject to Section 4.2) to be borrowed (and
        whether any of such borrowing will be a Swingline Advance), Converted,
        Continued, or prepaid; (iii) in the case of a Conversion, the Type of
        Balance to result from such Conversion; (iv) in the case of a borrowing,
        the Type of Balance or Balances to be applicable to such borrowing and
        the amounts thereof; (v) in the event a Libor Balance or an IBOR Balance
        is selected, the duration of the Interest Period therefor; and (vi) the
        date of borrowing, Conversion, Continuation, or prepayment (which shall
        be a Business Day).

               (b) Any notices by the Borrower of the type described in this
        Section may be made orally or in writing and, if made orally, must be
        confirmed immediately in writing (which may be by telecopy, provided
        that such telecopy is promptly followed by delivery of an original
        signed notice) on the same Business Day on which such oral notice is
        given; provided that any such oral notice shall be deemed to be
        controlling and proper notice in the

                                    Page 27
<PAGE>   34

        event of a discrepancy with or failure to receive a confirming written
        notice. The Agent shall notify the affected Lenders of the contents of
        each such notice on the date of its receipt of the same or, if received
        after the applicable time set forth above on a Business Day, on the next
        Business Day. In the event the Borrower fails to select the Type of
        Balance applicable to a borrowing of the Loan, or the duration of any
        Interest Period for any Libor Balance or IBOR Balance, within the time
        period and otherwise as provided in this Section, such Balance (if
        outstanding as a Libor Balance or an IBOR Balance) will be automatically
        Converted into the Base Rate Balance on the last day of the Interest
        Period for such Libor Balance or IBOR Balance or (if outstanding as a
        portion of the Base Rate Balance) will remain as, or (if not then
        outstanding) will be made as, a portion of the Base Rate Balance. The
        Borrower may not borrow under the Loan as a Libor Balance or an IBOR
        Balance, Convert any portion of the Base Rate Balance into Libor
        Balances or IBOR Balances, Continue any Libor Balance as a Libor
        Balance, or Continue any IBOR Balance as an IBOR Balance if the
        Applicable Rate for such Libor Balance or IBOR Balance (as applicable)
        would exceed the Maximum Rate.

        Section 4.4 Prepayments.

               (a)    Mandatory.

                      (i) Overadvance. If at any time the principal amount of
               the Loan outstanding exceeds the aggregate Commitments, the
               Borrower shall, within one (1) Business Day after the occurrence
               thereof, prepay the Loan by the amount of such excess.

                      (ii) Prepayments from Asset Dispositions. Immediately upon
               receipt by the Borrower or any of its Subsidiaries of the Net
               Proceeds of any Asset Disposition, the Borrower shall make a
               prepayment in respect of the Obligations equal to the amount of
               such Net Proceeds of such Asset Disposition.

                      (iii) Prepayments from Debt Offerings. In the event that
               the Borrower or any Subsidiary of the Borrower incurs any Funded
               Debt (other than Debt permitted by Section 10.1), no later than
               the third Business Day following the incurrence of such Debt, the
               Borrower shall make a prepayment in respect of the Obligations
               equal to the amount of the Net Proceeds of such Debt.

                      (iv) Swingline Advances. Within one (1) Business Day after
               any demand therefor by the Agent or Bank of America, the Borrower
               shall prepay in full the outstanding principal amount of the
               Swingline Advances.

                      (v) Annual "Clean-up" Period. For a period of not less
               than thirty (30) consecutive days during each calendar year
               between January 1st and June 30th of such calendar year, the
               Borrower shall make prepayments of the Loan to the extent that
               the outstanding principal of the Loan shall be equal to or less
               than $75,000,000 at all times during such thirty (30) day period.

                                    Page 28
<PAGE>   35

               (b) Optional. Subject to Section 4.2 and the provisions of this
        clause (b), the Borrower may, at any time and from time to time without
        premium or penalty upon prior notice to the Agent as specified in
        Section 4.3, prepay or repay the Loan in full or in part. Libor Balances
        and IBOR Balances may be prepaid or repaid only on the last day of the
        Interest Period applicable thereto unless the Borrower pays to the
        Agent, for the account of the applicable Lenders or Lender, any amounts
        due under Section 5.5 as a result of such prepayment or repayment.

        Section 4.5 Method of Payment. Except as otherwise expressly provided
herein, all payments of principal, interest, and other amounts to be made by the
Borrower under the Loan Documents shall be made to the Agent at the Principal
Office for the account of each Lender's Applicable Lending Office in Dollars and
in immediately available funds, without condition or deduction for any
counterclaim, defense, recoupment, or set-off, not later than 12:00 noon on the
date on which such payment shall become due (each such payment made after such
time on such due date to be deemed to have been made on the next succeeding
Business Day). Unless Bank of America expressly agrees otherwise and subject to
Section 4.4(a)(iv), all payments shall be applied as follows: first, with
respect to the Base Rate Balance outstanding under the Swingline Advances until
such portion of the Loan is repaid in full, second, with respect to the Base
Rate Balance outstanding under the Revolving Loan until such portion of the Loan
is repaid in full, and third, with respect to the IBOR Balance outstanding under
the Swingline Advances until such portion of the Loan is paid in full. Subject
to the preceding sentence, the Borrower shall, at the time of making each such
payment, specify to the Agent the sums payable under the Loan Documents to which
such payment is to be applied (and in the event that the Borrower fails to so
specify, or if an Event of Default is in existence, the Agent may apply such
payment to the Obligations in such order and manner as it may elect (subject to
the preceding sentence) in its sole discretion, subject to Section 4.6 and
provided that when applying any such amounts to any Balances, the portion of the
Loan outstanding as the Base Rate Balance shall be prepaid in full prior to any
application to any portion of the Loan outstanding as a Libor Balance or an IBOR
Balance). Each payment received by the Agent under any Loan Document for the
account of a Lender shall be paid to such Lender by 1:00 p.m. on the date the
payment is deemed made to the Agent in immediately available funds, for the
account of such Lender's Applicable Lending Office. Whenever any payment under
any Loan Document shall be stated to be due on a day that is not a Business Day,
such payment may be made on the next succeeding Business Day, and such extension
of time shall in such case be included in the computation of the payment of
interest and commitment fee, as the case may be.

        Section 4.6 Pro Rata Treatment. Except to the extent otherwise provided
herein: (a) each advance of the Revolving Loan shall be made by the Lenders,
each payment of commitment fees under Section 3.6, and each termination or
reduction of the Commitments shall be made, paid, or applied (as applicable) pro
rata according to the Lenders' respective Commitment Percentages; (b) the
making, Conversion, and Continuation of Balances of a particular Type (other
than Conversions provided for by Section 5.4) shall be made pro rata among the
Lenders holding Balances of such Type according to their respective Commitment
Percentages; and (c) each payment and prepayment of principal of or interest on
the Revolving Loan by the Borrower shall be made to the Agent for the account of
the Lenders pro rata in accordance with the respective unpaid principal

                                    Page 29
<PAGE>   36

amounts of the Revolving Loan held by each Lender; provided that as long as no
default in the payment of interest exists, payments of interest made when
Lenders are holding different types of Balances applicable to the Revolving Loan
as a result of the application of Section 5.4, shall be made to the Lenders in
accordance with the amount of interest owed to each. If at any time payment, in
whole or in part, of any amount distributed by the Agent hereunder is rescinded
or must otherwise be restored or returned by the Agent as a preference,
fraudulent conveyance, or otherwise under any bankruptcy, insolvency, or similar
law, then each Person receiving any portion of such amount agrees, upon demand,
to return the portion of such amount it has received to the Agent.

        Section 4.7 Sharing of Payments. If a Lender shall obtain payment of any
principal of or interest on any of the Obligations due to such Lender hereunder
directly (and not through the Agent) through the exercise of any right of
set-off, banker's lien, counterclaim, or similar right, or otherwise, it shall
promptly purchase from the other Lenders participations in the Obligations held
by the other Lenders in such amounts, and make such other adjustments from time
to time as shall be equitable to the end that all the Lenders shall share the
benefit of such payment pro rata in accordance with the unpaid principal of and
interest on the Obligations then due to each of them. To such end, all of the
Lenders shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if all or any portion of such excess payment
is thereafter rescinded or must otherwise be restored. The Borrower agrees, to
the fullest extent it may effectively do so under applicable law, that any
Lender so purchasing a participation in the Obligations held by the other
Lenders may exercise all rights of set-off, banker's lien, counterclaim, or
similar rights with respect to such participation as fully as if such Lender
were a direct holder of Obligations in the amount of such participation. Nothing
contained herein shall require any Lender to exercise any such right or shall
affect the right of any Lender to exercise, and retain the benefits of
exercising, any such right with respect to any other indebtedness, liability, or
obligation of the Borrower.

        Section 4.8 Non Receipt of Funds by the Agent.

               (a) Unless the Borrower or any Lender (as used in this Section,
        the "Payor") has notified the Agent prior to the date any payment to be
        made by the Payor is due, that the Payor does not intend to remit such
        payment, the Agent may, in its sole and absolute discretion, assume that
        the Payor has timely remitted such payment and the Agent may, in its
        sole and absolute discretion and in reliance thereon, make available
        such payment to the Person entitled thereto. If such payment was not in
        fact remitted to the Agent in immediately available funds, then:

                      (i) if the Borrower failed to make such payment, each
               Lender shall forthwith on demand repay to the Agent the amount of
               such assumed payment made available to such Lender, together with
               interest thereon in respect of each day from and including the
               date such amount was made available by the Agent to such Lender
               to the date such amount is repaid to the Agent at the Federal
               Funds Rate; and

                      (ii) if any Lender failed to make such payment, the Agent
               shall be entitled to recover such corresponding amount on demand
               from such Lender. If such Lender does not pay such corresponding
               amount forthwith upon the Agent's demand

                                    Page 30
<PAGE>   37

               therefor, the Agent promptly shall notify the Borrower, and the
               Borrower shall pay such corresponding amount to the Agent. The
               Agent also shall be entitled to recover from such Lender interest
               on such corresponding amount in respect of each day from the date
               such corresponding amount was made available by the Agent to the
               Borrower to the date such corresponding amount is recovered by
               the Agent, (A) from such Lender at a rate per annum equal to the
               daily Federal Funds Rate and (B) from the Borrower, at a rate per
               annum equal to the interest rate applicable to such borrowing.
               Nothing herein shall be deemed to relieve any Lender from its
               obligation to fulfill its Commitment or to prejudice any rights
               which the Agent or the Borrower may have against any Lender as a
               result of any default by such Lender hereunder.

               (b) The Commitments and other obligations of the Lenders under
        any Loan Document are several. The default by any Lender in making an
        advance under the Revolving Loan in accordance with its Commitment shall
        not relieve the other Lenders of their obligations under any Loan
        Document. In the event of any default by any Lender in making any
        advance under the Revolving Loan, each nondefaulting Lender shall be
        obligated to make its advance under the Revolving Loan but shall not be
        obligated to advance the amount which the defaulting Lender was required
        to advance hereunder. No Lender shall be responsible for any act or
        omission of any other Lender.

                                    ARTICLE 5

                             Change in Circumstances

        Section 5.1 Increased Cost and Reduced Return.

               (a) Increased Cost. If, after the Closing Date, any Regulatory
        Change or compliance by any Lender (or its Applicable Lending Office)
        with any request or directive (whether or not having the force of law)
        of any Governmental Authority, central bank, or comparable agency:

                      (i) shall subject such Lender (or its Applicable Lending
               Office) to any tax, duty, or other charge with respect to any
               Libor Balances or IBOR Balances, its Note, or its obligation to
               make Libor Balances or IBOR Balances available to the Borrower,
               or change the basis of taxation of any amounts payable to such
               Lender (or its Applicable Lending Office) under this Agreement or
               its Note in respect of any Libor Balances or IBOR Balances (other
               than franchise taxes or taxes imposed on or measured by the net
               income of such Lender by the jurisdiction in which such Lender is
               organized, has its principal office or such Applicable Lending
               Office, or is doing business);

                      (ii) shall impose, modify, or deem applicable any reserve,
               special deposit, assessment, or similar requirement (other than
               the Eurodollar Reserve Percentage utilized in the determination
               of the Libor Rate or the IBOR Rate) relating to any extensions of
               credit or other assets of, or any deposits with or other
               liabilities or

                                    Page 31
<PAGE>   38

               commitments of, such Lender (or its Applicable Lending Office),
               including the Commitment of such Lender hereunder; or

                      (iii) shall impose on such Lender (or its Applicable
               Lending Office), the London interbank market, or the offshore
               interbank market (with respect to the IBOR Rate) any other
               condition affecting this Agreement or its Note or any of such
               extensions of credit or liabilities or commitments;

        and the result of any of the foregoing is to increase the cost to such
        Lender (or its Applicable Lending Office) of making, Converting into,
        Continuing, or maintaining any Libor Balances or IBOR Balances or to
        reduce any sum received or receivable by such Lender (or its Applicable
        Lending Office) under this Agreement or its Note with respect to any
        Libor Balances or IBOR Balances, then the Borrower shall pay to such
        Lender on demand such amount or amounts as will compensate such Lender
        for such increased cost or reduction. If any Lender requests
        compensation by the Borrower under this Section 5.1(a), the Borrower
        may, by notice to such Lender (with a copy to the Agent), suspend the
        obligation of such Lender to make or maintain Libor Balances or IBOR
        Balances, or to Convert any portion of the Base Rate Balances into Libor
        Balances or IBOR Balances, until the event or condition giving rise to
        such request ceases to be in effect (in which case the provisions of
        Section 5.4 shall be applicable); provided that such suspension shall
        not affect the right of such Lender to receive the compensation so
        requested.

               (b) Capital Adequacy. If, after the date hereof, any Lender shall
        have determined that any Regulatory Change has or would have the effect
        of reducing the rate of return on the capital of such Lender or any
        corporation controlling such Lender as a consequence of such Lender's
        obligations hereunder to a level below that which such Lender or such
        corporation could have achieved but for such adoption, change, request,
        or directive (taking into consideration its policies with respect to
        capital adequacy) by an amount deemed by such Lender to be material,
        then from time to time upon demand, the Borrower shall pay to such
        Lender such additional amount or amounts as will compensate such Lender
        for such reduction.

               (c) Claims Under this Section 5.1. Each Lender shall promptly
        notify the Borrower and the Agent of any event of which it has
        knowledge, occurring after the date hereof, which will entitle such
        Lender to compensation pursuant to this Section 5.1 and will designate a
        different Applicable Lending Office if such designation will avoid the
        need for, or reduce the amount of, such compensation and will not, in
        the judgment of such Lender, be otherwise disadvantageous to it. Any
        Lender claiming compensation under this Section 5.1 shall furnish to the
        Borrower and the Agent a statement setting forth the additional amount
        or amounts to be paid to it hereunder which shall be conclusive in the
        absence of manifest error. In determining such amount, such Lender may
        use any reasonable averaging and attribution methods.

        Section 5.2 Limitation on Libor Balances and IBOR Balances. If on or
prior to the first day of any Interest Period for any Libor Balance or IBOR
Balance:

                                    Page 32
<PAGE>   39

               (a) the Agent (with respect to the Libor Rate) or Bank of America
        (with respect to the IBOR Rate) determines (which determination shall be
        conclusive) that by reason of circumstances affecting the relevant
        market, adequate and reasonable means do not exist for ascertaining the
        Libor Rate or the IBOR Rate, as applicable, for such Interest Period;

               (b) the Required Lenders determine (which determination shall be
        conclusive) and notify the Agent that the Libor Rate will not adequately
        and fairly reflect the cost to the Lenders of funding Libor Balances for
        such Interest Period; or

               (c) Bank of America determines (which determination shall be
        conclusive) and notifies the Agent that the IBOR Rate will not
        adequately and fairly reflect the cost to Bank of America of funding
        IBOR Balances for such Interest Period;

then the Agent shall give the Borrower prompt notice thereof specifying the
amounts or periods, and so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Libor Balances or IBOR Balances
(as applicable) available to the Borrower, Continue Libor Balances or IBOR
Balances (as applicable), or to Convert any portion of the Base Rate Balance
into Libor Balances or IBOR Balances (as applicable) and the Borrower shall, on
the last day(s) of the then current Interest Period(s) for the outstanding Libor
Balances or IBOR Balances (as applicable), either prepay such Libor Balances or
IBOR Balances (as applicable) or Convert such Libor Balances or IBOR Balances
(as applicable) into the Base Rate Balance in accordance with the terms of this
Agreement.

        Section 5.3 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to make, maintain, or fund Libor Balances or IBOR
Balances (as applicable) hereunder, then such Lender shall promptly notify the
Borrower and the Agent thereof and such Lender's obligation to make or Continue
Libor Balances or IBOR Balances (as applicable) and to Convert any portion of
the Base Rate Balance into Libor Balances or IBOR Balances (as applicable) shall
be suspended until such time as such Lender may again make, maintain, and fund
Libor Balances or IBOR Balances (as applicable) (in which case the provisions of
Section 5.4 shall be applicable).

        Section 5.4 Treatment of Affected Balances. If the obligation of any
Lender to make a particular Libor Balance or IBOR Balance (as applicable)
available to the Borrower or to Continue, or to Convert any portion of the Base
Rate Balance into, Libor Balances or IBOR Balances (as applicable) shall be
suspended pursuant to Section 5.1 or Section 5.3 (Balances of such Type being
herein called "Affected Balances"), such Lender's Affected Balances shall be
automatically Converted into the Base Rate Balances on the last day(s) of the
then current Interest Period(s) for the Affected Balances (or, in the case of a
Conversion required by Section 5.3, on such earlier date as such Lender may
specify to the Borrower with a copy to the Agent) and, unless and until such
Lender gives notice as provided below that the circumstances specified in
Section 5.1 or Section 5.3 that gave rise to such Conversion no longer exist:

                                    Page 33
<PAGE>   40

               (a) to the extent that such Lender's Affected Balances have been
        so Converted, all payments and prepayments of principal that would
        otherwise be applied to such Lender's Affected Balances shall be applied
        instead to its Base Rate Balance; and

               (b) all advances under the Loan that would otherwise be made or
        Continued by such Lender as Libor Balances or IBOR Balances (as
        applicable) shall be made or Continued instead as part of the Base Rate
        Balance, and all portions of the Base Rate Balance of such Lender that
        would otherwise be Converted into Libor Balances or IBOR Balances (as
        applicable) shall remain as all or a portion of the Base Rate Balance.

With respect to amounts outstanding under the Revolving Loan, if such Lender
gives notice to the Borrower (with a copy to the Agent) that the circumstances
specified in Section 5.1 or Section 5.3 that gave rise to the Conversion of such
Lender's Affected Balances no longer exist (which such Lender agrees to do
promptly upon such circumstances ceasing to exist) at a time when Libor Balances
made by other Lenders are outstanding, such Lender's Base Rate Balance shall be
automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Libor Balances, to the extent necessary so that,
after giving effect thereto, all Balances held by the Lenders holding Libor
Balances and by such Lender are held pro rata (as to principal amounts, Types,
and Interest Periods) in accordance with their respective Commitment
Percentages.

        Section 5.5 Compensation. Upon the request of any Lender, the Borrower
shall pay to such Lender such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost, or
expense (including, without limitation, loss of anticipated profits,
reemployment of funds obtained to maintain any Balance, from fees payable to
terminate the deposits from which such funds were obtained, any customary
administrative fees charged by the Lender in connection with the foregoing, and
any such amounts incurred in connection with syndication of the Loan) incurred
by it as a result of:

               (a) any payment, prepayment, or Conversion by the Borrower of a
        Libor Balance or an IBOR Balance for any reason (including, without
        limitation, the acceleration of the Loan pursuant to Section 12.2) on a
        date other than the last day of the Interest Period for such Libor
        Balance or IBOR Balance; or

               (b) any failure by the Borrower for any reason (including,
        without limitation, the failure of any condition precedent specified in
        Article 7 to be satisfied) to borrow, Convert, Continue, or prepay a
        Libor Balance or an IBOR Balance on the date for such borrowing,
        Conversion, Continuation, or prepayment specified in the relevant notice
        of borrowing, prepayment, Continuation, or Conversion under this
        Agreement.

Notwithstanding the foregoing provisions of this Section 5.5, if at any time the
mandatory prepayment of the Loan pursuant to Section 4.4(a) would result in the
Borrower incurring breakage costs under this Section 5.5 as a result of Libor
Balances or IBOR Balances being prepaid other than on the last day of an
Interest Period applicable thereto (collectively, the "Affected Libor/IBOR
Balances"), then the Borrower may in its sole discretion initially deposit a
portion (up to 100%) of the amounts that otherwise would have been paid in
respect of the Affected Libor/IBOR Balances

                                    Page 34
<PAGE>   41

with the Agent (which deposit, after giving effect to interest to be earned on
such deposit prior to the last day of the relevant Interest Periods, must be
equal in amount to the amount of Affected Libor/IBOR Balances not immediately
prepaid) to be held as security for the obligations of the Borrower hereunder
pursuant to a cash collateral agreement to be entered into in form and substance
satisfactory to the Agent, with such cash collateral to be directly applied upon
the first occurrence (or occurrences) thereafter of the last day of an Interest
Period applicable to the Affected Libor/IBOR Balances (or such earlier date or
dates as shall be requested by the Borrower), to repay an aggregate principal
amount of the Loan equal to the Affected Libor/IBOR Balances not initially
repaid pursuant to this sentence.

        Section 5.6 Taxes.

               (a) Withholding Taxes. Except as otherwise provided in this
        Agreement, any and all payments by the Borrower or any Guarantor to or
        for the account of any Lender or the Agent hereunder or under any other
        Loan Document shall be made free and clear of and without deduction for
        any and all present or future taxes, duties, levies, imposts,
        deductions, charges, or withholdings, and all liabilities with respect
        thereto, excluding, in the case of each Lender or the Agent (as
        applicable), taxes imposed on or measured by its income, and franchise
        taxes imposed on it, by the jurisdiction under the laws of which such
        Lender (or its Applicable Lending Office) or the Agent (as the case may
        be) is organized, located, or doing business or any political
        subdivision thereof, and excluding in the case of any Foreign Lender
        taxes arising as a result of such Lender's failure to comply with
        Section 14.22, (all such non-excluded taxes, duties, levies, imposts,
        deductions, charges, withholdings, and liabilities being hereinafter
        referred to as "Taxes"). If the Borrower or any Guarantor shall be
        required by law to deduct any Taxes from or in respect of any sum
        payable under any Loan Document to any Lender or the Agent (as
        applicable), (i) the sum payable shall be increased as necessary so that
        after making all required deductions (including, without limitation,
        deductions applicable to additional sums payable under this Section 5.6)
        such Lender or the Agent (as applicable) receives an amount equal to the
        sum it would have received had no such deductions been made, (ii) the
        Borrower or any Guarantor, as applicable, shall make such deductions,
        (iii) the Borrower or any Guarantor, as applicable, shall pay the full
        amount deducted to the relevant taxing authority or other authority in
        accordance with applicable law, and (iv) the Borrower or any Guarantor,
        as applicable, shall furnish to the Agent the original or a certified
        copy of a receipt evidencing payment thereof.

               (b) Stamp Taxes, Etc. In addition, the Borrower agrees to pay any
        and all present or future stamp or documentary taxes and any other
        excise or property taxes or charges or similar levies which arise from
        any payment made under this Agreement or any other Loan Document or from
        the execution or delivery of, or otherwise with respect to, this
        Agreement or any other Loan Document ("Other Taxes").

               (c) Tax Indemnification. THE BORROWER AGREES TO INDEMNIFY EACH
        LENDER AND THE AGENT-RELATED PERSONS FOR THE FULL AMOUNT OF TAXES AND
        OTHER TAXES (INCLUDING, WITHOUT LIMITATION, ANY "TAXES" OR "OTHER TAXES"
        IMPOSED OR ASSERTED BY ANY JURISDICTION ON

                                    Page 35
<PAGE>   42

        AMOUNTS PAYABLE UNDER THIS SECTION 5.6) PAID BY SUCH LENDER OR ANY
        AGENT-RELATED PERSON (AS THE CASE MAY BE) AND ANY LIABILITY (INCLUDING,
        WITHOUT LIMITATION, PENALTIES, INTEREST, AND EXPENSES) ARISING THEREFROM
        OR WITH RESPECT THERETO, OTHER THAN PENALTIES, ADDITIONS TO TAX,
        INTEREST, AND EXPENSES ARISING AS A RESULT OF GROSS NEGLIGENCE OR
        WILLFUL MISCONDUCT ON THE PART OF SUCH LENDER OR AGENT-RELATED PERSON
        AND ANY TAXES ARISING AS A RESULT OF THE FAILURE OF ANY FOREIGN LENDER
        TO COMPLY WITH THE TERMS OF SECTION 14.22.

                                    ARTICLE 6

                                   Guaranties

        Section 6.1 Guaranties. Each Subsidiary of the Borrower in existence as
of the Closing Date, each Subsidiary of the Borrower which after the Closing
Date executes a Joinder Agreement, and any other Subsidiary of the Borrower
which at any time Guarantees the indebtedness, liabilities, and obligations of
the Borrower under the Note Agreement shall guarantee payment and performance of
the Obligations pursuant to the Subsidiary Guaranty. Additionally, the Borrower
shall cause one or more of its other domestic Subsidiaries (if any) to Guarantee
payment and performance of the Obligations pursuant to the Subsidiary Guaranty
as follows: (a) in the event that any domestic Subsidiary of the Borrower which
is not a Guarantor has assets of a net book value in excess of $10,000,000 or
gross revenue for the most recently completed four (4) Fiscal Quarters,
beginning with the four (4) Fiscal Quarters ending October 29, 2000, in excess
of $10,000,000 the Borrower shall cause such domestic Subsidiary to become a
Guarantor as provided by Section 6.2 and (b) in the event that the Borrower's
domestic Subsidiaries which are not previously Guarantors hereunder have assets,
in the aggregate for all such domestic Subsidiaries, of a net book value in
excess of $75,000,000 or gross revenue for the most recently completed four (4)
Fiscal Quarters, beginning with the four (4) Fiscal Quarters ending October 29,
2000, in excess of $75,000,000, the Borrower shall cause one or more of such
Subsidiaries to become Guarantors as provided by Section 6.2 with the effect
that the assets and gross revenue of the remaining domestic Subsidiaries of the
Borrower which are not Guarantors hereunder do not exceed $75,000,000 as of such
date.

        Section 6.2 New Guarantors. In the event that the Borrower is required
to cause one or more of its Subsidiaries to become Guarantors as set forth in
Section 6.1, such new Guarantor or Guarantors (as the case may be) shall,
contemporaneously with the delivery of the financial statements required by
Section 9.1(a) and Section 9.1(b), execute and deliver to the Agent a Joinder
Agreement pursuant to which each such Subsidiary of the Borrower becomes a
Guarantor under this Agreement and such other certificates and documentation,
including the items otherwise required pursuant to Section 7.1, as the Agent may
reasonably request.

                                    Page 36
<PAGE>   43

                                    ARTICLE 7

                              Conditions Precedent

        Section 7.1 Initial Advance. The obligation of each Lender to make its
initial advance of the Loan is subject to the following conditions precedent:

               (a) Deliveries. The Agent shall have received on or before the
        Closing Date and on or before the day of such advance all of the
        following, each dated (unless otherwise indicated) the Closing Date, in
        form and substance satisfactory to the Agent and the Lenders:

                      (i) Resolutions; Authority. For each of the Borrower and
               the Guarantors, resolutions of its board of directors (or similar
               governing body) certified by its Secretary or an Assistant
               Secretary which authorize its execution, delivery, and
               performance of the Loan Documents to which it is or is to be a
               party;

                      (ii) Incumbency Certificate. For each of the Borrower and
               the Guarantors, a certificate of incumbency certified by the
               Secretary or an Assistant Secretary certifying the names of its
               officers (A) who are authorized to sign the Loan Documents to
               which it is or is to be a party (including, without limitation,
               the certificates contemplated herein) together with specimen
               signatures of each such officer and (B) who will, until replaced
               by other officers duly authorized for that purpose, act as its
               representatives for the purposes of signing documentation and
               giving notices and other communications in connection with this
               Agreement and the transactions contemplated hereby;

                      (iii) Organizational Documents. For each of the Borrower
               and the Guarantors, the certificate of incorporation, certificate
               of formation, certificate of limited partnership, or other
               similar document certified by the Secretary of State of the state
               of its incorporation, formation, or organization and dated a
               current date;

                      (iv) Bylaws. For each of the Borrower and the Guarantors,
               the bylaws, operating agreement, partnership agreement, or
               similar agreement certified by its Secretary or an Assistant
               Secretary;

                      (v) Governmental Certificates. For each of the Borrower
               and the Guarantors, (A) certificates (dated within thirty (30)
               days of the Closing Date) of the appropriate Governmental
               Authorities of the state of incorporation, formation, or
               organization as to its existence and, to the extent applicable,
               good standing and (B) certificates (dated within forty-five (45)
               days of the Closing Date) of the appropriate Governmental
               Authorities of each of the states set forth on Schedule 7.1 and
               of each other state in which such Person conducts business, other
               than the state of organization of such Person, as to such
               Person's qualification to do business and good standing in such
               state where failure to be so qualified could reasonably be
               expected to have a Material Adverse Effect, provided that the
               Borrower may defer

                                    Page 37
<PAGE>   44

               delivery of such certificates included in this clause (B) for a
               period of forty-five (45) days after the Closing Date;

                      (vi) Credit Agreement. This Agreement, together with all
               Schedules, Exhibits, and other attachments (if any), duly
               executed by the Borrower, the Agent, and the Lenders;

                      (vii) Acknowledgment of Intercreditor Agreement. An
               Acknowledgment of Intercreditor Agreement duly executed by each
               Lender;

                      (viii) Notes. The Revolving Notes and the Swingline Note
               executed by the Borrower;

                      (ix) Subsidiary Guaranty. The Subsidiary Guaranty executed
               by each of the Guarantors;

                      (x) Termination of Liens. Duly executed UCC-3 termination
               statements, mortgage releases, and such other documentation as
               shall be necessary to terminate or release all Liens other than
               those permitted by Section 10.2;

                      (xi) Certificate of Compliance. A certificate of the chief
               financial officer or the Vice President, Finance of the Borrower
               setting forth a calculation of the financial covenants in Section
               11.1, Section 11.2, and Section 11.3 as of the Borrower's Fiscal
               Quarter ended April 30, 2000;

                      (xii) Consents. Copies of all material consents or waivers
               necessary for the execution, delivery, and performance by the
               Borrower and each Guarantor of the Loan Documents to which it is
               a party, as the Agent may require, which consents shall be
               certified by an authorized representative of the Borrower or such
               Guarantor, as applicable, as true and correct copies of such
               consents as of the Closing Date;

                      (xiii) Opinions of Counsel. Satisfactory opinions of legal
               counsel to the Borrower and the Guarantors as to such matters as
               the Agent may request;

                      (xiv) Fees. Payment of all fees payable to the Lenders
               including, without limitation, those fees set forth in the
               Agent's Letter;

                      (xv) Letter of Direction. A letter of direction from the
               Borrower addressed to the Agent with respect to the disbursement
               of the proceeds of the initial advance under the Loan; and

                      (xvi) Termination of Line of Credit. The Borrower shall,
               with the proceeds of the initial advance hereunder, repay the
               outstanding line of credit provided pursuant to that certain
               Letter of Credit Agreement, as amended, dated as of June 1, 1997,
               between the Borrower and Bank of America National Trust and
               Savings

                                    Page 38
<PAGE>   45

               Association (now known as Bank of America, National Association)
               and terminate its rights to reborrow under such line of credit
               (provided that the Borrower shall not be required to terminate
               its rights to request letters of credit under such letter of
               credit agreement);

               (b) Attorney Costs. The Attorney Costs referred to in Section
        14.1 for which statements have been presented shall have been paid in
        full (or shall be paid with the proceeds of the initial advance under
        the Loan made on the Closing Date);

               (c) Compliance with Laws. As of the Closing Date, each Person
        that is a party to this Agreement or any of the other Loan Documents
        shall have complied with all requirements of any Governmental Authority
        necessary to consummate the transactions contemplated by this Agreement
        and the other Loan Documents;

               (d) No Prohibitions. No requirement of any Governmental Authority
        shall prohibit the consummation of the transactions contemplated by this
        Agreement or any other Loan Document, and no order, judgment, ruling,
        injunction, or decree of any Governmental Authority or arbitrator shall,
        and no litigation or other proceeding shall be pending or threatened
        which would, enjoin, prohibit, restrain, or otherwise adversely affect
        in any material manner the consummation of the transactions contemplated
        by this Agreement or the other Loan Documents or otherwise have a
        Material Adverse Effect;

               (e) No Material Adverse Change. As of the Closing Date, no
        material adverse change shall have occurred with respect to (i) the
        business, assets, liabilities (actual or contingent), operations,
        condition (financial or otherwise), or prospects of the Borrower
        (individually) or the Borrower and its Subsidiaries (taken as a whole)
        since January 30, 2000 or (ii) in the facts and information regarding
        such Persons disclosed to the Agent and the Lenders prior to the Closing
        Date;

               (f) No Material Litigation. Except as set forth in Schedule 8.5,
        as of the Closing Date, no action, suit, investigation, or proceeding
        shall be pending or threatened before any Governmental Authority that
        purports to affect the Borrower or any of its Subsidiaries that could
        reasonably be expected to result in a Material Adverse Effect;

               (g) Compliance With Financial and Other Obligations. As of the
        Closing Date, the Borrower and each of its Subsidiaries shall be in
        compliance with all of its respective existing financial obligations,
        and no default or event of default shall be in existence (either before
        or after giving effect to this Agreement) under any Capital Stock or
        Debt of the Borrower or any Subsidiary of the Borrower;

               (h) Capital Structure. The corporate capital and ownership
        structure (including, without limitation, articles of incorporation and
        bylaws), shareholders agreements, and management of the Borrower and its
        Subsidiaries shall be reasonably satisfactory to the Agent;

                                    Page 39
<PAGE>   46

               (i) No Material Market Changes. The absence of any material
        disruption of or material adverse change in conditions in the financial,
        banking, or capital markets which the Agent and the Arranger in their
        sole discretion, deem material in connection with the syndication of the
        Commitment and the Loan provided to the Borrower pursuant to the terms
        of this Agreement; and

               (j) Additional Documentation. The Agent and the Lenders shall
        have received such additional approvals, opinions, or other
        documentation as the Agent or any Lender may reasonably request.

        Section 7.2 All Advances. The obligation of each Lender to make any
advance under the Loan (including, without limitation, the initial advance) is
subject to the following additional conditions precedent:

               (a) No Default. No Default shall have occurred and be continuing,
        or would result from such Loan;

               (b) Representations and Warranties. All of the representations
        and warranties contained in Article 8 and in the other Loan Documents
        shall be true and correct in all material respects on and as of the date
        of such Loan with the same force and effect as if such representations
        and warranties had been made on and as of such date except to the extent
        that such representations and warranties relate specifically to another
        date;

               (c) Governmental Restrictions. There shall be no governmental
        inquiries, injunctions, or restraining orders instituted or pending, or
        any statute or rule enacted, promulgated, entered, or enforced which
        would have a Material Adverse Effect upon the Borrower (individually) or
        the Borrower and its Subsidiaries (taken as a whole); and

               (d) No Material Adverse Change. No material adverse change shall
        have occurred with respect to the business, assets, liabilities (actual
        or contingent), operations, condition (financial or otherwise), or
        prospects of the Borrower (individually) or the Borrower and its
        Subsidiaries (taken as a whole) since January 30, 2000.

Each notice of borrowing by the Borrower hereunder shall constitute a
representation and warranty by the Borrower that the conditions precedent set
forth in this Section 7.2 have been satisfied (both as of the date of such
notice and, unless the Borrower otherwise notifies the Agent prior to the date
of such borrowing, as of the date of such borrowing).

                                    ARTICLE 8

                         Representations and Warranties

        To induce the Agent and the Lenders to enter into this Agreement, the
Borrower represents and warrants that the following statements are and, after
giving effect to the transactions contemplated hereby will be, true, correct,
and complete:

                                    Page 40
<PAGE>   47

        Section 8.1 Existence, Power and Authority.

               (a) The Borrower and each of its Subsidiaries is (i) duly
        organized, validly existing, and in good standing under the laws of the
        jurisdiction of its organization; (ii) has all requisite power and
        authority to own its assets and carry on its business as now being or as
        proposed to be conducted; and (iii) is qualified to do business in all
        jurisdictions in which the nature of its business makes such
        qualification necessary and where failure to so qualify would have a
        Material Adverse Effect;

               (b) The Borrower and each of its Subsidiaries has the power and
        authority to execute, deliver, and perform its respective obligations
        under the Loan Documents to which it is or may become a party.

        Section 8.2 Financial Condition.

               (a) Financial Statements. The Borrower has delivered to the Agent
        and each Lender the audited financial statements of the Borrower and its
        Subsidiaries as of and for the (i) Fiscal Years ended February 1, 1998,
        January 31, 1999, and January 30, 2000 and (ii) the three (3) Fiscal
        Periods ended April 30, 2000. Such financial statements have been
        prepared in accordance with GAAP (subject to year-end audit adjustments
        and the inclusion of footnotes in the case of the financial statements
        described in clause (ii) preceding), and present fairly, the financial
        condition of the Borrower and its Subsidiaries as of the respective
        dates indicated therein and the results of operations for the respective
        periods indicated therein. Neither the Borrower nor any of its
        Subsidiaries has any material contingent liabilities, liabilities for
        taxes, unusual forward or long-term commitments, or unrealized or
        anticipated losses from any unfavorable commitments except as referred
        to or reflected in the financial statements referred to in clause (ii)
        preceding. Since the date of the financial statements referred to in
        clause (ii) preceding, no material adverse change has occurred with
        respect to the business, assets, liabilities (actual or contingent),
        operations, condition (financial or otherwise), or prospects of the
        Borrower (individually) or of the Borrower and its Subsidiaries (taken
        as a whole).

               (b) Projections. The Projections delivered and to be delivered by
        the Borrower to the Agent and included in the Offering Memorandum and
        the Projections to be delivered by the Borrower pursuant to Section
        9.1(a) have been and will be prepared by the Borrower in light of the
        past operation of the business of the Borrower and its Subsidiaries. All
        such Projections represent, as of the date thereof, a good faith
        estimate by the Borrower and its senior management of the financial
        conditions and performance of the Borrower and its Subsidiaries based on
        assumptions believed to be reasonable at the time made (provided that
        the performance of the Borrower and its Subsidiaries may vary from such
        Projections).

        Section 8.3 Corporate and Similar Action; No Breach. The execution,
delivery, and performance by the Borrower and each of its Subsidiaries of the
Loan Documents to which it is or may become a party and compliance with the
terms and provisions thereof have been duly authorized by all requisite action
on the part of the Borrower and each of its Subsidiaries, respectively, and do

                                    Page 41
<PAGE>   48

not and will not (a) violate or conflict with, or result in a breach of, or
require any consent under (i) the articles of incorporation, bylaws, or other
organizational documents (as applicable) of such Person, (ii) any applicable
law, rule, or regulation or any order, writ, injunction, or decree of any
Governmental Authority or arbitrator, or (iii) any agreement or instrument to
which such Person is a party or by which any of them or any of their property is
bound or subject, or (b) constitute a default under any such agreement or
instrument, or result in the creation or imposition of any Lien upon any of the
revenues or assets of such Person.

        Section 8.4 Operation of Business. Each of the Borrower and its
Subsidiaries possesses all material licenses, Permits, franchises, patents,
copyrights, trademarks, and tradenames, or rights thereto, necessary to conduct
its business substantially as now conducted and as presently proposed to be
conducted, and neither the Borrower nor any of its Subsidiaries is in violation
of any valid rights of others with respect to any of the foregoing where such
violation could be expected to have a Material Adverse Effect. Except as set
forth in Schedule 8.4, since April 30, 2000, the Borrower and its Subsidiaries
have conducted their respective businesses only in the ordinary and usual
course.

        Section 8.5 Litigation and Judgments. Except as set forth in Schedule
8.5, there is no action, suit, investigation, or proceeding before or by any
Governmental Authority or arbitrator pending or threatened against or affecting
the Borrower or any of its Subsidiaries which could reasonably be expected to
have a Material Adverse Effect. As of the Closing Date, except as set forth in
Schedule 8.5, there are no outstanding judgments against the Borrower or any of
its Subsidiaries.

        Section 8.6 Rights in Properties; Liens. The Borrower and each of its
Subsidiaries has good title to or valid leasehold interests in its respective
Properties, real and personal and none of such Properties or leasehold interests
of the Borrower or any of its Subsidiaries is subject to any Lien, except as
permitted by Section 10.2.

        Section 8.7 Enforceability. The Loan Documents to which the Borrower or
any Subsidiary of the Borrower is a party, when executed and delivered, shall
constitute the legal, valid, and binding obligations of the Borrower or such
Subsidiary, as applicable, enforceable against such Person in accordance with
their respective terms, except as limited by bankruptcy, insolvency, or other
laws of general application relating to the enforcement of creditors' rights and
general principles of equity.

        Section 8.8 Approvals. No authorization, approval, or consent of, and no
filing or registration with, any Governmental Authority or other third party is
or will be necessary for the execution, delivery, or performance by the Borrower
or any Subsidiary of the Borrower of the Loan Documents to which it is or may
become a party, except where the failure to obtain any such authorization,
approval or consent could not reasonably be expected to have a Material Adverse
Effect, or for the validity or enforceability thereof.

        Section 8.9 Debt. Neither the Borrower nor any of its Subsidiaries has
any Debt, except as set forth in Schedule 8.9 or as otherwise permitted by
Section 10.1.

                                    Page 42
<PAGE>   49

        Section 8.10 Taxes. Except as set forth in Schedule 8.10 or, after the
Closing Date, matters which do not violate Section 9.4, the Borrower and each
Subsidiary of the Borrower have filed all tax returns (federal, state, and
local) required to be filed, including all income, franchise, employment,
property, and sales tax returns, and have paid all of their respective
liabilities for taxes, assessments, governmental charges, and other levies that
are due and payable other than those being contested in good faith by
appropriate proceedings diligently pursued for which adequate reserves have been
established in accordance with GAAP. Except as set forth in Schedule 8.10 or,
after the Closing Date, matters which do not violate Section 9.4, there is no
pending investigation of the Borrower or any Subsidiary of the Borrower by any
taxing authority with respect to any liability for tax or of any pending but
unassessed tax liability of the Borrower or any Subsidiary of the Borrower.

        Section 8.11 Margin Securities. Neither the Borrower nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of buying or carrying margin
stock (within the meaning of Regulation U or Regulations T or X of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of the
Loan will be used to buy or carry any margin stock or to extend credit to others
for the purpose of buying or carrying margin stock.

        Section 8.12 ERISA. With respect to each Plan, the Borrower and each
Subsidiary of the Borrower is in compliance with all applicable provisions of
ERISA. Neither a Reportable Event nor a Prohibited Transaction has occurred and
is continuing with respect to any Plan. No notice of intent to terminate a Plan
has been filed, nor has any Plan been terminated. As of the Closing Date, no
circumstances exist which constitute grounds entitling the PBGC to institute
proceedings to terminate, or appoint a trustee to administer, a Plan, nor has
the PBGC instituted any such proceedings. Neither the Borrower nor any of its
Subsidiaries nor any ERISA Affiliate has completely or partially withdrawn from
a Multiemployer Plan. The Borrower each Subsidiary of the Borrower, and each
ERISA Affiliate have met their minimum funding requirements under ERISA with
respect to each Plan. Except as set forth in Schedule 8.12, the present value of
all vested benefits under each Plan do not exceed the fair market value of all
Plan assets allocable to such benefits, as determined on the most recent
valuation date of the Plan and in accordance with ERISA. Neither the Borrower,
any of its Subsidiaries, nor any ERISA Affiliate has any outstanding liability
to the PBGC under ERISA (other than liability for the payment of PBGC premiums
in the ordinary course of business).

        Section 8.13 Disclosure. All factual information furnished by or on
behalf of the Borrower or any Subsidiary of the Borrower to the Agent or any
Lender for purposes of or in connection with this Agreement, the other Loan
Documents, or any transaction contemplated herein or therein is, and all other
such factual information hereafter furnished by or on behalf of the Borrower or
any Subsidiary of the Borrower to the Agent or any Lender, will be true and
accurate in all material respects on the date as of which such information is
dated or certified and not incomplete by omitting to state any fact necessary to
make such information not misleading in any material respect at such time in
light of the circumstances under which such information was provided.

        Section 8.14 Subsidiaries; Capitalization. As of the Closing Date, the
Borrower has no other Subsidiaries other than those listed in Schedule 8.14. As
of the Closing Date, Schedule 8.14

                                    Page 43
<PAGE>   50

sets forth the jurisdiction of incorporation or organization of the Borrower and
its Subsidiaries, the percentage of the Borrower's ownership of the outstanding
Voting Stock of each Subsidiary of the Borrower, and the authorized, issued, and
outstanding Capital Stock of the Borrower and each Subsidiary of the Borrower.
All of the outstanding Capital Stock of the Borrower and its Subsidiaries has
been validly issued, is fully paid, is nonassessable, and has not been issued in
violation of any preemptive or similar rights. As of the Closing Date, except as
disclosed in Schedule 8.14, there are (a) no outstanding subscriptions, options,
warrants, calls, or rights (including, without limitation, preemptive rights) to
acquire, and no outstanding securities or instruments convertible into, Capital
Stock of the Borrower or any of its Subsidiaries, and (b) no shareholder
agreements, voting trusts, or similar agreements in effect and binding on any
shareholder of (i) to the Borrower's knowledge, the Borrower or any of its
Capital Stock or (ii) any Subsidiary of the Borrower or any of their respective
Capital Stock. All shares of Capital Stock of the Borrower and its Subsidiaries
were issued in compliance with all applicable state and federal securities laws.

        Section 8.15 Material Agreements. Except as set forth in Schedule 8.15,
neither the Borrower nor any of its Subsidiaries is a party to any indenture,
loan, or credit agreement, or to any lease or other agreement or instrument, or
subject to any charter or corporate restriction that could reasonably be
expected to have a Material Adverse Effect. Neither the Borrower nor any of its
Subsidiaries is in default, or has knowledge of facts or circumstances that with
the giving of notice or passage of time or both could be expected to result in a
default, in any respect in the performance, observance, or fulfillment of any of
the obligations, covenants, or conditions contained in any agreement or
instrument (including, without limitation, any indenture, loan, or credit
agreement, or any lease or other similar agreement or instrument) to which it is
a party where such default could be expected to cause a Material Adverse Effect.

        Section 8.16 Compliance with Laws. Neither the Borrower nor any of its
Subsidiaries is in violation of any law, rule, regulation, order, or decree of
any Governmental Authority or arbitrator except for violations which could not
be expected to have a Material Adverse Effect.

        Section 8.17 Investment Company Act. Neither the Borrower nor any of its
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.

        Section 8.18 Public Utility Holding Company Act. Neither the Borrower
nor any of its Subsidiaries is a "holding company" or a "subsidiary company" of
a "holding company" or an "affiliate" of a "holding company" or a "public
utility" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.

        Section 8.19 Environmental Matters.

        Except as disclosed on Schedule 8.19:

               (a) to the Borrower's knowledge, the Borrower, each Subsidiary of
        the Borrower, and all of their respective properties, assets, and
        operations are in compliance with all Environmental Laws; neither the
        Borrower nor any of its Subsidiaries has knowledge of, nor

                                    Page 44
<PAGE>   51

        has the Borrower or any Subsidiary of the Borrower received notice of,
        any past, present, or future conditions, events, activities, practices,
        or incidents which interfere with or prevent the compliance or continued
        compliance of the Borrower or its Subsidiaries with all Environmental
        Laws;

               (b) the Borrower and its Subsidiaries have obtained and
        maintained, and are in material compliance with, all material Permits,
        licenses, and authorizations that are required under applicable
        Environmental Laws;

               (c) except in compliance in all material respects with applicable
        Environmental Laws, during the course of the Borrower's or any of its
        Subsidiaries' ownership of or operations on any real Property, there has
        been no generation, treatment, recycling, storage, or disposal of
        hazardous waste, as that term is defined in 40 CFR Part 261 or any state
        equivalent, use of underground storage tanks or surface impoundments,
        use of asbestos containing materials, or use of polychlorinated
        biphenyls (PCB) used in hydraulic oils, electrical transformers, or
        other equipment that could reasonably be expected to have a Material
        Adverse Effect, and the use which the Borrower and its Subsidiaries make
        and intend to make of their respective properties and assets will not
        result in the use, generation, storage, transportation, accumulation,
        disposal, or Release of any Hazardous Material on, in, or from any of
        their properties or assets that could reasonably be expected to have a
        Material Adverse Effect;

               (d) neither the Borrower, any of its Subsidiaries, nor any of
        their respective currently or previously owned or leased Properties or
        operations is subject to any outstanding or, to their knowledge,
        threatened order from or agreement with any Governmental Authority or
        other Person or subject to any judicial or administrative proceeding
        with respect to (i) failure to comply with Environmental Laws, (ii)
        Remedial Action, or (iii) any Environmental Liabilities arising from a
        Release or threatened Release;

               (e) there are no conditions or circumstances associated with the
        currently or previously owned or leased Properties or operations of the
        Borrower or any Subsidiary of the Borrower that could reasonably be
        expected to result in any Environmental Liabilities or to have a
        Material Adverse Effect;

               (f) neither the Borrower nor any of its Subsidiaries is or
        operates a treatment, storage, or disposal facility requiring a permit
        under the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901
        et seq., the regulations thereunder, or any comparable provision of
        state law, and except as would not reasonably be expected to have a
        Material Adverse Effect, the Borrower and each Subsidiary of the
        Borrower is in compliance with all applicable financial responsibility
        requirements of all applicable Environmental Laws;

               (g) neither the Borrower nor any of its Subsidiaries has filed or
        failed to file any notice required under applicable Environmental Law
        reporting an unauthorized Release; and

                                    Page 45
<PAGE>   52

               (h) no Lien arising under any Environmental Law has attached to
        any property or revenues of the Borrower or any Subsidiary of the
        Borrower.

        Section 8.20 Broker's Fees. Except as disclosed on Schedule 8.20, no
broker's or finder's fee, commission, or similar compensation will be payable by
the Borrower or any Subsidiary of the Borrower with respect to the transactions
contemplated by this Agreement.

        Section 8.21 Employee Matters. Except as set forth on Schedule 8.21, as
of the Closing Date (a) neither the Borrower nor any of its Subsidiaries, nor
any of their respective employees, is subject to any collective bargaining
agreement, (b) no petition for certification or union election is pending with
respect to the employees of the Borrower or any Subsidiary of the Borrower and
no union or collective bargaining unit has sought such certification or
recognition with respect to the employees of the Borrower or any Subsidiary of
the Borrower, and (c) there are no strikes, slowdowns, work stoppages, or
controversies pending or, to the best knowledge of the Borrower and the
Subsidiaries of the Borrower after due inquiry, threatened between the Borrower
or any Subsidiary of the Borrower and its respective employees.

        Section 8.22 Solvency. Each of the Borrower and the Subsidiary
Guarantors, individually and on a consolidated basis is Solvent.

                                    ARTICLE 9

                              Affirmative Covenants

        The Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Lender has any Commitment hereunder, it
will perform and observe the following covenants:

        Section 9.1 Reporting Requirements. The Borrower will furnish to the
Agent and each Lender:

               (a) Annual Financial Statements and Projections. As soon as
        available, and in any event within ninety (90) days after the end of
        each Fiscal Year of the Borrower, beginning with the Fiscal Year ending
        January 28, 2001, (i) a copy of the annual audit report of the Borrower
        for such Fiscal Year containing, on a consolidated basis, a balance
        sheet and statements of income, retained earnings, and cash flow as at
        the end of such Fiscal Year and for the Fiscal Year then ended, in each
        case setting forth in comparative form the figures for the preceding
        Fiscal Year, all in reasonable detail and audited and certified on an
        unqualified basis by a "Big Five" firm of independent certified public
        accountants or other independent certified public accountants of
        recognized standing selected by the Borrower and reasonably acceptable
        to the Agent, to the effect that such report has been prepared in
        accordance with GAAP; (ii) a copy of the annual unaudited report of the
        Borrower and its Subsidiaries for such Fiscal Year containing, on a
        consolidating basis balance sheets and statements of income, retained
        earnings, and cash flow as at the end of such Fiscal Year and for the
        Fiscal Year then ended, in each case setting forth in comparative form
        the figures for the preceding

                                    Page 46
<PAGE>   53

        Fiscal Year, and in reasonable detail certified by the chief financial
        officer or Vice President, Finance of the Borrower to have been prepared
        in accordance with GAAP and to fairly present the financial condition
        and results of operation of the Borrower and its Subsidiaries, on a
        consolidating basis at the date and for the Fiscal Year then ended; and
        (iii) a copy of Projections for the Borrower's Fiscal Year immediately
        following the Fiscal Year which is the subject of the financial
        statements delivered pursuant to clause (i) preceding;

               (b) Quarterly Financial Statements. As soon as available, and in
        any event within forty-five (45) days after the end of each Fiscal
        Quarter of the Borrower, beginning with the Fiscal Quarter ending July
        30, 2000, a copy of an unaudited financial report of the Borrower and
        its Subsidiaries as of the end of such Fiscal Quarter and for the
        portion of the Fiscal Year then ended containing, on a consolidated
        basis, a balance sheet and statements of income, retained earnings, and
        cash flow, in each case setting forth in comparative form the figures
        for the corresponding period of the preceding Fiscal Year, all in
        reasonable detail certified by the chief financial officer or Vice
        President, Finance of the Borrower to have been prepared in accordance
        with GAAP and to fairly present the financial condition and results of
        operations of the Borrower and its Subsidiaries on a consolidated basis,
        at the date and for the periods indicated therein, subject to year-end
        audit adjustments and the inclusion of footnotes;

               (c) Compliance Certificate. As soon as available, and in any
        event accompanying the financial statements delivered in accordance with
        Section 9.1(a) and Section 9.1(b), a Compliance Certificate, together
        with schedules setting forth the calculations supporting the
        computations therein;

               (d) Applicable Rate Certificate. Concurrently with the delivery
        of each of the financial statements referred to in Section 9.1(b) and
        within forty-five (45) days after the end of each Fiscal Year of the
        Borrower, a certificate of the chief financial officer or Vice
        President, Finance of the Borrower showing in reasonable detail the
        calculation required for the Agent to determine the Applicable Rate;

               (e) Notice of Litigation, Etc. Promptly after receipt by the
        Borrower or any Subsidiary of the Borrower of notice of the commencement
        thereof, notice of all actions, suits, and proceedings by or before any
        Governmental Authority or arbitrator affecting the Borrower or any
        Subsidiary of the Borrower which, if determined adversely to the
        Borrower or such Subsidiary of the Borrower, could reasonably be
        expected to have a Material Adverse Effect;

               (f) Notice of Default. As soon as possible and in any event
        within two (2) Business Days after the chief executive officer,
        president, chief financial officer, any vice president, secretary,
        assistant secretary, treasurer, or any assistant treasurer of the
        Borrower has knowledge of the occurrence of a Default, a written notice
        setting forth the details of such Default and the action that the
        Borrower has taken and proposes to take with respect thereto;

                                    Page 47
<PAGE>   54

               (g) ERISA. As soon as possible and in any event within thirty
        (30) days after the Borrower or any Subsidiary of the Borrower knows, or
        has reason to know, that

                      (i) any Termination Event with respect to a Plan has
               occurred or will occur,

                      (ii) the aggregate present value of the Unfunded Vested
               Accrued Benefits under all Plans is equal to an amount in excess
               of $0, or

                      (iii) the Borrower or any Subsidiary of the Borrower is in
               "default" (as defined in Section 4219(c)(5) of ERISA) with
               respect to payments to a Multiemployer Plan required by reason of
               the Borrower's or any of its Subsidiaries' complete or partial
               withdrawal (as described in Section 4203 or 4205 of ERISA) from
               such Multiemployer Plan,

        the Borrower will provide the Agent and the Lenders with a certificate
        of its chief financial officer or Vice President, Finance setting forth
        the details of such event and the action which is proposed to be taken
        with respect thereto, together with any notice or filing which may be
        required by the PBGC or any other Governmental Authority with respect to
        such event;

               (h) Notice of Material Adverse Effect. As soon as possible and in
        any event within two (2) Business Days of the discovery of any event or
        condition that could reasonably be expected to have a Material Adverse
        Effect;

               (i) Proxy Statements, Periodic Reporting, Etc. As soon as
        available, one copy of each financial statement, report, notice, or
        proxy statement sent by the Borrower or any Subsidiary of the Borrower
        to its stockholders generally and one copy of each regular, periodic, or
        special report, registration statement, or prospectus filed by the
        Borrower or any Subsidiary of the Borrower with any securities exchange
        or the Securities and Exchange Commission or any successor agency;

               (j) Intercompany Contracts. Promptly upon entering into any such
        arrangement or contract (to the extent permitted by Section 10.7),
        copies or detailed descriptions of all tax sharing, cost allocation,
        overhead attribution, and any similar contracts or arrangements between
        the Borrower and any of its Affiliates at any time existing; and

               (k) General Information. Promptly, such other information
        concerning the Borrower or any Subsidiary of the Borrower as the Agent
        or any Lender may from time to time reasonably request.

        Section 9.2 Maintenance of Existence; Conduct of Business. Except as
permitted by Section 10.3, the Borrower will, and will cause each Subsidiary of
the Borrower to, preserve and maintain (a) its corporate existence and (b) all
of its leases, privileges, Permits, franchises, qualifications, and rights that
are necessary in the ordinary conduct of its business. The Borrower

                                    Page 48
<PAGE>   55

will, and will cause each Subsidiary of the Borrower to, conduct its business in
an orderly and efficient manner in accordance with good business practices.

        Section 9.3 Maintenance of Properties. Except as permitted by Section
10.3, the Borrower will, and will cause each Subsidiary of the Borrower to,
maintain, keep, and preserve all of its material Properties necessary in the
conduct of its business in good working order and condition, ordinary wear and
tear excepted.

        Section 9.4 Taxes and Claims. The Borrower will, and will cause each
Subsidiary of the Borrower to, pay or discharge at or before maturity or before
becoming delinquent (a) all taxes, levies, assessments, and governmental charges
imposed on it or its income or profits or any of its property, and (b) all
lawful claims for labor, material, and supplies, which, if unpaid, might become
a Lien upon any of its property; provided that neither the Borrower nor any
Subsidiary of the Borrower shall be required to pay or discharge any tax, levy,
assessment, or governmental charge or charge for labor, material, and supplies
(i) which is being contested in good faith by appropriate proceedings diligently
pursued, and for which adequate reserves in accordance with GAAP have been
established and (ii) if the failure to pay the same would not result in a Lien
on the Property of the Borrower or a Subsidiary of the Borrower other than a
Permitted Lien.

        Section 9.5 Insurance.

               (a) The Borrower will, and will cause each of its Subsidiaries
        to, keep insured by financially sound and reputable insurers all
        Property of a character usually insured by responsible businesses
        engaged in the same or a similar business similarly situated against
        loss or damage of the kinds and in the amounts customarily insured
        against by such corporations or entities and carry such other insurance
        as is usually carried by such businesses, provided that in any event the
        Borrower and each of its Subsidiaries (as appropriate) will maintain:

                      (i) Property Insurance. Insurance against loss or damage
               covering substantially all of the tangible real and personal
               Property and improvements of the Borrower and each of its
               Subsidiaries by reason of any Peril (as defined below) in such
               amounts (subject to any deductibles as shall be reasonably
               satisfactory to the Agent) as shall be reasonable and customary
               and sufficient to avoid the insured named therein from becoming a
               co-insurer of any loss under such policy, but in any event in
               such amounts reasonably acceptable to the Agent and as are
               reasonably available as determined by the independent insurance
               broker of the Borrower or its applicable Subsidiary;

                      (ii) Automobile Liability Insurance for Bodily Injury and
               Property Damage. Insurance in respect of all vehicles (whether
               owned, hired, or rented by the Borrower or any of its
               Subsidiaries) at any time located at, or used in connection with,
               their respective Properties or operations against liabilities for
               bodily injury and Property damage in such amounts as are then
               customary for vehicles used in

                                    Page 49
<PAGE>   56

               connection with similar Properties and businesses, but in any
               event to the extent required by applicable law;

                      (iii) Comprehensive General Liability Insurance. Insurance
               against claims for bodily injury, death, or Property damage
               occurring on, in or about the Property (and adjoining streets,
               sidewalks, and waterways) of the Borrower or any of its
               Subsidiaries, in such amounts as are then customary for Property
               similar in use in the jurisdictions where such Properties are
               located; and

                      (iv) Worker's Compensation Insurance. Worker's
               compensation insurance (including, without limitation, employers'
               liability insurance) to the extent required by applicable law,
               which may be self-insurance to the extent permitted by applicable
               law.

        Such insurance shall be written by financially responsible companies
        selected by the applicable Person and having an A.M. Best Rating of "A-"
        or better and being in a financial size category of "VI" or larger, or
        by other companies reasonably acceptable to the Agent. For purposes
        hereof, the term "Peril" shall mean, collectively, fire, lightning,
        flood (to the extent required by applicable law), windstorm, hail,
        explosion, riot and civil commotion, vandalism and malicious mischief,
        damage from aircraft, vehicles and smoke, and other perils covered by
        the "all-risk" endorsement then in use in the jurisdictions where the
        Properties of the Borrower and its Subsidiaries are located.

               (b) If a Default shall have occurred and be continuing, the
        Borrower will, and will cause each of its Subsidiaries to, cause all
        proceeds of insurance paid on account of the loss of or damage to any
        Property of the Borrower or any of its Subsidiaries and all awards of
        compensation for any Property of the Borrower or any of its Subsidiaries
        taken by condemnation or eminent domain to be paid directly to the Agent
        to be applied against the Obligations.

        Section 9.6 Inspection Rights. The Borrower will, and will cause each of
its Subsidiaries to, permit representatives and agents of the Agent and each
Lender, during normal business hours and upon reasonable notice to the Borrower,
to examine, copy, and make extracts from the Borrower's or any of such
Subsidiaries' books and records, to visit and inspect the Borrower's or any of
such Subsidiaries' Properties and to discuss the Borrower's or any of such
Subsidiaries's business, operations, and financial condition with its officers
and independent certified public accountants. The Borrower will, and will cause
each of its Subsidiaries to, authorize its accountants in writing (with a copy
to the Agent) to comply with this Section. The Agent or its representatives may,
at any time and from time to time at the Borrower's expense, conduct field exams
for such purposes as the Agent or the Required Lenders may reasonably request.

        Section 9.7 Keeping Books and Records. The Borrower will, and will cause
each of its Subsidiaries to, maintain proper books of record and account in
which full, true, and correct entries in conformity with GAAP shall be made of
all dealings and transactions in relation to its business and activities.

                                    Page 50
<PAGE>   57

        Section 9.8 Compliance with Laws. The Borrower will, and will cause each
of its Subsidiaries to, comply in all material respects with all applicable laws
(including, without limitation, all Environmental Laws, ERISA, the Code,
Regulation U, and Regulations T and X of the Board of Governors of the Federal
Reserve System), rules, regulations, orders, and decrees of a material nature of
any Governmental Authority or arbitrator other than any such laws, rules,
regulations, orders, and decrees contested by appropriate actions or proceedings
diligently pursued, if adequate reserves in conformity with GAAP and
satisfactory to the Agent are established with respect thereto and except for
violations which could not be expected to have a Material Adverse Effect.

        Section 9.9 Compliance with Agreements. The Borrower will, and will
cause each of its Subsidiaries to, comply with all agreements, contracts, and
instruments binding on it or affecting its properties or business other than
such noncompliance which could not reasonably be expected to have a Material
Adverse Effect.

        Section 9.10 Further Assurances.

               (a) Further Assurance. The Borrower will, and will cause each of
        its Subsidiaries to, execute and/or deliver pursuant to this clause (a)
        such further documentation and take such further action as may be
        reasonably requested by the Required Lenders to carry out the provisions
        and purposes of the Loan Documents.

               (b) Subsidiary Joinder. The Borrower shall, and shall cause each
        domestic Subsidiary of the Borrower to, execute and deliver to the Agent
        such documentation, including, without limitation, a Joinder Agreement,
        as the Agent may require to cause each such domestic Subsidiary to
        become a party to the Subsidiary Guaranty as required by Article 6.

        Section 9.11 ERISA. With respect to each Plan, the Borrower will, and
will cause each of its Subsidiaries to, comply with all minimum funding
requirements and all other material requirements of ERISA so as not to give rise
to any liability in excess of $1,000,000.

                                   ARTICLE 10

                               Negative Covenants

        The Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Lender has any Commitment hereunder, the
Borrower will perform and observe the following covenants:

        Section 10.1 Debt. The Borrower will not, nor will it permit any
Subsidiary of the Borrower to, incur, create, assume, or permit to exist any
Debt, except:

               (a) Debt to the Lenders pursuant to the Loan Documents;

                                    Page 51
<PAGE>   58

               (b) Debt described on Schedule 8.9, and any extensions, renewals,
        or refinancings of such existing Debt so long as (i) the principal
        amount of such Debt after such renewal, extension, or refinancing shall
        not exceed the principal amount of such Debt which was outstanding
        immediately prior to such renewal, extension, or refinancing and (ii)
        such Debt shall not be secured by any assets other than assets securing
        such Debt, if any, prior to such renewal, extension, or refinancing;

               (c) Debt of a Subsidiary Guarantor owed to the Borrower or
        another Subsidiary Guarantor; provided that such Debt must according to
        its terms be fully subordinate in all respects to any of such Subsidiary
        Guarantor's indebtedness, liabilities, or obligations to the Agent and
        the Lenders pursuant to any Loan Document;

               (d) Guaranties and other Debt incurred in the ordinary course of
        business with respect to surety and appeal bonds, performance and
        return-of-money bonds, banker's acceptances, and other similar
        obligations including those of the type otherwise described in Section
        10.2(f);

               (e) Debt of the Borrower or any Subsidiary of the Borrower
        constituting purchase money Debt (including, without limitation, Capital
        Lease Obligations) and secured by purchase money Liens permitted by
        Section 10.2(g), such Debt, in the aggregate, not to exceed at any time
        an amount equal to five percent (5.0%) of the Borrower's Tangible Net
        Worth;

               (f) Debt of the Borrower or any Subsidiary of the Borrower of the
        type described in clause (l) of the definition of Debt, such Debt, in
        aggregate principal or principal equivalent amount, not to exceed at any
        time an amount equal to twenty percent (20.0%) of the Borrower's
        Tangible Net Worth.

               (g) Debt constituting obligations to reimburse worker's
        compensation insurance companies for claims paid by such companies on
        behalf of the Borrower or any Subsidiary of the Borrower in accordance
        with the policies issued to the Borrower or any such Subsidiary;

               (h) Debt secured by the Liens permitted by Section 10.2(d) and
        Section 10.2(e);

               (i) unsecured Debt arising under, created by, and consisting of
        Hedge Agreements; provided, (i) such Hedge Agreements shall have been
        entered into for the purpose of hedging actual risk and not for
        speculative purposes and (ii) that each counterparty to such Hedge
        Agreement shall be a Lender or shall be rated at least AA- by Standard
        and Poor's Rating Service or Aa3 by Moody's Investors Service, Inc.;

               (j) Debt arising from endorsement of negotiable instruments for
        deposit or collection or similar transactions in the ordinary course of
        business of the Borrower or a Subsidiary of the Borrower;

                                    Page 52
<PAGE>   59

               (k) Debt of a Subsidiary of the Borrower acquired after the
        Closing Date and Debt of a Person merged or consolidated with or into
        the Borrower or a Subsidiary of the Borrower after the Closing Date, (i)
        which Debt in each case exists at the time of such acquisition, merger,
        or consolidation, (ii) which Debt was not created or incurred in
        contemplation of such acquisition, merger, or consolidation, (iii) where
        such acquisition, merger, or consolidation is not prohibited under this
        Agreement, (iv) where the aggregate principal of all such Debt at any
        time outstanding does not exceed an amount equal to ten percent (10.0%)
        of the Borrower's Tangible Net Worth, and (v) Guarantees of Debt
        permitted under this Section 10.1;

               (l) In addition to the Debt described in the foregoing clauses
        (a) through (k), Debt which when combined with the Debt described in
        clause (k) preceding does not exceed twelve and one-half percent (12.5%)
        of the Borrower's Tangible Net Worth in aggregate principal amount at
        any time outstanding; and

               (m) Debt consisting of letters of credit and reimbursement
        obligations therefor where the aggregate face amount of such letters of
        credit do not at any time exceed the sum of (i) the aggregate amount of
        the Commitments then in effect plus (ii) $20,000,000; provided that Debt
        permitted hereunder which consists of standby letters of credit and
        reimbursement obligations therefor shall not at any time exceed an
        aggregate face amount of $20,000,000.

        Section 10.2 Limitation on Liens and Restrictions on Subsidiaries. The
Borrower will not, nor will it permit any Subsidiary of the Borrower to, incur,
create, assume, or permit to exist any Lien upon any of its property, assets, or
revenues, whether now owned or hereafter acquired, except the following:

               (a) existing Liens described on Schedule 10.2, and any
        extensions, renewals, or refinancings of the Debt secured by such Liens
        as permitted under Section 10.1(b); provided that (i) no such Lien is
        expanded to cover any additional Property (other than after acquired
        title in or on such Property and proceeds of the existing collateral)
        after the Closing Date and (ii) no such Lien is spread to secure any
        additional Debt after the Closing Date;

               (b) Liens in favor of the Agent, for the benefit of the Agent and
        the Lenders;

               (c) encumbrances consisting of easements, zoning restrictions, or
        other restrictions on the use of real Property that do not (individually
        or in the aggregate) materially detract from the value of the real
        Property encumbered thereby or materially impair the ability of the
        Borrower or such Subsidiary to use such real Property in its business;

               (d) Liens for taxes, assessments, or other governmental charges
        (but excluding Environmental Liens or Liens under ERISA) that are not
        delinquent or which are being contested in good faith and for which
        adequate reserves have been established in accordance with GAAP;

                                    Page 53
<PAGE>   60

               (e) contractual or statutory Liens of mechanics, materialmen,
        warehousemen, carriers, landlords, or other similar Liens securing
        obligations that are not overdue or are being contested in good faith by
        appropriate proceedings diligently pursued and for which adequate
        reserves have been established in accordance with GAAP and are incurred
        in the ordinary course of business;

               (f) Liens resulting from deposits to secure payments of worker's
        compensation, unemployment insurance, or other social security programs
        or to secure the performance of tenders, statutory obligations, leases,
        insurance contracts, surety and appeal bonds, bids, and other contracts
        incurred in the ordinary course of business (other than for payment of
        Debt);

               (g) Liens for purchase money obligations and Liens securing
        Capital Lease Obligations; provided that (i) the Debt secured by any
        such Lien is permitted under Section 10.1(e) and (ii) any such Lien
        encumbers only the Property so purchased or leased and the products,
        proceeds (including insurance proceeds), accessions, replacements,
        substitutions, and improvements thereto;

               (h) any attachment or judgment Lien not constituting an Event of
        Default;

               (i) any interest or title of a licensor, lessor, or sublessor
        under any license or lease and any interest or title of a licensee,
        lessee, or sublessee under any license, cross-license, or lease in any
        event entered into in the ordinary course of business and not otherwise
        prohibited by the terms of this Agreement;

               (j) Liens against equipment arising from precautionary UCC
        financing statement filings regarding operating leases entered into by
        such Person in the ordinary course of business;

               (k) nonconsensual Liens in favor of banking institutions arising
        as a matter of law and encumbering the deposits (including the right of
        set-off) held by such banking institutions in the ordinary course of
        business; and

               (l) Liens (including statutory and common law liens) in or
        against goods, documents, or instruments, including proceeds (including
        insurance proceeds), products, accessions, substitutions, and
        replacements related thereto, related to or arising out of commercial or
        documentary letter of credit transactions, to the extent that such
        letter of credit transactions constitute permitted Debt under Section
        10.1(m).

        Section 10.3 Mergers, Etc. The Borrower will not, nor will it permit any
Subsidiary of the Borrower to, become a party to a merger or consolidation or
purchase or otherwise acquire all or a substantial part of the business or
Property of any Person or all or a substantial part of the business or Property
of a division or branch of a Person or a majority interest in the Capital Stock
of any Person, or wind-up, dissolve, or liquidate itself; provided that
notwithstanding the foregoing or any

                                    Page 54
<PAGE>   61

other provision of this Agreement as long as no Default exists or would result
therefrom and provided the Borrower gives the Agent and the Lenders prior
written notice:

               (a) a Subsidiary of the Borrower may wind-up, dissolve, or
        liquidate if its Property is transferred to the Borrower or a
        Wholly-Owned Subsidiary;

               (b) any Subsidiary of the Borrower, may merge or consolidate with
        the Borrower (provided the Borrower is the surviving entity) or a
        Wholly-Owned Subsidiary (provided the Wholly-Owned Subsidiary is the
        surviving entity);

               (c) the Borrower or any Wholly-Owned Subsidiary may make
        Permitted Acquisitions; and

               (d) to the extent the Required Lenders agree in writing, the
        Borrower or any Wholly- Owned Subsidiary may make additional
        acquisitions not included in Permitted Acquisitions.

        Section 10.4 Restricted Payments. The Borrower will not, nor will it
permit any Subsidiary of the Borrower to, (a) make any prepayment of any Debt
other than (i) the Obligations, (ii) any Debt owed to the Borrower or a
Subsidiary of the Borrower, or (iii) regularly scheduled payments of principal
and interest under the Note Agreement or (b) directly or indirectly declare,
order, pay, make, or set apart any sum for (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of such Person now or hereafter outstanding, (ii) any redemption,
conversion, exchange, retirement, sinking fund, or similar payment, purchase, or
other acquisition for value, direct or indirect, of any shares of any class of
Capital Stock of any such Person now or hereafter outstanding, or (iii) any
payment made to retire, or to obtain the surrender of, any outstanding warrants,
options, or other rights to acquire shares of any class of Capital Stock of any
such Person now or hereafter outstanding except:

               (w) Subsidiaries of the Borrower may make, declare, and pay
        dividends and make other distributions with respect to their Capital
        Stock to the Borrower or Wholly-Owned Subsidiaries;

               (x) the Borrower may declare and pay dividends on any class of
        its Capital Stock payable solely in shares of Capital Stock of the
        Borrower;

               (y) the Borrower may repurchase its Capital Stock; provided that
        (A) the amount of all such repurchases shall not at any time exceed an
        amount equal to the sum of $20,000,000, plus an amount equal to ten
        percent (10.0%) of the Borrower's Net Income during the period from and
        including August 1, 2000 through and including the end of the Fiscal
        Quarter ending immediately prior to the date of such repurchase, (B) no
        Default shall be in existence at the time of such repurchase, and (C)
        proceeds of the Loan shall not be used in connection with such
        repurchase; and

                                    Page 55
<PAGE>   62

               (z) the Borrower may acquire or redeem Capital Stock of the
        Borrower held by any former officer, director, or employee of the
        Borrower or beneficiaries of any such Person's estate or trusts created
        by or for the benefit of any such Person or their beneficiaries.

        Section 10.5 Investments. The Borrower will not, nor will it permit any
Subsidiary of the Borrower to, make or permit to remain outstanding any advance,
loan, extension of credit, or capital contribution to or investment in any
Person, or purchase or own any stocks, bonds, notes, debentures, or other
Securities of any Person, or be or become a joint venturer with or partner of
any Person (all the foregoing, herein "Investments"), except:

               (a) Permitted Acquisitions;

               (b) the Borrower or any Wholly-Owned Subsidiary may make
        Investments in domestic Subsidiaries;

               (c) the Borrower may make Investments in foreign Subsidiaries,
        (subject to the requirements of Section 10.1 and Section 10.3); provided
        that (i) the aggregate amount of all Investments in foreign Subsidiaries
        shall not exceed an amount equal to ten percent (10.0%) of the
        Borrower's assets at the time of making any such Investment and (ii)
        such Investments in foreign Subsidiaries which constitute advances,
        loans, extensions of credit, bonds, notes, or debentures owed to the
        Borrower shall at all times be subordinate in all respects to the
        Obligations or any indebtedness, liability, or obligation of such
        foreign Subsidiary to the Agent and the Lenders (if any) under any Loan
        Document and must otherwise be in compliance with Section 10.1 and
        Section 10.3;

               (d) the Borrower may, up to an aggregate amount at any time
        outstanding of not more than $10,000,000, make equity investments in
        Affiliates and other Persons and related businesses, excluding
        Subsidiaries of the Borrower;

               (e) readily marketable direct obligations of the U.S. or any
        agency thereof with maturities of one year or less from the date of
        acquisition;

               (f) fully insured certificates of deposit with maturities of one
        year or less from the date of acquisition issued by any commercial bank
        operating in the U.S. having capital and surplus in excess of
        $250,000,000 and repurchase and reverse repurchase obligations entered
        into with any such commercial bank;

               (g) commercial paper of a domestic issuer and equity or debt
        Securities of a domestic issuer if at the time of purchase such paper or
        debt Securities of such issuer is rated in one of the two highest rating
        categories of Standard and Poor's Rating Service or Moody's Investors
        Service, Inc. or any successor thereto and shares of any mutual fund
        company substantially all the assets of which consist of cash and the
        Investments of the type described in clause (d), clause (e), and this
        clause (g);

                                    Page 56
<PAGE>   63

               (h) Investments received in connection with the settlement of
        delinquent obligations of, and disputes with, customers and suppliers,
        and other trade debtors arising in the ordinary course of business;

               (i) extensions of trade credit in the ordinary course of
        business;

               (j) the Borrower and any Wholly-Owned Subsidiary may make loans
        and advances to officers, directors, and employees in the ordinary
        course of business and consistent with past practices up to an aggregate
        amount at any time outstanding of not more than $2,500,000;

               (k) Investments existing on the Closing Date and listed on
        Schedule 10.5; and

               (l) Investments consisting of purchases of debt Securities or
        other extensions of credit by the Borrower or any Subsidiary of the
        Borrower to the lessor/purchaser in connection with Permitted
        Sale-Leasebacks.

The amount of Investments pursuant to clause (c) preceding shall be the amount
of all cash or other Property invested, loaned, advanced, or otherwise
contributed to all foreign Subsidiaries of the Borrower whether such Investments
are made as a single transaction or as one of a series of transactions, and such
amount shall be determined at the time of making of each Investment, or portion
thereof if in connection with a series of transactions.

        Section 10.6 Limitation on Issuance of Capital Stock of Subsidiaries.
The Borrower will not permit any Subsidiary of the Borrower to, at any time
issue, sell, assign, or otherwise dispose of, except to the Borrower or a
Wholly-Owned Subsidiary or in connection with a Permitted Acquisition, (a) any
Capital Stock of a Subsidiary of the Borrower, (b) any Securities exchangeable
for or convertible into or carrying any rights to acquire any Capital Stock of a
Subsidiary of the Borrower, or (c) any option, warrant, or other right to
acquire any Capital Stock of a Subsidiary of the Borrower.

        Section 10.7 Transactions with Affiliates. The Borrower will not, nor
will it permit any Subsidiary of the Borrower to, enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate (as used in this Section 10.7
the term "Affiliate" shall exclude any Subsidiary of the Borrower) of the
Borrower or such Subsidiary of the Borrower, except in the ordinary course of
and pursuant to the reasonable requirements of the Borrower's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Borrower or such Subsidiary than would be obtained in a comparable
arms-length transaction with a Person not an Affiliate of the Borrower or such
Subsidiary.

        Section 10.8 Disposition of Assets. The Borrower will not, nor will it
permit any Subsidiary of the Borrower to, sell, lease, assign, transfer, or
otherwise voluntarily dispose of any of its Property other than (a) sales of
inventory in the ordinary course of business, (b) Asset Dispositions in
connection with the closing of any retail location of the Borrower or any
Subsidiary of the Borrower; provided that with respect to this Section 10.8,
such closings may not in any Fiscal

                                    Page 57
<PAGE>   64

Year exceed eight percent (8.0%) of the Borrower's and its Subsidiaries' retail
locations at the beginning of such Fiscal Year, and (c) other Asset Dispositions
not in excess of $25,000,000 in any Fiscal Year.

        Section 10.9 Lines of Business. The Borrower will not, nor will it
permit any Subsidiary of the Borrower to, engage in any line or lines of
business activity other than the business activities in which they are engaged
on the Closing Date or a business reasonably related or complementary thereto.

        Section 10.10 Limitations on Restrictions Affecting the Borrower and its
Subsidiaries. Neither the Borrower nor any Subsidiary of the Borrower shall
enter into or assume any agreement (other than the Loan Documents) prohibiting
the creation or assumption of any Lien upon its Properties, whether now owned or
hereafter acquired, other than pursuant to non-assignment provisions of a
Permitted Lien, operating lease, or of Debt of the type described in clause (l)
of the definition of Debt and which are restricted solely to the Property which
is the subject of such Permitted Lien or such lease transaction and which does
not prohibit the Borrower or any Subsidiary of the Borrower from granting Liens
to the Agent or any Lender as collateral for the Obligations. Except as provided
herein, the Borrower will not, nor will it permit any Subsidiary of the Borrower
to, directly or indirectly create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of the Borrower or any Subsidiary of the Borrower to (a) pay dividends
or make any other distribution on any of its Capital Stock, (b) pay any Debt
owed to the Borrower or any Subsidiary of the Borrower, (c) make loans or
advances to the Borrower or any Subsidiary of the Borrower, (d) transfer any
Property of the Borrower or any Subsidiary of the Borrower to any other Person,
except pursuant to non-assignment provisions of Permitted Liens, leases, and
licenses entered into in the ordinary course of business, or (e) make any
prepayment of any of the Obligations.

        Section 10.11 Environmental Protection. The Borrower will not, nor will
it permit any Subsidiary of the Borrower to, (a) use (or permit any tenant to
use) any of its Properties for the handling, processing, storage,
transportation, or disposal of any Hazardous Material except in compliance with
applicable Environmental Laws, (b) generate any Hazardous Material except in
compliance with applicable Environmental Laws, (c) conduct any activity that is
likely to cause a Release or threatened Release of any Hazardous Material in
violation of any Environmental Law, or (d) otherwise conduct any activity or use
any of its Properties in any manner, that in any material respect violates or is
likely to violate any Environmental Law or create any Environmental Liabilities
for which the Borrower or any Subsidiary of the Borrower would be responsible
that could be expected to have a Material Adverse Effect.

        Section 10.12 ERISA. The Borrower will not, nor will it permit any
Subsidiary of the Borrower to:

               (a) allow, or take (or permit any ERISA Affiliate to take) any
        action which would cause, any unfunded or unreserved liability for
        benefits under any Plan (exclusive of any Multiemployer Plan) in excess
        of $1,000,000 to exist or to be created; or

                                    Page 58
<PAGE>   65

               (b) with respect to any Multiemployer Plan, allow or take (or
        permit any ERISA Affiliate to take) any action which would cause any
        unfunded or unpaid liability by the Borrower or any ERISA Affiliate to
        any Multiemployer Plan in excess of $1,000,000 to exist or to be
        created, either individually as to any such Plan or in the aggregate as
        to all such Plans.

                                   ARTICLE 11

                               Financial Covenants

        The Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Lender has any Commitment hereunder, it
will perform and observe the following financial covenants:

        Section 11.1 Leverage Ratio. As of the end of each Fiscal Quarter, the
Borrower shall not permit the Leverage Ratio, calculated as of the Fiscal
Quarter ending July 30, 2000, and as of the end of each Fiscal Quarter
thereafter, for the preceding twelve (12) Fiscal Periods then ending, to exceed
the ratio set forth in the table following corresponding to such date.

<TABLE>
<CAPTION>
=======================================================================
                  Period                        Maximum Leverage Ratio
=======================================================================
<S>                                             <C>
From July 30, 2000 through and including             4.00 to 1.00
October 28, 2001
-----------------------------------------------------------------------
From February 3, 2002 through and                    3.75 to 1.00
including November 3, 2002
-----------------------------------------------------------------------
From February 2, 2003 and thereafter                 3.50 to 1.00
=======================================================================
</TABLE>

        Section 11.2 Fixed Charge Coverage Ratio. As of the end of each Fiscal
Quarter, the Borrower shall not permit the Fixed Charge Coverage Ratio,
calculated as of the Fiscal Quarter ending July 30, 2000, and as of the end of
each Fiscal Quarter thereafter, for the preceding four (4) Fiscal Quarter period
then ending, to be less than the ratio set forth in the table following
corresponding to such date.

<TABLE>
<CAPTION>
=======================================================================
                                                 Minimum Fixed Charge
                  Period                            Coverage Ratio
=======================================================================
<S>                                              <C>
From July 30, 2000 through and including             2.00 to 1.00
October 28, 2001
-----------------------------------------------------------------------
From February 3, 2002 through and                    2.10 to 1.00
including November 3, 2002
-----------------------------------------------------------------------
</TABLE>

                                    Page 59
<PAGE>   66

<TABLE>
<CAPTION>
=======================================================================
                                                 Minimum Fixed Charge
                  Period                            Coverage Ratio
=======================================================================
<S>                                              <C>
From February 2, 2003 through and                    2.25 to 1.00
including May 3, 2003
-----------------------------------------------------------------------
From August 3, 2003 and thereafter                   2.50 to 1.00
=======================================================================
</TABLE>

        Section 11.3 Minimum Tangible Net Worth. As of the end of each Fiscal
Quarter, the Borrower shall not permit its Tangible Net Worth to be less than
(a) $335,000,000, plus (b) seventy-five percent (75.0%) of the Borrower's
positive Net Income for each Fiscal Quarter completed after April 30, 2000, plus
(c) one hundred percent (100%) of any increase in Tangible Net Worth
attributable to issuance of equity Securities of the Borrower or any Subsidiary
of the Borrower after April 30, 2000.

        Section 11.4 Capital Expenditures. Beginning with the Fiscal Year ending
February 3, 2002, as of the end of each Fiscal Year, the aggregate amount of all
Capital Expenditures of the Borrower and its Subsidiaries for such Fiscal Year
shall not exceed eight and one-half percent (8.5%) of gross revenue of the
Borrower for such Fiscal Year, plus fifty percent (50.0%) of the amount by which
eight and one-half percent (8.5%) of gross revenue of the Borrower for the prior
Fiscal Year (provided that Capital Expenditures were subject to the terms of
this Section 11.4 during such prior Fiscal Year) exceeded Capital Expenditures
during such prior Fiscal Year.

                                   ARTICLE 12

                                     Default

        Section 12.1 Events of Default. Each of the following shall be deemed an
"Event of Default":

               (a) the Borrower shall fail to pay (i) when due any principal
        owing with respect to the Loan payable under any Loan Document or any
        part thereof; (ii) within three (3) Business Days of the date due any
        interest or fees payable under the Loan Documents or any part thereof;
        or (iii) within three (3) Business Days after the date the Borrower
        receives written notice of the failure to pay when due, any other
        Obligation or any part thereof, or any indebtedness, liability, or
        obligation due to any Lender under any Hedge Agreement;

               (b) any representation, warranty, or certification made or deemed
        made by the Borrower or any Subsidiary of the Borrower (or any of their
        respective officers) in any Loan Document or in any certificate, report,
        notice, or financial statement furnished at any time in connection with
        any Loan Document shall be false, misleading, or erroneous in any
        material respect when made or deemed to have been made;

                                    Page 60
<PAGE>   67

               (c) the Borrower or any Subsidiary of the Borrower shall fail to
        perform, observe, or comply with any covenant, agreement, or term
        contained in Section 2.4, Section 4.4(a), Section 9.1, Section 9.2,
        Section 9.6, Section 9.10, Article 10 (other than related to
        non-consensual Liens under Section 10.2), or Article 11;

               (d) the Borrower or any Subsidiary of the Borrower shall fail to
        perform, observe, or comply with any other agreement or term contained
        in any Loan Document (other than as described in Section 12.1(a),
        Section 12.1(b), or Section 12.1(c)) and (i) such failure shall continue
        for a period of thirty (30) days after the earlier of (A) the date the
        Agent provides the Borrower with notice thereof or (B) the date the
        Borrower should have notified the Agent thereof in accordance with
        Section 9.1(f) or (ii) as otherwise specifically provided by any other
        Loan Document;

               (e) the Borrower or any Subsidiary of the Borrower shall (i)
        apply for or consent to the appointment of, or the taking of possession
        by, a receiver, custodian, trustee, examiner, liquidator, or the like of
        itself or of all or a substantial part of its Property, (ii) make a
        general assignment for the benefit of its creditors, (iii) commence a
        voluntary case under the United States Bankruptcy Code (as now or
        hereafter in effect, the "Bankruptcy Code"), (iv) institute any
        proceeding or file a petition seeking to take advantage of any other law
        relating to bankruptcy, insolvency, reorganization, liquidation,
        dissolution, winding-up, or composition or readjustment of debts, (v)
        fail to controvert in a timely and appropriate manner, or acquiesce in
        writing to, any petition filed against it in an involuntary case under
        the Bankruptcy Code, (vi) admit in writing its inability to, or be
        generally unable to pay its debts as such debts become due, or (vii)
        take any corporate action for the purpose of effecting any of the
        foregoing;

               (f) (i) a proceeding or case shall be commenced, without the
        application, approval, or consent of the Borrower or any Subsidiary of
        the Borrower in any court of competent jurisdiction, seeking (A) its
        reorganization, liquidation, dissolution, arrangement, or winding-up, or
        the composition or readjustment of its debts, (B) the appointment of a
        receiver, custodian, trustee, examiner, liquidator, or the like of the
        Borrower or such Subsidiary or of all or any substantial part of its
        Property, or (C) similar relief in respect of the Borrower or such
        Subsidiary under any law relating to bankruptcy, insolvency,
        reorganization, winding-up, or composition or readjustment of debts, and
        such proceeding or case shall continue undismissed, or an order,
        judgment, or decree approving or ordering any of the foregoing shall be
        entered and continue unstayed and in effect, for a period of sixty (60)
        or more days or (ii) an order for relief against the Borrower or any
        Subsidiary shall be entered in an involuntary case under the Bankruptcy
        Code;

               (g) the Borrower or any Subsidiary of the Borrower shall fail
        within a period of thirty (30) days after the commencement thereof to
        discharge or obtain a stay of any attachment, sequestration, forfeiture,
        or similar proceeding or proceedings involving an aggregate amount in
        excess of $10,000,000 against any of its assets or Properties;

                                    Page 61
<PAGE>   68

               (h) A final judgment or judgments for the payment of money in
        excess of $10,000,000 in the aggregate (to the extent not paid or fully
        covered by insurance acknowledged by a carrier reasonably acceptable to
        the Agent) shall be rendered by a court or courts against the Borrower
        or any Subsidiary of the Borrower and the same shall not be satisfied,
        discharged, or dismissed (or provision shall not be made for such
        satisfaction, discharge, or dismissal), or a stay of execution or other
        stay of enforcement thereof shall not be procured, within sixty (60)
        days from the date of entry thereof and the Borrower or any Subsidiary
        of the Borrower, as applicable, shall not, within said period of sixty
        (60) days, or such longer period during which execution of the same
        shall have been stayed, appeal therefrom and cause the execution thereof
        to be stayed during such appeal;

               (i) (i) the Borrower or any Subsidiary of the Borrower shall fail
        to pay when due any principal of or interest on any Debt (other than the
        Obligations) beyond the period of grace (if any) if the aggregate
        principal amount of the affected Debt equals or exceeds $10,000,000, or
        the maturity of any such Debt shall have been accelerated or shall have
        been required to be prepaid prior to the stated maturity thereof, (ii)
        any event shall have occurred with respect to any Debt in the aggregate
        principal amount equal to or in excess of $10,000,000 that permits the
        holder or holders of such Debt or any Person acting on behalf of such
        holder or holders to accelerate the maturity thereof or require any
        prepayment thereof, (iii) any event of default shall have occurred under
        that certain Letter of Credit Agreement, as amended and as such
        agreement may be further amended, restated, or otherwise modified, dated
        as of June 1, 1997, between the Borrower and Bank of America National
        Trust and Savings Association (now known as Bank of America, National
        Association), or (iv) any event of default shall have occurred under the
        Note Agreement;

               (j) this Agreement or any other Loan Document shall cease to be
        in full force and effect or shall be declared null and void or the
        validity or enforceability thereof shall be contested or challenged by
        the Borrower or any Subsidiary, or the Borrower or any Subsidiary shall
        deny that it has any further liability or obligation under any of the
        Loan Documents;

               (k) Any of the following events shall occur or exist with respect
        to the Borrower, any Subsidiary of the Borrower, or any ERISA Affiliate
        and in each case, such event or condition, together with all other such
        events or conditions, if any, have subjected or could in the reasonable
        opinion of the Agent or the Required Lenders subject the Borrower or any
        Subsidiary of the Borrower (or any combination thereof) to any tax,
        penalty, or other liability to a Plan, a Multiemployer Plan, the PBGC,
        or otherwise (or any combination thereof) which in the aggregate could
        reasonably be expected to exceed $1,000,000: (i) any Prohibited
        Transaction involving any Plan; (ii) any Reportable Event with respect
        to any Plan; (iii) the filing under Section 4041 of ERISA of a notice of
        intent to terminate any Plan or the termination of any Plan; (iv) any
        event or circumstance that could reasonably be expected to constitute
        grounds entitling the PBGC to institute proceedings under Section 4042
        of ERISA for the termination of, or for the appointment of a trustee to
        administer, any Plan, or the institution by the PBGC of any such
        proceedings; or (v) complete or partial withdrawal

                                    Page 62
<PAGE>   69

        under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
        reorganization, insolvency, or termination of any Multiemployer Plan;

               (l) The occurrence of any event or condition which constitutes a
        Material Adverse Effect and thirty (30) days shall have passed since
        written notification thereof to the Borrower by the Agent (therein
        identifying such event or condition) without such event or condition
        having been remedied, cured, or waived; or

               (m) The occurrence of a Change of Control.

        Section 12.2 Remedies. If any Event of Default shall occur and be
continuing, the Agent may (and if directed by the Required Lenders, shall) do
any one or more of the following:

               (a) Acceleration. By notice to the Borrower, declare all
        outstanding principal of and accrued and unpaid interest on the Notes
        and all other amounts payable by the Borrower under the Loan Documents
        immediately due and payable, and the same shall thereupon become
        immediately due and payable, without further notice, demand,
        presentment, notice of dishonor, notice of acceleration, notice of
        intent to accelerate, protest, or other formalities of any kind, all of
        which are hereby expressly waived by the Borrower except as where
        required by the specific terms of this Agreement or the other Loan
        Documents;

               (b) Termination of Commitments. Terminate the Commitments without
        notice to the Borrower or any other Person;

               (c) Judgment. Reduce any claim to judgment; and

               (d) Rights. Exercise any and all rights and remedies afforded by
        the laws of the State of California, or any other jurisdiction governing
        any of the Loan Documents, by equity, or otherwise;

provided, however, that, upon the occurrence of an Event of Default under
Section 12.1(e) or Section 12.1(f) with respect to the Borrower or any
Guarantor, the Commitments of all of the Lenders shall automatically terminate
and the outstanding principal of and accrued and unpaid interest on the Notes
and all other amounts payable by the Borrower or any other party under the Loan
Documents shall thereupon become immediately due and payable without notice,
demand, presentment, notice of dishonor, notice of acceleration, notice of
intent to accelerate, protest, or other formalities of any kind, all of which
are hereby expressly waived by the Borrower.

        Section 12.3 Performance by the Agent. Upon the occurrence of a Default,
if the Borrower or any Guarantor shall fail to perform any agreement in
accordance with the terms of the Loan Documents, the Agent may, and at the
direction of the Required Lenders shall, perform or attempt to perform such
agreement on behalf of the Borrower or such Guarantor, as applicable. In such
event, at the request of the Agent, the Borrower shall promptly pay any amount
expended by the Agent or the Lenders in connection with such performance or
attempted performance, to the Agent at the Principal Office together with
interest thereon at the Default Rate applicable to the Base Rate

                                    Page 63
<PAGE>   70

Balance from and including the date of such expenditure to but excluding the
date such expenditure is paid in full. Notwithstanding the foregoing, it is
expressly agreed that neither the Agent, the Arranger, nor any Lender shall have
any liability or responsibility for the performance of any obligation of the
Borrower or any Guarantor under any Loan Document.

        Section 12.4 Set-off. If an Event of Default shall have occurred and be
continuing, each Lender is hereby authorized at any time and from time to time,
without notice to the Borrower or any other Person (any such notice being hereby
expressly waived), 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 to or for the credit or the
account of the Borrower against any and all of the Obligations now or hereafter
existing under any Loan Document, irrespective of whether or not the Agent or
such Lender shall have made any demand under such Loan Documents and although
the Obligations may be unmatured. Each Lender agrees promptly to notify the
Borrower (with a copy to the Agent) 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 and remedies of each Lender hereunder
are in addition to other rights and remedies (including, without limitation,
other rights of set-off) which such Lender may have.

        Section 12.5 Continuance of Default. For purposes of all Loan Documents,
a Default shall be deemed to have continued and exist until the Agent shall have
actually received evidence satisfactory to the Agent that such Default shall
have been remedied.

                                   ARTICLE 13

                                    The Agent

        Section 13.1 Appointment and Authorization of the Agent. Each Lender
hereby irrevocably (subject to Section 13.9) appoints, designates and authorizes
the Agent to take such action on its behalf under the provisions of this
Agreement and each other Loan Document and to exercise such powers and perform
such duties as are expressly delegated to it by the terms of this Agreement or
any other Loan Document, together with such powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary contained elsewhere in
this Agreement or in any other Loan Document, the Agent shall not have any
duties or responsibilities, except those expressly set forth herein, nor shall
the Agent have or be deemed to have any fiduciary relationship with any Lender
or participant, and no implied covenants, functions, responsibilities, duties,
obligations, or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Agent. Without limiting the generality
of the foregoing sentence, the use of the term "agent" in this Agreement with
reference to the Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.

        Section 13.2 Delegation of Duties. The Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees, or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent

                                    Page 64
<PAGE>   71

shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects in the absence of gross negligence or willful
misconduct.

        Section 13.3 Liability of the Agent. No Agent-Related Person shall (a)
be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct
in connection with its duties expressly set forth herein) or (b) be responsible
in any manner to any Lender or participant for any recital, statement,
representation, or warranty made by the Borrower or any other party to any Loan
Document, or any officer thereof, contained in this Agreement or in any other
Loan Document, or in any certificate, report, statement, or other document
referred to or provided for in, or received by the Agent under or in connection
with, this Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability, or sufficiency of this Agreement or any other Loan
Document, or for any failure of the Borrower or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Lender or participant to ascertain
or to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books, or records of the Borrower or any Subsidiary or
Affiliate thereof.

        Section 13.4 Reliance by the Agent.

               (a) The Agent shall be entitled to rely, and shall be fully
        protected in relying, upon any writing, communication, signature,
        resolution, representation, notice, consent, certificate, affidavit,
        letter, telegram, facsimile, telex, or telephone message, statement, or
        other document or conversation believed by it to be genuine and correct
        and to have been signed, sent, or made by the proper Person or Persons,
        and upon advice and statements of legal counsel (including counsel to
        the Borrower or any other Person party to any Loan Document),
        independent accountants, and other experts selected by the Agent. The
        Agent shall be fully justified in failing or refusing to take any action
        under any Loan Document unless it shall first receive such advice or
        concurrence of the Required Lenders as the Agent deems appropriate and,
        if the Agent so requests, it shall first be indemnified to its
        satisfaction by the Lenders against any and all liability and expense
        which may be incurred by the Agent by reason of taking or continuing to
        take any such action. The Agent shall in all cases be fully protected in
        acting, or in refraining from acting, under this Agreement or any other
        Loan Document in accordance with a request or consent of the Required
        Lenders or all Lenders, if required hereunder, and such request and any
        action taken or failure to act pursuant thereto shall be binding upon
        all of the Lenders and participants. Where this Agreement expressly
        permits or prohibits an action unless the Required Lenders otherwise
        determine, the Agent shall, and in all other instances, the Agent may,
        but shall not be required to, initiate any solicitation for the consent
        or a vote of the Lenders.

               (b) For purposes of determining compliance with the conditions
        specified in Article 7, each Lender and participant shall be deemed to
        have consented to, approved or accepted, or to be satisfied with, each
        document or other matter either sent by the Agent to

                                    Page 65
<PAGE>   72

        each Lender for consent, approval, acceptance, or satisfaction, or
        required thereunder to be consented to or approved by or acceptable or
        satisfactory to a Lender.

        Section 13.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest, and fees
required to be paid to the Agent for the account of the Lenders, unless the
Agent shall have received written notice from a Lender or the Borrower referring
to this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default". The Agent will notify the Lenders of its
receipt of any such notice. The Agent shall take such action with respect to
such Default or Event of Default as may be directed by the Required Lenders;
provided, however, that unless and until the Agent has received any such
direction, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the Lenders.

        Section 13.6 Credit Decision; Disclosure of Information by the Agent.
Each Lender and participant acknowledges that no Agent-Related Person has made
any representation or warranty to such Lender or participant, and that no act by
the Agent hereinafter taken, including any consent to and acceptance of any
assignment or review of the affairs of the Borrower or any of its Subsidiaries
or Affiliates, shall be deemed to constitute any representation or warranty by
any Agent-Related Person to any Lender or participant as to any matter,
including whether any Agent-Related Person has disclosed material information in
its possession. Each Lender, including any Lender by assignment, and each
participant represents to the Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition, and creditworthiness of the Borrower and its Subsidiaries and
Affiliates, and all applicable bank regulatory laws relating to the transactions
contemplated hereby, and each such Lender or participant has made its own
decision to enter into this Agreement and to extend credit to the Borrower
hereunder. Each Lender and participant also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as such Lender or participant shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, operations, property, financial and other
condition, and creditworthiness of the Borrower and its Subsidiaries and
Affiliates. Except for notices, reports, and other documents expressly required
to be furnished to the Lenders by the Agent herein, the Agent shall not have any
duty or responsibility to provide any Lender or participant with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition, or creditworthiness of the Borrower or any of its
Subsidiaries or Affiliates which may come into the possession of any Agent-
Related Person.

        Section 13.7 Indemnification of the Agent. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand each Agent-Related Person (to the extent not reimbursed by or on
behalf of the Borrower and without limiting the obligation of the Borrower to do
so), pro rata, and hold harmless each Agent-Related Person from and against any
and

                                    Page 66
<PAGE>   73

all Indemnified Liabilities incurred by it; provided, however, that no Lender
shall be liable for the payment to any Agent-Related Person of any portion of
such Indemnified Liabilities resulting from such Person's gross negligence or
willful misconduct; provided, however, that no action taken in accordance with
the directions of the Required Lenders shall be deemed to constitute gross
negligence or willful misconduct for purposes of this Section. Without
limitation of the foregoing, each Lender shall reimburse the Agent upon demand
for such Lender's ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) 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,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that the Agent is not reimbursed for such expenses by or on behalf
of the Borrower. The undertaking in this Section shall survive the payment of
all Obligations hereunder and the resignation or replacement of the Agent.

        Section 13.8 The Agent in Individual Capacity. Bank of America and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting, or other business with the
Borrower and its Affiliates as though Bank of America were not the Agent
hereunder and without notice to or consent of the Lenders. The Lenders and
participants acknowledge that, pursuant to such activities, Bank of America or
its Affiliates may receive information regarding the Borrower and its Affiliates
(including information that may be subject to confidentiality obligations in
favor of the Borrower or such Affiliate) and acknowledge that the Agent shall be
under no obligation to provide such information to them. With respect to its
Balances, Bank of America shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
the Agent.

        Section 13.9 Resignation of the Agent. The Agent may, and at the request
of the Required Lenders shall, resign as the Agent upon thirty (30) days notice
to the Lenders. If the Agent resigns under this Agreement, the Required Lenders
shall appoint from among the Lenders a successor administrative agent for the
Lenders which successor administrative agent shall be consented to by the
Borrower at all times other than during the existence of an Event of Default
(which approval of the Borrower shall not be unreasonably withheld or delayed).
If no successor administrative agent is appointed prior to the effective date of
the resignation of the Agent, the Agent may appoint, after consulting with the
Lenders and the Borrower, a successor administrative agent from among the
Lenders. Upon the acceptance of its appointment as successor administrative
agent hereunder, such successor administrative agent shall succeed to all the
rights, powers, and duties of the retiring Agent and the term "Agent" shall mean
such successor administrative agent and the retiring Agent's appointment,
powers, and duties as the Agent shall be terminated. After any retiring Agent's
resignation hereunder as the Agent, the provisions of this Article 13, Section
14.1, and Section 14.2 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was the Agent under this Agreement. If no
successor administrative agent has accepted appointment as the Agent by the date
which is thirty (30) days following a retiring Agent's notice of resignation,
the retiring Agent's resignation shall nevertheless thereupon become effective
and the Lenders shall perform all of the duties of the Agent hereunder until
such time, if any, as the Required Lenders appoint a successor agent as provided
for above.

                                    Page 67
<PAGE>   74

        Section 13.10 Co-Agents; Lead Managers. None of the Lenders identified
on the facing page or signature pages of this Agreement as a "co-agent" or other
similar title shall have any right, power, obligation, liability,
responsibility, or duty under this Agreement other than those applicable to all
Lenders as such. Without limiting the foregoing, none of the Lenders so
identified as a "co-agent" or other similar title shall have or be deemed to
have any fiduciary relationship with any Lender. Each Lender acknowledges that
it has not relied, and will not rely, on any of the Lenders so identified in
deciding to enter into this Agreement or in taking or not taking action
hereunder.

                                   ARTICLE 14

                                  Miscellaneous

        Section 14.1 Expenses. The Borrower hereby agrees to pay promptly after
presentation of supporting documentation, without duplication: (a) all
reasonable costs and expenses of the Agent arising in connection with the
preparation, negotiation, execution, delivery, syndication, and administration
of the Loan Documents and all amendments, waivers, or other modifications to the
Loan Documents, including, without limitation, Attorney Costs of the Agent; (b)
all costs and expenses of the Agent in connection with any Default and the
enforcement of any Loan Document or collection of the Obligations, including,
without limitation, Attorney Costs of the Agent; (c) all fees, costs, and
expenses of any Lender arising in connection with an Event of Default and the
enforcement of any Loan Document or collection of the Obligations during the
existence of an Event of Default; (d) all transfer, stamp, documentary, or other
similar taxes, assessments, or charges (including, without limitation, the Taxes
and any penalties or interest) levied by any Governmental Authority in respect
of any Loan Document or the transactions contemplated thereby; (e) all
reasonable costs, expenses, assessments, and other charges incurred in
connection with any filing, registration, recording, or perfection of any
security interest or other Lien contemplated by any Loan Document; and (f) all
other reasonable costs and expenses incurred by the Agent in connection with any
Loan Document. The Attorney Costs of the Agent that the Borrower has agreed to
pay hereunder include, without limitation, the Attorney Costs of the Agent
arising in connection with advice given to the Agent as to its rights and
responsibilities hereunder.

        Section 14.2 Indemnity by the Borrower. Whether or not the transactions
contemplated hereby are consummated, the Borrower agrees to indemnify, save and
hold harmless each Agent-Related Person and each Lender and their respective
Affiliates, directors, officers, agents, attorneys, and employees (collectively
the "Indemnitees") from and against: (a) any and all claims, demands, actions,
or causes of action that are asserted against any Indemnitee by any Person
(other than the Agent or any Lender) relating directly or indirectly to a claim,
demand, action, or cause of action that such Person asserts or may assert
against the Borrower, any of its Affiliates, or any of their respective officers
or directors; (b) any and all claims, demands, actions, or causes of action
arising out of or relating to, the Loan Documents, any predecessor loan
documents, the Commitments, the use or contemplated use of the proceeds of any
Loan, or the relationship of the Borrower, the Agent and the Lenders under this
Agreement; (c) any administrative or investigative proceeding by any
Governmental Authority arising out of or related to a claim, demand, action, or
cause of action described in clause (a) or clause (b) preceding; and (d) any and
all liabilities (including liabilities

                                    Page 68
<PAGE>   75

under indemnities), losses, costs, or expenses (including Attorney Costs) that
any Indemnitee suffers or incurs as a result of the assertion of any foregoing
claim, demand, action, cause of action, or proceeding, or as a result of the
preparation of any defense in connection with any foregoing claim, demand,
action, cause of action, or proceeding, in all cases, whether or not arising out
of the negligence of an Indemnitee, whether or not an Indemnitee is a party to
such claim, demand, action, cause of action, or proceeding (all the foregoing,
collectively, the "Indemnified Liabilities"); provided that no Indemnitee shall
be entitled to indemnification for any loss caused by its own gross negligence
or willful misconduct or for any loss asserted against it by another Indemnitee.
The agreements in this Section shall survive repayment of all Obligations.

        Section 14.3 Limitation of Liability. No Agent-Related Person, Lender,
or any Affiliate, officer, director, employee, attorney, or agent thereof shall
have any liability with respect to the Borrower for and, by the execution of the
Loan Documents to which it is a party, each other party to any Loan Document,
hereby waives, releases, and agrees not to sue any of them upon, any claim for,
any special, indirect, incidental, consequential, or punitive damages suffered
or incurred by any such Person in connection with, arising out of, or in any way
related to any of the Loan Documents, or any of the transactions contemplated by
any of the Loan Documents.

        Section 14.4 No Duty. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by any of the Agent, the Arranger,
or any Lender shall have the right to act exclusively in the interest of Agent,
the Arranger, and the Lenders and shall have no duty of disclosure, duty of
loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to the Borrower or any Guarantor, any shareholders of the Borrower or
any Guarantor, or any other Person.

        Section 14.5 No Fiduciary Relationship. The relationship between the
Borrower and the Guarantors on the one hand and the Agent, the Arranger, and the
Lenders on the other is solely that of debtor and creditor, and neither any of
the Agent, the Arranger, nor any Lender has any fiduciary or other special
relationship with the Borrower or any Guarantor, and no term or condition of any
of the Loan Documents shall be construed so as to deem the relationship between
the Borrower and the Guarantors on the one hand and any of the Agent, the
Arranger, and each Lender on the other to be other than that of debtor and
creditor.

        Section 14.6 Equitable Relief. The Borrower recognizes that in the event
the Borrower or any Guarantor fails to pay, perform, observe, or discharge any
or all of the Obligations under the Loan Documents, any remedy at law may prove
to be inadequate relief to the Agent and the Lenders. The Borrower therefore
agrees that the Agent and the Lenders, if the Agent or the Required Lenders so
request, shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages.

        Section 14.7 No Waiver; Cumulative Remedies. No failure on the part of
the Agent or any Lender to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power, or privilege under any Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power, or privilege under any Loan Document preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege. The rights and

                                    Page 69
<PAGE>   76

        remedies provided for in the Loan Documents are cumulative and not
        exclusive of any rights and remedies provided by law.

        Section 14.8 Binding Effect; Successors; Assignment.

               (a) This Agreement and the other Loan Documents to which the
        Borrower is a party will be binding upon and inure to the benefit of the
        Borrower, the Agent, the Lenders, and their respective successors and
        assigns, except that, the Borrower may not assign its rights hereunder
        or thereunder or any interest herein or therein without the prior
        written consent of all of the Lenders and any such attempted assignment
        shall be void. Any Lender may at any time pledge its Note (or, with
        respect to Bank of America, its Notes) or any other instrument
        evidencing its rights as a Lender under this Agreement to a Federal
        Reserve Bank, but no such pledge shall release such Lender from its
        obligations hereunder or grant to such Federal Reserve Bank the rights
        of a Lender hereunder absent foreclosure of such pledge.

               (b) From time to time following the Closing Date, each Lender may
        assign to one or more Eligible Assignees all or any portion of its
        Commitment; provided that (i) such assignment, if not to a Lender or an
        Affiliate of the assigning Lender, shall be consented to by the Borrower
        at all times other than during the existence of a Default or Event of
        Default (which approval shall not be unreasonably withheld or delayed)
        and by the Agent, (ii) a copy of a duly signed and completed Assignment
        and Acceptance and a copy of a duly signed and completed Acknowledgment
        of Intercreditor Agreement shall be delivered to the Agent, (iii) except
        in the case of an assignment (A) to an Affiliate of the assigning Lender
        or to another Lender or (B) of the entire remaining Commitment of the
        assigning Lender, the portion of the Commitment assigned shall not be
        less than $10,000,000, and (iv) the effective date of any such
        assignment shall be as specified in the Assignment and Acceptance, but
        not earlier than the date which is five (5) Business Days after the date
        the Agent has received the Assignment and Acceptance. Upon obtaining any
        consent required as set forth in the prior sentence, any forms required
        by Section 14.22 and payment of the requisite fee described below, the
        assignee named therein shall be a Lender for all purposes of this
        Agreement to the extent of the Assigned Interest (as defined in such
        Assignment and Acceptance), and the assigning Lender shall be released
        from any further obligations under this Agreement to the extent of such
        Assigned Interest. Upon request, the Borrower shall execute and deliver
        new or replacement Revolving Notes to the assigning Lender and the
        assignee Lender to evidence the portion of the Revolving Loan made by
        them. The Agent's consent to any assignment shall not be deemed to
        constitute any representation or warranty by any Agent-Related Person as
        to any matter. The Agent shall record the information contained in the
        Assignment and Acceptance in the Register. For purposes hereof, each
        mutual fund that is an Affiliate of a Lender shall be deemed to be a
        single Eligible Assignee, whether or not such fund is managed by the
        same fund manager as other mutual funds that are Affiliates of the same
        Lender.

               (c) After receipt of a completed Assignment and Acceptance, and
        receipt of an assignment fee of $3,500 from such Eligible Assignee
        and/or such assigning Lender (including in the case of assignments to
        Affiliates of assigning Lenders or assignments from

                                    Page 70
<PAGE>   77

        one Lender to another Lender), the Agent shall, promptly following the
        effective date thereof, provide to the Borrower and the Lenders a
        revised Schedule 14.13 giving effect thereto.

               (d) Each Lender may from time to time, without the consent of any
        other Person, grant participations to one or more other Persons
        (including another Lender) of all or any portion of its Commitment;
        provided, however, that (i) such Lender's obligations under this
        Agreement shall remain unchanged, (ii) such Lender shall remain solely
        responsible to the other parties hereto for the performance of such
        obligations, (iii) the participating banks or other financial
        institutions shall not be a Lender hereunder for any purpose except, if
        the participation agreement so provides, for the purposes of Article 5
        (but only to the extent that the cost of such benefits to the Borrower
        does not exceed the cost which the Borrower would have incurred in
        respect of such Lender absent the participation) and subject to Section
        4.7 and Section 12.4, (iv) the Borrower, the Agent, and the other
        Lenders shall continue to deal solely and directly with such Lender in
        connection with such Lender's rights and obligations under this
        Agreement, (v) the participation agreement shall not restrict an
        increase in the combined Commitments or in the granting Lender's
        Commitment or Commitment Percentage, so long as the amount of the
        participation interest is not increased, and (vi) the consent of the
        holder of such participation interest shall not be required for
        amendments or waivers of provisions of the Loan Documents; provided,
        however, that the assigning Lender may, in any agreement with a
        participant, give such participant the right to consent to any matter
        which (A) extends the Maturity Date as to such participant or any other
        date upon which any payment of money is due to such participant, (B)
        reduces the rate of interest owing to such participant, any fee or any
        other monetary amount owing to such participant, (C) reduces the amount
        of any installment of principal owing to such participant, or (D)
        releases all or substantially all of the Guarantors of their obligations
        under the Subsidiary Guaranty. Any Lender that sells a participation to
        any Person that is a "foreign corporation, partnership, or trust" within
        the meaning of the Code shall include in its participation agreement
        with such Person a covenant by such Person that such Person will comply
        with the provisions of Section 14.22 as if such Person were a Lender and
        provide that the Agent and the Borrower shall be third party
        beneficiaries of such covenant.

               (e) Amendment of Commitments. Upon execution, delivery, and
        acceptance of an Assignment and Acceptance, the signature pages of the
        Lenders shall be deemed to be automatically amended to reflect the
        resulting Commitments of the Lenders after giving effect to such
        Assignment and Acceptance; provided that the Commitments of the Lenders
        not a party to such Assignment and Acceptance shall not be affected as a
        result of such amendment.

               (f) Register.

                      (i) The Agent shall maintain, at the Agent's Office, a
               register for the recordation of the names and addresses of the
               Lenders and the Commitments and Balances of each Lender from time
               to time (the "Register"). The Register shall be available for
               inspection by the Borrower or any Lender at any reasonable time
               and from time to time upon reasonable prior notice. The Agent
               shall maintain the

                                    Page 71
<PAGE>   78

               Register as agent for the Borrower (it being acknowledged and
               agreed that the Agent and each Agent-Related Person, in such
               capacity, shall constitute Indemnitees under Section 14.2).

                      (ii) The Agent shall record in the Register the Commitment
               and Balances from time to time of each Lender, and each repayment
               or prepayment in respect thereof. Any recordation shall be
               conclusive and binding on the Borrower and each Lender, absent
               manifest error; provided, however, that the failure to make any
               such recordation, or any error in such recordation, shall not
               affect any Lender's Commitments or Balances.

                      (iii) Each Lender shall record on its internal records
               (including, without limitation, the Note (or with respect to Bank
               of America, the Notes) held by such Lender) the amount of each
               Balance held by it and each payment in respect thereof. Any
               recordation shall be conclusive and binding on the Borrower,
               absent manifest error; provided, however, that the failure to
               make any such recordation, or any error in such recordation,
               shall not affect any Lender's Commitment or Balances; provided,
               further, that in the event of any inconsistency between the
               Register and any Lender's records, the recordations in the
               Register shall govern.

                      (iv) The Borrower, the Agent and the Lenders shall deem
               and treat the Persons listed as Lenders in the Register as the
               holders and owners of the corresponding Commitments and Balances
               listed therein for all purposes hereof, and no assignment or
               transfer of any such Commitment or Balances shall be effective,
               in each case, unless and until an Assignment and Acceptance
               effecting the assignment or transfer thereof shall have been
               accepted by the Agent and recorded in the Register. Prior to such
               recordation, all amounts owed with respect to the applicable
               Commitment or Obligations shall be owed to the Lender listed in
               the Register as the owner thereof, and any request, authority or
               consent of any Person who, at the time of making such request or
               giving such authority or consent, is listed in the Register as
               the Lender shall be conclusive and binding on any subsequent
               holder, assignee, or transferee of the corresponding Commitments
               or Obligations.

               (g) Delivery of Information. Any Lender may furnish any
        information concerning the Borrower or any Affiliate of the Borrower in
        the possession of such Lender from time to time to assignees and
        participants (including, without limitation, prospective assignees and
        participants) subject to such Persons agreeing to being bound by the
        provisions of Section 14.21.

        Section 14.9 Survival. All representations and warranties made by the
Borrower or any Guarantor in any Loan Document or in any document, statement, or
certificate furnished in connection with any Loan Document shall survive the
execution and delivery of the Loan Documents and no investigation by the Agent
or any Lender or any closing shall affect the representations and warranties or
the right of the Agent and the Lenders to rely upon them. Without prejudice to
the survival of any other obligation of the Borrower hereunder, the obligations
under Article 5,

                                    Page 72
<PAGE>   79

Section 13.7, Section 14.1, and Section 14.2 shall survive repayment of the
Notes and termination of the Commitments.

        Section 14.10 Entire Agreement. This Agreement, together with the other
Loan Documents and any letter agreements referred to herein, comprises the
complete and integrated agreement of the parties on the subject matter hereof
and supersedes all prior agreements, written or oral, on the subject matter
hereof. In the event of any conflict between the provisions of this Agreement
and those of any other Loan Document, the provisions of this Agreement shall
control and govern; provided that the inclusion of supplemental rights or
remedies in favor of the Agent or the Lenders in any other Loan Document shall
not be deemed a conflict with this Agreement. Each Loan Document was drafted
with the joint participation of the respective parties thereto and shall be
construed neither against nor in favor of any party, but rather in accordance
with the fair meaning thereof.

        Section 14.11 Amendments and Waivers. Any provision of any Loan Document
may be amended or waived and any consent to any departure by the Borrower
therefrom may be granted if, but only if, such amendment, waiver, or consent is
in writing and is signed by the Borrower, and the Required Lenders (and, if
Article 13 or the rights or duties of the Agent are affected thereby, by the
Agent); provided that no such amendment, waiver, or consent applicable to:

               (a) a Balance or Commitment which has the effect of

                      (i) increasing such Commitment (but not the aggregate
               Commitments as provided by Section 2.6),

                      (ii) reducing the principal of or rate of interest on such
               Balance or any fees or other amounts payable hereunder with
               respect to such Balance or Commitment,

                      (iii) postponing any date fixed for the payment of any
               principal of or interest on such Balance or any fees or other
               amounts payable hereunder with respect to such Balance or
               Commitment or changing any optional or mandatory prepayment
               provision applicable to such Balance, or

                      (iv) postponing any date fixed for termination of such
               Commitment,

        shall be effective unless also signed by each Lender holding the Balance
        or Commitment of the type being modified; and

               (b) any change (including a waiver):

                      (i) in the definition of Required Lenders or the
               provisions of this Section 14.11;

                                    Page 73
<PAGE>   80

                      (ii) which has the effect of releasing the Borrower, any
               Subsidiary of the Borrower, or any Guarantor in a transaction
               which is not otherwise permitted hereby; or

                      (iii) which releases all or substantially all of the
               Guarantors of their obligations under the Subsidiary Guaranty;

        shall not be effective unless signed by all Lenders.

        Section 14.12 Maximum Interest Rate. Notwithstanding anything to the
contrary contained in any Loan Document, the interest paid or agreed to be paid
under the Loan Documents shall not exceed the maximum rate of non-usurious
interest permitted by applicable law (the "Maximum Rate"). If the Agent or any
Lender shall receive interest in an amount that exceeds the Maximum Rate, the
excessive interest shall be applied to the principal of the Obligations or, if
it exceeds the unpaid principal, refunded to the Borrower. In determining
whether the interest contracted for, charged, or received by the Agent or a
Lender exceeds the Maximum Rate, such Person may, to the extent permitted by
applicable law, (a) characterize any payment that is not principal as an
expense, fee, or premium rather than interest, (b) exclude voluntary prepayments
and the effects thereof, and (c) amortize, prorate, allocate, and spread in
equal or unequal parts the total amount of interest throughout the contemplated
term of the Obligations.

        Section 14.13 Notices. All notices and other communications provided for
in any Loan Document to which the Borrower is a party shall be given or made in
writing (except as otherwise permitted by Section 4.3) and telecopied, mailed by
certified mail return receipt requested, or delivered to the intended recipient
at the "Address for Notices" specified in Schedule 14.13, or with respect to a
Lender not a party to this Agreement on the Closing Date, in its Assignment and
Acceptance, or, as to any party at such other address as shall be designated by
such party in a notice to each other party given in accordance with this
Section. Except as otherwise provided in any Loan Document, all such
communications shall be deemed to have been duly given when transmitted by
telecopy, subject to telephone confirmation of receipt, or when personally
delivered or, in the case of a mailed notice, three (3) Business Days after
being duly deposited in the mails, in each case given or addressed as aforesaid;
provided, however, notices to the Agent pursuant to Section 4.3 shall not be
effective until received by the Agent. Any agreement of the Agent and the
Lenders herein to receive certain notices by telephone or telecopy is solely for
the convenience and at the request of the Borrower. The Agent and the Lenders
shall be entitled to rely on the authority of any Person purporting to be a
Person authorized by the Borrower to give such notice and neither the Agent nor
any Lender shall have any liability to the Borrower or any other Person on
account of any action taken or not taken by the Agent or any Lender in reliance
upon such telephonic or telecopy notice. The obligation of the Borrower to repay
the Loan shall not be affected in any way or to any extent by any failure of the
Agent or any Lender to receive written confirmation of any telephonic or
telecopy notice or the receipt by the Agent or any Lender of a confirmation
which is at variance with the terms understood by the Agent or such Lender to be
contained in such telephonic or telecopy notice.

        Section 14.14 Governing Law; Venue; Service of Process.

                                    Page 74
<PAGE>   81

               (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
        ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
        AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED
        THAT THE AGENT AND EACH LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER
        FEDERAL LAW.

               (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
        OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF
        CALIFORNIA OR OF THE UNITED STATES FOR SUCH STATE, AND BY EXECUTION AND
        DELIVERY OF THIS AGREEMENT, THE BORROWER, THE AGENT AND EACH LENDER
        CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
        NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE BORROWER, THE AGENT, AND
        EACH LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO
        THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS,
        WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
        PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER
        DOCUMENT RELATED THERETO. THE BORROWER, THE AGENT, AND EACH LENDER
        WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT, OR OTHER PROCESS,
        WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAWS OF SUCH
        STATE.

        Section 14.15 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.

        Section 14.16 Severability. Any provision of any Loan Document held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of such Loan Document and the effect thereof shall
be confined to the provision held to be invalid or illegal.

        Section 14.17 Headings. The headings, captions, and arrangements used in
this Agreement are for convenience of reference only and shall not affect the
interpretation of this Agreement.

        Section 14.18 Construction. The Borrower, each Guarantor (by its
execution of the Loan Documents to which it is a party), the Agent and each
Lender acknowledges that each of them has had the benefit of legal counsel of
its own choice and has been afforded an opportunity to review the Loan Documents
with its legal counsel and that the Loan Documents shall be construed as if
jointly drafted by the parties thereto.

        Section 14.19 Independence of Covenants. All covenants under the Loan
Documents shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants, the fact that it would be
permitted by an exception to, or be otherwise within the

                                    Page 75
<PAGE>   82

limitations of, another covenant shall not avoid the occurrence of a Default if
such action is taken or such condition exists.

        Section 14.20 Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR
CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH
RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR
TORT OR OTHERWISE, AND EACH PARTY HERETO HEREBY AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

        Section 14.21 Confidentiality. The Agent, each Lender and each
participant shall use any confidential non-public information concerning the
Borrower and its Subsidiaries that is furnished to the Agent or such Lender by
or on behalf of the Borrower and its Subsidiaries in connection with the Loan
Documents (collectively, "Confidential Information") solely for the purpose of
evaluating and providing products and services to them and administering and
enforcing the Loan Documents, and it will hold the Confidential Information in
confidence. Notwithstanding the foregoing, the Agent and each Lender may
disclose Confidential Information (a) to their Affiliates or any of their or
their Affiliates' directors, officers, employees, auditors, counsel, advisors,
or representatives (collectively, the "Representatives") whom it determines need
to know such information for the purposes set forth in this Section, (b) to any
bank or financial institution or other entity to which such Lender has assigned
or desires to assign an interest or participation in the Loan Documents or the
Obligations, provided that any such foregoing recipient of such Confidential
Information agrees to keep such Confidential Information confidential as
specified herein, (c) to any Governmental Authority having or claiming to have
authority to regulate or oversee any aspect of the Agent's or such Lender's
business or that of their Representatives in connection with the exercise of
such authority or claimed authority, (d) to the extent necessary or appropriate
to effect or preserve the Agent's or such Lender's or any of their Affiliates'
security (if any) for any Obligation or to enforce any right or remedy or in
connection with any claims asserted by or against the Agent or such Lender or
any of their Representatives; and (e) pursuant to any subpoena or any similar
legal process. For purposes hereof, the term "Confidential Information" shall
not include information that (x) is in the Agent's or a Lender's possession
prior to its being provided by or on behalf of the Borrower or any of its
Subsidiaries, provided that such information is not known by the Agent or such
Lender to be subject to another confidentiality agreement with, or other legal
or contractual obligation of confidentiality to, the Borrower or any of its
Subsidiaries, (y) is or becomes publicly available (other than through a breach
hereof by the Agent or such Lender), or (z) becomes available to the Agent or
such Lender on a nonconfidential basis, provided that the source of such
information was not known by the Agent or such Lender to be bound by a
confidentiality agreement or other legal or contractual obligation of
confidentiality with respect to such information.

                                    Page 76
<PAGE>   83

        Section 14.22 Foreign Lenders. Each Foreign Lender shall deliver to the
Agent, prior to receipt of any payment subject to withholding under the Code (or
after accepting an assignment of an interest herein), two (2) duly signed
completed copies of either IRS Form W-8BEN or any successor thereto (relating to
such Foreign Lender and entitling it to an exemption from, or reduction of,
withholding tax on all payments to be made to such Foreign Lender by the
Borrower pursuant to this Agreement) or IRS Form W-8ECI or any successor thereto
(relating to all payments to be made to such Foreign Lender by the Borrower
pursuant to this Agreement) or such other evidence satisfactory to the Borrower
and the Agent that such Foreign Lender is entitled to an exemption from, or
reduction of, U.S. withholding tax. Thereafter and from time to time, each such
Foreign Lender shall (a) promptly submit to the Agent such additional duly
completed and signed copies of one of such forms (or such successor forms as
shall be adopted from time to time by the relevant U.S. taxing authorities) as
may then be available under then current U.S. laws and regulations to avoid, or
such evidence as is satisfactory to the Borrower and the Agent of any available
exemption from or reduction of, U.S. withholding taxes in respect of all
payments to be made to such Foreign Lender by the Borrower pursuant to this
Agreement, (b) promptly notify the Agent of any change in circumstances which
would modify or render invalid any claimed exemption or reduction, and (c) take
such steps as shall not be materially disadvantageous to it, in the reasonable
judgment of such Foreign Lender, and as may be reasonably necessary (including
the re-designation of its Applicable Lending Office) to avoid any requirement of
applicable laws that the Borrower make any deduction or withholding for taxes
from amounts payable to such Foreign Lender. If such Foreign Lender fails to
deliver the above forms or other documentation, then the Agent may withhold from
any interest payment to such Foreign Lender an amount equivalent to the
applicable withholding tax imposed by Sections 1441 and 1442 of the Code,
without reduction. If any Governmental Authority asserts that the Agent did not
properly withhold any tax or other amount from payments made in respect of such
Foreign Lender, such Foreign Lender shall indemnify the Agent therefor,
including all penalties and interest, any taxes imposed by any jurisdiction on
the amounts payable to the Agent under this Section, and costs and expenses
(including Attorney Costs) of the Agent. The obligation of the Lenders under
this Section shall survive the payment of all Obligations and the resignation or
replacement of the Agent.

        Section 14.23 Amendment and Restatement. This Agreement and the other
Loan Documents amends, restates, and replaces in its entirety the Original
Agreement. All rights, benefits, indebtedness, interest, liabilities, and
obligations of the parties to the Original Agreement are hereby amended,
restated, replaced, and superseded in their entirety according to the terms and
provisions set forth herein and in the other Loan Documents. All indebtedness,
liabilities, and obligations under the Original Agreement, including, without
limitation, all promissory notes executed by the Borrower pursuant thereto, are
hereby renewed by this Agreement, the Notes, and the other Loan Documents
executed by the Borrower pursuant to this Agreement and shall, from and after
the Closing Date, be governed by this Agreement and the other Loan Documents.
The Borrower represents and warrants that as of the date hereof there are no
claims or offsets against, or defenses or counterclaims to, its obligations
under this Agreement, the Original Agreement, or any of the other agreements,
documents, or instruments executed in connection herewith or therewith. To
induce the Agent and the Lenders to enter into this Agreement, the Borrower
waives any and all such

                                    Page 77
<PAGE>   84

claims, offsets, defenses, or counterclaims, whether known or unknown, arising
prior to the Closing Date and relating to the Original Agreement or this
Agreement.

                  [Remainder of page intentionally left blank]

                                    Page 78
<PAGE>   85

        IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.

                                      BORROWER:

                                      WILLIAMS-SONOMA, INC.

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

                                    Page 79
<PAGE>   86

                                      AGENT:

                                      BANK OF AMERICA, NATIONAL
                                      ASSOCIATION, as the Agent

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

                                    Page 80
<PAGE>   87

                                      LENDERS:

                                      BANK OF AMERICA, NATIONAL
                                      ASSOCIATION
Commitment:
        $45,000,000
                                      By:
                                         ---------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------

                                    Page 81
<PAGE>   88

                                      FLEET NATIONAL BANK
Commitment:
        $28,000,000
                                      By:
                                         ---------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------

                                    Page 82
<PAGE>   89

                                      THE BANK OF NEW YORK
Commitment:
        $22,500,000
                                      By:
                                         ---------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------

                                    Page 83
<PAGE>   90

                                      FIRST UNION NATIONAL BANK
Commitment:
        $17,500,000
                                      By:
                                         ---------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------

                                    Page 84
<PAGE>   91

                                      WELLS FARGO BANK, N.A.
Commitment:
        $17,500,000
                                      By:
                                         ---------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------

                                    Page 85
<PAGE>   92

                                      BNP PARIBAS
Commitment:
        $17,500,000
                                      By:
                                         ---------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------

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

                                    Page 86
<PAGE>   93

                                      THE CHASE MANHATTAN BANK
Commitment:
        $13,000,000
                                      By:
                                         ---------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------

                                    Page 87
<PAGE>   94

                                      NATIONAL CITY BANK
Commitment:
        $13,000,000
                                      By:
                                         ---------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------

                                    Page 88
<PAGE>   95

                                      UNION BANK OF CALIFORNIA, N.A.
Commitment:
        $13,000,000
                                      By:
                                         ---------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------

                                    Page 89
<PAGE>   96

                                      FIRSTAR BANK NA
Commitment:
        $13,000,000
                                      By:
                                         ---------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------

                                    Page 90
<PAGE>   97

                                    EXHIBIT A

                             Form of Revolving Note

                             Exhibit A, Cover Page
<PAGE>   98

                                    EXHIBIT B

                             Form of Swingline Note

                             Exhibit B, Cover Page

<PAGE>   99

                                    EXHIBIT C

                        Form of Assignment and Acceptance

                             Exhibit C, Cover Page

<PAGE>   100

                                    EXHIBIT D

                         Form of Compliance Certificate

                             Exhibit D, Cover Page

<PAGE>   101

                                    EXHIBIT E

                           Form of Subsidiary Guaranty

                             Exhibit E, Cover Page

<PAGE>   102

                                    EXHIBIT F

    Form of Notice of Borrowings, Conversions, Continuations, or Prepayments

                             EXHIBIT F, Cover Page

<PAGE>   103

                                    EXHIBIT G

                            Form of Joinder Agreement

                             Exhibit G, Cover Page

<PAGE>   104

                                    EXHIBIT H

                Form of Acknowledgment of Intercreditor Agreement

                             Exhibit H, Cover Page

<PAGE>   105

                                  Schedule 7.1
                                       to
                              Williams-Sonoma, Inc.
                                Credit Agreement

                            Governmental Certificates

New York
Texas
Florida
New Jersey
Illinois
Massachusetts
Connecticut
Pennsylvania
Ohio
Virginia
Washington
Georgia
Michigan
Colorado
North Carolina

                            Schedule 7.1, Solo Page

<PAGE>   106

                                  Schedule 8.4
                                       to
                              Williams-Sonoma, Inc.
                                Credit Agreement

                              Operation of Business

1.      In July 2000, Williams-Sonoma Direct, Inc. entered into a 10-year lease
        with C.A. Hempt Estate, Inc. for property in Camp Hill, Pennsylvania,
        outside of Harrisburg, to be used as a mail-order call center. The lease
        has two five-year renewal options. Base rent for the first five years is
        fixed; in years six through ten the rent increases 2% each year and in
        years 11 through 20 increases by the greater of 2% or Consumer Price
        Index-US City Average. Assuming Williams-Sonoma Direct, Inc. exercises
        both renewal options, the total rent payments over the 20 year lease are
        expected to be approximately $10,935,000.

2.      In February 2000, the Letter of Credit Agreement between the Borrower
        and Bank of America, dated as of June 1, 1997, as amended (the "Letter
        of Credit Agreement"), was amended to provide for a revolving line of
        credit equal to $75,000,000. This revolving line of credit under the
        Letter of Credit Agreement will be terminated as of the Closing Date and
        a portion of the proceeds from the initial Loan will be used to repay
        the $73,000,000 outstanding under the revolving line; only the letter of
        credit portion of the agreement will remain in effect.

3.      The Borrower's documentary letter of credit facility under the Letter of
        Credit Agreement was recently increased from $75,000,000 to $90,000,000.

                            Schedule 8.4, Solo Page

<PAGE>   107

                                  Schedule 8.5
                                       to
                              Williams-Sonoma, Inc.
                                Credit Agreement

                            Litigation and Judgments

Bonnie Weinstein, Jack Biancalana, et. al v. Williams-Sonoma, Inc., The Ruffoni
Family, et. al., Case No. 301-563 (filed March 8, 2000), Superior Court of
California (San Francisco). The class action lawsuit filed against the Borrower
alleges physical injuries and emotional distress suffered and is seeking
approximately $22,500,000 in damages. The Company believes that the matter is
covered by insurance and has referred the matter to its insurance carrier.
Although the Borrower believes it has strong defenses, litigation is inherently
unpredictable and there is no guarantee the Borrower will prevail and that the
outcome of the case would not have a Material Adverse Effect.

                             Schedule 8.5 Solo Page

<PAGE>   108

                                  Schedule 8.9
                                       to
                              Williams-Sonoma, Inc.
                                Credit Agreement

                                      Debt

1.      $40,000,000 7.20% Senior Notes Due August 8, 2005 issued by the Borrower
        pursuant to that certain Note Agreement dated as of August 1, 1995. The
        outstanding principal balance as of July 30, 2000 was $34,256,000.

2.      $7,000,000 initial principal amount pursuant to the Amended and Restated
        Standing Loan Agreement, dated as of June 1, 1997 between the Borrower
        and Bank of America evidenced by the promissory note dated as of March
        9, 1995 and secured by a Deed of Trust relating to the property located
        at 3250 Van Ness Avenue, San Francisco, California. (See Schedule 10.2
        regarding UCC-1 Financing Statement and Deed of Trust). The remaining
        principal balance as of July 30, 2000 was $6,216,250.

3.      $6,216,250 under a floating/fixed rate swap agreement with Bank of
        America that expires on April 2, 2001 related to the Amended and
        Restated Standing Loan Agreement described in Item 2 above.

4.      $14,000,000 aggregate initial principal amount pursuant to that certain
        Lease Intended as Security dated as of January 25, 2000, between the
        Borrower and Banc of America Leasing & Capital, LLC. (See Schedule 10.2
        regarding the lien filed with the Federal Aviation Administration). The
        remaining principal balance on the synthetic lease. as of July 30, 2000,
        was approximately $13,750,000.

5.      Approximately $542,000 outstanding as of July 30, 2000 under capital
        leases (excluding the capital lease described in Item 4 above).

6.      Other Debt outstanding on the Closing Date in a principal amount not to
        exceed in the aggregate, together with all other Debt listed on this
        Schedule 8.9 and the amount shown on the Borrower's most recent
        financial statement delivered pursuant to Section 8.2 of the Credit
        Agreement, plus $100,000.

7.      $90,000,000 letter credit facility pursuant to that certain Letter of
        Credit Agreement, between the Borrower and Bank of America, dated as of
        June 1, 1997, as amended. As of July 30, 2000 there was approximately
        $59,406,000 outstanding under the letter of credit portion of the Letter
        of Credit Agreement. Under the same Letter of Credit of Agreement there
        is a $75,000,000 revolving line that will be terminated as of the
        Closing Date. As of July 30, 2000 there was $73,000,000 outstanding
        under the revolving line that will be repaid in full with the proceeds
        of the initial Loan hereunder.

                            Schedule 8.9, Solo Page

<PAGE>   109

                                  Schedule 8.10
                                       to
                              Williams-Sonoma, Inc.
                                Credit Agreement

                                      Taxes

INCOME AND FRANCHISE TAXES

Texas:

        The Borrower filed its final franchise tax report on August 11, 2000.
The additional tax due with the filing was approximately $25,000.

SALES AND USE TAX

Missouri:

        Use Tax on Fixed Assets - Approximately $10,000.

        Sales Tax on Expenses for Williams-Sonoma Stores, Inc. - Approximately
$30,000 (Issue is still open. Preliminary audit workpapers are being reviewed.
The Borrower expects the assessment to be reduced.)

Texas:

        Use Tax on Fixed Assets - Approximately $520,000 - The Borrower is
working with a sales tax consultant in Texas to reduce this amount.

        Additional Tax - Exempt Transactions - Approximately $865,000 (Issue is
currently being protested. The Borrower is working with a sales tax consultant
in Texas. This amount should be reduced significantly or eliminated from audit.)

Baton Rouge Department of Revenue:

        Sales Tax Audit - Approximately $6,400. (Assessment is being protested.
The Borrower should be able to have the assessment either significantly reduced
or eliminated.

California:

        Currently being audited. No assessment or proposed assessment has been
issued. Auditor has not yet scheduled his return to complete audit.

        NOTE: Although the audit has not been completed, the Borrower has been
        able to determine that there is an outstanding liability due to the
        sales tax on shipping income for the period of January 1, 1998 through
        June 30, 2000 of approximately $600,000.

Tennessee:

        Currently being audited. No assessment or proposed assessment has been
issued. Auditor is scheduled to return to complete audit and provide preliminary
assessment in September.

                            Schedule 8.10, Solo Page

<PAGE>   110

                                  Schedule 8.12
                                       to
                              Williams-Sonoma, Inc.
                                Credit Agreement

                                  ERISA Matters

None.

                            Schedule 8.12, Solo Page

<PAGE>   111

                                  Schedule 8.14
                                       to
                              Williams-Sonoma, Inc.
                                Credit Agreement

                          Subsidiaries; Capitalization

1.      SUBSIDIARIES: Williams-Sonoma Stores, Inc.
                      Williams-Sonoma Direct, Inc.
                      Williams-Sonoma Retail Services, Inc.
                      Pottery Barn, Inc.
                      Pottery Barn Kids, Inc.
                      Chambers Catalog Company, Inc.
                      Hold Everything, Inc.
                      Williams-Sonoma Stores, LLC

2.      CAPITALIZATION:

        CORPORATIONS

<TABLE>
<CAPTION>
======================================================================================================
                       State of                                                            Percentage
      Issuer        Incorporation     Authorized Stock     Issued Stock     Shareholder     Interest
======================================================================================================
<S>                 <C>            <C>                    <C>              <C>             <C>
Williams-Sonoma,    California     126,562,500 shares of  56,702,030
Inc.                               Common Stock and       shares of
                                   7,500,000 shares of    Common                N/A           N/A
                                   Preferred Stock        Stock(1)
------------------------------------------------------------------------------------------------------
Williams-Sonoma     California     100 shares of          100 shares of    Williams-
Stores, Inc.                       Common Stock           Common Stock     Sonoma, Inc.       100%
------------------------------------------------------------------------------------------------------
Williams-Sonoma     California     1,000 shares of        100 shares of    Williams-
Direct, Inc.                       Common Stock           Common Stock     Sonoma, Inc.       100%
------------------------------------------------------------------------------------------------------
Williams-Sonoma     California     1,000 shares of        1,000 shares     Williams-
Retail Services,                   Common Stock           of Common        Sonoma, Inc.       100%
Inc.                                                      Stock
------------------------------------------------------------------------------------------------------
Pottery Barn, Inc.  California     1,000 shares of        100 shares of    Williams-
                                   Common Stock           Common Stock     Sonoma, Inc.       100%
------------------------------------------------------------------------------------------------------
</TABLE>

--------
   (1) As of August 14, 2000

                           Schedule 8.14, Page 1 of 2

<PAGE>   112

<TABLE>
<CAPTION>
======================================================================================================
                       State of                                                            Percentage
      Issuer        Incorporation     Authorized Stock     Issued Stock     Shareholder     Interest
======================================================================================================
<S>                 <C>            <C>                    <C>              <C>             <C>
Pottery Barn        California     1,000 shares of        1,000 shares     Williams-
Kids, Inc.                         Common Stock           of Common        Sonoma, Inc.       100%
                                                          Stock
------------------------------------------------------------------------------------------------------
Chambers Catalog    California     100 shares of          100 shares of    Williams-
Company, Inc.                      Common Stock           Common Stock     Sonoma, Inc.       100%
------------------------------------------------------------------------------------------------------
Hold Everything,    California     1,000 shares of        100 shares of    Williams-          100%
Inc.                               Common Stock           Common Stock     Sonoma, Inc.
======================================================================================================
</TABLE>

        LIMITED LIABILITY COMPANIES

<TABLE>
<CAPTION>
================================================================================
                      State of
Issuer                Formation       Members             Units      Percentage
================================================================================
<S>                   <C>             <C>                 <C>        <C>
Williams-Sonoma       Delaware        Williams-Sonoma      100          100%
Stores, LLC                           Stores, Inc.
================================================================================
</TABLE>

3.      OPTIONS, WARRANTS, VOTING AGREEMENTS:

        As of August 14, 2000 there were options outstanding covering 6,598,503
shares of Common Stock of the Borrower.

                           Schedule 8.14, Page 2 of 2

<PAGE>   113

                                  Schedule 8.15
                                       to
                              Williams-Sonoma, Inc.
                                Credit Agreement

                               Material Agreements

None.

                            Schedule 8.15, Solo Page

<PAGE>   114

                                  Schedule 8.19
                                       to
                              Williams-Sonoma, Inc.
                                Credit Agreement

                              Environmental Matters

None.

                            Schedule 8.19, Solo Page

<PAGE>   115

                                  Schedule 8.20
                                       to
                              Williams-Sonoma, Inc.
                                Credit Agreement

                                  Broker's Fees

Arrangement Fee payable to the Arranger as set forth in the Agent's Letter.

                            Schedule 8.20, Solo Page

<PAGE>   116

                                  Schedule 8.21
                                       to
                              Williams-Sonoma, Inc.
                                Credit Agreement

                                Employee Matters

None.

                            Schedule 8.21, Solo Page

<PAGE>   117

                                  Schedule 10.2
                                       to
                              Williams-Sonoma, Inc.
                                Credit Agreement

                                 Permitted Liens

1.      Deed of Trust, Assignment of Rents and Fixture Filings covering the real
        property at 3250 Van Ness Avenue, San Francisco, California, dated as of
        March 9, 1994 made by the Borrower, in favor of Equitable Deed Company,
        as trustee for the benefit of Bank of America, and the related
        California UCC-1 Financing Statement (State of California; File No.
        94070510).

2.      Lease Intended as Security described in Item 4 of Schedule 8.9 and the
        related Certificate of Acceptance filed with the Federal Aviation
        Administration on January 28, 2000 (Conveyance No. RR020554), perfecting
        the security interest in the Canadair model CL-600-2BI6 aircraft and two
        General Electric model CF34-3AI aircraft engines.

3.      UCC-1 Financing Statement filed pursuant to that certain Aircraft Lease
        Agreement dated as of December 28, 1994 between the Company and General
        Electric Capital Corporation covering the Canadair model CL-600-2BI6
        aircraft and the two General Electric model CF34-3AI aircraft engines.
        (State of California; File No. 95-01960116).

4.      Liens securing debt described in Schedule 8.9, Item 6, incurred to
        finance the acquisition, construction or improvement of equipment,
        including vehicles, attaching only to the assets acquired, constructed
        or improved, and directly-related assets such as proceeds (including
        insurance proceeds), products, accessions, substitutions and
        replacements.

                            Schedule 10.2, Solo Page

<PAGE>   118

                                  Schedule 10.5
                                       to
                              Williams-Sonoma, Inc.
                                Credit Agreement

                                   Investments

1.      9,200 shares of capital Il Fornaio "America" Corporation. The total
        investment as of July 30, 2000 was approximately $309,115.

2.      937,234 shares of Series J Preferred Stock of Wedcom, Inc., a Delaware
        corporation. the total investment as of July 30, 2000 was approximately
        $2,000,002.

3.      See Schedule 8.14, Section 1, regarding Subsidiaries of the Borrower.

                            Schedule 10.5, Solo Page

<PAGE>   119

                                 Schedule 14.13
                                       to
                              Williams-Sonoma, Inc.
                                Credit Agreement

                              Addresses for Notices

WILLIAMS - SONOMA, INC.:

        Williams-Sonoma, Inc.
        100 North Point Street
        San Francisco, California 94133
        Attention:     Sharon McCollam, Vice President, Finance
        Telecopy No.:  415-616-8483

                          Schedule 14.13, Page 1 of 12

<PAGE>   120

                                 Schedule 14.13
                                     (cont.)

BANK OF AMERICA, NATIONAL ASSOCIATION (as the Agent)

Funding Notices:

        1850 Gateway Boulevard
        Concord, California 94520
        Attention: Kristine Kelleher
        Telecopy No.: 925-969-2817

Other Notices:

        Commercial Agency Management
        WA1-102-16-20
        701 5th Avenue, Floor 16
        Seattle, Washington 98104
        Attention: Dora A. Brown
        Telecopy No.: 206-358-0971

Agent's Payment Instructions:

        Bank of America, National Association
        ABA #11100012
        Dallas, Texas
        Acct. # Corporate FTA 3750836479
        Attention: Kristine Kelleher
        Reference:  Williams-Sonoma

                          Schedule 14.13, Page 2 of 12

<PAGE>   121

                                 Schedule 14.13
                                     (cont.)

BANK OF AMERICA, NATIONAL ASSOCIATION (as a Lender)

Domestic and Libor Lending Office:

        1850 Gateway Boulevard
        Concord, California 94520
        Attention: Kristine Kelleher

Notices (other than Funding notices):

        CA5-102-LL-13
        345 Montgomery St.
        San Francisco, California 94104
        Attention: Michael Sanz
        Telecopy No.: 415-622-1878

                          Schedule 14.13, Page 3 of 12

<PAGE>   122

                                 Schedule 14.13
                                     (cont.)

FLEET NATIONAL BANK

Applicable Lending Office for Base Rate Balances and Libor Rate Balances:

        100 Federal Street
        Mail Code: MA DE 10008F
        Boston, Massachusetts 02110
        Attention: Dwayne Nelson

Credit Contact:

        100 Federal Street
        Mail Code: MA DE 10008F
        Boston, Massachusetts 02110
        Attention:  Peter Griswold
        Telecopy No.:  617-434-6685

Operations Contact:

        100 Federal Street
        Mail Code: MA DE 10008F
        Boston, Massachusetts 02110
        Attention:  Dwayne Nelson
        Telecopy No.:  617-434-9933

                          Schedule 14.13, Page 4 of 12

<PAGE>   123

                                 Schedule 14.13
                                     (cont.)

THE BANK OF NEW YORK

Applicable Lending office for Base Rate Balances:

        101 Barclay Street
        New York, New York 10286
        Attention: Commercial Loan Servicing Department

Applicable Lending Office for Libor Rate Balances:

        101 Barclay Street
        New York, New York 10286
        Attention: Eurodollar/Cayman Funding Area

Credit Contact:

        One Wall Street
        New York, New York 10286
        Attention:  Charlotte Sohn Fuiks
        Telecopy No.: 212-635-1483

Operations Contact:

        One Wall Street
        New York, New York 10286
        Attention:  Madlyn Myrick
        Telecopy No.:  212-653-1481

                          Schedule 14.13, Page 5 of 12

<PAGE>   124

                                 Schedule 14.13
                                     (cont.)

FIRST UNION NATIONAL BANK

Applicable Lending Office for Base Rate Balances and Libor Rate Balances:

        301 South College Street
        Charlotte, North Carolina 28288
        Attention:  Lisa Johnson-Keys

Credit Contact:

        Widener Building, 12th Floor
        1 South Penn Square PA4843
        Philadelphia, Pennsylvania 19107
        Attention:  Bill Fox
        Telecopy No.:  215-786-2877

Operations Contact:

        FUNB PA4848
        1339 Chestnut Street
        Philadelphia, Pennsylvania 19107
        Attention:  Lisa Johnson-Keys
        Telecopy No.:  215-973-7185

                          Schedule 14.13, Page 6 of 12

<PAGE>   125

                                 Schedule 14.13
                                     (cont.)

WELLS FARGO BANK, N.A.

Applicable Lending Office for Base Rate Balances and Libor Rate Balances:

        420 Montgomery, 9th Floor
        San Francisco, California 94104
        Attention: Ginnie Padgett

Credit Contact:

        420 Montgomery, 9th Floor
        San Francisco, California 94104
        Attention:  June Hanson
        Telecopy No.:  415-837-0610

Operations Contact:

        201 3rd Street, MAC A0187-081
        San Francisco, California 94103
        Attention:  Ginnie Padgett
        Telecopy No.:  415-512-1943

                          Schedule 14.13, Page 7 of 12

<PAGE>   126

                                 Schedule 14.13
                                     (cont.)

BNP PARIBAS

Applicable Lending Office for Base Rate Balances and Libor Rate Balances:

        180 Montgomery Street
        San Francisco, California 94104
        Attention: Donald Hart

Credit Contact:

        180 Montgomery Street
        San Francisco, California 94104
        Attention: Hamed Farhadi
        Telecopy No.: 415-445-0137

Operations Contact:

        180 Montgomery Street
        San Francisco, California 94104
        Attention: Deborah McAdam
        Telecopy No.: 415-989-9041

                          Schedule 14.13, Page 8 of 12

<PAGE>   127

                                 Schedule 14.13
                                     (cont.)

THE CHASE MANHATTAN BANK

Applicable Lending Office for Base Rate Balances and Libor Rate Balances:

        1 Chase Plaza, 8th Floor
        New York, New York 10081
        Attention:  Vito Cipriano
        Telecopy No.:  212-552-5662

Credit Contact:

        101 California Street
        San Francisco, California 94111
        Attention:  William Rindfuss
        Telecopy No.:  415-954-9583

Operations Contact:

        1 Chase Plaza, 8th Floor
        New York, New York 10081
        Attention:  Vito Cipriano
        Telecopy No.:  212-552-5662

                          Schedule 14.13, Page 9 of 12

<PAGE>   128

                                 Schedule 14.13
                                     (cont.)

NATIONAL CITY BANK

Applicable Lending Office for Base Rate Balances and Libor Rate Balances:

        1900 E. 9th Street, Loc. 2077
        Cleveland, Ohio 44114
        Attention:  Revette Vickerstaff

Credit Contact:

        1 South Broad Street
        Philadelphia, Pennsylvania 19107
        Attention:  Thomas J. McDonnell
        Telecopy No.:  267-256-4001

Operations Contact:

        1900 E. 9th Street, Loc. 2077
        Cleveland, Ohio 44114
        Attention:  Revette Vickerstaff
        Telecopy No.: 216-488-7110

                         Schedule 14.13, Page 10 of 12

<PAGE>   129

                                 Schedule 14.13
                                     (cont.)

UNION BANK OF CALIFORNIA, N.A.

Applicable Lending Office for Base Rate Balances and Libor Rate Balances:

        Commercial Customer Service Unit
        1980 Saturn Street
        Monterey Park, California 91755
        Attention:  Ruby Gonzales

Credit Contact:

        350 California Street, 6th Floor
        San Francisco, California 94104
        Attention:  Cecilia Valente
        Telecopy No.:  415-705-7085

Operations Contact:

        Commercial Customer Service Unit
        1980 Saturn Street
        Monterey Park, California 91755
        Attention:  Ruby Gonzales

                         Schedule 14.13, Page 11 of 12

<PAGE>   130

                                 Schedule 14.13
                                     (cont.)

FIRSTAR BANK NA

Applicable Lending Office for Base Rate Balances and Libor Rate Balances:

        One Firstar Plaza
        Tram 12-3
        St. Louis, Missouri 63101
        Attention: Mary Birk

Credit Contact:

        One Firstar Plaza
        Tram 12-3
        St. Louis, Missouri 63101
        Attention:  Steve Reese
        Telecopy No.:  314-418-1963

Operations Contact:

        One Firstar Plaza
        Tram 12-3
        St. Louis, Missouri 63101
        Attention:  Connie Sweeney
        Telecopy No.:  920-426-7655

                         Schedule 14.13, Page 12 of 12

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00014-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00014-of-00352.parquet"}]]