Exhibit 10.1

VALUE CITY DEPARTMENT STORES, INC.
THE LEAD BORROWER
FOR:
VALUE CITY DEPARTMENT STORES, INC.
SHONAC CORPORATION
DSW SHOE WAREHOUSE, INC.
GRAMEX RETAIL STORES, INC.
FILENE'S BASEMENT, INC.
VALUE CITY LIMITED PARTNERSHIP
VALUE CITY OF MICHIGAN, INC.
GB RETAILERS, INC.
VCM, LTD.

THE BORROWERS

NATIONAL CITY COMMERCIAL FINANCE, INC.
ADMINISTRATIVE AGENT FOR
THE REVOLVING CREDIT LENDERS REFERENCED HEREIN

NATIONAL CITY COMMERCIAL FINANCE, INC.
FLEET RETAIL FINANCE INC.
AS COLLATERAL AGENTS

NATIONAL CITY BANK
AS LETTER OF CREDIT ISSUER

THE CIT GROUP/BUSINESS CREDIT, INC.
GENERAL ELECTRIC CAPITAL CORPORATION
AS CO-DOCUMENTATION AGENTS

FLEET RETAIL FINANCE INC.
WELLS FARGO RETAIL FINANCE, LLC
AS CO-SYNDICATION AGENTS

NATIONAL CITY BANK
FLEET SECURITIES, INC.
WELLS FARGO RETAIL FINANCE, LLC

2.1.     Establishment of  Revolving Credit.............................................................41
2.2.     Advances in Excess of Borrowing Base (OverLoans)...............................................42
2.3.     Risks of Value of Collateral...................................................................42
2.4.     Commitment to Make Revolving Credit Loans and Support Letters of Credit........................43
2.5.     Revolving Credit Loan Requests.................................................................43
2.6.     Suspension of Revolving Credit.................................................................45
2.7      Making of Revolving Credit Loans...............................................................45
2.8.     SwingLine Loans................................................................................46
2.9.     The Loan Account...............................................................................47
2.10.    The Revolving Credit Notes.....................................................................48
2.11.    Payment of The Loan Account....................................................................48
2.12.    Interest on Revolving Credit Loans. ...........................................................49
2.13.    Underwriting Fee; Collateral Monitoring Fee....................................................50
2.14.    Unused Line Fee................................................................................50
2.15.    Early Termination Fee..........................................................................51
2.16.    Concerning Fees................................................................................51
2.17.    Agent's and Revolving Credit Lenders' Discretion...............................................51
2.18.    Procedures For Issuance of L/Cs and Banker's Acceptances.......................................51
2.19.    Fees For L/Cs and Banker's Acceptances.........................................................54
2.20.    Concerning L/C's and Banker's Acceptances......................................................55
2.21.    Changed Circumstances..........................................................................57
2.22.    Designation of Lead Borrower as Borrowers' Agent...............................................57
2.23.    Revolving Credit Lenders' Commitments..........................................................58
2.24     PAYMENTS.......................................................................................60

         3.1.     Corporate Due Diligence........................................................................60
         3.2.     Opinions.......................................................................................61
         3.3.     Additional Documents...........................................................................61
         3.4.     Officers' Certificates.........................................................................61
         3.5.     Representations and Warranties.................................................................61
         3.6.     Minimum Day One Availability...................................................................61
         3.7.     Term Loans; Intercreditor Agreement............................................................61
         3.8      Repayment of Existing Indebtedness.............................................................61
         3.9      CONSENTS.......................................................................................61
         3.10     Appraisals and Commercial Finance Examinations.................................................61
         3.11     Material Agreements............................................................................62
         3.12     Litigation.....................................................................................62
         3.13     Perfection of Encumbrances.....................................................................62
         3.14.    All Fees and Expenses Paid.....................................................................62
         3.15     CASH MANAGEMENT................................................................................62
         3.16     INSURANCE......................................................................................62
         3.17.    No Loan Party in Default.......................................................................63
         3.18.    No Adverse Change..............................................................................63
         3.19     Certain Changes................................................................................63
         3.20.    Benefit of Conditions Precedent................................................................63

ARTICLE 4 - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:


         4.1.     Payment and Performance of Liabilities.........................................................63
         4.2.     Due Organization. Authorization. No Conflicts..................................................63
         4.3.     Trade Names....................................................................................65
         4.4.     Intellectual property..........................................................................65
         4.5.     Locations......................................................................................65
         4.6.     Encumbrances...................................................................................66
         4.7.     Indebtedness...................................................................................67
         4.8.     Insurance......................................................................................67
         4.9.     Licenses.......................................................................................68
         4.10.    Leases.........................................................................................68
         4.11.    Requirements of Law............................................................................68
         4.12.    Labor Relations................................................................................68
         4.13.    Maintain Properties............................................................................69
         4.14.    Taxes..........................................................................................70
         4.15.    No Margin Stock................................................................................71
         4.16.    Investment and Holding Company Status..........................................................71
         4.17.    ERISA..........................................................................................71
         4.18.    Hazardous Materials............................................................................72

         4.19.    Litigation.....................................................................................73
         4.20.    Dividends. Investments. Corporate Action.......................................................73
         4.21.    Loans..........................................................................................75
         4.22.    Protection of Assets...........................................................................76
         4.23.    Line of Business...............................................................................76
         4.24.    Affiliate Transactions.........................................................................76
         4.25       Additional Subsidiaries......................................................................77
         4.26.    Further Assurances.............................................................................77
         4.27.    ADEQUACY OF DISCLOSURE.........................................................................78
         4.28.    No Restrictions on Liabilities.................................................................79
         4.29.    Restrictions on Payment of Term Loans..........................................................79
         4.30     UNRESTRICTED SUBSIDIARIES......................................................................80
         4.31     NO BANKRUPTCY FILING...........................................................................80

ARTICLE 5      FINANCIAL REPORTING AND PERFORMANCE COVENANTS:


         5.1.     Maintain Records...............................................................................81
         5.2.     Access to Records..............................................................................81
         5.3.     Prompt Notice to Administrative Agent..........................................................82
         5.4.     Weekly Reports.................................................................................84
         5.5.     Monthly Reports................................................................................84
         5.6.     Quarterly Reports..............................................................................84
         5.7.     Annual Reports.................................................................................85
         5.8.     Officers' Certificates.........................................................................85
         5.9.     Inventories, Appraisals, and Audits............................................................86
         5.10.    Additional Financial Information...............................................................87
         5.11.    Information Delivered Pursuant to Article 5....................................................88

ARTICLE 6 - USE OF COLLATERAL:


         6.1.     Use of  Inventory Collateral...................................................................88
         6.2.     Inventory Quality..............................................................................89
         6.3.     Adjustments and Allowances.....................................................................89
         6.4.     Validity of Accounts...........................................................................89
         6.5.     Notification to Account Debtors................................................................89

ARTICLE 7 - CASH MANAGEMENT. PAYMENT OF LIABILITIES:


         7.1.     Depository Accounts............................................................................90
         7.2.     Credit Card Receipts...........................................................................90

         7.3.     The Administrative agent's, Collection, and Operating Accounts.................................91
         7.4.     Proceeds and Collections.......................................................................91
         7.5.     Payment of Liabilities.........................................................................92
         7.6.     The Operating Account..........................................................................94

ARTICLE 8 - GRANT OF SECURITY INTEREST:


         8.1.     Grant of Security Interest.....................................................................94
         8.2.     Extent and Duration of Security Interest.......................................................95

ARTICLE 9 - COLLATERAL AGENTS AS BORROWERS' ATTORNEY-IN-FACT:


         9.1.     Appointment as Attorney-In-Fact................................................................96
         9.2.     No Obligation to Act...........................................................................96

ARTICLE 10 - EVENTS OF DEFAULT:

         10.1.    Failure to Pay the Revolving Credit............................................................97
         10.2.    Failure To Make Other Payments.................................................................97
         10.3.    Failure to Perform Covenant or Liability (No Grace Period).....................................97
         10.4.    Financial Reporting Requirements...............................................................97
         10.5.    Failure to Perform Covenant or Liability (Grace Period)........................................98
         10.6.    Misrepresentation..............................................................................98
         10.7.    Acceleration of Other Debt. Breach of Lease....................................................98
         10.8.    Default Under Other Agreements.................................................................98
         10.9.    Uninsured Casualty Loss........................................................................98
         10.10.   Attachment. Judgment. Restraint of Business....................................................98
         10.11.   Business Failure...............................................................................99
         10.12.   Bankruptcy.....................................................................................99
         10.13.   Termination of Guaranty........................................................................99
         10.14.   Challenge to Loan Documents....................................................................99
         10.15.   Change in Control.............................................................................100

ARTICLE 11 - RIGHTS AND REMEDIES UPON DEFAULT:


         11.1     Acceleration..................................................................................100
         11.2.    Rights of Enforcement.........................................................................100
         11.3.    Sale of Collateral............................................................................101
         11.4.    Occupation of Business Location...............................................................102
         11.5.    Grant of Nonexclusive License.................................................................102

         11.6.    Assembly of Collateral........................................................................102
         11.7.    Rights and Remedies...........................................................................102

ARTICLE 12 - REVOLVING CREDIT FUNDINGS AND DISTRIBUTIONS:


         12.1.    Revolving Credit Funding Procedures...........................................................103
         12.2.    SwingLine Loans...............................................................................103
         12.3.    Administrative Agent's Covering of Fundings:..................................................104
         12.4.    Ordinary Course Distributions.................................................................106

ARTICLE 13 - ACCELERATION AND LIQUIDATION:


         13.1.    Acceleration Notices..........................................................................107
         13.2.    Acceleration..................................................................................107
         13.3.    Initiation of Liquidation.....................................................................107
         13.4.    Actions At and  Following Initiation of Liquidation...........................................108
         13.5.    Collateral Agents' Conduct of Liquidation.....................................................108
         13.6.    Distribution of Liquidation Proceeds:.........................................................108
         13.7.    Relative Priorities To Proceeds of Liquidation ...............................................109

ARTICLE 14 - THE AGENT:


         14.1.    Appointment of The Agent   ...................................................................110
         14.2.    Responsibilities of Agent.....................................................................110
         14.3.    Concerning Distributions By the Agent ........................................................111
         14.4.    Dispute Resolution:...........................................................................112
         14.5.    Distributions of Notices and of Documents.....................................................112
         14.6.    Confidential Information......................................................................113
         14.7.    Reliance by Agent ............................................................................113
         14.8.    Non-Reliance on Agent and Other Revolving Credit Lenders......................................113
         14.9.    Indemnification...............................................................................114
         14.10.   Resignation of Agent..........................................................................114
         14.11    Co-Lead Arrangers, Documentation Agent and Syndication Agent..................................115

ARTICLE 15 - ACTION BY AGENT - CONSENTS - AMENDMENTS - WAIVERS:


         15.1.    Administration of Credit Facilities...........................................................115
         15.2.    Actions Requiring or On Direction of Majority Lenders.........................................116
         15.3.    Actions Requiring or On Direction of SuperMajority Lenders....................................116

         15.4.    Action Requiring Certain Consent .............................................................117
         15.5.    Actions Requiring or Directed By Unanimous Consent............................................117
         15.6.    Actions Requiring SwingLine Lender Consent....................................................119
         15.7.    Actions Requiring Agent's Consent.............................................................119
         15.8.    Miscellaneous Actions.........................................................................119
         15.9.    Actions Requiring Lead Borrower's Consent.....................................................120
         15.10.   NonConsenting Revolving Credit Lender.........................................................121

ARTICLE 16 -      ASSIGNMENTS BY REVOLVING CREDIT LENDERS:


         16.1.    Assignments and Assumptions:..................................................................122
         16.2.    Assignment Procedures.........................................................................123
         16.3.    Effect of Assignment..........................................................................123

ARTICLE 17 - NOTICES:


         17.1.    Notice Addresses..............................................................................124
         17.2.    Notice Given..................................................................................125
         17.3.    Wire Instructions. Notice Given...............................................................126

ARTICLE 18 - TERM:


         18.1.    Termination of Revolving Credit...............................................................126
         18.2.    Actions On Termination........................................................................126

ARTICLE 19 - GENERAL:


         19.1.    Protection of Collateral......................................................................127
         19.2.    Publicity.....................................................................................127
         19.3.    Confidentiality...............................................................................127
         19.4.    Successors and Assigns........................................................................128
         19.5.    Severability..................................................................................128
         19.6.    Amendments.  Course of Dealing................................................................128
         19.7.    Power of Attorney.............................................................................129
         19.8.    Application of Proceeds.......................................................................129
         19.9.    Increased Costs...............................................................................129
         19.10.   Replacement of Revolving Credit Lender........................................................130
         19.11.   Costs and Expenses of the Agent and Issuer....................................................131
         19.12.   Copies and Facsimiles.........................................................................131

19.13.   New York Law..................................................................................132
19.14.   Consent to Jurisdiction.......................................................................132
19.15.   Indemnification...............................................................................132
19.16.   Rules of Construction.........................................................................133
19.17.   Agent's Consent...............................................................................135
19.18.   Participations:...............................................................................135
19.19.   Right of Set-Off..............................................................................135
19.20.   Pledges To Federal Reserve Banks: ............................................................135
19.21.   Maximum Interest Rate.........................................................................135
19.22.   Waivers. .....................................................................................136
19.23.   Additional Waivers. ..........................................................................136

1.1          :        Existing L/Cs and Banker's Acceptances
1.2          :        Facility Guarantors
1.3          :        Intercompany Notes
1.4          :        Exempt DDA
1.5          :        Unrestricted Subsidiaries
1.6          :        Existing Investments
1.7          :        Permitted Dispositions
2.5          :        Form of Loan Request
2.8(c)       :        SwingLine Note
2.10         :        Revolving Credit Note
2.23         :        Revolving Credit Lenders' Commitments
3.3          :        Additional Documents
4.2          :        Corporate Information
4.3          :        Trade Names
4.5          :        Locations, Leases, and Landlords
4.6(a)       :        Encumbrances
4.6(b)       :        Consigned Property
4.7          :        Indebtedness
4.8          :        Insurance Policies
4.9          :        Licenses
4.10         :        Capital Leases
4.12         :        Labor Contracts
4.14         :        Taxes
4.18(a)      :        Hazardous Materials
4.19         :        Litigation
4.21(e)      :        Existing Loans
4.21(f)      :        Intercompany Loans
5.4          :        Borrowing Base Certificate
5.5          :        Monthly Financial Reporting Requirements
7.1          :        DDA's.
7.2          :        Credit Card Arrangements
7.3          :        Administrative Agent's Accounts; Collection
                      Account Banks; Operating Accounts
16.2         :        Assignment / Assumption

THIS AGREEMENT is made between

National City Commercial Finance, Inc., an Ohio corporation with offices at 1965 E. Sixth Street, Cleveland, Ohio 44114, as administrative agent (in such capacity, herein the "ADMINISTRATIVE AGENT"), for the ratable benefit of the "REVOLVING CREDIT LENDERS", who are, at present, those financial institutions identified on the signature pages of this Agreement and who in the future are those Persons (if any) who become "Revolving Credit Lenders" in accordance with the provisions hereof;

National City Commercial Finance, Inc., and Fleet Retail Finance Inc., a Delaware corporation with offices at 40 Broad Street, Boston, Massachusetts 02109, as collateral agents (collectively, in such capacity, herein the "COLLATERAL AGENTS"), for the ratable benefit of the Revolving Credit Lenders,

and

The Revolving Credit Lenders;

and

Value City Department Stores, Inc. ( in such capacity, the "LEAD BORROWER"), an Ohio corporation with its principal executive offices at 3241 Westerville Road, Columbus, Ohio 43224-3751, as agent for the following (individually, a "BORROWER" and collectively, the "BORROWERS"):

Said Value City Department Stores, Inc. ("Value City"); and

Shonac Corporation ("Shonac"), an Ohio corporation with its principal executive offices at 4150 East Fifth Avenue, Columbus, Ohio 43219;

DSW Shoe Warehouse, Inc. ("DSW"), a Missouri corporation with its principal executive offices at 4150 East Fifth Avenue, Columbus, Ohio 43219; and

Gramex Retail Stores, Inc. ("Gramex"), a Delaware corporation with its principal

executive offices at 3241 Westerville Road, Columbus, Ohio 43224; and Filene's Basement, Inc. ("Filene's"), a Delaware corporation with its principal executive offices at 3241 Westerville Road, Columbus, Ohio 43224-3751; and

Value City Limited Partnership ("VCLP"), an Ohio limited partnership with its principal executive offices at 3241 Westerville Road, Columbus, Ohio 43224-3751; and

Value City of Michigan, Inc. ("VC Michigan"), a Michigan corporation with its principal executive offices at 36901 Warren Road, Westland, Michigan 48185; and

GB Retailers, Inc. ("GBR"), a Delaware corporation with its principal executive offices at 3241 Westerville Road, Columbus, Ohio 43224; and

VCM, Ltd. ("VCM"), an Ohio limited liability company with its principal executive offices at 3241 Westerville Road, Columbus, Ohio 43224-3751

in consideration of the mutual covenants contained herein and benefits to be derived herefrom,

WITNESSETH:

ARTICLE 1 - DEFINITIONS:

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

"ACCELERATION": The making of demand or declaration that any Indebtedness, not otherwise due and payable, is due and payable. Derivations of the word "Acceleration" (such as "Accelerate") are used with like meaning in this Agreement.

"ACCELERATION NOTICE": Written notice as follows:
(a) From the Administrative Agent to the Revolving Credit Lenders, as provided in Section 13.1(a).
(b) From the SuperMajority Lenders to the Administrative Agent, as provided in Section 13.1(b).

"ACCOUNT DEBTOR": Has the meaning given that term in the UCC.

"ACCOUNTS" include, without limitation, "accounts" as defined in the UCC, and also all: accounts, accounts receivable, receivables, and rights to payment (whether or not earned by performance) for: property that has been or is to be sold, leased,

licensed, assigned, or otherwise disposed of; services rendered or to be rendered; a policy of insurance issued or to be issued; a secondary obligation incurred or to be incurred; arising out of the use of a credit or charge card or information contained on or used with that card; winnings in a lottery or other game of chance; and also all Inventory which gave rise thereto, and all rights associated with such Inventory, including the right of stoppage in transit; all reclaimed, returned, rejected or repossessed Inventory (if any) the sale of which gave rise to any Account.

"ACH": Automated clearing house.

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

"ADMINISTRATIVE AGENT": NCCF, or its successors or assigns, in its capacity as administrative agent for the Revolving Credit Lenders hereunder.

"ADMINISTRATIVE AGENT'S ACCOUNT": Is defined in Section 7.3.

"ADMINISTRATIVE AGENT'S COVER": Defined in Section 12.3(c)(i).

"AFFILIATE": The following:

(a) With respect to any Person, any other Person that directly or, alone or with a group of related Persons whose interests taken as a whole, indirectly through one of more intermediaries, Controls, is Controlled by, or is under common Control with, such Person. Notwithstanding anything to the contrary herein contained, in no event shall the Agent, the Issuer, or any Revolving Credit Lender be considered an "Affiliate" of a Loan Party.

(b) Any Person: which is a parent, brother-sister or subsidiary, of a Borrower; whose enterprise's tax returns or financial statements are consolidated with those of a Borrower; which is a member of the same controlled group of corporations (within the meaning of Section 1563(a)(1), (2) and (3) of the Internal Revenue Code of 1986, as amended from time to time) of which any Borrower is a member; or Controls or is Controlled by any Borrower.

(c) With respect to the Loan Parties, without limiting the provisions of clauses (a) and (b) hereof, "Affiliate" includes Schottenstein Stores Corporation.

"AGENT": Collectively, the Administrative Agent and the Collateral Agents.

"AGENTS' RIGHTS AND REMEDIES": Is defined in Section 11.7.

"APPLICABLE LAW": As to any Person:(i) All statutes, rules, regulations, orders, or other requirements having the force of law and (ii) all court orders and injunctions, arbitrator's decisions, and/or similar rulings, in each instance ((i) and
(ii)) of or by any federal, state, municipal, and other governmental authority, or court, tribunal, panel, or other body which has or claims jurisdiction over such Person, or any property of such Person, or of any other Person for whose conduct such Person would be responsible.

"APPLICABLE MARGIN": The following percentages for Base Margin Loans and Eurodollar Loans based upon the following criteria:

--------------------------------------------------------------------------------
LEVEL        EXCESS AVAILABILITY          APPLICABLE       APPLICABLE MARGIN
                                          MARGIN FOR       FOR EURODOLLAR LOANS
                                          BASE MARGIN
                                          LOANS
--------------------------------------------------------------------------------
1            Greater than $150,000,000    0%               2.00%
--------------------------------------------------------------------------------

2            Greater than $100,000,000,   0%               2.25%
             but less than or equal to
             $150,000,000
--------------------------------------------------------------------------------

3            Greater than $75,000,000,    0.25%            2.50%
             but less than or equal to
             $100,000,000
--------------------------------------------------------------------------------

4            Less than or equal to        0.50%            2.75%
             $75,000,000
--------------------------------------------------------------------------------

The Applicable Margin shall initially be established at Level
2. Thereafter, the Applicable Margin shall be adjusted quarterly of the first day of each calendar quarter, commencing October 1, 2002, based upon the Average Excess Availability during the prior quarter, PROVIDED THAT in no event shall the Applicable Margin be established at Level 1 during the first six (6) months subsequent to the Closing Date. Upon the occurrence and during the continuance

of a Specified Event of Default, the Applicable Margin may, at the option of the Agent, be immediately increased to the percentages set forth in Level 4 (even if the Excess Availability requirements for another Level have been met) and interest shall be determined in the manner set forth in
Section 2.12(g).

"APPRAISED INVENTORY LIQUIDATION VALUE": The product of (a) the Cost of Eligible Inventory (net of Inventory Reserves) multiplied by
(b) that percentage, determined from the then most recent appraisal of each Division's Inventory undertaken initially at the Lead Borrower's request, and subsequently at the request of the Collateral Agents, to reflect the appraiser's estimate of the net recovery on such Division's Inventory in the event of an in-store liquidation of that Inventory.

"APPRAISED INVENTORY PERCENTAGE": 85%.

"ASSIGNING REVOLVING CREDIT LENDER": Defined in Section 16.1(a).

"ASSIGNMENT AND ACCEPTANCE": Defined in Section 16.2.

"AUTHORIZED OFFICER": Is defined in Section 5.8.

"AVAILABILITY": Gross Availability Minus the Excess Availability Reserve.

"AVAILABILITY RESERVES": Without duplication, such reserves as the Collateral Agents from time to time determine in the Collateral Agents' reasonable, good faith discretion as being appropriate to reflect the impediments to the Collateral Agents' ability to realize upon the Collateral. The Collateral Agents shall furnish the Lead Borrower with written notice two
(2) Business Days prior to imposing or changing any Availability Reserve (unless a Specified Event of Default then exists and is continuing, in which event no prior notice shall be required). Without limiting the generality of the foregoing, Availability Reserves may include (but are not limited to) reserves based on the following:

(i) Rent (but only if a landlord's waiver, acceptable to the Collateral Agents, has not been received by the Collateral Agents).
(ii) Customer Credit Liabilities.
(iii) Taxes and other governmental charges, including, ad valorem, personal property, and such other taxes which are reasonably likely to have priority over the Collateral Interests of the Collateral Agents in the Collateral.
(iv) L/C Landing Costs.
(v) Hedge Agreements.

Without limiting the rights of the Collateral Agents to establish or modify Availability Reserves, the initial Availability Reserves on the Closing Date shall be the following:

(a) Gift Certificates and Merchandise Credits
(in an amount equal to fifty percent (50%) of the outstanding gift certificates and merchandise credits reflected in the Borrowers' financial statements (which amount shall be updated no less frequently than every thirty (30) days and which financial statements will be maintained consistently with past practices)).
(b) Landlord Lien Reserve equal to two months' rent for all stores located in Pennsylvania and Virginia.
(c) Layaway Deposits (in an amount equal to one hundred percent (100%) of the outstanding layaway deposits reflected in the Borrowers' financial statements (which amount shall be updated no less frequently than every thirty
(30) days and which financial statements will be maintained consistently with past practices)).
(d) Hedge Agreements.

"AVERAGE EXCESS AVAILABILITY ": For any period, the sum of Excess Availability for each day comprising such period divided by the number of days in such period.

"BANKER'SACCEPTANCE": A time draft or bill of exchange relating to a Documentary Letter of Credit which has been accepted by the Issuer. Without limitation, Existing Banker's Acceptances shall be deemed to be Banker's Acceptances issued under this Agreement and shall be entitled to all of the benefits hereof.

"BANKER'S ACCEPTANCE FEES": The fees payable in respect of Banker's Acceptances pursuant to Section 2.19.

"BANKRUPTCY CODE": Title 11, U.S.C., as amended from time to time.

"BASE": For any day, a rate per annum equal to the higher of (a) the rate of interest which is established from time to time by NCB at its principal office in Cleveland, Ohio as its "prime rate" or "base rate" in effect, such rate to be adjusted automatically, without notice, as of the opening of business on the effective date of any change in such rate (it being agreed that (i) such rate is not necessarily the lowest rate of interest then available from NCB on fluctuating rate loans, and (ii) such rate may be established by NCB by public announcement or otherwise), and (b) the Federal Funds Effective Rate in effect on such day plus one-half of one percent (0.50%) per annum.

"BASE MARGIN LOAN": Each Revolving Credit Loan while bearing interest at the Base Margin Rate.

"BASE MARGIN RATE": The Applicable Margin for Base Margin Loans.

"BORROWER" and "BORROWERS":Is defined in the Preamble.

"BORROWING BASE": The aggregate of the following with respect to all Borrowers:

(a) The face amount of Eligible Credit Card Receivables multiplied by the Credit Card Advance Rate.

Plus

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

"BORROWING BASE CERTIFICATE": Is defined in Section 5.4.

"BUSINESS DAY": Any day other than (a) a Saturday or Sunday; (b) any day on which banks in Cleveland, Ohio, generally are not open to the general public for the purpose of conducting commercial banking business; (c) a day on which the principal office of the Administrative Agent is not open to the general public to conduct business; or (d) when used in connection with a Eurodollar Loan, any day on which banks are not open for dealings in dollar deposits in the London interbank market.

"BUSINESS PLAN": The business plan for the Loan Parties fiscal years 2002 through and including 2004 dated March 19, 2002, as set forth in that certain confidential side letter from the Lead Borrower to the Administrative Agent.

"CAPITAL EXPENDITURES": The expenditure of funds or the incurrence of liabilities which may be capitalized in accordance with GAAP.

"CAPITAL LEASE": Any lease which may be capitalized in accordance with GAAP.

"CASH CONTROL EVENT": Either (i) an Event of Default has occurred and is continuing, or (ii) the Average Excess Availability for any five (5) consecutive Business Days is less than Seventy Million Dollars ($70,000,000.00). For purposes hereof, the occurrence of a Cash Control Event shall be deemed continuing notwithstanding that Average Excess Availability may thereafter exceed the amount set forth in the preceding sentence unless and until Average Excess Availability exceeds such amounts for ninety (90) consecutive Business Days, in which case a Cash Control Event shall no longer be deemed to be continuing for purposes hereof; provided that a Cash Control Event shall be deemed continuing (even if Average Excess Availability exceeds the required

         amounts for ninety (90) consecutive Business Days) if a Cash
         Control Event has occurred and been discontinued on one (1)
         occasion during the preceding twelve month period.

"CCM":   Cerberus Partners, L.P., a Delaware limited partnership with
         its principal office at 450 Park Avenue, New York, New York
         10022.

"CCM     TERM LOAN FACILITIES": The term loan facilities entered into
         amongst the Borrowers and CCM, as agent, pursuant to a
         Financing Agreement dated June 11, 2002, in the aggregate
         principal amount of $100,000,000.00.

"CHANGE IN CONTROL": The occurrence of any of the following:

(a) The acquisition, by any group of Persons (within the meaning of the Securities Exchange Act of 1934, as amended) or by any Person, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission) of 25% or more of the issued and outstanding capital stock of the Lead Borrower having the right, under ordinary circumstances, to vote for the election of directors of the Lead Borrower, excluding from the foregoing any acquisition pursuant to warrants issued under the CCM Term Loan Facilities or the exercise of conversion rights under the Senior Convertible Facility.

(b) Other than as a result of the exercise by CCM of board representation rights under the Senior Convertible Facility, more than half of the Persons who were directors of the Lead Borrower on the first day of any period consisting of twelve (12) consecutive calendar months (the first of which twelve (12) month periods commencing with the first day of the month during which this Agreement was executed), cease, for any reason other than death, disability, or replacement by other Persons nominated by a nominating committee controlled by Schottenstein Stores Corporation to be directors of the Lead Borrower.

(c) The failure of the Lead Borrower to own, directly or indirectly, 95% of the capital stock of each of the other Loan Parties.

(d) The failure of Schottenstein Stores Corporation to possess, directly or indirectly, the power to cause the direction of the management and policies of the Borrowers.

"CHATTEL PAPER": Has the meaning given that term in the UCC.

"CLOSING DATE": The date upon which the conditions precedent set forth in Article 3 hereof have been satisfied or waived and the first Revolving Credit Loans are to be made and L/Cs to be issued hereunder.

"CO-LEAD ARRANGERS": Collectively, Fleet Securities Inc., Wells Fargo Retail Finance, LLC, The CIT Group/Business Credit, Inc., and
NCB.

"COLLATERAL": Is defined in Section 8.1.

"COLLATERAL AGENTS": Collectively, NCCF and FRF, in their capacity as collateral agents for the Revolving Credit Lenders hereunder.

"COLLATERAL INTEREST": Any interest in property to secure an obligation, including, without limitation, a security interest, mortgage, and deed of trust.

"COLLATERAL MONITORING FEE": Is defined in Section 2.13.

"COLLECTION ACCOUNT": Any DDA into which the proceeds of Collateral are transferred and concentrated, including, without limitation, transfers from other DDAs, credit card processors, checks, and accounts receivables. The Collection Accounts as of the Closing date are set forth on EXHIBIT 7.3 hereto.

"COLLECTION ACCOUNT AGREEMENT": An Agreement, in form satisfactory to the Collateral Agents, which Agreement recognizes the Collateral Agents' Collateral Interest in the contents of the DDA which is the subject of such Agreement and agrees that, after and during the continuance of a Cash Control Event, such contents shall be transferred only to the Administrative Agent's Account or as otherwise instructed by the Administrative Agent.

"COMMERCIAL TORT CLAIM": Has the meaning given that term in the UCC.

"COMPETITIVE BUSINESS": Any business or enterprise consisting of any of the following:

(a) Operation of Off-Price Discount Department Stores.
(b) Operation of Retail Furniture Stores and Related Accessories.
(c) Operation of Designer and Name Brand Shoe Stores.
(d) Operation of Licensed Shoe Departments.
(e) Furniture Manufacturing.
(f) Bedding Manufacturing.

"CONSENT": Actual consent given by the Revolving Credit Lender from whom such consent is sought; or the passage of seven (7) Business Days from receipt of written notice to a Revolving Credit Lender from any Agent of a proposed course of action to be followed by such Agent without such Revolving Credit Lender's giving such Agent written notice of that Revolving Credit Lender's objection to

such course of action, provided that the Agent may rely on such passage of time as consent by a Revolving Credit Lender only if such written notice states that consent will be deemed effective if no objection is received within such time period.

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

"CONTROL": The possession, direct or indirect, of the power to cause the direction of the management and policies of a Person whether through the ownership of voting securities, by contract or otherwise. A Person shall be deemed to have control of another Person if it is a "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 of the Securities Exchange Act of 1934, as amended) or a member of a "group" that is the beneficial owner, directly or indirectly, of 20% or more of the voting stock or equity interest in such Person. The terms "Controlled" and "Controlling" as used herein are intended to have the same meaning as "Control."

"COST": The lower of cost or market, determined in each case in accordance with GAAP.

"COSTS OF COLLECTION": Includes, without limitation, all reasonable attorneys' fees and reasonable out-of-pocket expenses incurred by the Agents' and Issuer's attorneys, and all reasonable out-of-pocket costs incurred by the Agents and the Issuer in the administration of the Liabilities and/or the Loan Documents, including, without limitation, reasonable costs and expenses associated with travel on behalf of the Agents and Issuer, where such costs and expenses are related to or in respect of the Agents' and Issuer's: administration and management of the Liabilities; negotiation, documentation, and amendment of any Loan Document; or efforts to preserve, protect, collect, or enforce the Collateral, the Liabilities, and/or the Agents' Rights and Remedies and/or any of the rights and remedies of the Agents and Issuer against or in respect of any guarantor or other Person liable in respect of the Liabilities (whether or not suit is instituted in connection with such efforts). "Costs of Collection" also includes the reasonable fees and expenses of Lenders' Special Counsel. The Costs of Collection are Liabilities, and at the Administrative Agent's option may bear interest at the then effective Base Margin Rate after such time as they have been added to the Loan Account.

"CREDIT CARD ADVANCE RATE": 85%

"CUSTOMERCREDIT LIABILITY": Gift certificates, customer deposits, merchandise credits, layaway obligations, frequent shopping programs, and similar liabilities of any Borrower to its retail customers and prospective customers.

"DDA": Any checking or other demand daily depository account maintained by any Borrower other than any Exempt DDA.

"DEFAULT": Any occurrence, circumstance, or state of facts with respect to a Borrower which (a) is an Event of Default; or (b) would become an Event of Default if any requisite notice were given and/or any requisite period of time were to run and such occurrence, circumstance, or state of facts were not cured within any applicable grace period.

"DELINQUENT REVOLVING CREDIT LENDER": Defined in Section 12.3(c).

"DEPOSIT ACCOUNT": Has the meaning given that term in the UCC and also includes all demand, time, savings, passbook, or similar accounts maintained with a bank.

"DIVISION(S)": The various business segments of the Borrowers, such being the DSW/Shonac Business, the Filene's Business, and the Value City Business.

"DOCUMENTS": Has the meaning given that term in the UCC.

"DOCUMENTS OF TITLE": Has the meaning given that term in the UCC.

"DSW": Has the meaning given that term in the Preamble hereto.

AVAILABILITY":   The lesser of:

                 (a) the result of the following:

                 (i)     The lesser of
                         (A) The Revolving Credit Ceiling
                             or
                         (B) The DSW/Shonac Borrowing Base
                Minus
                 (ii)    The aggregate unpaid balance of the
                         Loan Account attributable to
                         Revolving Credit Loans made to DSW
                         or Shonac.
                 Minus
                 (iii)   The aggregate undrawn Stated Amount
                         of all then outstanding L/Cs and
                         Banker's Acceptances issued for the
                         account of DSW or Shonac.
                 Minus
                 (iv)    The aggregate of the Availability Reserves
                         attributable to

DSW and Shonac.

or

(b) Availability.

"DSW/SHONAC BORROWING BASE": The aggregate of the following:

(a) The face amount of Eligible Credit Card Receivables of DSW and Shonac multiplied by the Credit Card Advance Rate.

Plus

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

"DSW/SHONAC BUSINESS": Collectively, the businesses operated by DSW Shoe Warehouse Inc. and Shonac Corporation.

"ELIGIBLE ASSIGNEE": A bank, insurance company, or company engaged in the business of making commercial loans having a combined capital and surplus in excess of $500,000,000 or any Affiliate of any Revolving Credit Lender, or any Person to whom a Revolving Credit Lender assigns its rights and obligations under this Agreement as part of a programmed assignment and transfer of such Revolving Credit Lender's rights in and to a material portion of such Revolving Credit Lender's portfolio of asset based credit facilities. In no event shall an "Eligible Assignee" include a Person who is engaged in a Competitive Business with any Loan Party, and as long as Schottenstein Stores Corporation remains in Control of the Borrowers, an "Eligible Assignee" shall in no event include a Person which is engaged in a Competitive Business or a Related Business with Schottenstein Stores Corporation.

"ELIGIBLE CREDIT CARD RECEIVABLES":Accounts due on a non-recourse basis from major or private label credit card processors, which have been outstanding for less than five (5) Business Days.

"ELIGIBLE INVENTORY": Such of the Borrowers' Inventory, inclusive of Eligible L/C Inventory, at such locations, and of such types, character, qualities and quantities, as the Collateral Agents in their reasonable, good faith discretion from time to time determine to be acceptable for borrowing, as to which Inventory, the Collateral Agents have a perfected security interest which is prior and superior to all security interests, claims, and Encumbrances. Without limiting the foregoing,

Inventory acquired in a Permitted Acquisition shall not be deemed Eligible Inventory unless the Collateral Agents otherwise agree.

"ELIGIBLEL/C INVENTORY": Without duplication of other Eligible Inventory, Inventory not yet delivered to the Borrowers, the purchase of which is supported by a documentary L/C or Banker's Acceptance then having an initial expiry of sixty
(60) or less days, provided that

(a) Such Inventory is of such types, character, qualities and quantities (net of Inventory Reserves) as the Collateral Agents in their reasonable, good faith discretion from time to time determine to be eligible for borrowing and it would otherwise constitute Eligible Inventory; and

(b) The documentary L/C supporting such purchase names the Collateral Agents as consignee of the subject Inventory or the Collateral Agents have control over the documents which evidence ownership of the subject Inventory (such as by the providing to the Collateral Agents of a Customs Brokers Agreement in form reasonably satisfactory to the Collateral Agents).

"EMPLOYEE BENEFIT PLAN": An employee benefit pension benefit plan that is covered by Title IV of ERISA or is subject to the minimum finding standards under Section 412 of the Internal Revenue Code of 1986, as amended from time to time, and as to which a Borrower or any ERISA Affiliate may have any liability.

"ENCUMBRANCE": Each of the following:

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

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

"END DATE": The date upon which all of the following conditions are met: (a) all payment Liabilities described in Section 18.2(a) have been paid in full (b) satisfactory arrangements with respect to L/Cs and Banker's Acceptances have been made in accordance with the provisions of Section 18.2(b), and (c) all

obligations of any Revolving Credit Lender to make loans and advances and to provide other financial accommodations to the Borrowers hereunder shall have been irrevocably terminated.

"ENVIRONMENTAL ACTIONS": Any complaint, summons, citation, notice, directive, order, claim, litigation, investigation, judicial or administrative proceeding, judgment, letter or other communication from any Person or Governmental Authority involving violations of Environmental Laws or Releases of Hazardous Materials (i) from any assets, properties or businesses owned or operated by any Loan Party or any of its Subsidiaries or any predecessor in interest; or (ii) onto any facilities which received Hazardous Materials generated by any Loan Party or any of its Subsidiaries or any predecessor in interest.

"ENVIRONMENTAL LAWS": The Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601, ET SEQ.), the Hazardous Materials Transportation Act (49 U.S.C.
Section 1801, ET seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901, ET SEQ.), the Federal Clean Water Act (33 U.S.C. Section 1251 ET SEQ.), the Clean Air Act (42 U.S.C. Section 7401 ET SEQ.), the Toxic Substances Control Act (15 U.S.C. Section 2601 ET SEQ.) and the Occupational Safety and Health Act (29 U.S.C. Section 651 ET SEQ.), as such laws may be amended or otherwise modified from time to time, and any other present or future federal, state, local or foreign statute, ordinance, rule, regulation, order, judgment, decree, permit, license or other binding determination of any Governmental Authority imposing liability or establishing standards of conduct for protection of the environment or other government restrictions relating to the protection of the environment or the Release, deposit or migration of any Hazardous Materials into the environment.

"ENVIRONMENTAL LIABILITIES AND COSTS": All liabilities, monetary obligations, remedial actions, losses, damages, punitive damages, consequential damages, treble damages, reasonable costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants and costs of investigations and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand by any Governmental Authority or any third party, and which relate to any environmental condition or a Release of Hazardous Materials from or onto (i) any property presently or formerly owned by any Loan Party or any of its Subsidiaries or (ii) any facility which received Hazardous Materials generated by any Loan Party or any of its Subsidiaries.

"ENVIRONMENTAL LIEN": Any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs.

"EQUIPMENT": Includes, without limitation, "equipment" as defined in the UCC, and also all furniture, store fixtures, motor vehicles, rolling stock, machinery, office

equipment, plant equipment, tools, dies, molds, and other goods, property, and assets which are used and/or were purchased for use in the operation or furtherance of a Borrowers' business, and any and all accessions or additions thereto, and substitutions therefor.

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

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

"EUROCURRENCY RESERVE PERCENTAGE": For any Interest Period with respect to a Eurodollar Loan, as of any date of determination, the aggregate of the then stated maximum reserve percentages (including any marginal, special, emergency or supplemental reserves), expressed as a decimal, applicable to such Interest Period (if more than one such percentage is applicable, the daily average of such percentages for those days in such Interest Period during which any such percentages shall be so applicable) by the Board of Governors of the Federal Reserve System, any successor thereto, or any other banking authority, domestic or foreign, to which the Administrative Agent or any Revolving Credit Lender may be subject in respect of eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Federal Reserve Board) or in respect of any other category of liabilities including deposits by reference to which the rate of interest on Eurodollar Loans is determined or any category or extension of credit or other assets that include Eurodollar Loans. as defined in such regulations. For purposes hereof, such reserve requirements shall include, without limitation, those imposed under Regulation D of the Federal Reserve Board and the Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities subject to reserve requirements without benefit of credits for proration, exceptions or offsets which may be available to any Revolving Credit Lender under Regulation D.

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

"EURODOLLAR LOAN": Any Revolving Credit Loan which bears interest at a Eurodollar Rate.

"EURODOLLAR MARGIN": The Applicable Margin for Eurodollar Loans.

"EURODOLLAR OFFER RATE": For any Interest Period for Eurodollar Loans, the quotient

(rounded upwards, if necessary, to the next 1/100 of 1%) of:
(x) the per annum rate of interest determined by the Administrative Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) as of approximately 11:00 a.m. (London time) two Eurodollar Business Days prior to the beginning of such Interest Period pertaining to such Eurodollar Loan, appearing on page 3770 of the Dow Jones Market Services (or any successor or substitute page of such Service, or any successor to or substitute for such Service providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to deposits in U.S. Dollars in the applicable Eurodollar interbank market) as the rate in the applicable Eurodollar interbank market for deposits in U.S. Dollars in immediately available funds with a maturity comparable to such Interest Period DIVIDED BY (y) a number equal to 1.00 minus the Eurocurrency Reserve Percentage. In the event that such rate quotation is not available for any reason, then the rate (for purposes of clause (x) hereof) shall be the rate, determined by the Administrative Agent as of approximately 11:00 a.m. (London time) two Eurodollar Business Days prior to the beginning of such Interest Period pertaining to such Eurodollar Loan, to be the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the per annum rates at which deposits in U.S. Dollars in immediately available funds in an amount comparable to NCCF's Revolving Credit Commitment Percentage of such Eurodollar Loan and with a maturity comparable to such Interest Period are offered to the prime banks by leading banks in the applicable Eurodollar interbank market. The Eurodollar Offer Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Percentage.

"EURODOLLAR RATE": That per annum rate which is the aggregate of the Eurodollar Offer Rate plus the Eurodollar Margin.

"EVENTS  OF DEFAULT": Is defined in Article 10. An "Event of Default"
         shall be deemed to have occurred and to be continuing unless
         and until that Event of Default has been duly waived by the
         Administrative Agent in writing or cured to the satisfaction
         of the Administrative Agent.

"EXCESS  AVAILABILITY": As of any date of determination, Gross
         Availability less all then held checks, accounts payable which
         are beyond customary payment terms consistent with past
         practice (other than accounts payable which are being disputed
         in good faith and for which the Borrowers have adequate
         reserves), and overdrafts (other than daylight overdrafts, as
         defined in the Federal Reserve Daylight Credit Policies in
         effect from time to time).

"EXCESS AVAILABILITY RESERVE": $35,000,000.

"EXCLUDED PROPERTY": Shall mean the following:

(a) the Equipment that is subject to a "purchase money security interest", as such term is now or hereafter defined in the UCC, which (x) constitutes a Permitted Encumbrance under this Agreement and (y) prohibits the creation by a Loan Party of a junior security interest therein, unless the holder thereof has consented to the creation of such a junior security interest; or

(b) any General Intangibles, other than Payment Intangibles, if and only to the extent that (i) in the case of any such General Intangible, (x) any contract evidencing such General Intangible contains a valid and effective contractual restriction or limitation which prohibits the grant or creation of a security interest therein, or (y) a valid and effective restriction or limitation imposed by applicable law, regulation, rule, order or other directive of any governmental body, agency or authority, or the order of any court of competent jurisdiction, prohibits the grant or creation of a security interest in such General Intangible, or (ii) in the case of any such General Intangible, such General Intangible would be subject to loss or forfeiture upon the grant or creation of a security interest therein by reason of (x) a valid and effective contractual restriction or limitation contained in any contract evidencing such General Intangible, or (y) a valid and effective restriction or limitation imposed by applicable law, regulation, rule, order or other directive of any governmental body, agency or authority, or the order of any court of competent jurisdiction.

(c) Inventory or other property held pursuant to consignment arrangements in which a Borrower is the consignee to the extent that the consignor has properly perfected its interest therein;

(d) all motor vehicles owned by any Loan Party; or

(e) any Exempt DDA.

PROVIDED THAT the Proceeds realized from any of the foregoing shall not be deemed Excluded Property but shall constitute Collateral.

"EXEMPT DDA": Those depository accounts described on EXHIBIT 1.4 hereto, and, in addition, any depository account maintained by any Borrower, the only contents of which may be transfers from the Operating Account and actually used solely (i) for petty cash purposes; (ii) for payroll; (iii) for charitable contributions; or (iv) for medical, pension, benefits, VEBA, employees, taxes, stock options and like special purpose accounts.

"EXISTING BANKER'S ACCEPTANCES": Those Banker's Acceptances described
on EXHIBIT

1.1 hereto which have been issued by NCB under the Borrowers' existing credit facility with, among others, NCB.

"EXISTING L/CS": Those letters of credit described on EXHIBIT 1.1 hereto which have been issued by NCB under the Borrowers' existing credit facility with, among others, NCB.

"FACILITY GUARANTEE": The Guaranty executed by the Facility Guarantors in favor of the Agent, the Issuer and the Revolving Credit Lenders.

"FACILITY GUARANTORS": Each Borrower, the Persons listed on EXHIBIT 1.2 hereto and all other Subsidiaries of each Borrower now existing or hereafter created, other than Unrestricted Subsidiaries.

"FACILITY GUARANTORS COLLATERAL DOCUMENTS": All security agreements, mortgages, pledge agreements, deeds of trust, and other instruments, documents or agreements executed and delivered by any Facility Guarantor to secure the Facility Guarantee.

"FARM PRODUCTS": Has the meaning given that term in the UCC.

"FEDERAL FUNDS EFFECTIVE RATE": For any day, the rate per annum
(rounded upwards, if necessary, to the nearest 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 Effective Rate for such day shall be such rate on such transactions on the immediately preceding Business Day as so published on the next succeeding Business Day, and (ii) if such rate is not so published for any Business Day, the Federal Funds Effective Rate for such day shall be the average of quotations for such day on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by the Administrative Agent.

"FEE LETTER": That letter dated on or about the Closing Date and styled "Fee Letter" between the Lead Borrower and the Administrative Agent, as such letter may from time to time be amended.

"FILENE'S": Has the meaning given that term in the Preamble hereto.

"FILENE'S
AVAILABILITY": The lesser of:

(a) the result of the following:

(i) The lesser of (A) The Revolving Credit Ceiling or (B) The Filene's Borrowing Base Minus
(ii) The aggregate unpaid balance of the Loan Account attributable to Revolving Credit Loans made to Filene's.

Minus

(iii) The aggregate undrawn Stated Amount of all then outstanding L/Cs and Banker's Acceptances issued for the account of Filene's.

Minus

(iv) The aggregate of the Availability Reserves attributable to Filene's.

or

(b) Availability.

"FILENE'S BORROWING BASE": The aggregate of the following:

(a) The face amount of Eligible Credit Card Receivables of Filene's multiplied by the Credit Card Advance Rate.

Plus

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

"FILENE'S BUSINESS": The businesses operated by Filene's Basement, Inc.

"FISCAL": When followed by "month", "quarter" or "year", the relevant fiscal period based on the Borrowers' fiscal year and accounting conventions.

"FIXTURES": Has the meaning given that term in the UCC.

"FRF":   Fleet Retail Finance Inc., a Delaware corporation.

"GAAP":  Generally accepted accounting principles in effect from time
         to time in the United States, applied on a consistent basis,
         provided that "GAAP" shall mean

generally accepted accounting principles consistent with those used in the preparation of the financial statements described herein.

"GBR": Has the meaning given that term in the Preamble hereto.

"GENERAL INTANGIBLES": Includes, without limitation, "general intangibles" as defined in the UCC; and also all: rights to payment for credit extended; deposits; amounts due to any Borrower; credit memoranda in favor of any Borrower; warranty claims; tax refunds and abatements; insurance refunds and premium rebates; all means and vehicles of investment or hedging, including, without limitation, options, warrants, and futures contracts; records; customer lists; telephone numbers; goodwill; causes of action; judgments; payments under any settlement or other agreement; literary rights; rights to performance; royalties; license and/or franchise fees; rights of admission; licenses; franchises; license agreements, including all rights of any Borrower to enforce same; permits, certificates of convenience and necessity, and similar rights granted by any governmental authority; patents, patent applications, patents pending, and other intellectual property; internet addresses and domain names; developmental ideas and concepts; proprietary processes; blueprints, drawings, designs, diagrams, plans, reports, and charts; catalogs; manuals; technical data; computer software programs (including the source and object codes therefor), computer records, computer software, rights of access to computer record service bureaus, service bureau computer contracts, and computer data; tapes, disks, semi-conductors chips and printouts; trade secrets rights, copyrights, mask work rights and interests, and derivative works and interests; user, technical reference, and other manuals and materials; trade names, trademarks, service marks, and all goodwill relating thereto; applications for registration of the foregoing; and all other general intangible property of any Borrower in the nature of intellectual property; proposals; cost estimates, and reproductions on paper, or otherwise, of any and all concepts or ideas, and any matter related to, or connected with, the design, development, manufacture, sale, marketing, leasing, or use of any or all property produced, sold, or leased, by any Borrower or credit extended or services performed, by any Borrower, whether intended for an individual customer or the general business of any Borrower, or used or useful in connection with research by any Borrower.

"GOODS": Has the meaning given that term in the UCC, and also includes all things movable when a security interest therein attaches and also all computer programs embedded in goods and any supporting information provided in connection with a transaction relating to the program if (i) the program is associated with the goods in such manner that it customarily is considered part of the goods or (ii) by becoming the owner of the goods, a Person acquires a right to use the program in connection with the goods.

"GOVERNMENTAL AUTHORITY": Any nation or government, any federal, state, city, town, municipality, county, local or other political subdivision thereof or thereto and any department, commission, board, bureau, instrumentality, agency or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

"GRAMEX": Has the meaning given that term in the Preamble hereto.

"GROSS AVAILABILITY": The result of the following in the aggregate with respect to all Borrowers:

(i) The lesser of (A) The Revolving Credit Ceiling or (B) The Borrowing Base Minus
(ii) The aggregate unpaid balance of the Loan Account.

Minus

(iii) The aggregate undrawn Stated Amount of all then outstanding L/Cs and Banker's Acceptances.

Minus

(v) The aggregate of the Availability Reserves.

"HAZARDOUS MATERIALS": (a) Any element, compound or chemical that is defined, listed or otherwise classified as a contaminant, pollutant, toxic pollutant, toxic or hazardous substance, extremely hazardous substance or chemical, hazardous waste, special waste, or solid waste under Environmental Laws or that is reasonably likely to cause immediately, or at some reasonably foreseeable future time, harm to or have an adverse effect on, the environment or risk to human health or safety, including, without limitation, any pollutant, contaminant, waste, hazardous waste, toxic substance or dangerous good which is defined or identified in any Environmental Law and which is present in the environment in such quantity or state that it contravenes any Environmental Law; (b) petroleum and its refined products; (c) polychlorinated biphenyls; (d) any substance exhibiting a hazardous waste characteristic, including, without limitation, corrosivity, ignitability, toxicity or reactivity as well as any radioactive or explosive materials; and (e) any raw materials, building components
(including, without limitation, asbestos-containing materials)
and manufactured products containing hazardous substances listed or classified as such under Environmental Laws.

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

without limitation, the Hedge Agreement between the Lead Borrower and NCB dated March 28, 2000.

"INDEBTEDNESS": Without duplication, all obligations, contingent and otherwise, that in accordance with GAAP should be classified upon the balance sheet of any Borrower and/or the consolidated balance sheet of the Borrowers as liabilities, other than trade payables, deferred rent, or accrued expenses incurred in the ordinary course of business or to which reference should be made by footnotes thereto, including in any event and whether or not so classified:

(a) All obligations in respect of money borrowed (including any indebtedness which is non-recourse to the credit of such Person but which is secured by an Encumbrance on any asset of such Person) whether or not evidenced by a promissory note, bond, debenture or other written obligation to pay money.

(b) All obligations evidenced by bonds, notes, debentures or other similar instruments.

(c) All obligations in connection with Hedge Agreements.

(d) All obligations in connection with any letter of credit or acceptance transaction (including, without limitation, the face amount of all letters of credit and acceptances issued for the account of such Person or reimbursement on account of which such Person would be obligated).

(e) All obligations in connection with the sale or discount of accounts receivable or chattel paper of such Person.

(f) All obligations on account of deposits or advances other than deferred rent incurred in the ordinary course of business.

(g) All obligations as lessee under Capital Leases; and

(h) All obligations in connection with any sale and leaseback transaction.

"Indebtedness" also includes:

(x) Indebtedness of others secured by an Encumbrance on any asset of such Person, whether or not such Indebtedness is assumed by such Person.

(y) Any guaranty, endorsement, suretyship or other undertaking in respect of Indebtedness pursuant to which that Person may be liable on account of any obligation of any third party; and

(z) The Indebtedness of a partnership or joint venture for which such Person is liable as a general partner or joint venturer.

"INDEMNIFIED PERSON": Is defined in Section 19.15.

"INFORMATION": Is defined in Section 19.3.

"INSTRUMENTS": Has the meaning given that term in the UCC.

"INTERCOMPANY NOTES": The promissory notes and other evidences of Indebtedness amongst the Loan Parties outstanding from time to time. The Intercompany Notes outstanding as of the Closing Date are set forth on EXHIBIT 1.3 hereto.

"INTERCREDITOR AGREEMENT": The Intercreditor and Lien Subordination Agreement of even date entered into amongst the Agent, on behalf of the Revolving Credit Lenders, CCM, as agent under the CCM Term Loan Facilities, and CCM, as agent under the Senior Convertible Facility.

"INTEREST PAYMENT DATE": With reference to:

Each Eurodollar Loan: The last day of the Interest Period relating thereto (and on the last day of the third month for any such loan which has a six month Interest Period); the Termination Date; and the End Date.

Each Base Margin Loan: The first day of each month; the Termination Date; and the End Date.

"INTEREST PERIOD": The following:

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

(b) With respect to each Base Margin Loan: Subject to Subsection (c), below, the period commencing on the date of the making or continuation of or

conversion to such Base Margin Loan and ending on that date
(i) as of which the subject Base Margin Loan is converted to a Eurodollar Loan, as the Lead Borrower may elect by notice
(pursuant to Section 2.5) to the Administrative Agent, or (ii) on which the subject Base Margin Loan is paid by the Borrowers.

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

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

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

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

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

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

"INVENTORY": Includes, without limitation, "inventory" as defined in the UCC and also all: (a) Goods which are leased by a Person as lessor; are held by a Person for sale or lease or to be furnished under a contract of service; are furnished by a Person under a contract of service; or consist of raw materials, work in process, or materials used or consumed in a business; (b) Goods of said description in transit; (c) Goods of said description which are returned, repossessed and rejected; (d) packaging, advertising, and shipping materials related to any of the foregoing; (e) all names, marks, and General Intangibles affixed or to be affixed or associated thereto; and (f) Documents and Documents of Title which represent any of the foregoing.

"INVENTORY ADVANCE RATE": As to any Borrower, the following percentages of the Cost of Eligible Inventory of such Borrower specified below for the periods indicated:

--------------------------------------------------------------------------------------------------------------------
Borrower                                 Period                                Inventory Advance Rate
--------------------------------------------------------------------------------------------------------------------
Filene's Basement, Inc.                  December 15 through                   73%
                                         August 31 of each year

                                         September 1 through December 14 of
                                         each year                             80%
--------------------------------------------------------------------------------------------------------------------

DSW Shoe Warehouse Inc.                  October 15 through March 31 of each   74%
                                         year

                                         April 1 through October 14 of each
                                         year                                  78%
--------------------------------------------------------------------------------------------------------------------

Shonac Corporation                       December 15 through October 31 of     77%
                                         each year

                                         November 1 through December 14 of
                                         each year                             83%
--------------------------------------------------------------------------------------------------------------------

All other Borrowers                      December 15 through October 31 of     67%
                                         each year

                                         November 1 through December 14 of
                                         each year                             79%
--------------------------------------------------------------------------------------------------------------------

Any Inventory Advance Rate may be increased by the Collateral Agents from time to time in their sole discretion by an amount not to exceed two percent (2%) from the rates set forth above. Without limiting the generality of the Collateral Agent's discretion, the increase of an Inventory Advance Rate by the Collateral Agents shall not obligate the Collateral Agents to maintain such increased Inventory Advance Rate for any specific period of time and the Collateral Agents may reduce the Inventory Advance Rate (but not below the levels set forth in the above table) at any time in their sole discretion. The increase of the Inventory Advance Rate by the Collateral Agents on any one occasion shall not obligate them to increase the Inventory Advance Rate on any other occasion.

"INVENTORY RESERVES": Without duplication, such Reserves as may be established from time to time by the Collateral Agents in the Collateral Agents' reasonable, good faith discretion with respect to the determination of the saleability, at retail, of the Eligible Inventory or which reflect such other factors as affect the market value of the Eligible Inventory. The Collateral Agents shall furnish the Lead Borrower with notice two (2) Business Days prior to imposing or changing any Inventory Reserve (unless a Specified Event of Default then exists and is

continuing, in which event no prior notice shall be required). Without limiting the rights of the Collateral Agents to establish or modify Inventory Reserves, the initial Inventory Reserves on the Closing Date shall be the following:

(a) Shrinkage.
(b) Consigned Inventory.
(c) Damaged Goods.

"INVESTMENT PROPERTY": Has the meaning given that term in the UCC.

"ISSUER":The issuer of any L/C or Banker's Acceptance. The Issuer shall be NCB or such other Revolving Credit Lender (or Affiliate of a Revolving Credit Lender) as the Administrative Agent may, in its reasonable, good faith discretion, select.

"L/C": Any letter of credit, the issuance of which is procured by the Administrative Agent for the account of any Borrower. Without limitation, Existing L/Cs shall be deemed to be L/Cs issued under this Agreement and shall be entitled to all of the benefits hereof.

"L/C LANDING COSTS": To the extent not included in the Stated Amount of an L/C or a Banker's Acceptance, customs, duty, freight, and other out-of-pocket costs and expenses which will be expended to "land" the Inventory, the purchase of which is supported by such L/C or Banker's Acceptance.

"L/C FEES": The fees payable in respect of L/Cs pursuant to Section 2.19.

"LEAD BORROWER": Defined in the Preamble.

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

"LEASEHOLD INTEREST": Any interest of a Borrower as lessee under any Lease.

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

"LETTER-OF-CREDIT RIGHT": Has the meaning given that term in UCC and also refers to any right to payment or performance under an L/C, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance.

"LIABILITIES": Includes, without limitation, the following:

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

(i) Any and all direct and indirect liabilities, debts, and obligations of each Borrower to any Agent or any Revolving Credit Lender, each of every kind, nature, and description.

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

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

(iv) All interest, fees, and charges and other amounts which may be charged by any Agent or any Revolving Credit Lender to any Borrower and/or which may be due from any Borrower to any Agent or any Revolving Credit Lender from time to time.

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

(vi) Any and all covenants of each Borrower to or with any Agent or any Revolving Credit Lender and any and all obligations of each Borrower to act or to refrain from acting in accordance with any agreement between that Borrower and any Agent or any Revolving Credit Lender or instrument furnished by that Borrower to any Agent or any Revolving Credit Lender.

(vii) Each of the foregoing as if each reference to the "any Agent or any Revolving Credit Lender" were to each Affiliate of each Agent.

(b) Any and all direct or indirect liabilities, debts, and obligations of each Borrower to any Agent or any Affiliate of any Agent, each of every kind, nature, and description owing on account of any service or accommodation provided to, or for the account of any Borrower pursuant to this or any other Loan Document, including cash management services, Hedge Agreements, and the issuances of L/C's and Banker's Acceptances.

"LIQUIDATION": The exercise, by the Collateral Agents, of those rights accorded to the Collateral Agents under the Loan Documents as a creditor of the Borrowers following and on account of the occurrence and continuance of an Event of Default looking towards the realization on the Collateral. Derivations of the word "Liquidation" (such as "Liquidate") are used with like meaning in this Agreement.

"LOAN ACCOUNT": Is defined in Section 2.9.

"LOAN COMMITMENT": With respect to each Revolving Credit Lender, that respective Revolving Credit Lender's Revolving Credit Dollar Commitment.

"LOAN DOCUMENTS": This Agreement, the Facility Guarantee, the Facility Guarantors Collateral Documents, the Intercreditor Agreement, and each other instrument or document from time to time executed and/or delivered in connection with the arrangements contemplated hereby or in connection with any transaction with any Agent or any Affiliate of any Agent related to this Agreement, including, without limitation, any transaction which arises out of any cash management, depository, investment, banker's acceptance, letter of credit, interest rate protection, Hedge Agreement, or other services provided by any Agent or any Affiliate of any Agent, as each may be amended from time to time.

"LOAN PARTY OR LOAN PARTIES":Collectively, the Borrowers and the Facility Guarantors.

"MAJORITY LENDERS": (a) If there are two or fewer Revolving Credit Lenders who are not Delinquent Revolving Credit Lenders: All Revolving Credit Lenders who are not Delinquent Revolving Credit Lenders.

(b) If there are three or more Revolving Credit Lenders who are not Delinquent Revolving Credit Lenders:
Revolving Credit Lenders (other than Delinquent Revolving Credit Lenders) holding more than 50% of the Revolving Credit Commitment Percentages (calculated without regard to any Revolving Credit Commitment Percentages of any Delinquent Revolving Credit Lender).

"MATERIAL ACCOUNTING CHANGE": Any change in GAAP applicable to accounting periods subsequent to the Borrowers' fiscal year most recently completed prior to

the execution of this Agreement, which change has a material effect on the Borrowers' Consolidated financial condition or operating results, as reflected on financial statements and reports prepared by or for the Borrowers, when compared with such condition or results as if such change had not taken place.

"MATERIAL ADVERSE EFFECT": A material adverse effect on (a) the business, operations, property, assets, or financial condition of (i) the Loan Parties taken as a whole, or (ii) the Value City Business taken as a whole (including those portions of Shonac that operate as part of the Value City Business), or
(b) the validity or enforceability of this Agreement or any of the other Loan Documents or any of the material rights or remedies of the Agent or the Revolving Credit Lenders hereunder or thereunder.

"MATURITY DATE": June 11, 2005.

"NCB": National City Bank, a national banking association.

"NCCF": National City Commercial Finance, Inc., an Ohio corporation.

"NOMINEE": A business entity (such as a corporation or limited partnership) formed by the Collateral Agents to own or manage any Post Foreclosure Asset.

"OPERATING ACCOUNT": Is defined in Section 7.3.

"OVERLOAN": A loan, advance, or providing of credit support (such as the issuance of any L/C) to the extent that, immediately after its having been made, Availability, DSW/Shonac Availability, Filene's Availability or VC Availability, as applicable, is less than zero.

"PARTICIPANT": Is defined in Section 19.18, hereof.

"PAYMENT INTANGIBLE": As defined in the UCC and also any general intangible under which the Account Debtor's primary obligation is a monetary obligation.

"PERMITTED ACQUISITION": (i) Any Acquisition the cash consideration for which is less than $3,000,000 in the aggregate in any fiscal year of the Borrowers and which satisfies the conditions set forth in clauses (f), (g), (h), and (i) below, and (ii) any other Acquisition in which each of the following conditions are satisfied:

(a) No Default or Event of Default then exists or would arise from the consummation of such Acquisition.

(b) Such Acquisition shall have been approved by the Board of Directors of the

Person (or similar governing body if such Person is not a corporation) which is the subject of such Acquisition and such Person shall not have announced that it will oppose such Acquisition or shall not have commenced any action which alleges that such Acquisition will violate applicable law.

(c) The Lead Borrower shall have furnished the Collateral Agents with ten (10) days prior notice of such intended Acquisition and shall have furnished the Collateral Agents with a current draft of the acquisition agreement and other acquisition documents, a summary of any due diligence undertaken by the Borrowers in connection with such Acquisition, appropriate financial statements of the Person which is the subject of such Acquisition, pro forma projected financial statements for the twelve month period following such Acquisition after giving effect to such Acquisition (including balance sheets, cash flows and income statements by month for the acquired Person, individually, and on a consolidated basis with all Loan Parties), and such other information as the Collateral Agents may reasonably require, each of which shall be reasonably satisfactory to the Collateral Agents.

(d) The structure of the Acquisition shall be acceptable to the Collateral Agents in their reasonable judgment. If an Acquisition of capital stock or other equity interests, after consummation of such Acquisition, a Borrower shall own directly or indirectly a majority of the equity interests in the Person being acquired and shall control a majority of any voting interests, and/or shall otherwise Control the Person being acquired.

(e) The Collateral Agents shall have received (i) the results of appraisals of the assets (or the assets of the Person) to be acquired in such Acquisition and of a commercial finance examination of the Person which is (or whose assets are) being acquired, and (ii) such other due diligence as the Collateral Agents may reasonably require, all of the results of the foregoing to be reasonably satisfactory to the Collateral Agents.

(f) Any assets acquired shall be utilized in, and if the Acquisition involves a merger, consolidation or stock acquisition, the Person which is the subject of such Acquisition shall be engaged in, only those businesses permitted under Section 4.23, below.

(g) If the Person which is the subject of such Acquisition will be maintained as a Subsidiary of the Borrower, such Subsidiary shall have executed such documents as may be necessary to be joined as a "Borrower" or "Facility Guarantor" hereunder , as determined by the Collateral Agents, and the Collateral Agents shall have received a first priority security and mortgage interest (subject to Permitted Encumbrances) in such Subsidiary's capital stock, inventory, accounts, equipment, real estate, leaseholds, and other property of the same nature as constitutes Collateral under this Agreement in order to secure the Liabilities.

(h) The total consideration paid for all Acquisitions (whether in cash, tangible property, notes or other property (other than capital stock of the Parent)) after the Closing Date, shall not exceed in the aggregate the sum of $15,000,000.

(i) Excess Availability immediately prior to such Acquisition, immediately after giving effect thereto, and projected Excess Availability on a pro forma projected basis for the twelve months immediately following such Acquisition, shall not be less than $70,000,000.

"PERMITTED DISPOSITION": Shall mean any of the following:

(a) Licenses of intellectual property or licensed departments of a Loan Party or any of its Subsidiaries in the ordinary course of business;

(b) Leases or subleases of Leases, to the extent at any point in time such Lease or subleases have anticipated minimum fixed annual rental payments of not more than $3,000,000 in the aggregate;

(c) Sales, assignments, transfers, conveyances or other dispositions of any or all of the Property specified in EXHIBIT 1.7 hereof; provided that in connection with a sale or similar disposition of any such Property, if a Loan Party receives a note or similar obligations as all or part of the consideration therefor, such Loan Party shall secure such note or obligation with a mortgage or similar Lien on such Property and pledge such note or other obligation to the Collateral Agents as security for the Liabilities pursuant to the terms of the Loan Documents;

(d) Sales of Inventory and Equipment in connection with store closures permitted in accordance with the provisions of Section 4.5(c) hereof, PROVIDED THAT all sales of Inventory in connection with store closings (1) after the occurrence and during the continuance of an Event of Default, or (2) consisting of more than fifteen (15) retail stores at the same time, shall be in accordance with liquidation agreements and with liquidators reasonably acceptable to the Collateral Agents; and

(e) (i) the sale of any property, land or building (including any related receivables or other intangible assets) to any Person which is not a Subsidiary of a Borrower, or (ii) the sale of the entire capital stock (or other equity interests) and Indebtedness of any Subsidiary owned by a Loan Party to any Person which is not a Subsidiary of a Borrower, or (iii) the consummation of any other asset sale with a Person who is not a Subsidiary of a Borrower, provided that:

A. the consideration for such transaction represents fair value, and at least 90% of such consideration consists of cash, PROVIDED THAT in connection with a sale or similar disposition of any such Property, if a Loan Party receives a note or similar obligations as all or part of the consideration

therefor, such Loan Party shall secure such note or obligation with a mortgage or similar Lien on such Property and pledge such note or other obligation to the Collateral Agents as security for the Liabilities pursuant to the terms of the Loan Documents;

B. the aggregate consideration for all such transactions completed in any fiscal year does not exceed $500,000,

C. the aggregate consideration for all such transactions completed after the Closing Date does not exceed $1,500,000, and

D. other than in connection with a transaction, the aggregate consideration for which is equal to an amount less than $500,000, at least five (5) Business Days prior to the date of completion of such transaction such Loan Party shall have delivered to the Agent an officer's certificate executed on behalf of such Loan Party by an Authorized Officer of such Loan Party, which certificate shall contain a description of the proposed transaction, the date such transaction is scheduled to be consummated, the estimated purchase price or other consideration for such transaction, financial information pertaining to compliance with the preceding clause (A), and which shall (if requested by the Agent) include a certified copy of the draft or definitive documentation pertaining thereto.

"PERMITTED ENCUMBRANCES": Shall mean any of the following:

(a) Encumbrances for taxes not yet delinquent or which are being contested in good faith by appropriate proceedings, PROVIDED THAT adequate reserves with respect thereto are maintained on the books of the Borrowers in accordance with GAAP, and PROVIDED FURTHER THAT, no notice of tax lien has been filed with respect thereto;

(b) Encumbrances in respect of property or assets imposed by law in the ordinary course of business, such as carrier's, warehousemen's, mechanics', materialmen's, repairmen's, landlord's or similar Encumbrances arising in the ordinary course of business which
(i) are not overdue in accordance with customary business practices and consistent with the applicable Loan Party's prior practices, and do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Loan Parties, or (ii) are being contested in good faith by a Loan Party, by appropriate proceedings diligently instituted and conducted and without danger of any material risk to the Collateral and adequate reserves or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor;

(c) Encumbrances, pledges or deposits in connection with workers'

compensation, unemployment insurance and other types of social security;

(d) Deposits to secure the performance of tenders, bids, sales, trade and government contracts, leases, statutory obligations, surety, appeal, and supersedeas bonds, warranty, advance payment, customs, performance and return-of-money bonds and other obligations of a like nature in the ordinary course of business (exclusive of obligations in respect of the payment of borrowed money) whether pursuant to statutory requirements, common law or consensual arrangements;

(e) Easements, rights of way, leases, zoning or deed restrictions, licenses, covenants, building, restrictions, minor defects or irregularities in title and other similar real estate encumbrances incurred in the ordinary course of business that in the aggregate do not materially interfere with the conduct of the business of the Loan Parties; defects and irregularities in titles, survey exceptions, encumbrances, easements or reservations of others for rights-of-way, roads, pipelines, railroad crossings, services, utilities or other similar purposes; outstanding mineral rights or reservations (including rights with respect to the removal of material resource) which do not materially diminish the value of the surface estate, assuming usage of such surface estate similar to that being carried on by any Loan Party as of the effective date;

(f) Any interest or title of a lessor under any lease entered into by any Loan Party in the ordinary course of business not in violation of the Loan Documents;

(g) Any interest or title of any lessee under any leases or subleases of real property of a Loan Party not in violation of the requirements of the Loan Documents, provided that all such Encumbrances do not in the aggregate materially detract from the value of such Loan Party's property or materially impair the use thereof in the operation of such Loan Party's business;

(h) Encumbrances arising from financing statements regarding property subject to Capital Leases not in violation of the requirements of the Loan Documents, provided that such Encumbrances are only in respect of the property subject to, and secure only, the respective lease;

(i) Rights of consignors of goods to a Loan Party as consignee;

(j) Encumbrances arising from judgments, decrees or attachments in existence less than 30 days after the entry thereof, with respect to which execution has been stayed and with respect to which payment in full above any applicable deductible is covered by insurance or a bond, or in circumstances not constituting an Event of Default under section 10.10(a);

(k) Encumbrances created by this Agreement or the other Loan Documents;

(l) Encumbrances (i) listed on EXHIBIT 4.6(a), annexed hereto, or (ii) arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any such Encumbrances, provided that the principal amount of such Indebtedness is not increased and such Indebtedness is not secured by any additional assets;

(m) Encumbrances which are placed upon Equipment or improvements to real property (including the associated real property) used in the ordinary course of business of a Loan Party or any Subsidiary (i) at the time of (or within 90 days after) the acquisition of such Equipment or the completion of such improvements by such Loan Party or any such Subsidiary to secure Indebtedness incurred to pay or finance all or a portion of the purchase price or other cost thereof, provided that the Encumbrance on the Equipment so acquired or the real property so improved does not encumber any other asset of such Loan Party or any such Subsidiary; or (ii) are existing on Equipment or real property at the time acquired by a Loan Party or any Subsidiary or on assets of a Person at the time such Person first becomes a Subsidiary of the Borrower; provided that (A) any such Encumbrances were not created at the time of or in contemplation of the acquisition of such assets or Person by a Loan Party or any Subsidiaries; (B) in the case of any such acquisition of a Person, any such Encumbrance attaches only to the Equipment or real estate, as applicable, of such Person; and (C) in the case of any such acquisition of Equipment or real estate by a Loan Party or any Subsidiary, any such Encumbrance attaches only to the property and assets so acquired and not to any other property or assets of such Loan Party or any such Subsidiary; PROVIDED THAT the Encumbrances outstanding from time to time under this clause (m) shall not secure any Indebtedness other than Permitted Indebtedness described in clause (c) of such definition;

(n) Encumbrances securing Indebtedness assumed in connection with, or continuing to exist after, but not incurred in connection with, or contemplation of, a Permitted Acquisition, which Encumbrances were in effect prior to the consummation of the Permitted Acquisition, PROVIDED THAT such Encumbrances may not extend to any Accounts, Inventory, or General Intangibles of the Loan Parties or of the Person so acquired; and

(o) An Encumbrance granted by any Loan Party in connection with the Term Loans.

The inclusion of the foregoing as "Permitted Encumbrances" shall not limit or impair the right of the Collateral Agents to impose Reserves on account thereof in accordance with the provisions of this Agreement.

"PERMITTED INDEBTEDNESS": Any of the following:

(a) Indebtedness incurred under this Agreement and the other Loan

Documents including any Indebtedness on account of the Revolving Credit.

(b) Any Indebtedness incurred under the Term Loans (including, without limitation, any indemnity required thereunder in connection with the securitization of the Term Loans).

(c) Indebtedness on account of Equipment or improvements to real property acquired in compliance with the requirements of subparagraph (m) of the definition of Permitted Encumbrances, the incurrence of which would not otherwise be prohibited by this Agreement; PROVIDED THAT such Indebtedness shall not exceed $10,000,000 in the aggregate at any time outstanding;

(d) (i) Indebtedness consisting of all obligations of a Loan Party or any Subsidiary as lessee under Capital Leases, and

(ii) Indebtedness consisting of all obligations of a Loan Party or any Subsidiary under any lease (i) which is accounted for by the lessee as an operating lease and (ii) under which the lessee is intended to be the "owner" of the leased property for Federal income tax purposes;

provided that (A) at the time of any incurrence thereof after the date hereof, and after giving effect thereto, no Event of Default shall have occurred and be continuing or would result therefrom; and (B) the aggregate outstanding principal amount (using the obligations in lieu of principal amount, in the case of any Capital Lease, or present value, based on the implicit interest rate, in lieu of principal amount, in the case of any lease described above in part (ii)) of Indebtedness permitted by this clause (d) shall not exceed $10,000,000 in the aggregate principal amount outstanding at any time.

(e) Indebtedness of the Loan Parties and any Subsidiary under (i) the Hedge Agreement between the Lead Borrower and NCB dated March 28, 2000, and (ii) Hedge Agreements other than for speculative purposes with any Revolving Credit Lender or an Affiliate of a Revolving Credit Lender to which the agents under the Term Loans have consented in accordance with agreements evidencing the Term Loans.

(f) The Indebtedness listed on EXHIBIT 4.7, annexed hereto;

(h) Indebtedness to sellers in connection with Permitted Acquisitions;

(i) Intercompany indebtedness between and among the Lead Borrower and the other Loan Parties;

(j) Indebtedness to creditors of the former Filene's incurred in connection with the acquisition of Filene's, such Indebtedness not to exceed $6,000,000;

(k) Indebtedness with respect to indemnities, warranties, statutory obligations, and surety, appeal and supersedeas bonds incurred in the ordinary course of business;

(l) Indebtedness in respect of overdraft protections and otherwise in connection with deposit accounts; and

(m) Indebtedness arising out of the refinancing, extension, renewal or refunding of any Indebtedness permitted under this Agreement, provided that the principal amount of such Indebtedness is not increased from the amount outstanding at the time of such refinancing.

"PERMITTED INVESTMENTS": Each of the following:

(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing not more than one year from the date of acquisition thereof;

(b) investments in commercial paper maturing not more than one year from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from Standard & Poors or from Moody's Investment Services, Inc.;

(c) investments in certificates of deposit, banker's acceptances and time deposits maturing not more than one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any financial institution organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000;

(d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above (without regard to the limitation on maturity contained in such clause) and entered into with a financial institution satisfying the criteria described in clause (c) above;

(e) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition

thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poors or from Moody's Investment Services, Inc.;

(f) investments in money market funds, substantially all the assets of which are comprised of securities of the types described in clauses (a) through (e) above;

(g) investments acquired by a Loan Party or any of its Subsidiaries (i) in exchange for any other investment held by such Loan Party or any such Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other investment, or
(ii) as a result of a foreclosure by such Loan Party or any of its Subsidiaries with respect to any secured investment or other transfer of title with respect to any secured investment in default;

(h) investments by a Loan Party in the capital of any wholly-owned subsidiary of such Loan Party, including without limitation, any Permitted Acquisitions, provided that the provisions of Section 4.25 hereof have been complied with respect to such Subsidiary;

(i) to the extent not permitted by the foregoing clauses, existing investments in any Subsidiaries (and any increases thereof attributable to increases in retained earnings);

(j) to the extent not permitted by the foregoing clauses, the existing investments described on EXHIBIT 1.6 hereto;

(k) investments of a Loan Party and any Subsidiary in Hedge Agreements other than for speculative purposes, to which the agents under the Term Loans have consented in accordance with agreements evidencing the Term Loans;

(l) investments of any Person which are outstanding at the time such Person becomes a Subsidiary of a Loan Party as a result of Permitted Acquisition, but not any increase in the amount thereof; and

(m) any other investments (whether in the form of cash or contribution of property, and if in the form of a contribution of property, such property shall be valued for purposes of this clause at the fair value thereof) in any corporation, partnership, limited liability company, joint venture or other business entity, which is not itself a Subsidiary of a Borrower or owned or Controlled by any director, officer or employee of a Borrower or any of its Subsidiaries, not

otherwise permitted by the foregoing clauses, made after the Closing Date, shall be permitted to be incurred if (i) no Event of Default shall have occurred and be continuing, or would result therefrom, and (ii) the aggregate cumulative amount of such investments (together with any loans and advances permitted under Sections 4.21(c) and (d)) does not exceed $6,000,000.

"PERSON": Any natural person, and any corporation, limited liability company, trust, partnership, joint venture, or other enterprise or entity.

"POST FORECLOSURE ASSET": All or any part of the Collateral, ownership of which is acquired by the Collateral Agents or a Nominee on account of the "bidding in" at a disposition as part of a Liquidation or by reason of a "deed in lieu" type of transaction.

"PROTECTIVE OVERADVANCES": Revolving Credit Loans which are OverLoans, but as to which each of the following conditions is satisfied:
(a) when aggregated with all other Revolving Credit Loans, SwingLine Loans, Protective OverAdvances and the Stated Amount of L/Cs and Banker's Acceptances, the Revolving Credit Ceiling is not exceeded; and (b) when aggregated with all other Protective OverAdvances, such Revolving Credit Loans do not aggregate more than $17,500,000; (c) such Protective OverAdvances shall not remain outstanding for more than forty-five (45) days in any period of one hundred eighty (180) consecutive days, and (d) such Revolving Credit Loans are made or undertaken in the Administrative Agent's reasonable, good faith discretion (or as directed by the Collateral Agents) to protect and preserve the interests of the Revolving Credit Lenders. Overadvances on account of circumstances beyond the control of the Agent (such as a drop in collateral value) shall not be deemed "Protective Overadvances" and shall not be subject to the limitations contained herein.

"PROCEEDS": Includes, without limitation, "Proceeds" as defined in the UCC and each type of property described in Section 8.1 hereof.

"RECEIPTS": All cash, cash equivalents, money, checks, credit card slips, receipts and other Proceeds from any sale of the Collateral.

"RECEIVABLES COLLATERAL": That portion of the Collateral which consists of Accounts, Payment Intangibles, Chattel Paper, Instruments, Documents of Title, Documents, Investment Property, Payment Intangibles, Letter-of-Credit Rights, bankers' acceptances, and all other rights to payment.

"RELATED BUSINESS": Any business or enterprise consisting of any of the following:

(a) Asset Maximization Services.

(b) Asset Valuation Services.

"RELEASE": Any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, seeping, migrating, dumping or disposing of any Hazardous Material (including the abandonment or discarding of barrels, containers and other closed receptacles containing any Hazardous Material) into the indoor or outdoor environment, including, without limitation, the movement of Hazardous Materials through or in the ambient air, soil, surface or ground water, or property.

"REGISTER":       Is defined in Section 16.2(c).

"REQUIREMENTS OF LAW":     As to any Person:

                  (a)      Applicable Law.

                  (b)      That Person's organizational documents.

(c) That Person's by-laws and/or other instruments which deal with corporate or similar governance, as applicable.

"RESERVES": The following: Availability Reserves and Inventory Reserves.

"REVOLVING CREDIT": Is defined in Section 2.1.

"REVOLVING CREDIT CEILING": $350,000,000.00.

"REVOLVING CREDIT DOLLAR COMMITMENT": As set forth on EXHIBIT 2.23,

annexed hereto (as such amounts may change in accordance with the provisions of this Agreement).

"REVOLVING CREDIT EARLY TERMINATION FEE": Is defined in Section 2.15.

"REVOLVING CREDIT LENDERS": Each Revolving Credit Lender to which reference is made in the Preamble of this Agreement and any other Person who becomes a "Revolving Credit Lender" in accordance with the provisions of this Agreement.

"REVOLVING CREDIT LOANS": Loans made under the Revolving Credit, except that where the term "Revolving Credit Loan" is used with reference to available interest rates applicable to the loans under the Revolving Credit, it refers to so much of the unpaid principal balance of the Loan Account as bears the same rate of interest for the same Interest Period. (See Section 2.12(d)).

"REVOLVING CREDIT NOTE": Is defined in Section 2.10.

"REVOLVING CREDIT COMMITMENT PERCENTAGE": As set forth on EXHIBIT 2.23,

annexed hereto (as such amounts may change in accordance with the provisions of this Agreement).

"SEC": The Securities and Exchange Commission.

"SENIOR CONVERTIBLE FACILITY": The credit facility set forth in the Senior Subordinated Convertible Loan Agreement dated as of March 15, 2000, amended from time to time prior to the Closing Date and as amended and restated June 11, 2002, in the present principal amount of $75,000,000.00.

"SHONAC": Has the meaning given that term in the Preamble hereto.

"SPECIFIED EVENT OF DEFAULT": An Event of Default arising under any of the following sections of this Agreement:

(a) Section 10.1.
(b) Section 10.2.
(c) Section 10.3 (with respect to Sections 4.20, 4.21, 4.24, and Article 7 only).

(d) Section 10.5 (with respect to a breach of Sections 4.6 and 4.29 only).
(e) Section 10.6.
(f) Section 10.11.
(g) Section 10.12.
(h) Section 10.15.

"STATED AMOUNT": The maximum amount for which an L/C or Banker's Acceptance may be honored.

"SUBSIDIARY": Any corporation, association, partnership, limited liability company, trust, or other business entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes or Controlling interests) of the outstanding voting interests.

"SUPERMAJORITY LENDERS": Revolving Credit Lenders (other than Delinquent Revolving Credit Lenders) holding 66-2/3% or more of the Revolving Credit Commitment Percentages (calculated without regard to any Revolving Credit Commitment Percentage of any Delinquent Revolving Credit Lender).

"SUPPORTING OBLIGATION": Has the meaning given that term in the UCC and also refers to a Letter-of-Credit Right or secondary obligation which supports the payment or

performance of an Account, Chattel Paper, a Document, a General Intangible, an Instrument, or Investment Property.

"SWINGLINE": The facility pursuant to which the SwingLine Lender may advance Revolving Credit Loans aggregating up to the SwingLine Loan Ceiling.

"SWINGLINE LENDER": NCCF.

"SWINGLINE LOAN CEILING": $25,000,000.00 (subject to increase as provided in Section 15.4(e)).

"SWINGLINE LOANS": Defined in Section 2.8.

"TERM LOANS": (i) The CCM Term Loan Facilities, and (ii) the Senior Convertible Facility.

"TERM LOAN SENIOR COLLATERAL": All assets of the Borrowers other than Accounts, Inventory, Chattel Paper, Instruments, and Documents related to any Accounts or Inventory, Payment Intangibles, marketable securities, licensed department agreements, Intercompany Notes, Collection Accounts, DDAs, and credit card proceeds, and books and records relating to the foregoing.

"TERMINATION DATE": The earliest of (a) the Maturity Date; or (b) the occurrence of any event described in Section 10.12, below; or
(c) the Administrative Agent's notice to the Lead Borrower setting the Termination Date on account of the occurrence of any Event of Default other than as described in Section 10.12, below; or (d) that date, thirty (30) days irrevocable written notice of which is provided by the Lead Borrower to the Administrative Agent.

"TRANSFER": Wire transfer pursuant to the wire transfer system

         maintained by the Board of Governors of the Federal Reserve
         Board, or as otherwise may be agreed to from time to time by
         the Administrative Agent making such Transfer and the subject
         Revolving Credit Lender. Wire instructions may be changed in
         the same manner that Notice Addresses may be changed (Section
         17.1), except that no change of the wire instructions for
         Transfers to any Revolving Credit Lender shall be effective
         without the consent of the Administrative Agent.

"UCC":   The Uniform Commercial Code as in effect from time to time in
         the State of New York.

"UNANIMOUS CONSENT": Consent of Revolving Credit Lenders (other than Delinquent Revolving Credit Lenders) holding 100% of the Loan Commitments (other than Loan Commitments held by a Delinquent Revolving Credit Lender).

"UNDERWRITING FEE": Is defined in Section 2.13.

"UNRESTRICTED SUBSIDIARY": Those Subsidiaries of the Lead Borrower described on EXHIBIT 1.5 hereto.

"UNUSED LINE FEE": As defined in Section 2.14.

"VALUE CITY": Has the meaning given that term in the Preamble hereto.

"VALUE CITY BUSINESS": The Borrowers' business other than the DSW/Shonac Business and the Filene's Business.

"VALUE CITY ENTITIES": Collectively, Value City, Gramex, VCLP, VC Michigan, GBR, and VCM.

"VC AVAILABILITY": The lesser of:

(a) the result of the following:

(i) The lesser of

(A) The Revolving Credit Ceiling or (B) The VC Borrowing Base

Minus
(ii) The aggregate unpaid balance of the Loan Account attributable to Revolving Credit Loans made to the Value City Entities.

Minus

(iii) The aggregate undrawn Stated Amount of all then outstanding L/Cs and Banker's Acceptances issued for the account of the Value City Entities.

Minus

(iv) The aggregate of the Availability Reserves attributable to the Value City Entities. or
(b) Availability.

"VC BORROWING BASE": The aggregate of the following:

(a) The face amount of Eligible Credit Card Receivables of the Value

City Entities multiplied by the Credit Card Advance Rate.

Plus

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

"VCLP": Has the meaning given that term in the Preamble hereto.

"VCM": Has the meaning given that term in the Preamble hereto.

"VC MICHIGAN": Has the meaning given that term in the Preamble hereto.

ARTICLE 2 - THE REVOLVING CREDIT:

2.1. ESTABLISHMENT OF REVOLVING CREDIT

(a) The Revolving Credit Lenders hereby establish a revolving line of credit (the "REVOLVING CREDIT") in the Borrowers' favor pursuant to which each Revolving Credit Lender, subject to, and in accordance with, this Agreement, acting through the Administrative Agent, shall make loans and advances and otherwise provide financial accommodations to and for the account of the Borrowers as provided herein.

(b) Loans, advances, and financial accommodations under the Revolving Credit shall be made (i) with respect to DSW and Shonac, with reference to the DSW/Shonac Borrowing Base and shall be subject to DSW/Shonac Availability, (ii) with respect to Filene's, with reference to the Filene's Borrowing Base and shall be subject to Filene's Availability, and (iii) with respect to the Value City Entities, with reference to the VC Borrowing Base and shall be subject to VC Availability, and (iv) with respect to all Borrowers, with reference to Availability. The Borrowing Base, the DSW/Shonac Borrowing Base, the Filene's Borrowing Base, the VC Borrowing Base, Availability, DSW/Shonac Availability, Filene's Availability and VC Availability shall be determined by the Administrative Agent by reference to Borrowing Base Certificates furnished as provided in Section 5.4, below, and shall be subject to the following:

(i) Such determination shall take into account such Reserves as the Collateral Agents may determine as being applicable thereto.

(ii) The Cost of Eligible Inventory will be determined in a manner consistent with current tracking practices, based on the Borrowers' stock ledgers inventory.

(c) The commitment of each Revolving Credit Lender to provide such loans, advances, and financial accommodations is subject to Section 2.23.

(d) The proceeds of borrowings under the Revolving Credit shall be used solely to repay the Borrowers' existing lines of credit due to NCB, as agent, and to Schottenstein Stores Corporation, and for the Borrowers' working capital and general corporate purposes (including, intercompany loans), all solely to the extent permitted by this Agreement. No proceeds of a borrowing under the Revolving Credit may be used, nor shall any be requested, with a view towards the accumulation of any general fund or funded reserve of the Borrowers other than in the ordinary course of the Borrowers' business and consistent with the provisions of this Agreement.

2.2. ADVANCES IN EXCESS OF BORROWING BASE (OVERLOANS).

(a) No Revolving Credit Lender has any obligation to any Borrower to make any loan or advance, or otherwise to provide any credit to or for the benefit of any Borrower where the result of such loan, advance, or credit is an OverLoan.

(b) The Revolving Credit Lenders' obligations, among themselves, are subject to (among other provisions of this Agreement) Section
12.3(a) (which relates to each Revolving Credit Lender's making amounts available to the Administrative Agent) and 15.3(a) (which relates to Protective OverAdvances).

(c) The Revolving Credit Lenders' providing of an OverLoan on any one occasion does not affect the obligations of each Borrower hereunder (including each Borrower's obligation to immediately repay any amount which otherwise constitutes an OverLoan) nor obligate the Revolving Credit Lenders to do so on any other occasion.

2.3. RISKS OF VALUE OF COLLATERAL. The Agent's reference to a given asset in connection with the making of loans, credits, and advances and the providing of financial accommodations under the Revolving Credit and/or the monitoring of compliance with the provisions hereof shall not be deemed a determination by any Agent or any Revolving Credit Lender relative to the actual value of the asset in question. All risks concerning the value of the Collateral are and remain upon the Borrowers. All Collateral secures the prompt, punctual, and faithful performance of the Liabilities whether or not relied upon by the Administrative Agent in connection with the making of loans, credits, and advances and the providing of financial accommodations under the Revolving Credit.

2.4. COMMITMENT TO MAKE REVOLVING CREDIT LOANS AND SUPPORT LETTERS OF CREDIT. Subject to the provisions of this Agreement, the Revolving Credit Lenders shall make a loan or advance under the Revolving Credit and the Administrative Agent shall endeavor to have an L/C or Banker's Acceptance issued for the account of one or more of the Loan Parties,

in each instance if duly and timely requested by the Lead Borrower as provided herein provided that:

(a) No OverLoan is then outstanding and none will result therefrom.

(b) No Borrower is then in Default and none will thereby become in Default.

2.5. REVOLVING CREDIT LOAN REQUESTS.

(a) Requests for loans and advances under the Revolving Credit or for the continuance or conversion of an interest rate applicable to a Revolving Credit Loan may be requested by the Lead Borrower by written or telephonic notice (in the case of telephonic notice, promptly confirmed in writing if so requested by the Administrative Agent). Such notice of borrowing shall be substantially in the form of EXHIBIT 2.5 hereto, signed by the Lead Borrower and transmitted to the Administrative Agent by telecopier. Each such notice shall be irrevocable and shall specify (i) the proposed Borrower (i.e. DSW/Shonac, Filene's or the Value City Entities, as applicable), (ii) the amount of the proposed borrowing and the date thereof (which shall be a Business Day) and (iii) whether the borrowing then being requested is to be a borrowing of Base Margin Loans or Eurodollar Loans and, if Eurodollar Loans, the Interest Period with respect thereto. If no election is made as to the Type of Loan or no election of Interest Period is specified in any such notice for a borrowing of Eurodollar Loans, such notice shall be deemed a request for borrowing of Base Margin Loans. The Administrative Agent may rely on any telephonic request for a borrowing to the same extent that the Administrative Agent may rely on a written request. The Borrowers shall bear all risks related to the giving of borrowing requests telephonically.

(b) Subject to the provisions of this Agreement, the Lead Borrower may, on behalf of any Borrower, request a Revolving Credit Loan and elect an interest rate and Interest Period to be applicable to that Revolving Credit Loan by giving notice to the Administrative Agent by no later than the following:

(i) If such Revolving Credit Loan is to be or is to be converted to a Base Margin Loan: By 2:00 p.m. on the Business Day on which the subject Revolving Credit Loan is to be made or is to be so converted (PROVIDED THAT if notice is furnished after 12:00 noon on any Business Day, the Revolving Credit Loan so requested shall be deemed a request for a SwingLine Loan). Base Margin Loans requested by the Lead Borrower, other than those resulting from the conversion of a Eurodollar Loan, shall not be less than $250,000 and in increments of $10,000 in excess of such minimum.

(ii) If such Revolving Credit Loan is to be, or is to be continued as, or converted to, a Eurodollar Loan: By 2:00 p.m. three
(3) Eurodollar Business Days before the commencement of any new Interest Period or the end of the then applicable Interest Period. Eurodollar Loans and conversions to Eurodollar Loans shall each be not less than

$3,000,000 and in increments of $1,000,000 in excess of such minimum.

(iii) Any Eurodollar Loan which matures while any Borrower is in Default shall be converted, at the option of the Administrative Agent, to a Base Margin Loan notwithstanding any notice from the Lead Borrower that such Loan is to be continued as a Eurodollar Loan.

(iv) Eurodollar Loans may not be converted or continued as Eurodollar Loans at any time other than the end of the Interest Period applicable thereto unless the Borrowers shall pay, upon demand, any amounts due pursuant to Section 2.11(f) hereof.

(c) Any request for a Revolving Credit Loan or for the continuance or conversion of an interest rate applicable to a Revolving Credit Loan which is made after the applicable deadline therefor, as set forth above, shall be deemed to have been made at the opening of business on the then next Business Day or Eurodollar Business Day, as applicable.

(d) The Lead Borrower may, on behalf of any Loan Party, request that the Administrative Agent cause the issuance by the Issuer of L/Cs or Banker's Acceptances for the account of the Borrowers as provided in Section 2.18.

(e) The Administrative Agent may rely on any request for a loan or advance, or other financial accommodation under the Revolving Credit which the Administrative Agent, in good faith, believes to have been made by a Person duly authorized to act on behalf of the Lead Borrower and may decline to make any such requested loan or advance, or issuance, or to provide any such financial accommodation pending the Administrative Agent's being furnished with such documentation concerning that Person's authority to act as may be satisfactory to the Administrative Agent.

(f) A request by the Lead Borrower for loan or advance, or other financial accommodation under the Revolving Credit shall be irrevocable and shall constitute certification by each Borrower that as of the date of such request, each of the following is true and correct:

(i) There has been no material adverse change in the Borrowers' financial condition from the most recent financial information furnished any Agent or any Revolving Credit Lender pursuant to this Agreement.

(ii) Each representation which is made herein or in any of the Loan Documents is then true and complete in all material respects as of and as if made on the date of such request except to the extent that any of the same relates expressly to a different date.

(iii) Unless accompanied by a written Certificate of the Lead Borrower's President or its Chief Financial Officer describing (in reasonable detail) the

facts and circumstances of any Default then existing and the steps (if any) being taken to remedy such condition, that no Default has occurred and is continuing.

2.6. SUSPENSION OF REVOLVING CREDIT. If, at any time or from time to time, any Borrower is in Default:

(a) The Administrative Agent may, and at the direction of the SuperMajority Lenders shall, suspend the Revolving Credit immediately, in which event, neither the Administrative Agent nor any Revolving Credit Lender shall be obligated, during such suspension, to make any loans or advance to any Borrower, or to provide any financial accommodation hereunder or to seek the issuance of any L/C or of any Banker's Acceptance for the account of any Loan Party. Nothing contained herein shall limit the right of the Administrative Agent to make Protective OverAdvances or the obligation of the Revolving Credit Lenders with respect to SwingLine Loans, Protective OverAdvances, L/Cs and Banker's Acceptances during such suspension period.

(b) The Administrative Agent may, and at the direction of the SuperMajority Lenders shall, suspend the right of the Lead Borrower to request any Eurodollar Loan or to convert any Base Margin Loan to a Eurodollar Loan.

2.7 MAKING OF REVOLVING CREDIT LOANS.

(a) A loan or advance under the Revolving Credit shall be made by the transfer of the proceeds of such loan or advance to the Operating Account of the applicable Division. The proceeds of any Revolving Credit Loan shall be made available before 3:00 p.m. on the date requested in accordance with Section 2.5 hereof.

(b) A loan or advance shall be deemed to have been made under the Revolving Credit (and the Borrowers shall be indebted to the Administrative Agent and the Revolving Credit Lenders for the amount thereof immediately) at the following:

(i) The Administrative Agent's initiation of the transfer of the proceeds of such loan or advance in accordance with the Lead Borrower's instructions (if such loan or advance is of funds requested by the Lead Borrower).

(ii) The charging of the amount of such loan to the Loan Account (in all other circumstances).

(c) Absent gross negligence, bad faith or willful misconduct, there shall not be any recourse to or liability of the Administrative Agent or any Revolving Credit Lender, on account of:

(i) Any delay in the making of any loan or advance requested under the Revolving Credit.

(ii) Any delay by any bank or other depository institution in treating the proceeds of any such loan or advance as collected funds.

(iii) Any delay in the receipt, and/or any loss, of funds which constitute a loan or advance under the Revolving Credit, the wire transfer of which was properly initiated by the Administrative Agent in accordance with wire instructions provided to the Administrative Agent by the Lead Borrower.

2.8. SWINGLINE LOANS.

(a) For ease of administration, Base Margin Loans may be made by the SwingLine Lender (in the aggregate, the "SWINGLINE LOANS") in accordance with the procedures set forth in this Agreement for the making of loans and advances under the Revolving Credit. The aggregate unpaid principal balance of the SwingLine Loans shall not at any one time be in excess of the lesser of (i) as to all Borrowers, the SwingLine Loan Ceiling, or (ii) as to any Division, DSW/Shonac Availability, Filene's Availability, or VC Availability, as applicable. The SwingLine Lender shall not make a SwingLine Loan if the SwingLine Lender has received notice from the Administrative Agent that the Administrative Agent has suspended, or the Administrative Agent has received written notice from the SuperMajority Lenders instructing the Administrative Agent to suspend, the Revolving Credit in accordance with the terms hereof. Absent such notification, the SwingLine Lender (x) shall not otherwise be required to determine whether the conditions precedent to such SwingLine Loan have been satisfied or whether the requested borrowing would cause Availability, DSW/Shonac Availability, Filene's Availability or VC Availability, as applicable, to be exceeded, and (y) shall be entitled in all cases to have each Revolving Credit Lender make Revolving Credit Loans in settlement of such SwingLine Loans in accordance with the provisions of Section 12.2 hereof.

(b) The aggregate unpaid principal balance of SwingLine Loans shall bear interest at the rate applicable to Base Margin Loans and shall be repayable as a loan under the Revolving Credit.

(c) The Borrowers' obligation to repay SwingLine Loans shall be evidenced by a Note in the form of EXHIBIT 2.8(C), annexed hereto, executed by the Borrowers, and payable to the SwingLine Lender. Neither the original nor a copy of that Note shall be required, however, to establish or prove any Liability. Upon receipt of an affidavit of an officer of, and a customary indemnity from, a SwingLine Lender as to the loss, theft, destruction or mutilation of the SwingLine Note, the Borrowers will issue in lieu thereof a replacement SwingLine Note in the same principal amount thereof and of like tenor.

(d) For all purposes of this Loan Agreement, the SwingLine Loans and the Borrowers' obligations to the SwingLine Lender constitute Revolving Credit Loans and are secured as "Liabilities".

(e) SwingLine Loans shall be subject to periodic settlement with the Revolving Credit Lenders as provided in this Agreement.

2.9. THE LOAN ACCOUNT.

(a) An account ("LOAN ACCOUNT") shall be opened on the books of the Administrative Agent in which a record shall be kept of all loans and advances made under the Revolving Credit (including, without limitation, Swingline Loans). The Loan Account shall also contain separate entries for loans and advances made to each Division.

(b) The Administrative Agent shall also keep a record (either in the Loan Account or elsewhere, as the Administrative Agent may from time to time elect) of all interest, fees, service charges, costs, expenses, and other debits owed to each Agent and each Revolving Credit Lender on account of the Liabilities from each Borrower and from each Division and of all credits against such amounts so owed.

(c) All credits against the Liabilities shall be conditional upon final payment to the Administrative Agent for the account of the Agent or Revolving Credit Lender entitled thereto of the items giving rise to such credits. The amount of any item credited against the Liabilities which is charged back against any Agent or any Revolving Credit Lender or is disgorged for any reason or is not so paid shall be a Liability and shall be added to the Loan Account, whether or not the item so charged back or not so paid is returned.

(d) Except as otherwise provided herein, all fees, service charges, costs, and expenses for which any Borrower is obligated hereunder are payable on demand.

(e) The Administrative Agent, without the request of the Lead Borrower, may advance under the Revolving Credit any interest, fee, service charge, or other payment to which any Agent or any Revolving Credit Lender is entitled from any Borrower pursuant hereto and may charge the same to the Loan Account notwithstanding that an OverLoan may result thereby; PROVIDED THAT the Administrative Agent shall not charge the Loan Account for any third-party expenses incurred by the Agent (such as fees for attorneys, appraisers and commercial finance examinations) without first having furnished the Lead Borrower with a copy of the invoice therefor two (2) Business Days prior to the date that the Loan Account is to be so charged.. Any such advance shall be deemed a Base Margin Loan. Such action on the part of the Administrative Agent shall not constitute a waiver of the Administrative Agent's rights and each Borrower's obligations under Section 2.11(b). Any amount which is added to the principal balance of the Loan Account as provided in this Section 2.9(e) shall bear interest at the interest rate then and thereafter applicable to Base Margin Loans. The Administrative Agent shall promptly furnish the Lead Borrower with a detailed statement itemizing any amounts so charged to the Loan Account.

(f) Any statement rendered by the Administrative Agent or any Revolving Credit Lender to the Lead Borrower concerning the Liabilities shall be considered correct and

accepted by each Borrower and shall, absent manifest error, be conclusively binding upon each Borrower unless the Lead Borrower provides the Administrative Agent with written objection thereto within twenty (20) days from the receipt by the Lead Borrower of such statement, which written objection shall indicate, with particularity, the reason for such objection. The Loan Account and the Administrative Agent's books and records concerning the loan arrangement contemplated herein and the Liabilities shall be prima facie evidence and proof of the items described therein.

2.10. THE REVOLVING CREDIT NOTES. The Borrowers' obligation to repay loans and advances under the Revolving Credit, with interest as provided herein, shall be evidenced by Notes (each, a "REVOLVING CREDIT NOTE") in the form of EXHIBIT 2.10, annexed hereto, executed by each Borrower, one payable to each Revolving Credit Lender. Neither the original nor a copy of any Revolving Credit Note shall be required, however, to establish or prove any Liability. Upon receipt of an affidavit of an officer of, and a customary indemnity from, a Revolving Credit Lender as to the loss, theft, destruction or mutilation of the Revolving Credit Note, the Borrowers will issue in lieu thereof a replacement Revolving Credit Note in the same principal amount thereof and of like tenor.

2.11. PAYMENT OF THE LOAN ACCOUNT.

(a) The Borrowers may repay all or any portion of the principal balance of the Loan Account from time to time until the Termination Date.

(b) Each Borrower, without notice or demand from the Administrative Agent or any Revolving Credit Lender, shall immediately pay the Administrative Agent that amount, from time to time, which is necessary so that there is no OverLoan outstanding.

(c) Subject to Section 7.4, during the continuance of a Cash Control Event, the Borrowers shall repay the Revolving Credit:

(i) subject to the terms of the Intercreditor Agreement, in an amount equal to the proceeds realized from the sale, refinancing, or other disposition of, or realization upon, any Collateral; and

(ii) in accordance with the provisions of Article 7 hereof.

All amounts prepaid under this Section 2.11(c) may be reborrowed under the Revolving Credit, subject to and in accordance with, the terms of this Agreement.

(d) The Borrowers shall repay the then entire unpaid balance of the Loan Account and all other Liabilities on the Termination Date.

(e) The Administrative Agent shall endeavor to cause the application of

payments (if any), pursuant to Sections 2.11(a) and 2.11(b) against Eurodollar Loans then outstanding in such manner as results in the least cost to the Borrowers, but shall not have any affirmative obligation to do so nor liability on account of the Administrative Agent's failure to have done so. In no event shall action or inaction taken by the Administrative Agent excuse any Borrower from any indemnification obligation under Section 2.11(f).

(f) The Borrowers shall indemnify the Administrative Agent and each Revolving Credit Lender and hold the Administrative Agent and each Revolving Credit Lender harmless from and against any loss, cost or expense (including loss of anticipated profits and amounts payable by the Administrative Agent or such Revolving Credit Lender on account of "breakage fees" (so-called)) which the Administrative Agent or such Revolving Credit Lender may sustain or incur (including, without limitation, by virtue of acceleration after the occurrence of any Event of Default) as a consequence of the following:

(i) Failure by any Borrower to pay any of the principal amount of or any interest on any Eurodollar Loan as and when due and payable, including any such loss or expense arising from interest or fees payable by such Revolving Credit Lender in order to maintain its Eurodollar Loans.

(ii) Failure by any Borrower to make a borrowing or conversion after the Lead Borrower has given (or is deemed to have given) a request for a Revolving Credit Loan or a request to convert a Revolving Credit Loan from one applicable interest rate to another.

(iii) The making of any payment on a Eurodollar Loan or the making of any conversion of any such Loan to a Base Margin Loan on a day that is not the last day of the applicable Interest Period with respect thereto.

(g) Upon at least two (2) Business Days' prior written notice to the Administrative Agent, the Borrowers may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Revolving Credit Dollar Commitments. Each such reduction shall be in the principal amount of $5,000,000 or any integral multiple thereof. Each such reduction or termination shall (i) be applied ratably to the Revolving Credit Dollar Commitments of each Revolving Credit Lender and (ii) be irrevocable when given. At the effective time of each such termination, the Borrowers shall pay to the Administrative Agent for application as provided herein (i) all Early Termination Fees payable on the amount of the Revolving Credit Dollar Commitments so terminated, and (ii) any amount by which the unpaid balance of the Loan Account and aggregate undrawn Stated Amount of all then outstanding L/Cs and Banker's Acceptances outstanding on such date exceeds the amount to which the Revolving Credit Dollar Commitments are so reduced. Any such reduction or termination of the Revolving Credit Dollar Commitments may not be reinstated.

2.12. INTEREST ON REVOLVING CREDIT LOANS.

(a) Each Revolving Credit Loan shall bear interest at the Base Margin Rate unless timely notice is given (as provided in Section 2.5) that the subject Revolving Credit Loan (or a portion thereof) is, or is to be converted to, a Eurodollar Loan.

(b) Each Revolving Credit Loan which consists of a Eurodollar Loan shall bear interest at the applicable Eurodollar Rate.

(c) Subject to, and in accordance with, the provisions of this Agreement, the Lead Borrower may cause all or a part of the unpaid principal balance of the Loan Account to bear interest at the Base Margin Rate or the Eurodollar Rate as specified from time to time by the Lead Borrower by notice to the Administrative Agent.

(d) For ease of reference and administration, each part of the Loan Account which bears interest at the same rate of interest and for the same Interest Period is referred to herein as if it were a separate "Revolving Credit Loan".

(e) The Lead Borrower shall not select, renew, or convert any interest rate for a Revolving Credit Loan such that, in addition to interest at the Base Margin Rate, there are more than twelve (12) Interest Periods for Eurodollar Loans in the aggregate for all Borrowers applicable to the Revolving Credit Loans at any one time.

(f) The Borrowers shall pay accrued and unpaid interest on each Revolving Credit Loan to its Division in arrears as follows:

(i) On the applicable Interest Payment Date for that Revolving Credit Loan.

(ii) On the Termination Date and on the End Date.

(iii) Following the occurrence of any Event of Default, with such frequency as may be determined by the Administrative Agent.

(g) Following the occurrence of any Event of Default (and whether or not any Agent exercises its rights on account thereof), all Revolving Credit Loans shall bear interest, at the option of the Administrative Agent or at the instruction of the SuperMajority Lenders, at a rate which is the aggregate of the applicable rate (including the Applicable Margin) for Base Margin Loans and/or Eurodollar Loans, as applicable, plus two percent (2%) per annum.

2.13. UNDERWRITING FEE; COLLATERAL MONITORING FEE. In addition to any other fee or expense to be paid by the Borrowers on account of the Revolving Credit, the Borrowers shall pay the Administrative Agent the "UNDERWRITING FEE" and the "COLLATERAL MONITORING FEE" at the times and in the amounts as set forth the Fee Letter.

2.14. UNUSED LINE FEE. In addition to any other fee to be paid by the Borrowers on account of the Revolving Credit, the Borrowers shall pay the Administrative Agent, for the account of the Revolving Credit Lenders, the "UNUSED LINE FEE" (so referred to herein) of 0.375% per annum of the average difference, during the month just ended (or relevant period with respect to the payment being made on the Termination Date) between the Revolving Credit Ceiling and the aggregate of the unpaid principal balance of the Loan Account for its respective Division and the undrawn Stated Amount of L/Cs and Banker's Acceptances outstanding during the relevant period for its respective Division. The Unused Line Fee shall be paid in arrears, on the first day of each month after the execution of this Agreement and on the Termination Date.

2.15. EARLY TERMINATION FEE.

(a) In the event that the Termination Date occurs, for any reason, prior to the second anniversary of the Closing Date, the Borrowers shall pay to the Administrative Agent , for the benefit of the Revolving Credit Lenders, the "REVOLVING CREDIT EARLY TERMINATION FEE" (so referred to herein) in an amount equal to (i) one percent (1%) of the Revolving Credit Dollar Commitments in effect on the date of this Agreement, if the Termination Date occurs before the first anniversary of the Closing Date, or (ii) one half of one percent (0.50%) of the Revolving Credit Dollar Commitments in effect on the date of this Agreement, if the Termination Date occurs on or after the first anniversary of the Closing Date and before the second anniversary of the Closing Date. There shall be no Early Termination Fee payable if the Termination Date occurs on or after the second anniversary of the Closing Date.

(b) All parties to this Agreement agree and acknowledge that the Revolving Credit Lenders will have suffered damages on account of the early termination of the Revolving Credit and that, in view of the difficulty in ascertaining the amount of such damages, that the Early Termination Fee constitutes reasonable compensation and liquidated damages to compensate Revolving Credit Lenders on account thereof.

2.16. CONCERNING FEES. The Borrowers shall not be entitled to any credit, rebate or repayment of any fee earned by the Administrative Agent or any Revolving Credit Lender pursuant to this Agreement or any Loan Document notwithstanding any termination of this Agreement or suspension or termination of the Administrative Agent's and any Revolving Credit Lender's respective obligation to make loans and advances hereunder.

2.17. AGENT'S AND REVOLVING CREDIT LENDERS' DISCRETION.

(a) Each reference in the Loan Documents to the exercise of reasonable, good faith discretion or the like by any Agent or any Revolving Credit Lender shall be to such Person's exercise of its judgment, in good faith, based upon such information of which that Person then has actual knowledge.

(b) The burden of establishing the failure of any Agent or any Revolving Credit Lender to have acted in a reasonable manner in such Person's exercise of such discretion shall be the Borrowers'.

2.18. PROCEDURES FOR ISSUANCE OF L/CS AND BANKER'S ACCEPTANCES.

(a) The Lead Borrower may request, either directly or, as provided in Section 2.22(a), through Value City Imports (a division of Schottenstein Stores Corporation), that the Administrative Agent cause the issuance by the Issuer of L/Cs or Banker's Acceptances for the account of any Loan Party. Requests for L/Cs and Banker's Acceptances shall be given by the Lead Borrower to the Administrative Agent and the Issuer not later than 2:00
p.m. three (3) Business Days prior to the specified date for the issuance of the requested L/C or Banker's Acceptance. Requests for L/Cs and Banker's Acceptances may be requested by the Lead Borrower by written or telephonic notice (in the case of telephonic notice, promptly confirmed in writing if so requested by the Administrative Agent). Each such notice shall be irrevocable and shall specify with respect to each L/C and Banker's Acceptance requested (i) the Borrower which is to be the account party for whose benefit the L/C or Banker's Acceptance is being issued, (ii) the face amount of the proposed L/C or Banker's Acceptance, which shall be denominated in dollars and the intended date of issuance thereof (which shall be a Business Day), (iii) the beneficiary, and
(iv) the terms (including the anticipated expiry date) of the L/C or Banker's Acceptance. The Administrative Agent and the Issuer may rely on any telephonic request for the issuance of a L/C or Banker's Acceptance to the same extent that the Administrative Agent and the Issuer may rely on a written request. The Borrowers shall bear all risks related to the giving of requests for the issuance of L/Cs or Banker's Acceptances telephonically.

(b) The Administrative Agent will endeavor to cause the issuance of any L/C or Banker's Acceptance so requested by the Lead Borrower from and including the Closing Date until the thirtieth (30th) Business Day prior to the Maturity Date, provided that, at the time that the request is made, the Revolving Credit has not been suspended as provided in Section 2.6 and if so issued:

(i) The aggregate Stated Amount of all L/Cs and Banker's Acceptances then outstanding, does not exceed One Hundred Million Dollars ($100,000,000);

(ii) The expiry of the L/C or Banker's Acceptance is not later than the earlier of thirty (30) days prior to the Maturity Date or the following:

(A) Standby's: One (1) year from initial issuance (or in the case of renewal or extension thereof, one year after such renewal or extension), PROVIDED THAT each standby L/C may, upon the request of the Lead Borrower, include a provision whereby, subject to the approval of the Issuer, such standby L/C may be renewed for additional consecutive periods of twelve (12) months or

less (but not beyond the date that is thirty Business Days prior to the Maturity Date) unless the Issuer notifies the beneficiary thereof at least 30 days prior to the then applicable expiration date that such L/C will not be renewed.

(B) Documentary's: Ninety (90) days from issuance.

(C) Banker's Acceptances: Ninety (90) days from issuance.

(iii) If, notwithstanding the foregoing, the Administrative Agent causes the issuance of an L/C or Banker's Acceptance, the expiry of which is later than the Maturity Date, it shall be 105% cash collateralized at its issuance; and

(iv) An OverLoan will not result from the issuance of the subject L/C or Banker's Acceptance.

(c) Concurrently with requesting the issuance of a L/C or a Banker's Acceptance, the applicable Borrower shall execute and deliver to the Issuer in respect of such requested L/C or Banker's Acceptance a reimbursement or similar agreement in the Issuer's then standard form of application for and reimbursement agreement with respect to letters of credit and banker's acceptances; provided however that in the event of any conflict between the provisions of such reimbursement agreement and this Agreement, the provisions of this Agreement shall govern.

(d) Absent gross negligence, bad faith or willful misconduct, there shall not be any recourse to, nor liability of, the Administrative Agent or any Revolving Credit Lender on account of

(i) Any delay or refusal by an Issuer to issue an L/C or a Banker's Acceptance;

(ii) Any action or inaction of an Issuer on account of or in respect to, any L/C or any Banker's Acceptance.

(e) Immediately upon the issuance of any L/C or any Banker's Acceptance by the Issuer (or the amendment of a L/C or Banker's Acceptance increasing the amount thereof), and without any further action on the part of the Issuer, the Issuer shall be deemed to have sold to each Revolving Credit Lender, and each such Revolving Credit Lender shall be deemed unconditionally and irrevocably to have purchased from the Issuer, without recourse or warranty, an undivided interest and participation, to the extent of such Revolving Credit Lender's Revolving Credit Commitment Percentage, in such L/C and Banker's Acceptance, each drawing thereunder and the obligations of the Borrowers under this Agreement and the other Loan Documents with respect thereto. In consideration thereof, each Revolving Credit Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent for the account of the

Issuer its Revolving Credit Commitment Percentage of each disbursement made by the Issuer with respect to a L/C or Banker's Acceptance which is not reimbursed by the Borrowers. Each Revolving Credit Lender acknowledges and agrees that its obligations hereunder are absolute and unconditional and shall not be effected by any event or circumstance whatsoever, including the existence of a Default or the suspension of the Revolving Credit. Any action taken or omitted by the Issuer under or in connection with a L/C or Banker's Acceptance, if taken or omitted in the absence of gross negligence, actual bad faith, or willful misconduct, shall not create for the Issuer any resulting liability to any Revolving Credit Lender.

(f) The Borrowers shall reimburse the Issuer for the amount of any honoring of a drawing under an L/C or Banker's Acceptance on the same day on which such honoring takes place in immediately available funds in U.S. dollars. The Administrative Agent, without the request of any Borrower, may advance under the Revolving Credit (and charge to the Loan Account) the amount of any honoring of any L/C or Banker's Acceptance and other amount for which any Borrower, the Issuer, or the Revolving Credit Lenders become obligated on account of, or in respect to, any L/C or Banker's Acceptance. Such advance shall be a Base Margin Loan and shall be made whether or not any Borrower is in Default or such advance would result in an OverLoan. Such action shall not constitute a waiver of the Administrative Agent's rights under Section 2.11(b) hereof.

2.19. FEES FOR L/CS AND BANKER'S ACCEPTANCES.

(a) The applicable Borrowers shall pay the Administrative Agent, for the account of the Revolving Credit Lenders, on the first day of each calendar month, in arrears, a fee (each, an "L/C Fee") equal to the following per annum percentages of the average Stated Amount of the following categories of L/Cs outstanding during the subject month for such Borrowers' Division:

(i) Standby Letters of Credit: The Applicable Margin for Eurodollar Loans.

(ii) Documentary Letters of Credit: The Applicable Margin for Eurodollar Loans minus 0.50%.

(iii) After the occurrence and during the continuance of an Event of Default, at the option of the Administrative Agent (or at the instruction of the SuperMajority Lenders), the L/C Fee shall be increased for any L/Cs which from time to time are not cash collateralized in the amounts required in accordance with the provisions of this Agreement by an amount equal to two percent (2%) per annum.

(b) The applicable Borrowers shall pay the Administrative Agent, for the account of the Revolving Credit Lenders, on the first day of each month, in arrears, a fee (each, a "Banker's Acceptance Fee") equal to the Applicable Margin for Eurodollar Loans minus 0.50%

of the average Stated Amount of the Banker's Acceptances outstanding during the subject month for such Borrowers' Division. After the occurrence and during the continuance of an Event of Default, at the option of the Administrative Agent (or at the instruction of the SuperMajority Lenders), the Banker's Acceptance Fee shall be increased for any Banker's Acceptances which from time to time are not cash collateralized in the amounts required in accordance with the provisions of this Agreement by an amount equal to two percent (2%) per annum.

(c) In addition to the fees to be paid as provided in Subsections 2.19(a) and 2.19(b), above, the Borrowers shall pay to the Administrative Agent (or to the Issuer, if so requested by Administrative Agent), on demand, all issuance, processing, negotiation, amendment, and administrative fees and other amounts charged by the Issuer on account of, or in respect to, any L/C or Banker's Acceptance issued for its Division.

(d) If any change in Applicable Law shall either:

(i) impose, modify or deem applicable any reserve, special deposit or similar requirements against letters of credit heretofore or hereafter issued by any Issuer or with respect to which any Revolving Credit Lender or any Issuer has an obligation to lend to fund drawings under any L/C or any Banker's Acceptance; or

(ii) impose on any Issuer any other condition or requirements relating to any such letters of credit or banker's acceptance;

and the result of any event referred to in Section 2.19(d)(i) or 2.19(d)(ii), above, shall be to increase the cost to any Revolving Credit Lender or to any Issuer of issuing or maintaining any L/C or Banker's Acceptance (which increase in cost shall be the result of such Issuer's reasonable allocation among that Revolving Credit Lender's or Issuer's letter of credit customers of the aggregate of such cost increases resulting from such events), then, upon demand by the Administrative Agent and delivery by the Administrative Agent to the Lead Borrower of a certificate of an officer of the subject Revolving Credit Lender or the subject Issuer describing such change in law, executive order, regulation, directive, or interpretation thereof, its effect on such Revolving Credit Lender or such Issuer, and the basis for determining such increased costs and their allocation, the Borrowers shall immediately pay to the Administrative Agent, from time to time as specified by the Administrative Agent, such amounts as shall be sufficient to compensate the subject Revolving Credit Lender or the subject Issuer for such increased cost. Any Revolving Credit Lender's or any Issuer's determination of costs incurred under Section 2.19(d)(i) or 2.19(d)(ii), above, and the allocation, if any, of such costs among the Borrowers and other letter of credit customers of such Revolving Credit Lender or such Issuer, if done in good faith and made on an equitable basis and in accordance with such officer's certificate, shall, absent manifest error, be presumed to be accurate.

2.20. CONCERNING L/C'S AND BANKER'S ACCEPTANCES.

(a) None of the Issuer, the Issuer's correspondents, any Revolving Credit Lender, the Administrative Agent, or any advising, negotiating, or paying bank with respect to any L/C or Banker's Acceptance shall be responsible in any way for:

(i) The performance by any beneficiary under any L/C or Banker's Acceptance of that beneficiary's obligations to any Borrower.

(ii) The form, sufficiency, correctness, genuineness, authority of any Person signing; falsification; or the legal effect of; any documents called for under any L/C or Banker's Acceptance if (with respect to the foregoing) such documents on their face appear to be in order.

(b) The Issuer may honor, as complying with the terms of any L/C or any Banker's Acceptance and of any drawing thereunder, any drafts or other documents otherwise in order, but signed or issued by an administrator, executor, conservator, trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, liquidator, receiver, or other legal representative of the party authorized under such L/C or Banker's Acceptance to draw or issue such drafts or other documents.

(c) The Issuer may reject any drafts and documents presented under any L/C or any Banker's Acceptance which are discrepant in any manner, notwithstanding any prior course of dealing by the Issuer in honoring drafts under L/Cs or Banker's Acceptances.

(d) Unless otherwise agreed to, in the particular instance, each Borrower hereby authorizes any Issuer to:

(i) Select an advising bank, if any.

(ii) Select a paying bank, if any.

(iii) Select a negotiating bank.

(e) All directions, correspondence, and funds transfers relating to any L/C or any Banker's Acceptance are at the risk of the Borrowers. The Issuer shall have discharged the Issuer's obligations under any L/C or Banker's Acceptance which, or the drawing under which, includes payment instructions, by the initiation of the method of payment called for in, and in accordance with, such instructions (or by any other commercially reasonable and comparable method). None of the Administrative Agent, any Revolving Credit Lender, or the Issuer shall have any responsibility for any inaccuracy, interruption, error, or delay in transmission or delivery by post, telegraph or cable, or for any inaccuracy of translation.

(f) The Administrative Agent's, each Revolving Credit Lender's, and the Issuer's rights, powers, privileges and immunities specified in or arising under this Agreement are in addition to any heretofore or at any time hereafter otherwise created or arising, whether by

statute or rule of law or contract.

(g) Except to the extent otherwise expressly provided hereunder or agreed to in writing by the Issuer and the Lead Borrower, documentary L/Cs will be governed by the Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce, Publication No. 500, and standby L/Cs will be governed by International Standby Practices ISP98 (adopted by the International Chamber of Commerce on April 6, 1998) and any respective subsequent revisions thereof.

(h) The obligations of the Borrowers under this Agreement with respect to L/Cs and Banker's Acceptances are absolute, unconditional, and irrevocable and shall be performed strictly in accordance with the terms hereof under all circumstances, whatsoever including, without limitation, the following:

(i) Any lack of validity or enforceability or restriction, restraint, or stay in the enforcement of this Agreement, any L/C, any Banker's Acceptance, or any other agreement or instrument relating thereto.

(ii) Any Borrower's consent to any amendment or waiver of, or consent to the departure from, any L/C or any Banker's Acceptance.

(iii) The existence of any claim, set-off, defense, or other right which any Borrower may have at any time against the beneficiary of any L/C or Banker's Acceptance.

(iv) Any good faith honoring of a drawing under any L/C or Banker's Acceptance, which drawing possibly could have been dishonored based upon a strict construction of the terms of the L/C or Banker's Acceptance.

2.21. CHANGED CIRCUMSTANCES.

(a) The Administrative Agent may advise the Lead Borrower that the Administrative Agent has made the good faith determination (which determination shall be final and conclusive) of any of the following:

(i) Adequate and fair means do not exist for ascertaining the rate for Eurodollar Loans.

(ii) The continuation of or conversion of any Revolving Credit Loan to a Eurodollar Loan has been made impracticable or unlawful by the occurrence of a contingency that materially and adversely affects the applicable market or the compliance by the Administrative Agent or any Revolving Credit Lender in good faith with any Applicable Law.

(iii) The indices on which the interest rates for Eurodollar Loans are based shall no longer represent the effective cost to the Administrative Agent or any Revolving Credit Lender for U.S. dollar deposits in the interbank market for deposits in which it regularly participates.

(b) In the event that the Administrative Agent advises the Lead Borrower of an occurrence described in Section 2.21(a), then, until the Administrative Agent notifies the Lead Borrower that the circumstances giving rise to such notice no longer apply:

(i) The obligation of the Administrative Agent or each Revolving Credit Lender to make loans of the type affected by such changed circumstances or to permit the Lead Borrower to select the affected interest rate as otherwise applicable to any Revolving Credit Loans shall be suspended.

(ii) Any notice which the Lead Borrower had given the Administrative Agent with respect to any Eurodollar Loan, the time for action with respect to which has not occurred prior to the Administrative Agent's having given notice pursuant to Section 2.21(a), shall be deemed at the option of the Administrative Agent to not having been given.

2.22. DESIGNATION OF LEAD BORROWER AS BORROWERS' AGENT.

(a) Each Borrower hereby irrevocably designates and appoints the Lead Borrower as that Borrower's agent to obtain loans and advances under the Revolving Credit, the proceeds of which shall be available to each Borrower for those uses as those set forth in Section 2.1(d) and to request the issuance of L/Cs and Banker's Acceptances for such Borrower. The Value City Entities and Filene's further irrevocably designate and appoint Value City Imports (a division of Schottenstein Stores Corporation) as their agent to request the issuance of L/Cs and Banker's Acceptances for such Borrower. As the disclosed principal for its agent, each Borrower shall be obligated to each Agent and each Revolving Credit Lender on account of loans and advances so made to, and L/Cs and Banker's Acceptances so issued for, its Division under the Revolving Credit as if made directly by the Revolving Credit Lenders to that Borrower, notwithstanding the manner by which such loans and advances are recorded on the books and records of the Lead Borrower and of any Borrower.

(b) Each Borrower recognizes that credit available to it under the Revolving Credit is in excess of and on better terms than it otherwise could obtain on and for its own account and that one of the reasons therefor it is joining in the credit facility contemplated herein with all other Borrowers. Consequently, each Borrower hereby assumes and agrees to fully, faithfully, and punctually discharge all Liabilities of all of the Borrowers and hereby guarantees the payment and performance of all Liabilities of all other Borrowers.

(c) The proceeds of each loan and advance provided under the Revolving

Credit which is requested by the Lead Borrower shall be deposited into the Operating Account of the applicable Division. Neither the Administrative Agent nor any Revolving Credit Lender shall have any obligation to see to the application of such proceeds.

2.23. REVOLVING CREDIT LENDERS' COMMITMENTS

(a) Subject to Section 16.1 (which provides for assignments and assumptions of commitments), each Revolving Credit Lender's "REVOLVING CREDIT COMMITMENT PERCENTAGE", and "REVOLVING CREDIT DOLLAR COMMITMENT" (respectively so referred to herein) is set forth on EXHIBIT 2.23, annexed hereto.

(b) The obligations of each Revolving Credit Lender are several and not joint. No Revolving Credit Lender shall have any obligation to make any loan under the Revolving Credit in excess of either of the following:

(i) That Revolving Credit Lender's Revolving Credit Commitment Percentage of the subject loan or advance or of Availability, DSW/Shonac Availability, Filene's Availability or VC Availability, as applicable.

(ii) Any loan which, when aggregated with all other loans made by that Revolving Credit Lender under the Revolving Credit and then outstanding, exceed that Revolving Credit Lender's Revolving Credit Dollar Commitment.

(c) No Revolving Credit Lender shall have any liability to the Borrowers on account of the failure of any other Revolving Credit Lender to provide any loan or advance under the Revolving Credit nor any obligation to make up any shortfall which may be created by such failure.

(d) The Revolving Credit Dollar Commitments, Revolving Credit Commitment Percentages, and identities of the Revolving Credit Lenders may be changed, from time to time by the reallocation or assignment of Revolving Credit Dollar Commitments and Revolving Credit Commitment Percentages amongst the Revolving Credit Lenders or with other Persons who determine to become "Revolving Credit Lenders", provided, however unless an Event of Default has occurred and is continuing (in which event, no consent of any Borrower is required) any assignment to a Person shall be subject to the prior consent of the Lead Borrower (not to be unreasonably withheld or delayed), which consent will be deemed given unless the Lead Borrower provides the Administrative Agent with written objection, not more than five (5) Business Days after the Administrative Agent shall have given the Lead Borrower written notice of a proposed assignment), provided that the Lead Borrower's consent shall in no event be required with respect to the following: (i) an assignment to another Revolving Credit Lender; or (ii) an assignment to a transferee of a Revolving Credit Lender's rights in and to a material portion of such Revolving Credit Lender's portfolio of asset based credit facilities; or (iii) to any Eligible Assignee (A) in connection with the initial syndication of the loan arrangement and (B)

until a successful syndication as determined by the Syndication Agent and the Co-Lead Arrangers has occurred.

(e) Upon written notice given the Lead Borrower from time to time by the Administrative Agent, of any assignment or allocation referenced in
Section 2.23(d):

(i) Each Borrower shall execute one or more replacement Revolving Credit Notes to reflect such changed Revolving Credit Dollar Commitments, Revolving Credit Commitment Percentages, and identities and shall deliver such replacement Revolving Credit Notes to the Administrative Agent (which promptly thereafter shall deliver to the Lead Borrower the Revolving Credit Notes so replaced) provided however, in the event that a Revolving Credit Note is to be exchanged following its acceleration or the entry of an order for relief under the Bankruptcy Code with respect to any Borrower, the Administrative Agent, in lieu of causing the Borrowers to execute one or more new Revolving Credit Notes, may issue the Administrative Agent's Certificate confirming the resulting Revolving Credit Dollar Commitments and Revolving Credit Percentage Commitments.

(ii) Such change shall be effective from the effective date specified in such written notice and any Person added as a Revolving Credit Lender shall have all rights and privileges of a Revolving Credit Lender hereunder thereafter as if such Person had been a signatory to this Agreement and any other Loan Document to which a Revolving Credit Lender is a signatory and any Person removed as a Revolving Credit Lender shall be relieved of any obligations or responsibilities of a Revolving Credit Lender hereunder thereafter.

2.24 PAYMENTS.

(a) The Borrowers shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, fees or reimbursement of drawings under L/Cs, Banker's Acceptances, or otherwise) prior to 2:00 p.m. on the date when due, in immediately available funds, without setoff or counterclaim. Any amounts received after such time on any date may, in the reasonable, good faith discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 1965 East Sixth Street, Cleveland, Ohio (or such other address as to which the Lead Borrower shall have been advised by the Administrative Agent), except payments to be made directly to the Issuer as expressly provided herein. If any payment under any Loan Document shall be due on a day that is not a Business Day, except with respect to Eurodollar Loans, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments under each Loan Document shall be made in dollars.

(b) If and to the extent that any payment owed by the Borrowers to the Administrative Agent, any Revolving Credit Lender or the Issuer is not made when due, each Borrower authorizes the Administrative Agent, the Revolving Credit Lenders and the Issuer, as the case may be, to charge from time to time against any or all of the deposit accounts of the Borrowers any amount so due. Notice of such charge shall be given promptly to the Lead Borrower.

ARTICLE 3 - CONDITIONS PRECEDENT:

As a condition to the effectiveness of this Agreement, the establishment of the Revolving Credit, and the making of the first loan under the Revolving Credit, each of the documents respectively described in Sections 3.1 through and including 3.4, (each in form and substance satisfactory to the Administrative Agent) shall have been delivered to the Administrative Agent, and the conditions respectively described in Sections 3.5 through and including 3.19, shall have been satisfied:

3.1. CORPORATE DUE DILIGENCE.

(a) Certificates of corporate good standing for each Loan Party, respectively issued by the Secretary of State for the state in which that Loan Party is incorporated.

(b) Certificates of due qualification, in good standing, issued by the Secretary(ies) of State of each State for each Borrower reasonably required by the Administrative Agent.

(c) Certificates of each Loan Party's Secretary of the due adoption, continued effectiveness, and setting forth the texts of, each corporate resolution adopted in connection with the establishment of the loan arrangement contemplated by the Loan Documents and attesting to the true signatures of each Person authorized as a signatory to any of the Loan Documents.

3.2. OPINIONS. Opinions of counsel to the Loan Parties in form and substance satisfactory to the Administrative Agent.

3.3. ADDITIONAL DOCUMENTS. Such additional instruments and documents as any Agent or its counsel may reasonably require or request including, without limitation, the documents described on EXHIBIT 3.3 hereto.

3.4. OFFICERS' CERTIFICATES. Certificates executed by the Chief Executive Officer and the Chief Financial Officer of the Lead Borrower in form and substance satisfactory to the Administrative Agent.

3.5. REPRESENTATIONS AND WARRANTIES. Each of the representations made by or on behalf of each Loan Party in this Agreement or in any of the other Loan Documents or in

any other report, statement, document, or paper provided by or on behalf of each Loan Party shall be true and complete as of the date as of which such representation or warranty was made.

3.6. MINIMUM DAY ONE AVAILABILITY. After giving effect to the first funding under the Revolving Credit, any charges to the Loan Account made in connection with the establishment of the credit facility contemplated hereby, L/Cs and Banker's Acceptances to be issued at, or immediately subsequent to, such establishment, Excess Availability shall not be less than One Hundred Fifteen Million Dollars ($115,000,000.00).

3.7. TERM LOANS; INTERCREDITOR AGREEMENT. The Term Loans shall be fully funded on the Closing Date. All documentation entered into with respect to the Term Loans shall be satisfactory to the Co-Lead Arrangers, in their sole reasonable, good faith discretion. The Agent shall have entered into the Intercreditor Agreement on terms reasonably satisfactory to the Co-Lead Arrangers.

3.8 REPAYMENT OF EXISTING INDEBTEDNESS. The Administrative Agent shall have received a payoff letter from the Borrowers' existing lenders (including, without limitation, NCB, as agent, and Schottenstein Stores Corporation, but excluding the Senior Convertible Facility) as well as a tender of releases and discharges of all collateral security for the Borrowers' existing credit facilities, each in form and substance satisfactory to the Administrative Agent. Such Indebtedness shall be repaid contemporaneously with the making of the first Revolving Credit Loan hereunder.

3.9 CONSENTS. All necessary consents and approvals to the transactions contemplated hereby shall have been obtained and shall be satisfactory to the Administrative Agent.

3.10 APPRAISALS AND COMMERCIAL FINANCE EXAMINATIONS. The Collateral Agents shall have received (a) appraisals of the Borrowers' Inventory by a third party appraiser acceptable to the Collateral Agents, and (b) a commercial finance examination with respect to the Lead Borrower and its Subsidiaries, each in form and substance satisfactory to the Collateral Agents.

3.11 MATERIAL AGREEMENTS. The consummation of the transactions contemplated hereby shall not (a) violate any applicable law, statute, rule or regulation or (b) conflict with, or result in a default or event of default under, any material agreement of any Loan Party. There shall not have occurred any default of any material contract or agreement of any Loan Party.

3.12 LITIGATION. There shall not be pending any litigation or other proceeding, the result of which could reasonably be expected to have a Material Adverse Effect.

3.13 PERFECTION OF ENCUMBRANCES.

(a) The Collateral Agents shall have received results of searches or other evidence reasonably satisfactory to the Collateral Agents (in each case dated as of a date reasonably satisfactory to the Collateral Agents) indicating the absence of Encumbrances, except for Permitted Encumbrances, on the assets of the Loan Parties, except for which termination statements and releases reasonably satisfactory to the Collateral Agents are being tendered concurrently with such extension of credit.

(b) The Collateral Agents shall have received all documents and instruments, including Uniform Commercial Code financing statements, required by law or reasonably requested by the Collateral Agents to be filed, registered or recorded to create or perfect the first priority Encumbrances intended to be created under the Loan Documents (subject to Permitted Encumbrances having priority over the Encumbrance of the Collateral Agents pursuant to operation of law) and all such documents and instruments shall have been so filed (or provision made therefor), registered or recorded to the satisfaction of the Collateral Agents.

3.14. ALL FEES AND EXPENSES PAID. All fees due at or immediately after the first funding under the Revolving Credit and all costs and expenses incurred by the Agent and the Co-Lead Arrangers in connection with the establishment of the credit facility contemplated hereby (including the fees and expenses of counsel to the Agent and the Co-Lead Arrangers) shall have been paid in full.

3.15 CASH MANAGEMENT. The Loan Parties shall have established cash management systems reasonably acceptable to the Agent, including, without limitation, compliance with the provisions of Sections 7.1(b), 7.2(b), and 7.3(a).

3.16 INSURANCE. The Agent shall be reasonably satisfied with the insurance maintained by the Loan Parties and the Agent shall have received an endorsement to such insurance policies naming the Agent as loss payee and/or additional insured and otherwise satisfactory in form and substance to the Agent.

3.17. NO LOAN PARTY IN DEFAULT. No Loan Party is in Default.

3.18. NO ADVERSE CHANGE. Each Agent shall be reasonably satisfied that any financial statements delivered to it fairly present the business and financial condition of the Borrowers and their Subsidiaries, and that there has been no material adverse change in the assets, business, financial condition, or income of the Borrowers and their Subsidiaries since the March, 2002 financial information delivered to the Agent.

3.19 CERTAIN CHANGES.

(a) No material changes in governmental regulations or policies affecting the Loan Parties, the Agents, the Co-Lead Arrangers or any Revolving Credit Lender involved in this

transaction shall have occurred prior to the Closing Date.

(b) There shall not have occurred prior to the Closing Date any disruption or material adverse change in the financial or capital markets in general that would, in the reasonable opinion of the Administrative Agent, have a material adverse effect on the market for loan syndications or adversely affecting the syndication of the Revolving Credit Loans.

3.20. BENEFIT OF CONDITIONS PRECEDENT. The conditions set forth in this Article 3 are for the sole benefit of the Agent and each Revolving Credit Lender and may be waived by the Administrative Agent in whole or in part without prejudice to the Agent or any Revolving Credit Lender.

No document shall be deemed delivered to the Agents or any Revolving Credit Lender until received and accepted by the Administrative Agent at its offices in Cleveland, Ohio. Under no circumstances shall this Agreement take effect until executed and accepted by the Agents.

ARTICLE 4 - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:

To induce each Revolving Credit Lender to establish the credit facility contemplated herein and to induce the Revolving Credit Lenders to provide loans and advances under the Revolving Credit (each of which loans shall be deemed to have been made in reliance thereupon) the Loan Parties, in addition to all other representations, warranties, and covenants made by any Loan Party in any other Loan Document, make those representations, warranties, and covenants included in this Agreement.

4.1. PAYMENT AND PERFORMANCE OF LIABILITIES. The Loan Parties shall pay each payment Liability when due (or when demanded, if payable on demand) and shall promptly, punctually, and faithfully perform each other Liability.

4.2. DUE ORGANIZATION. AUTHORIZATION. NO CONFLICTS.

(a) Each Loan Party presently is and hereafter shall remain in good standing as a corporation or other entity under the laws of the State in which it is organized, and is and shall hereafter remain duly qualified and in good standing in every other State in which, by reason of the nature or location of each Loan Parties' assets or operation of each of their respective business, such qualification may be necessary, except where the failure to so qualify would not have a Material Adverse Effect.

(b) Each Loan Party's respective organizational identification number assigned to it by the State of its incorporation and its respective federal employer identification number, as of the Closing Date, is listed on EXHIBIT 4.2, annexed hereto.

(c) No Loan Party shall change its State of organization; any organizational

identification number assigned to that Loan Party by that State; or that Loan Party's federal taxpayer identification number, without the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld.

(d) Each Loan Party has all requisite power and authority to execute and deliver all Loan Documents to which that Loan Party is a party and has and will hereafter retain all requisite power to perform all Liabilities.

(e) The execution and delivery by each Loan Party of each Loan Document to which it is a party; each Loan Party's consummation of the transactions contemplated by such Loan Documents (including, without limitation, the creation of Collateral Interests by that Loan Party to secure the Liabilities); and each Loan Party's performance under those of the Loan Documents to which it is a party:

(i) Have been duly authorized by all necessary action.

(ii) Do not, and will not, contravene in any material respect any provision of any Requirement of Law or obligation of that Loan Party.

(iii) Will not result in the creation or imposition of, or the obligation to create or impose, any Encumbrance upon any assets of that Loan Party pursuant to any Requirement of Law or obligation, except pursuant to the Loan Documents.

(f) Except where the failure to observe, maintain, or perform the following is not reasonably likely to have a Material Adverse Effect:

(i) All customary formalities regarding the corporate existence of each Loan Party will be observed.

(ii) In accordance with its present practices, each Loan Party will accurately maintain its organizational documents separate from those of any Affiliate of such Loan Party and any other Person.

(g) The Loan Documents have been duly executed and delivered by each Loan Party and are the legal, valid and binding obligations of each Loan Party, enforceable against each Loan Party in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability.

4.3. TRADE NAMES.

(a) EXHIBIT 4.3, annexed hereto, is a listing as of the Closing Date, of:

(i) All names under which, to the knowledge of the Lead Borrower, any Loan Party has conducted its business in the past five
(5) years.

(ii) All Persons with whom any Loan Party has consolidated or merged, or from whom any Loan Party has acquired in a single transaction or in a series of related transactions substantially all of such Person's assets in the past five (5) years.

(b) The Lead Borrower will provide the Administrative Agent with not less than ten (10) days prior written notice (with reasonable particularity) of any change to any Loan Party's name from that under which that Loan Party is conducting its business at the execution of this Agreement and will not effect such change unless each Loan Party is then in compliance with all provisions of this Agreement.

4.4. INTELLECTUAL PROPERTY.

(a) Each Loan Party owns and possesses, or has the right to use all material patents, industrial designs, trademarks, trade names, trade styles, brand names, service marks, logos, copyrights, trade secrets, know-how, confidential information, and other intellectual or proprietary property of any third Person necessary for that Loan Party's conduct of that Loan Party's business.

(b) The conduct by each Loan Party of that Loan Party's business does not, to the knowledge of the Loan Parties, presently infringe (nor will any Loan Party conduct its business in the future so as to infringe) the patents, industrial designs, trademarks, trade names, trade styles, brand names, service marks, logos, copyrights, trade secrets, know-how, confidential information, or other intellectual or proprietary property of any third Person, except where such infringement is not reasonably likely to have a Material Adverse Effect.

4.5. LOCATIONS.

(a) The Collateral, and the books, records, and papers of the Loan Parties pertaining thereto, are kept and maintained and will be kept and maintained hereafter solely (i) at those locations which are listed on EXHIBIT 4.5, annexed hereto (or as supplemented pursuant to the terms of this Agreement), which EXHIBIT includes, with respect to each such location, the name and address of the landlord on the Lease which covers such location (or an indication that a Loan Party owns the subject location) and of all service bureaus with which any such records are maintained or (ii) at such other locations as to which the Lead Borrower has provided ten (10) days prior written notice to the Administrative Agent of the intended location of the Collateral, books, records, and papers thereat.

(b) No Loan Party shall remove any of the Collateral from those locations described in Section 4.5(a) except for the following purposes:

(i) To accomplish sales of Inventory in the ordinary course of business.

(ii) To move Inventory or other Collateral from one such location to another such location.

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

(c) No Loan Party will:

(i) Alter, modify, or amend any Lease in a manner which is reasonably likely to have a Material Adverse Effect.

(ii) Other than leased departments and similar arrangements with third parties, commit to open or close, or open or close, any location at which any Loan Party maintains, offers for sales, or stores any of the Collateral, in any fiscal year such that the actual number of stores of all Borrowers in the aggregate (A) exceeds by ten (10) the number of stores reflected on the Business Plan for such fiscal year, or (B) is more than ten (10) fewer than the number of stores reflected on the Business Plan for such fiscal year (without giving effect to any new stores which the Business Plan projected to be opened or closed, but which have not in fact been opened or closed)

(d) No tangible personal property of any Loan Party is in the care or custody of any third party or stored or entrusted with a bailee or other third party and none shall hereafter be placed under such care, custody, storage, or entrustment, except (i) as otherwise disclosed pursuant to, or permitted by, this Section 4.5, or (ii) for Inventory in an amount not to exceed $1,000,000 at Cost in the aggregate at any time in the ordinary course of business.

4.6. ENCUMBRANCES.

(a) The Loan Parties are, and shall hereafter remain, the owners of the Collateral free and clear of all Encumbrances other than any Permitted Encumbrance.

(b) No Loan Party has, and none shall have, possession of any property on consignment to that Loan Party except (i) as of the Closing Date, those listed on EXHIBIT 4.6(b), annexed hereto and (ii) those as to which the Loan Parties notify the Administrative Agent in accordance with the provisions of Section 5.3 hereof.

4.7. INDEBTEDNESS. The Loan Parties do not and shall not hereafter have any Indebtedness other than:

(a) Permitted Indebtedness; and

(b) A Loan Party's guaranty of Permitted Indebtedness of another Loan Party.

4.8. INSURANCE.

(a) EXHIBIT 4.8, annexed hereto, is a schedule of all insurance policies owned by the Loan Parties or under which any Loan Party is the named insured as of the Closing Date. Each of such policies is in full force and effect. To the best of such Loan Party's knowledge, neither the issuer of any such policy nor any Loan Party is in default or violation of any such policy. The Lead Borrower shall provide the Administrative Agent with prompt written notice of any change in the insurance policies owned by the Loan Parties or under which any Loan Party is the named insured from those in effect as of the Closing Date.

(b) The Loan Parties shall have and maintain at all times insurance covering such risks, in such amounts, containing such terms, in such form, for such periods, and written by the companies presently providing such insurance, or such other companies as may be selected by the Lead Borrower and are satisfactory to the Agent (whose consent shall not be unreasonably withheld).

(c) All insurance carried by the Loan Parties shall provide for a minimum of thirty (30) days' prior written notice of cancellation to the Administrative Agent and all such insurance which covers the Collateral shall

(i) Include an endorsement in favor of the Collateral Agents, which endorsement shall provide that the insurance, to the extent of the Collateral Agents' interest therein, shall not be impaired or invalidated, in whole or in part, by reason of any act or neglect of any Loan Party or by the failure of any Loan Party to comply with any warranty or condition of the policy.

(ii) Not include an endorsement in favor of any other Person (other than the agents for the holders of the Term Loans, those Persons intended as beneficiaries of any builder's risk insurance, and the holder of any Permitted Encumbrances).

(d) The Lead Borrower shall furnish the Collateral Agents from time to time, upon request of the Collateral Agents, with certificates or other evidence satisfactory to the Collateral Agents regarding compliance by the Loan Parties with the foregoing requirements.

(e) In the event of the failure by the Loan Parties to maintain insurance as required herein, any Agent, at its option and the Loan Parties' expense, may obtain such insurance at the expense of the Loan Parties, provided, however, an Agent's obtaining of such insurance shall not constitute a cure or waiver of any Event of Default occasioned by the Loan Parties' failure to have maintained such insurance.

4.9. LICENSES. Each material license, distributorship, franchise, and similar agreement issued to, or to which any Loan Party is a party is in full force and effect. Each material license agreement to which a Loan Party is a party as of the Closing Date is listed on EXHIBIT 4.9, annexed hereto. No party to any such license or agreement is in default or violation thereof, except where such default or failure is not reasonably likely to have a Material Adverse Effect. No Loan Party has received any notice or threat of cancellation of any such license or agreement. The Loan Parties shall (a) with respect to existing licensors and licensees, use its best efforts to, and (b) with respect to license agreements entered into after the Closing Date, shall, cause the licensors and licensees to enter into such tri-party or estoppel agreements as any Agent may reasonably request.

4.10. LEASES. EXHIBIT 4.10, annexed hereto, is a schedule of all presently effective Capital Leases as of the Closing Date. (Exhibit 4.5 includes a list of all other presently effective Leases). Each of such Leases and Capital Leases is in full force and effect. No Loan Party, to the best of its knowledge, is in default or violation of any such Lease or Capital Lease, except where such violation is not reasonably likely to have a Material Adverse Effect. No Loan Party has received any notice or threat of cancellation of any such Lease or Capital Lease, which cancellation (together with all other similar cancellations) is reasonably likely to have a Material Adverse Effect.

4.11. REQUIREMENTS OF LAW. Each Loan Party is and will cause its Subsidiaries to be in compliance with, and shall hereafter comply with and use its assets in compliance with, all Requirements of Law except where the failure of such compliance will not have a Material Adverse Effect. No Loan Party has received any notice of any violation of any Requirement of Law (other than of a violation which does not have a Material Adverse Effect), which violation has not been cured or otherwise remedied.

4.12. LABOR RELATIONS.

(a) As of the Closing Date, no Loan Party is a party to any collective bargaining or other labor contract except as listed on EXHIBIT 4.12, annexed hereto. The Lead Borrower shall provide the Administrative Agent with prompt written notice of any additional or amended collective bargaining or other labor contract entered into after the Closing Date.

(b) There is not presently pending and, to any Loan Party's knowledge, there is not threatened any of the following except to the extent any of the following is not reasonably likely to have a Material Adverse Effect:

(i) Any strike, slowdown, picketing, work stoppage, or employee grievance process.

(ii) Any proceeding against or affecting any Loan Party relating to the alleged violation of any Applicable Law pertaining to labor relations or before National

Labor Relations Board, the Equal Employment Opportunity Commission, or any comparable governmental body, organizational activity, or other labor or employment dispute against or affecting any Loan Party, which, if determined adversely to that Loan Party is reasonably likely to have a Material Adverse Effect on that Loan Party.

(iii) Any lockout of any employees by any Loan Party (and no such action is contemplated by any Loan Party).

(iv) Any application for the certification of a collective bargaining agent.

(c) No event has occurred or circumstance exists which could provide the basis for any work stoppage or other labor dispute which would be reasonably likely to have a Material Adverse Effect.

(d) Each Loan Party:

(i) Has complied with all Applicable Law relating to employment, equal employment opportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining, the payment of social security and similar taxes, occupational safety and health, and plant closing, except where such non-compliance is not reasonably likely to have a Material Adverse Effect.

(ii) Is not liable for the payment of compensation, damages, taxes, fines, penalties, or other amounts, however designated, for that Loan Party's failure to comply with any Applicable Law referenced in Section 4.12(d)(i) which is reasonably likely to have a Material Adverse Effect.

4.13. MAINTAIN PROPERTIES. The Loan Parties shall:

(a) Keep the Collateral in good order and repair (ordinary reasonable wear and tear and insured casualty excepted).

(b) Not suffer or cause the waste or destruction of any material part of the Collateral.

(c) Not use any of the Collateral in violation of any policy of insurance thereon.

(d) Not sell, lease, or otherwise dispose of any of the Collateral, other than the following:

(i) The sale of Inventory in compliance with this Agreement.

(ii) The disposal of Equipment which is obsolete, worn out, or damaged beyond repair, or no longer useful in the Loan Parties' businesses.

(iii) Permitted Dispositions.

(iv) The turning over to the Administrative Agent of all Receipts as provided herein.

(v) The use of the Collateral to pay Liabilities arising in the ordinary course.

4.14. TAXES.

(a) With respect to the Loan Parties' federal, state, and local tax liability and obligations:

(i) To the best of its knowledge, the Lead Borrower, in compliance with all Applicable Law, has properly filed all material returns due to be filed up to the date of this Agreement.

(ii) Except as described on EXHIBIT 4.14:

(A) Currently, no Loan Party has received from any taxing authority any request to perform any examination of or with respect to any Loan Party nor any other written or verbal notice in any way relating to any claimed failure by any Loan Party to comply with all Applicable Law concerning payment of any taxes or other amounts in the nature of taxes in excess of $500,000 in any one instance.

(B) No agreement exists which waives or extends any statute of limitations applicable to the right of any taxing authority to assert a deficiency or make any other claim for or in respect to federal income taxes.

(C) No issue has been raised in any tax examination of any Loan Party which reasonably could be expected to result in the assertion of a deficiency for any fiscal year open for examination, assessment, or claim by any taxing authority in excess of $500,000 in the aggregate for all Loan Parties.

(b) The Loan Parties have and hereafter shall: pay, as they become due and payable, all taxes and unemployment contributions and other charges of any kind or nature levied, assessed or claimed against any Loan Party or the Collateral by any Person whose claim could result in an Encumbrance upon any asset of any Loan Party or by any governmental

authority, provided, however, that (i) no such taxes, contributions and charges are required to be paid if being contested in good faith by such Loan Party, by appropriate proceedings diligently instituted and conducted, without danger to any material risk to the Collateral, and adequate reserves or appropriate provision, if any, as shall be required in conformity with GAAP, shall have been made therefor, and provided that no Encumbrance has been filed on account thereof, and (ii) the inadvertent failure of a Loan Party to pay any such taxes, contributions, and other charges when due shall not constitute an Event of Default hereunder as long as (A) the aggregate amount thereof does not exceed $500,000, and (B) no Encumbrance has been filed on account thereof, and (C) promptly upon the date an Authorized Officer obtains knowledge or should have obtained knowledge thereof, the Borrowers make payment of such taxes, contributions or charges; properly exercise any trust responsibilities imposed upon any Loan Party by reason of withholding from employees' pay or by reason of any Loan Parties' receipt of sales tax or other funds for the account of any third party; timely make all contributions and other payments as may be required pursuant to any Employee Benefit Plan now or hereafter established by any Loan Party; and timely file all tax and other returns and other reports with each governmental authority to whom any Loan Party is obligated to so file, provided that the inadvertent failure of a Loan Party to file any such returns or reports when due shall not constitute an Event of Default hereunder as long as (A) the aggregate amount of taxes, assessments or charges with respect to such returns does not exceed $500,000, and (B) no Encumbrance has been filed on account thereof, and (C) promptly upon the date an Authorized Officer obtains knowledge or should have obtained knowledge thereof, the Borrowers file such returns and/or reports and make payment of any amounts required to be paid on account thereof.

4.15. NO MARGIN STOCK. No Loan Party is engaged in the business of extending credit for the purpose of purchasing or carrying any margin stock (within the meaning of Regulations U, T, and X of the Board of Governors of the Federal Reserve System of the United States). No part of the proceeds of any borrowing hereunder will be used at any time to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock.

4.16. INVESTMENT AND HOLDING COMPANY STATUS. No Loan Party is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935.

4.17.ERISA.

(a) Except to the extent that such action is not reasonably likely to have a Material Adverse Effect, neither any Loan Party nor any ERISA Affiliate has within the past three (3) years:

(i) Violated or failed to be in full compliance with any Loan Party's Employee Benefit Plan.

(ii) Failed timely to file all reports and filings required by ERISA to be filed by any Loan Party.

(iii) Engaged in any nonexempt "prohibited transactions" or "reportable events" (respectively as described in ERISA).

(iv) Engaged in, or committed, any act such that a tax or penalty reasonably could be imposed upon any Loan Party on account thereof pursuant to ERISA.

(v) Incurred any material accumulated funding deficiency within the meaning of ERISA.

(vi) Terminated any Employee Benefit Plan such that a lien could be asserted against any assets of any Loan Party on account thereof pursuant to ERISA.

(vii) Failed to make any required contribution or payment to, or made a complete or partial withdrawal from, any Employee Benefit Plan which is a multiemployer plan within the meaning of
Section 4001(a) of ERISA.

(b) Neither any Loan Party nor any ERISA Affiliate shall ever engage in any action of the type described in Section 4.17(a), if as a result thereof, such Loan Party or ERISA Affiliate will, or could reasonably be expected to, incur liability that could reasonably likely have a Material Adverse Effect.

4.18. HAZARDOUS MATERIALS.

(a) Except as set forth on EXHIBIT 4.18(a) hereto, (i) the operations of each Loan Party are in material compliance with all Environmental Laws; (ii) to the best of each Loan Party's knowledge, there has been no Release at any of the properties owned or operated by any Loan Party or a predecessor in interest, or at any disposal or treatment facility which received Hazardous Materials generated by any Loan Party or any predecessor in interest which is reasonably likely to have a Material Adverse Effect; (iii) no Environmental Action has been asserted against any Loan Party or any predecessor in interest nor does any Loan Party have knowledge or notice of any threatened or pending Environmental Action against any Loan Party or any predecessor in interest which is reasonably likely to have a Material Adverse Effect; (iv) no Loan Party has knowledge of any Environmental Actions that have been asserted against any facilities that may have received Hazardous Materials generated by any Loan Party or any predecessor in interest which are reasonably likely to have a Material Adverse Effect; (v) to the best of such Loan Party's knowledge, no property now or formerly owned or operated by a Loan Party has been used as a treatment or disposal site for any Hazardous Material; (vi) no Loan Party has failed to report to the proper Governmental Authority any Release which is required to be so reported by any Environmental Laws which is reasonably likely to have a Material Adverse Effect; (vii) each Loan Party holds all licenses, permits and approvals required under any Environmental Laws in connection with the operation of the business carried on by it, except for such licenses, permits and approvals as to which a Loan Party's failure to maintain or comply with is not reasonably likely to have a Material Adverse

Effect; and (viii) no Loan Party has received any notification pursuant to any Environmental Laws that (A) any work, repairs, construction or Capital Expenditures are required to be made in respect as a condition of continued compliance with any Environmental Laws, or any license, permit or approval issued pursuant thereto or (B) any license, permit or approval referred to above is about to be reviewed, made, subject to limitations or conditions, revoked, withdrawn or terminated, in each case, except as is not reasonably likely to have a Material Adverse Effect.

(b) Each Loan Party shall, except where a violation or failure is not reasonably likely to have a Material Adverse Effect: (i) Keep any property either owned or operated by it or any of its Subsidiaries free of any Environmental Liens; (ii) comply, and cause each of its Subsidiaries to comply, in all material respects with Environmental Laws and provide to the Collateral Agents any documentation of such compliance which the Collateral Agents may reasonably request; (iii) provide the Collateral Agents written notice within five (5) days of any Release of a Hazardous Material in excess of any reportable quantity from or onto property at any time owned or operated by it or any of its Subsidiaries and take any remedial actions required to abate said Release; (iv) provide the Collateral Agents with written notice within ten (10) days of the receipt of any of the following: (A) notice that an Environmental Lien has been filed against any property of any Loan Party or any of its Subsidiaries; (B) commencement of any Environmental Action or notice that an Environmental Action will be filed against any Loan Party or any of its Subsidiaries; and (C) notice of a violation, citation or other administrative order which, to the extent that any of the foregoing are reasonably likely to have a Material Adverse Effect and
(v) defend, indemnify and hold harmless the Agent and the Revolving Credit Lenders and their transferees, and their respective employees, agents, officers and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs or expenses (including, without limitation, attorney and consultant fees, investigation and laboratory fees, court costs and litigation expenses) arising out of (A) the generation, presence, disposal, Release or threatened Release of any Hazardous Materials on, under, in, originating or emanating from any property at any time owned or operated by any Loan Party or any of its Subsidiaries (or its predecessors in interest or title), (B) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to the presence or Release of such Hazardous Materials, (C) any request for information, investigation, lawsuit brought or threatened, settlement reached or order by a Governmental Authority relating to the presence or Release of such Hazardous Materials, (D) any violation of any Environmental Law and/or (E) any Environmental Action filed against the Agent or any Revolving Credit Lender, to the extent that any of the foregoing is reasonably likely to have a Material Adverse Effect.

(c) No Loan Party shall knowingly or negligently permit the use, handling, generation, storage, treatment, Release or disposal of Hazardous Materials at any property owned or leased by it or any of its Subsidiaries, except in compliance with Environmental Laws and so

long as such use, handling, generation, storage, treatment, Release or disposal of Hazardous Materials is not reasonably likely to result in a Material Adverse Effect.

4.19. LITIGATION. Except as described in EXHIBIT 4.19, annexed hereto, there is not presently pending or threatened by or against any Loan Party any suit, action, proceeding, or investigation which, if determined adversely to any Loan Party, would have a Material Adverse Effect. As of the Closing Date, no Loan Party is the holder of any Commercial Tort Claim other than as described on EXHIBIT 4.19.

4.20. DIVIDENDS. INVESTMENTS. CORPORATE ACTION. No Loan Party shall:

(a) Pay any cash dividend or make any other distribution in respect of any class of that Loan Party's capital stock, (other than dividends payable to another Loan Party or payable solely in the capital stock of such paying Loan Party).

(b) Own, redeem, retire, purchase, or acquire any of any Loan Party's capital stock; provided that the Loan Parties may make cash payments for any such purposes if:

(i) no Default or Event of Default shall have occurred and be continuing at the time of declaration or payment thereof; and

(ii) after giving effect to the making any such cash payment, the aggregate amount so expended for such purposes subsequent to the Closing Date does not exceed $1,500,000; and

(iii) after giving effect to the making any such cash payment, the aggregate amount so expended for such purposes in any fiscal year of the Borrowers does not exceed $500,000.

(c) Invest in or purchase any stock or securities or rights to purchase any such stock or securities, of any Person other than a Permitted Investment, or a Permitted Acquisition.

(d) Merge or consolidate or be merged or consolidated with or into any other corporation or other entity, other than in connection with a Permitted Acquisition (provided that a Loan Party is the surviving, continuing or resulting corporation) or of one Loan Party into another Loan Party, or (ii) consolidate any Loan Party's operations with those of any other Person other than with another Loan Party; provided that, if no Default or Event of Default shall have occurred and be continuing or would result therefrom, the following shall be permitted:

(i) With the prior written consent of the agents under the Term Loans, the merger, consolidation or amalgamation of any wholly-owned Subsidiary with or into a Borrower or with or into another wholly-owned Subsidiary of a Borrower, so long as in any merger, consolidation or amalgamation involving a Borrower, the Borrower is the surviving,

continuing or resulting corporation;

(ii) The liquidation or dissolution of any Unrestricted Subsidiary.

(iii) Any acquisition which is a Permitted Acquisition, provided that all of the conditions contained in the definition of the term Permitted Acquisition are satisfied;

(e) Subordinate any debts or obligations owed to that Loan Party by any third party to any other debts owed by such third party to any other Person.

(f) Enter into leases of property or assets not constituting Permitted Acquisitions, unless such leases are not otherwise in violation of this Agreement.

(g) Organize or create any Affiliate other than in connection with a Permitted Acquisition.

(h) Acquire any assets other than in the ordinary course and conduct of that Loan Party's business as conducted at the execution of this Agreement, other than in connection with a Permitted Acquisition or as otherwise permitted in this Agreement.

4.21. LOANS. No Loan Party shall make any loans or advances to, nor acquire the Indebtedness of, any Person, provided, however, the foregoing does not prohibit any of the following:

(a) Advance payments made to that Loan Party's suppliers in the ordinary course;.

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

(c) Loans and advances to employees for business-related moving expenses, costs of replacement homes, business machines or supplies, automobiles and other similar expenses, in each case incurred in the ordinary course of business not to exceed (together with loans and advances under Section 4.21(d) and investments permitted under clause (m) of the definition of Permitted Investments) $6,000,000 in the aggregate outstanding to all employees at any one time;

(d) Loans and advances to that Loan Party's officers, employees, and salespersons in connection with any employment agreements or arrangements, or any stock options or option plans not to exceed $6,000,000 (together with loans and advances under Section 4.21(c) and investments permitted under clause (m) of the definition of Permitted Investments) in the aggregate outstanding to all employees at any one time;

(e) To the extent not permitted by the foregoing clauses, the existing loans and advances, described on EXHIBIT 4.21(e) hereto;

(f) Intercompany loans (i) existing on the date hereof and described on EXHIBIT 4.21(f) hereof, (ii) hereafter made amongst any Loan Parties within the same Division, (iii) hereafter made by DSW, Shonac, or Filene's to Value City, and (iv) hereafter made by Value City to any other Loan Party, PROVIDED THAT (x) such intercompany loans shall be evidenced by such documentation, as the Collateral Agents may require, and (y) after the occurrence of a Cash Control Event, (A) no such intercompany loans may be made under clause (iii) hereof unless there is no VC Availability immediately prior to the making of such loan, and (B) no such intercompany loans may be made under clause (iv) hereof to (1) Filene's unless there is no Filene's Availability immediately prior to the making of such loan, or (2) DSW and/or Shonac unless there is no DSW/Shonac Availability immediately prior to the making of such loan.

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

(h) Any other loans and advances to or for the benefit of any Person which (i) is not itself a Loan Party, (ii) are not otherwise permitted by the foregoing clauses, and (iii) are made after the Closing Date, which loans and advances have been approved in advance by the Administrative Agent.

4.22. PROTECTION OF ASSETS. The Administrative Agent, in the Administrative Agent's reasonable, good faith discretion, and from time to time, may discharge any tax or Encumbrance on any of the Collateral, or take any other action which the Administrative Agent may deem reasonably necessary or desirable to repair, insure, maintain, preserve, collect, or realize upon any of the Collateral. The Administrative Agent shall not have any obligation to undertake any of the foregoing and shall have no liability on account of any action so undertaken except where there is a specific finding in a judicial proceeding (in which the Administrative Agent has had an opportunity to be heard), from which finding no further appeal is available, that the Administrative Agent had acted in actual bad faith, in willful misconduct, or in a grossly negligent manner. The Loan Parties shall pay to the Administrative Agent, on demand, or the Administrative Agent, in its reasonable, good faith discretion, may add to the Loan Account, all amounts paid or incurred by the Administrative Agent pursuant to this Section 4.22.

4.23. LINE OF BUSINESS; CONDUCT OF BUSINESS.

(a) No Loan Party shall engage in any business other than the business in which it is currently engaged or a business reasonably related thereto, or any retail lease

department operation.

(b) The Loan Parties shall conduct their business substantially in accordance with the Business Plan, or as otherwise approved by the Administrative Agent pursuant to Section 5.10, below. The foregoing shall not obligate the Borrowers to achieve any specific financial performance and no financial performance covenants are intended to be imposed thereby.

4.24. AFFILIATE TRANSACTIONS.

(a) Except as set forth in that certain confidential side letter from the Lead Borrower to the Administrative Agent and for loans which may be made between Loan Parties permitted pursuant to Section 4.21, above, no Loan Party shall make any payment, nor give any value to any Affiliate except for leases, goods and services with such Affiliate for a price and on terms which shall be in the ordinary course of business at prices and on terms and conditions no less favorable to that Loan Party than those which would have been charged and imposed in an arms length transaction from unrelated third parties, except (i) sales of goods to an Affiliate for use or distribution outside of the United States of America which complies with the any applicable legal requirements of the Internal Revenue Code of 1986 and the Treasury Regulations, each as amended from time to time, PROVIDED THAT such sales shall not exceed $500,000 in the aggregate in any fiscal year of the Borrowers, (ii) loans, advances and other payments to officers and directors as part of their compensation which are entered into in the ordinary course of business and which are not otherwise prohibited under the Loan Documents, (iii) other dividends and distributions to officers, directors and shareholders otherwise permitted under this Agreement, or (iv) transactions between or among the Loan Parties not prohibited hereunder and not involving any other Affiliate.

(b) The Loan Parties shall not (i) without the prior written consent of the Administrative Agent, amend, modify or waive any of the provisions of the instruments, documents or agreements described in the confidential side letter referred to in clause (a) above, the effect of which is to increase the payments or value to be furnished by a Loan Party to any Affiliate (other than for ordinary increases under such instruments, documents and agreements in the ordinary course of business, for which the Loan Parties are presently obligated to make payment in such instrument, document or agreement as in effect on the Closing Date) or which would cause such instruments, documents or agreements to be at prices and on terms and conditions less favorable to that Loan Party than those which would have been charged and imposed in an arms length transaction from unrelated third parties, or (ii) make any payments under such instruments, documents or agreements in advance of the date when due (other than payments made to Affiliates to fund obligations or anticipated claims under workers' compensation, medical plans, employee benefit plans or agreements, and other similar plans, all in accordance with current practices).

(c) The Borrowers shall use their best efforts to cause their Affiliates to execute

and deliver to the Agent and the Revolving Credit Lenders such documentation as the Administrative Agent may reasonably require to evidence the Affiliates' agreement with the provisions of this Section 4.24.

4.25 ADDITIONAL SUBSIDIARIES. If any additional Subsidiary is formed or acquired after the Closing Date, the Lead Borrower will notify the Collateral Agents thereof and (a) the Loan Parties will cause such Subsidiary to become a Borrower or Facility Guarantor hereunder, as determined by the Collateral Agents, within three (3) Business Days after such Subsidiary is formed or acquired and promptly take such actions to create and perfect Encumbrances on such Subsidiary's assets to secure the Liabilities as the Collateral Agents or the Majority Lenders shall reasonably request and (b) if any shares of capital stock or Indebtedness of such Subsidiary are owned by or on behalf of any Loan Party, the Loan Parties will cause such shares and promissory notes evidencing such Indebtedness to be pledged within three (3) Business Days after such Subsidiary is formed or acquired. Nothing contained herein shall be deemed a modification of any other provisions of this Agreement restricting the formation or acquisition of Subsidiaries by the Loan Parties.

4.26. FURTHER ASSURANCES.

(a) No Loan Party is the owner of, nor has it any interest in, any property or asset which is not subject to a Collateral Interest in favor of the Collateral Agents (subject only to Permitted Encumbrances) to secure the Liabilities.

(b) No Loan Party will hereafter acquire any asset or any interest in property which is not, immediately upon such acquisition, subject to such a perfected Collateral Interest in favor of the Collateral Agents to secure the Liabilities (subject only to Permitted Encumbrances).

(c) Each Loan Party shall execute and deliver to the Collateral Agents such instruments, documents, and papers, and shall do all such things from time to time hereafter as the Collateral Agents may reasonably request to carry into effect the provisions and intent of this Agreement; to protect and perfect the Collateral Agents' Collateral Interests in the Collateral; and to comply with all applicable statutes and laws, and facilitate the collection of the Receivables Collateral. Each Loan Party shall execute all such instruments as may be reasonably required by the Collateral Agents with respect to the recordation and/or perfection of the Collateral Interests created or contemplated herein.

(d) Each Loan Party hereby designates the Collateral Agents as and for that Loan Party's true and lawful attorney, with full power of substitution, to sign and file any financing statements in order to perfect or protect the Collateral Agents' Collateral Interests in the Collateral.

(e) This Agreement constitutes an authenticated record which authorizes the Collateral Agents to file such financing statements as the Collateral Agents determine as

appropriate to perfect or protect the Collateral Interests created by this Agreement.

4.27. ADEQUACY OF DISCLOSURE.

(a) All quarterly and annual financial statements furnished to the Administrative Agent and to each Revolving Credit Lender by the Loan Parties on a consolidated basis have been prepared in accordance with GAAP consistently applied (provided however, that unaudited financial statements are subject to normal year end adjustments and to the absence of footnotes). All financial statements furnished to the Administrative Agent and to each Revolving Credit Lender by the Loan Parties present fairly the condition of the Loan Parties at the date(s) thereof and the results of operations and cash flows for the period(s) covered (provided however, that unaudited financial statements are subject to normal year end adjustments and to the absence of footnotes). There has been no change in the Consolidated financial condition, results of operations, or cash flows of the Loan Parties since the date(s) of such financial statements, other than changes which are not reasonably likely to have a Material Adverse Effect.

(b) No Loan Party has any material contingent obligation or material obligation under any Lease or Capital Lease which is not noted in the Loan Parties' annual Consolidated financial statements furnished to the Administrative Agent and to each Revolving Credit Lender prior to the execution of this Agreement.

(c) No document, instrument, agreement, or paper now or hereafter given to the Agents or to any Revolving Credit Lender by or on behalf of each Loan Party or any guarantor of the Liabilities in connection with the execution of this Agreement by the Agents and to each Revolving Credit Lender contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements therein not misleading. There is no fact known to any Loan Party which has, or which, in the foreseeable future is reasonably likely to have a Material Adverse Effect.

4.28. NO RESTRICTIONS ON LIABILITIES. No Loan Party shall enter into or directly or indirectly become subject to any agreement which prohibits or restricts, in any manner, any Loan Party's:

(a) Creation of, and granting of Collateral Interests in favor of the Collateral Agents.

(b) Incurrence of Liabilities.

4.29. RESTRICTIONS ON PAYMENT OF TERM LOANS.

(a) The Term Loans may be paid only as follows:

(i)(A) Except as permitted pursuant to clause (i)(B) hereof, interest and fees on the Term Loans may be paid in cash in the ordinary course in accordance with the terms

of the documents evidencing the Term Loans as long as (A) no Specified Event of Default has occurred and is continuing, and (B) Average Excess Availability for the thirty (30) day period prior to the making of such payment is equal to or greater than Thirty-Five Million Dollars ($35,000,000.00), plus the amount of the proposed payment, and Excess Availability immediately after giving effect to such payment is equal to or greater than Thirty-Five Million Dollars ($35,000,000.00). If such Excess Availability requirements are not satisfied, no interest or fee payments may be made on the Term Loans in cash (i.e. partial payments of interest or fees on the Term Loans in cash shall not be permitted).

(B) Notwithstanding the provisions of Section 4.29(a)(i)(A) hereof, the Borrowers may pay cash interest on the Term Loans after the second anniversary of the Closing Date but only up to an amount equal to fifty percent (50%) of the interest accruing from and after the second anniversary of the Closing Date.

(ii) Subject to the terms of the Intercreditor Agreement, principal on the Term Loans may be paid only as follows:

(A) In the case of the CCM Term Loan Facilities only, from the net cash proceeds of the Term Loan Senior Collateral;

(B) Upon satisfaction of each of the following conditions and only to the extent that the following conditions are not breached as a result of such payment:

(I) The Administrative Agent's receipt of the financial statements required pursuant to Section 5.7 hereto for the fiscal year ending on or about January 31, 2003; and
(II) The Borrowers shall have achieved at least 85% of Consolidated EBITDA set forth in the most receipt forecasts furnished pursuant to Section 5.10(b) hereof for the twelve months ending on the last day of the month immediately preceding such payment; and
(III) After giving effect to such payment, Excess Availability shall be at least $160,000,000, as determined by the Collateral Agents;
(IV) After giving effect to such payment, pro forma projected Excess Availability for each of the ninety (90) days subsequent to the date of such payment must be at least $160,000,000, as determined by the Collateral Agents; and

(V) Prior to, at the time of, and after giving effect to

such payment, no Specified Event of Default then exists; or

(C) On the scheduled maturity date of the Term Loans (but not any accelerated maturity date).

(iii) All payments on account of the Term Loans shall first be applied to the CCM Term Loan Facilities prior to the application to the Senior Convertible Facility.

(b) The Borrowers shall not hereafter effect or permit any changes in or amendment to (i) the terms relating to the repayment of the Term Loans, or (ii) except as provided in the Intercreditor Agreement, any of the instruments, documents or agreements evidencing the Term Loans. If, notwithstanding the foregoing, CCM, as agent under any Term Loan, hereafter imposes any additional or more restrictive covenants (financial or otherwise) or events of default with respect to the Term Loans (including by amendment or an existing covenant or event of default, by waiver, consent or otherwise) than is imposed on the Closing Date under this Agreement or any Loan Party grants to CCM, as agent under any Term Loan, a new covenant or event of default that is not contained in this Agreement as of the Closing Date, the Lead Borrower shall promptly notify, and furnish a copy thereof to the Administrative Agent.

4.30 UNRESTRICTED SUBSIDIARIES. Each of the Unrestricted Subsidiaries is inactive or in the process of being liquidated or dissolved. The Unrestricted Subsidiaries shall not at any time have assets in excess of $500,000 in the aggregate.

4.31 NO BANKRUPTCY FILING. No Loan Party is contemplating, or has any knowledge of any other Person contemplating, taking any of the actions described in Section 10.11 or 10.12 hereof. No Loan Party is contemplating the liquidation of all or a major portion of such Loan Party's assets.

ARTICLE 5 FINANCIAL REPORTING AND PERFORMANCE COVENANTS:

5.1. MAINTAIN RECORDS. The Loan Parties shall:

(a) At all times, keep proper books of account, in which full, true, and accurate entries shall be made of all of the Loan Parties' financial transactions, all in accordance with GAAP applied consistently with prior periods to fairly reflect the Consolidated financial condition of the Loan Parties at the close of, and its results of operations for, the periods in question.

(b) Timely provide the Administrative Agent with those financial reports, statements, and schedules required by this Article 5 or otherwise, each of which reports, statements and schedules shall be prepared, to the extent applicable, in accordance with GAAP applied consistently with prior periods to fairly reflect the Consolidated financial condition of the

Loan Parties at the close of, and the results of operations for, the period(s) covered therein.

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

(d) At all times, retain (i) Deloitte and Touche, LLP, or such other nationally recognized independent certified public accountants who are reasonably satisfactory to Schottenstein Stores Corporation (as long as it remains in Control of the Borrowers) or (ii) or such other independent certified public accountants who are reasonably satisfactory to Schottenstein Stores Corporation (as long as it remains in Control of the Borrowers) and the Administrative Agent, and instruct such accountants, subject to the terms of such accountants' internal policies, and subject to the confidentiality provisions of this Agreement, to fully cooperate with, and be available to, the Administrative Agent to discuss the Loan Parties' financial performance, financial condition, operating results, controls, and such other matters, within the scope of the retention of such accountants, as may be raised by the Administrative Agent.

(e) Not change any Loan Party's fiscal year.

5.2. ACCESS TO RECORDS.

(a) Each Loan Party shall accord each Agent with reasonable access during normal business hours from time to time as each Agent may require to all properties owned by or over which any Loan Party has control. Each Agent shall have the right, and each Loan Party will permit each Agent from time to time as such Agent may request, to examine, inspect, copy, and make extracts from any and all of the Loan Parties' books, records, electronically stored data, papers, and files. Each Loan Party shall make that Loan Party's copying facilities available to the Agent.

(b) Each Loan Party hereby authorizes each Agent to:

(i) Inspect, copy, duplicate, review, cause to be reduced to hard copy, run off, draw off, and otherwise use any and all computer or electronically stored information or data which relates to any Loan Party. Each Loan Party shall request full cooperation with each Agent from any service bureau, contractor, accountant, or other Person.

(ii) Verify at any time the Collateral or any portion thereof, including verification with Account Debtors, and/or with each Loan Party's computer billing companies, collection agencies, and accountants.

(c) Any Agent from time to time may designate one or more representatives to exercise such Agent's rights under this Section 5.2 as fully as if such Agent were doing so, PROVIDED THAT the Agent shall not designate a Person which is in a Competitive Business.

5.3. PROMPT NOTICE TO ADMINISTRATIVE AGENT.

(a) The Lead Borrower shall provide the Administrative Agent with written notice promptly upon the occurrence of any of the following events, which written notice shall be with reasonable particularity as to the facts and circumstances in respect of which such notice is being given:

(i) Any change in any Loan Party's President, chief executive officer, chief operating officer, and chief financial officer (without regard to the title(s) actually given to the Persons discharging the duties customarily discharged by officers with those titles).

(ii) Any ceasing of any Loan Party's payment of the debts of that Loan Party generally as they mature, in the ordinary course, to its creditors (other than its ceasing of making of such payments on account of a dispute which, if adversely determined to the Loan Parties is not reasonably likely to have a Material Adverse Effect).

(iii) Any failure by any Loan Party to pay rent at any of that Loan Party's locations, which failure continues for more than three (3) days following the last day on which such rent was payable unless such failure is not reasonably likely to have a Material Adverse Effect.

(iv) Any material adverse change in the business, operations, or financial affairs of any Borrower.

(v) The occurrence of any Default.

(vi) Any intention on the part of any Loan Party to discharge that Loan Party's present independent accountants or any withdrawal or resignation by such independent accountants from their acting in such capacity (as to which, see Subsection 5.1(d)).

(vii) Any litigation which, if determined adversely to any Loan Party, is reasonably likely to have a Material Adverse Effect.

(viii) Any intention of a Borrower to enter into a consignment arrangement or licensing or other similar agreement (whether for intellectual property, leased departments in stores or otherwise) with any other Person.

(ix) Any Material Accounting Changes.

(x) Any event, occurrence or circumstance not specifically described herein which is reasonably likely to have a Material Adverse Effect.

(xi) Any Loan Party's entering into a license agreement after the Closing Date.

(xii) Any Loan Party's entering into a Capital Lease after the Closing Date.

(b) The Lead Borrower shall:

(i) Provide the Administrative Agent, when so distributed, with copies of any materials distributed to all shareholders of the Lead Borrower (qua such shareholders).

(ii) Provide the Administrative Agent:

(A) When filed, copies of all filings with the SEC. Such copies may be provided in electronic format.

(B) When received, copies of all correspondence from the SEC, other than routine general communications from the SEC.

(C) Should any of the information on any of the Exhibits hereto become misleading in any material respect, the Borrower shall promptly advise the Administrative Agent in writing with such revisions or updates as may be necessary or appropriate to update or correct the same; provided however that no such Exhibit shall be deemed to have been amended, modified or superseded by any such correction or update, nor shall any breach of representation or warranty resulting from the inaccuracy or incompleteness of such Exhibit be deemed to have been cured or waived, unless and until the Administrative Agent, in its discretion shall have accepted in writing such revisions.

(iii) At the request of the Administrative Agent, from time to time, provide the Administrative Agent with copies of all advertising (including copies of all print advertising and duplicate tapes of all video and radio advertising).

(iv) Provide the Administrative Agent, when received by any Loan Party, with a copy of any management letter or similar communications from any

independent accountant of any Loan Party.

5.4. WEEKLY REPORTS. Weekly, on Friday of each week (as of the then immediately preceding Saturday) the Lead Borrower shall provide the Administrative Agent with Borrowing Base Certificates (in the form of EXHIBIT 5.4 annexed hereto, as such form may be revised from time to time by the Administrative Agent) prepared separately for each Division and combined for all Borrowers, and sales audit reports and flash collateral reports (each in such form as may be specified from time to time by the Collateral Agents) prepared separately for each Division and combined for all Borrowers. Such reports may be sent to the Administrative Agent by facsimile transmission, provided that the original thereof is forwarded to the Administrative Agent on the date of such transmission.

5.5. MONTHLY REPORTS. Monthly, the Lead Borrower shall provide the Administrative Agent with those financial statements and reports described in EXHIBIT 5.5, annexed hereto, at the times set forth in such exhibit.

5.6. QUARTERLY REPORTS. Quarterly, within forty-five (45) days following the end of each of the Loan Parties' fiscal quarters, the Lead Borrower shall provide the Administrative Agent with the following:

(a) An original counterpart of a management prepared financial statement (which shall be prepared in the same manner and using the same assumptions as set forth in the forecasts furnished to, and approved by, the Administrative Agent pursuant to the provisions of Section 5.10(c) hereof) for
(i) the Loan Parties on a consolidated basis, (ii) the DSW/Shonac Business,
(iii) the Filene's Business, and (iv) the Value City Business, in each case for the fiscal quarter most recently ended, and for the period from the beginning of the Loan Parties' then current fiscal year through the end of the subject quarter, with comparative information for the same period of the previous fiscal year, which statement shall include a balance sheet, statement of operations, and cash flows and comparisons for the corresponding quarter of the then immediately previous year, as well as to the Loan Party's forecast.

(b) The officer's compliance certificate described in
Section 5.8.

5.7. ANNUAL REPORTS.

(a) Annually, within ninety (90) days following the end of the Loan Parties' fiscal year, the Lead Borrower shall furnish the Administrative Agent with the following:

(i) An original signed counterpart of the Loan Parties' Consolidated annual financial statement, which statement shall have been prepared by, and bear the unqualified opinion of, the Lead Borrower's independent certified public accountants (i.e. said statement shall be "certified" by such accountants) and shall include, at a minimum (with comparative information for the then prior fiscal year) a balance sheet, statement of

operations, statement of changes in shareholders' equity, and cash flows.

(ii) A consolidating annual financial statement for
(i) the DSW/Shonac Business, (ii) the Filene's Business, and (iii) the Value City Business which shall include (with comparative information for the then prior fiscal year) a balance sheet and statement of operations.

(iii) The officer's compliance certificate described in Section 5.8.

(b) No later than fifteen (15) days prior to the end of each of the Loan Parties' fiscal years, the Lead Borrower shall give written notice to such independent certified accountants (with a copy of such notice, when sent, to the Administrative Agent) that such annual financial statement will be delivered by the Lead Borrower to the Administrative Agent (for subsequent distribution to each Revolving Credit Lender), and that the Lead Borrower has been advised that the Administrative Agent and each Revolving Credit Lender will rely thereon with respect to the administration of, and transactions under, the credit facility contemplated by this Agreement.

5.8. OFFICERS' CERTIFICATES. The Lead Borrower shall cause either the Lead Borrower's Chief Executive Officer, President, Executive Vice President, Chief Financial Officer, Controller, or Treasurer (collectively, an "Authorized Officer"), in each instance, to provide such Person's Certificate with the monthly, quarterly and annual financial statements to be provided pursuant to this Agreement, which Certificate shall:

(a) Indicate that (i) with respect to the Consolidated financial statement, the subject statement was prepared in accordance with GAAP consistently applied, and (ii) with respect to all financial statements, presents fairly the financial condition of the applicable Loan Parties at the close of, and the results of the applicable Loan Parties' operations and cash flows (where such cash flows are required to be provided) for, the period(s) presented, subject, however to the following:

(A) Usual year end adjustments (this exception shall not be included in the Certificate which accompanies such annual statement).

(B) Material Accounting Changes (in which event, such Certificate shall include a schedule (in reasonable detail) of the effect of each such Material Accounting Change.

(b) Indicate either that (i) no Default has occurred and is continuing, or (ii) if such an event has occurred, its nature (in reasonable detail) and the steps (if any) being taken or contemplated by the Loan Parties to be taken on account thereof.

5.9. INVENTORIES, APPRAISALS, AND AUDITS.

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

(b) The Loan Parties, at their own expense, shall cause not less than one (1) physical inventory of each of Division to be undertaken in each twelve (12) month period during which this Agreement is in effect conducted by such inventory takers as are reasonably satisfactory to the Collateral Agents and following such methodology as may be reasonably satisfactory to the Collateral Agents.

(i) The Lead Borrower, within forty-five (45) days following the completion of such inventory, shall provide the Collateral Agents with a reconciliation of the results of each such inventory (as well as of any other physical inventory undertaken by any Loan Party) and shall post such results to the Loan Parties' stock ledger and, as applicable to the Loan Parties' other financial books and records.

(ii) The Collateral Agents, in their reasonable, good faith discretion, if any Event of Default has occurred and is continuing, may cause such additional inventories to be taken as the Collateral Agents determine (each, at the expense of the Loan Parties).

(c) The Collateral Agents may obtain appraisals of the Collateral (copies of which, subject to the approval of the appraiser, shall be provided to the Lead Borrower promptly upon receipt thereof), from time to time (in all events, at the Loan Parties' expense) conducted by Hilco Appraisal Services, LLC or such appraisers as are satisfactory to the Collateral Agents. The Collateral Agents may conduct up to four (4) appraisals (in each event, at the Loan Parties' expense) of the Collateral during any twelve (12) month period during which this Agreement is in effect, but in their reasonable, good faith discretion, during the occurrence and continuance of an Event of Default, may undertake additional such appraisals (likewise at the Loan Party's expense) during such period.

(d) The Collateral Agents may conduct up to four (4) commercial finance field examinations (in each event, at the Loan Parties' expense) of the Loan Parties' books and records during any twelve (12) month period during which this Agreement is in effect, but in their reasonable, good faith discretion during the occurrence and continuance of an Event of Default, may undertake additional such audits (likewise at the Loan Party's expense) during such period.

(e) Notwithstanding anything to the contrary herein contained, upon the occurrence of any event or circumstance which is reasonably likely to have a material adverse effect on the business, operations, property, assets, or financial condition of any Division, the

limitations set forth in clauses (c) and (d) on the number of appraisals and commercial finance examinations which the Agent may cause to be undertaken for such Division only shall be inapplicable and the Agent may undertake as many appraisals and commercial finance examinations of such Division with such frequency as the Agent may deem reasonably appropriate and necessary (none of which shall be included in determining the number of appraisals and commercial finance examinations the Agent may undertake with respect to other Divisions).

(f) Pursuant to the terms of the Intercreditor Agreement, CCM, as agent under the Term Loans, may require the Collateral Agents to undertake appraisals of the Collateral by appraisers selected in accordance with the provisions of Section 5.9(c) hereof. Any such appraisals undertaken by the Collateral Agents at the requirement of any Term Lender shall not reduce the number of appraisals permitted to be undertaken by the Collateral Agents under
Section 5.9(c) hereof. To the extent that the results of any such appraisal reflect a reduction in the Appraised Inventory Liquidation Value, the Collateral Agents may in their reasonable, good faith discretion reduce the Inventory Advance Rates in a manner consistent with the reduced Appraised Inventory Liquidation Value. In no event shall such Inventory Advance Rates be subject to increase as a result of such appraisals, provided that nothing contained herein shall impair the right of the Collateral Agents to increase the Inventory Advance Rate as set forth in the definition of such term.

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

5.10. ADDITIONAL FINANCIAL INFORMATION.

(a) In addition to all other information required to be provided pursuant to this Article 5, the Lead Borrower promptly shall provide the Agent with such other and additional information concerning the Loan Parties, the Collateral, the operation of the Loan Parties' business, and the Loan Parties' financial condition, including original counterparts of financial reports and statements, as any Agent may from time to time reasonably request from the Lead Borrower.

(b) The Lead Borrower shall, upon the Administrative Agent's request, provide the Administrative Agent, from time to time hereafter, with updated forecasts of the Loan Parties' anticipated performance and operating results for the current fiscal year. Such forecasts shall be in a format consistent with the format previously provided to the Administrative Agent.

(c) In all events, the Lead Borrower, no sooner than ninety
(90) nor later than sixty (60) days prior to the end of each of the Loan Parties' fiscal years, shall provide the Administrative Agent with an updated and extended forecast which shall go out at least through the end of the then next fiscal year and shall include a statement of operations, balance sheet, and

statement of cash flow, by month, each Consolidated (with consolidating schedules by Division) and each prepared in conformity with GAAP and consistent with the Loan Parties' then current accounting practices.

(d) When available the "Annual Budget", as approved by the Lead Borrowers' Board of Directors, shall be provided to the Administrative Agent. The Annual Budget shall be subject to the approval of the Administrative Agent (whose approval shall not be unreasonably withheld) only if the Annual Budget varies in a material way from the Business Plan for such fiscal year.

(e) Each Loan Party recognizes that all commercial finance examinations, inventories, analysis, financial information, and other materials which the Agent may obtain, develop, or receive with respect to the Loan Parties (other than appraisals and inventories received from third parties) are confidential to the Agent and that, except as otherwise provided herein, no Loan Party is entitled to receipt of any of such commercial finance examinations, inventories, analysis, financial information, and other materials, nor copies or extracts thereof or therefrom.

5.11. INFORMATION DELIVERED PURSUANT TO ARTICLE 5.

All information required to be delivered pursuant to Article 5 may be delivered by and in electronic format.

ARTICLE 6 - USE OF COLLATERAL:

6.1. USE OF INVENTORY COLLATERAL.

(a) No Loan Party shall engage in any of the following with respect to its Inventory:

(i) Any sale other than for fair consideration in the conduct of the Loan Parties' business in the ordinary course.

(ii) Sales or other dispositions to creditors, except returns in the ordinary course of business.

(iii) Sales or other dispositions in bulk except in the ordinary course of business consistent with past practices.

(iv) Sales in breach of any provision of this Agreement.

(v) Sales in connection with Permitted Dispositions.

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

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

6.3. ADJUSTMENTS AND ALLOWANCES. Each Loan Party may grant such allowances or other adjustments to that Loan Party's Account Debtors as that Loan Party may reasonably deem to accord with sound business practice and which are normal and customary extensions and adjustments in the ordinary course of business, provided, however, the authority granted the Loan Parties pursuant to this Section 6.3 may be limited or terminated by the Administrative Agent at any time in the Administrative Agent's reasonable, good faith discretion after the occurrence and during the continuance of an Event of Default.

6.4. VALIDITY OF ACCOUNTS.

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

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

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

6.5. NOTIFICATION TO ACCOUNT DEBTORS. The Collateral Agents shall have the right (after the occurrence of a Cash Control Event) to notify any of the Loan Parties' Account Debtors to make payment directly to the Administrative Agent and to collect all amounts due on account of the Collateral.

ARTICLE 7 - CASH MANAGEMENT. PAYMENT OF LIABILITIES:

7.1. DEPOSITORY ACCOUNTS.

(a) Annexed hereto as EXHIBIT 7.1 is a listing of all present DDA's, which listing includes, with respect to each depository of the Loan Parties, the following: (i) the name and address of that depository; (ii) the account number(s) of the account(s) maintained with such depository; and (iii) a contact person at such depository.

(b) The Lead Borrower shall deliver the following to the Administrative Agent, as a condition to the effectiveness of this Agreement:

(i) Notifications, executed on behalf of each Borrower, to each depository institution with which any DDA is maintained (other than any Exempt DDA and the Collection Accounts), in form satisfactory to the Administrative Agent of the Collateral Agents' interest in such DDA. Such Notifications shall be held in escrow by the Administrative Agent until the occurrence of a Cash Control Event at which time they may be delivered to the applicable depositary institutions.

(ii) A Collection Account Agreement with any depository institution at which a Collection Account is maintained, including those listed on EXHIBIT 7.1.

(c) No Borrower will establish any DDA hereafter (other than an Exempt DDA) unless, contemporaneous with such establishment, the Lead Borrower delivers the following to the Administrative Agent:

(i) A notification for the depository at which such DDA is established if the same would have been required pursuant to
Section 7.1(b)(i) if the subject DDA were open at the execution of this Agreement.

(ii) A Collection Account Agreement executed on behalf of the depository at which such DDA is established if the same would have been required pursuant to Section 7.1(b)(ii) if the subject DDA were open at the execution of this Agreement.

7.2. CREDIT CARD RECEIPTS.

(a) Annexed hereto as EXHIBIT 7.2, is a Schedule which describes all arrangements to which any Borrower is a party with respect to the payment to that Borrower of the proceeds of credit card charges for sales by that Borrower.

(b) The Lead Borrower shall deliver to the Administrative Agent, as a condition to the effectiveness of this Agreement, an agreement executed on behalf of each

Borrower with each of each Borrower's credit card clearinghouses and processors (in form satisfactory to the Administrative Agent), which agreement provides that, during the existence of a Cash Control Event, payment of all credit card charges submitted by that Borrower to that clearinghouse or other processor and any other amount payable to that Borrower by such clearinghouse or other processor shall be directed to the Administrative Agent's Account or as otherwise designated from time to time by the Administrative Agent. No Borrower shall change such direction or designation except upon and with the prior written consent of the Administrative Agent and no Borrower will enter into any agreements with a new credit card clearinghouse or processor hereafter unless, contemporaneous with such establishment, the Lead Borrower delivers to the Administrative Agent an agreement with such credit card clearinghouse or processor of like terms to those required hereunder on the Closing Date.

7.3. THE ADMINISTRATIVE AGENT'S, COLLECTION, AND OPERATING ACCOUNTS.

(a) The following checking accounts have been or will be established (and are so referred to herein):

(i) The "ADMINISTRATIVE AGENT'S ACCOUNT(S)" (so referred to herein): Established by the Administrative Agent with NCB for each Division as more specifically described on EXHIBIT 7.3 hereto.

(ii) The "COLLECTION ACCOUNTS" (so referred to herein): Established by the Lead Borrower with those financial institutions described on EXHIBIT 7.3 hereof.

(iii) The "OPERATING ACCOUNTs" (so referred to herein): Established by each Division with NCB as more specifically described on EXHIBIT 7.3 hereto.

(b) The contents of each DDA and of each Collection Account constitutes Collateral and Proceeds of Collateral. The contents of each Administrative Agent's Account constitutes the Administrative Agent's property.

(c) The Borrowers shall pay all fees and charges of, and maintain such impressed balances as may be required by the depository in which any account is opened as required hereby (even if such account is opened by and/or is the property of the Agent).

7.4. PROCEEDS AND COLLECTIONS.

(a) All Receipts constitute Collateral and proceeds of Collateral.

(b) Absent a Cash Control Event, the Borrowers may collect all Receipts and use such Receipts in the ordinary course of business.

(c) During a Cash Control Event, the Borrowers for each Division shall cause

all Receipts to be deposited or transferred to the Administrative Agent's Account for such Division.

(d) Subject to this Section 7.4, upon notice from the Administrative Agent to the Lead Borrower that a Cash Control Event has occurred:

(i) All Receipts:

(A) Shall be held in trust by the Borrowers for the Collateral Agents.

(B) Shall not be commingled with any of any Borrower's other funds.

(C) Shall be deposited and/or transferred only to a Collection Account or the applicable Administrative Agent's Accounts, and the Borrowers shall not have any authority to withdraw any amounts from such accounts and the Administrative Agent shall have no obligation to deposit such Receipts in the applicable Operating Account.

(ii) The Lead Borrower shall cause the ACH transfer or wire transfer to the Collection Account or the applicable Administrative Agent's Account (except in those instances in which such transfer is not within the control of the Lead Borrower or any other Borrower), no less frequently than daily (and whether or not there is then an outstanding balance in the Loan Account) of the following:

(A) The then contents of each DDA (other than any Exempt DDA), each such transfer to be net of any minimum balance, not to exceed $2,000.00, as may be required to be maintained in the subject DDA by the bank at which such DDA is maintained.

(B) The proceeds of all credit card charges not otherwise provided for pursuant hereto.

(iii) In the event that, notwithstanding the provisions of this Section 7.4(d), any of the Borrowers receives or otherwise has dominion and control of any Receipts, or any proceeds or collections of any Collateral, such Receipts, proceeds, and collections shall be held in trust by that Borrower for the Agent and shall not be commingled with any of that Borrower's other funds or deposited in any account of any Borrower other than as instructed by the Administrative Agent.

(iv) The Borrowers shall not disburse any funds in

the DDAs,

Collection Accounts or other deposit accounts (other than Exempt DDAs and the Operating Accounts in the ordinary course of business consistent with past practices) other than in accordance with the provisions of this Section 7.4.

7.5. PAYMENT OF LIABILITIES.

(a) On each Business Day after the occurrence and during the continuance of a Cash Control Event, the Administrative Agent shall apply the then collected balance of each Administrative Agent's Account (net of fees charged, and of such impressed balances as may be required by the bank at which such Administrative Agent's Account is maintained) First, towards the SwingLine Loans of the applicable Division, Second, towards the unpaid balance of the Loan Account for such Division, and Third, to all other Liabilities in such order as the Administrative Agent may determine.

(b) The following rules shall apply to deposits and payments under and pursuant to this Section 7.5:

(i) Funds shall be deemed to have been deposited to an Administrative Agent's Account on the Business Day on which deposited, provided that notice of such deposit is available to the Administrative Agent by 1:00PM on that Business Day.

(ii) Funds paid to the Administrative Agent, other than by deposit to an Administrative Agent's Account, shall be deemed to have been received on the Business Day when they are good and collected funds, provided that notice of such payment is available to the Administrative Agent by 1:00PM on that Business Day.

(iii) If notice of a deposit to an Administrative Agent's Account (Section 7.5(b)(i)) or payment (Section 7.5(b)(ii)) is not available to the Administrative Agent until after 1:00PM on a Business Day, such deposit or payment shall be deemed to have been made at 9:00AM on the then next Business Day.

(iv) All deposits to an Administrative Agent's Account and other payments to the Administrative Agent are subject to clearance and collection.

(c) The Administrative Agent shall transfer to the Operating Account of the applicable Division any surplus in the Administrative Agent's Account for such Division remaining after the application towards the Liabilities referred to in Section 7.5(a), above (less those amounts which are to be netted out, as provided therein) provided, however, in the event that

(i) any Default has occurred and is continuing; and

(ii) one or more L/Cs and Banker's Acceptances are then outstanding,

then the Administrative Agent may, and at the direction of the SuperMajority Lenders shall, establish a funded reserve of up to 105% of the aggregate Stated Amounts of such L/C's and such Banker's Acceptances. Such funded reserve shall either be (i) returned to the applicable Borrower provided that no Borrower is in Default or (ii) applied towards the Liabilities in the manner set forth herein following the occurrence of any Event of Default described in Section 10.12 or acceleration following the occurrence of any other Event of Default.

7.6. THE OPERATING ACCOUNT.

(a) Except as otherwise specifically provided in, or permitted by, this Agreement, funds in the Operating Account of each Division shall be utilized to fund disbursements made by such Division, including, without limitation, from any expense accounts maintained by such Division, PROVIDED THAT funds in the Operating Account for the Filene's Business may be distributed to the Lead Borrower in the ordinary course to the extent necessary in order that the Lead Borrower may pay the expenses of the Filene's Business consistent with the parties' prior practices.

(b) After the occurrence and during the continuance of any Event of Default or at any time that Average Excess Availability for any five
(5) consecutive Business Days is less than $60,000,000, NCB shall not be obligated to permit any outgoing ACH transfers unless the amount of the proposed transfer is fully prefunded in accordance with the requirements and practices of NCB.

ARTICLE 8 - GRANT OF SECURITY INTEREST:

8.1. GRANT OF SECURITY INTEREST. To secure the Borrowers' prompt, punctual, and faithful performance of all and each of the Liabilities, each Borrower hereby grants to the Collateral Agents, for the ratable benefit of the Revolving Credit Lenders, the Issuer, the Agents, and the Affiliates of each of them, a continuing security interest in and to, and assigns to the Collateral Agents, for the ratable benefit of the Revolving Credit Lenders, the following, and each item thereof, whether now owned or now due, or in which that Borrower has an interest, or hereafter acquired, arising, or to become due, or in which that Borrower obtains an interest, and all products, Proceeds, substitutions, and accessions of or to any of the following, but excluding the Excluded Property (all of which, together with any other property in which the Collateral Agents may in the future be granted a security interest, is referred to herein as the "COLLATERAL"):

(a) All Accounts.
(b) All Inventory.

(c) All General Intangibles.
(d) All Equipment.
(e) All Goods.
(f) All Farm Products.
(g) All Fixtures.
(h) All Chattel Paper.
(i) All Letter-of-Credit Rights.
(j) All Payment Intangibles.
(k) All Supporting Obligations.
(l) The Commercial Tort Claim described on EXHIBIT 4.19 hereto.
(m) All books, records, and information relating to the Collateral and/or to the operation of each Borrowers' business, and all rights of access to such books, records, and information, and all property in which such books, records, and information are stored, recorded, and maintained.
(n) All Leasehold Interests.
(o) All Investment Property, Instruments, Documents, Deposit Accounts, money, policies and certificates of insurance, deposits, impressed accounts, compensating balances, cash, or other property.
(p) All insurance proceeds, refunds, and premium rebates, including, without limitation, proceeds of fire and credit insurance, whether any of such proceeds, refunds, and premium rebates arise out of any of the foregoing. (8.1(a) through 8.1(o)) or otherwise.
(q) All liens, guaranties, rights, remedies, and privileges pertaining to any of the foregoing (8.1(a) through 8.1(p)), including the right of stoppage in transit.

8.2. EXTENT AND DURATION OF SECURITY INTEREST.

(a) The security interest created and granted herein is in addition to, and supplemental of, any security interest previously granted by any Borrower to the Collateral Agents (including, without limitation, under any mortgages and deeds of trust) and shall continue in full force and effect applicable to all Liabilities until

(i) the Termination Date has occurred; and

(ii) all Liabilities have been paid or satisfied in full in cash and satisfactory arrangements with respect to L/Cs and Banker's Acceptances as provided in Section 18.2 hereof have been made; and

(iii) the security interest created herein is specifically terminated in writing by duly authorized officers of the Collateral Agents as provided in Section 18.2(d) hereof.

(b) It is intended that the Collateral Interests created herein extend to and cover all assets of each Borrower, except for Excluded Property.

(c) If a Borrower shall at any time acquire a Commercial Tort Claim, the Lead Borrower shall promptly notify the Administrative Agent in writing of the details thereof and the Borrowers shall take such actions as the Collateral Agents shall request in order to grant to the Collateral Agents, for the ratable benefit of the Revolving Credit Lenders, the Issuer, the Agents, and the Affiliates of each of them, a perfected and first priority security interest therein and in the Proceeds thereof.

ARTICLE 9 - COLLATERAL AGENTS AS BORROWERS' ATTORNEY-IN-FACT:

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

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

(b) Sign change of address forms to change the address to which each Borrowers' mail is to be sent to such address as the Collateral Agents shall designate (after which copies of all such mail shall be promptly furnished to the Lead Borrower); receive and open each Borrowers' mail; remove any Receivables Collateral and Proceeds of Collateral therefrom and turn over the balance of such mail either to the Lead Borrower or to any trustee in bankruptcy or receiver of the Lead Borrower, or other legal representative of a Borrower whom the Collateral Agents determine to be the appropriate Person to whom to so turn over such mail.

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

(d) Sign the name of the relevant Borrower on any notice to that Borrowers' Account Debtors or verification of the Receivables Collateral; sign the relevant Borrowers' name on any Proof of Claim in Bankruptcy against Account Debtors, and on notices of lien, claims of mechanic's liens, or assignments or releases of mechanic's liens securing the Accounts.

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

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

(g) Use, license or transfer any or all General Intangibles of each Borrower.

9.2. NO OBLIGATION TO ACT. The Collateral Agents shall not be obligated to do any of the acts or to exercise any of the powers authorized by
Section 9.1 herein, but if the Collateral Agents elect to do any such act or to exercise any of such powers, they shall not be accountable for more than they actually receive as a result of such exercise of power, and shall not be responsible to any Borrower for any act or omission to act except for any act or omission to act as to which there is a final determination made in a judicial proceeding (in which proceeding the Collateral Agents have had an opportunity to be heard) which determination includes a specific finding that the subject act or omission to act had been grossly negligent or in actual bad faith, or willful misconduct.

ARTICLE 10 - EVENTS OF DEFAULT:

The occurrence of any event described in this Article 10 respectively shall constitute an "EVENT OF DEFAULT" herein. The occurrence of any Event of Default shall also constitute, without notice or demand, a default under all other agreements between the Agent or any Revolving Credit Lender and any Loan Party and instruments and papers heretofore, now, or hereafter given the Agent or any Revolving Credit Lender by any Loan Party in connection with any of the Loan Documents.

10.1. FAILURE TO PAY THE REVOLVING CREDIT. The failure by any Loan Party to pay when due any principal of, interest on, or fees in respect of, the Revolving Credit.

10.2. FAILURE TO MAKE OTHER PAYMENTS. The failure by any Loan Party to pay when due (or upon demand, if payable on demand) any payment Liability other than any payment liability on account of the principal of, or interest on, or fees in respect of, the Revolving Credit.

10.3. FAILURE TO PERFORM COVENANT OR LIABILITY (NO GRACE PERIOD). The failure by any Loan Party to promptly, punctually, faithfully and timely perform, discharge, or comply with any covenant or Liability included in any of the following provisions hereof:

4.14                   Pay taxes
4.20                   Dividends. Investments. Other
                       Corporate Actions
4.21                   Loans and Advances
4.24                   Affiliate Transactions
Article 5              Reporting Requirements (except
                       as set forth in Section 10.4,
                       below)
Article 7              Cash Management

10.4. FINANCIAL REPORTING REQUIREMENTS. The failure by the Borrower to promptly, punctually, faithfully and timely perform, discharge, or comply with the financial reporting requirements included in Section 5.4, subject, however, to the following limited number of grace periods applicable to certain of those requirements:

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

REPORT / STATEMENT         REQUIRED BY        GRACE PERIOD               NUMBER OF GRACE
                           SECTION                                       PERIODS
-------------------------- ------------------ -------------------------- ----------------------------
Weekly Report              5.4                Two (2) Business Days      Twice in any twelve (12)
                                              Days                       consecutive months
-------------------------- ------------------ -------------------------- ----------------------------

10.5. FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD). The failure by any Loan Party, within twenty (20) days following the earlier of any Authorized Officer's knowledge of a breach of any covenant or Liability not described in any of Sections 10.1, 10.2, 10.3, or 10.4 or of its receipt of written notice from the Administrative Agent of the breach of any of such covenants or Liabilities, provided that if such failure cannot be reasonably cured within such twenty (20) day period and the Loan Parties have diligently proceeded, and continue to diligently proceed, to effectuate a cure of such failure, such failure shall not be an Event of Default hereunder unless (a) such failure is not cured within twenty (20) days after the expiration of such initial twenty (20) day period, or (b) such failure, in the reasonable judgment of the Collateral Agents, is reasonably likely to have a Material Adverse Effect.

10.6. MISREPRESENTATION. The determination by the Administrative Agent that any representation or warranty at any time made by any Loan Party to any Agent or any

Revolving Credit Lender was not true or complete in all material respects when given.

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

10.8. DEFAULT UNDER OTHER AGREEMENTS. The occurrence of any breach of any covenant or Liability imposed by, or of any default under, any agreement between any Agent or any Revolving Credit Lender and any Loan Party or instrument given by any Loan Party to any Agent or any Revolving Credit Lender relating to Indebtedness of any Loan Party in excess of $1,000,000 in the aggregate and the expiration, without cure, of any applicable grace period (notwithstanding that the subject Agent or Revolving Credit Lender may not have exercised all or any of its rights on account of such breach or default).

10.9. UNINSURED CASUALTY LOSS. The occurrence of any uninsured loss, theft, damage, or destruction of or to any material portion of the Collateral.

10.10. ATTACHMENT. JUDGMENT. RESTRAINT OF BUSINESS.

(a) The entry of any judgment in excess of Two Million Five Hundred Thousand Dollars ($2,500,000.00) against any Loan Party, which judgment
(i) is not covered by insurance (as to which the insurer has not notified the applicable Loan Party of the insurer's reservation of rights) or (ii) is not satisfied, stayed (if a money judgment) or appealed from (with execution or similar process stayed) within thirty (30) days of its entry.

(b) The entry of any order or the imposition of any other process having the force of law, the effect of which is to restrain the conduct by any Borrower of its business in the ordinary course and which is reasonably likely to have a Material Adverse Effect.

10.11. BUSINESS FAILURE. Any act by, against, or relating to any Loan Party, or its property or assets, which act constitutes the determination, by any Loan Party, to initiate a program of substantial or total self-liquidation; application for, consent to, or sufferance of the appointment of a receiver, trustee, or other Person, pursuant to court action or otherwise, over all, or any part of any Loan Party's property; the granting of any trust mortgage or execution of an assignment for the benefit of the creditors of any Loan Party, or the occurrence of any other voluntary or involuntary liquidation or extension of debt agreement for any Loan Party; the offering by or entering into by any Loan Party of any composition, extension, or any other

arrangement seeking relief generally from or extension of the debts of any Loan Party; or the initiation of any judicial or non-judicial proceeding or agreement by, against, or including any Loan Party which seeks or intends to accomplish a reorganization or arrangement with creditors; and/or the initiation by or on behalf of any Loan Party of the liquidation or winding up of all or any part of any Loan Party's business or operations except that any of the foregoing actions which are commenced against a Loan Party shall not be deemed an Event of Default hereunder as long as such action is timely contested in good faith by that Loan Party by appropriate proceedings and is dismissed within sixty (60) days of the institution of the foregoing.

10.12. BANKRUPTCY. The failure by any Loan Party to generally pay the debts of that Loan Party as they mature; adjudication of bankruptcy or insolvency relative to any Loan Party; the entry of an order for relief or similar order with respect to any Loan Party in any proceeding pursuant to the Bankruptcy Code or any other federal bankruptcy law; the filing of any complaint, application, or petition by any Loan Party initiating any matter in which any Loan Party is or may be granted any relief from the debts of that Loan Party pursuant to the Bankruptcy Code or any other insolvency statute or procedure; the filing of any complaint, application, or petition against any Loan Party initiating any matter in which that Loan Party is or may be granted any relief from the debts of that Loan Party pursuant to the Bankruptcy Code or any other insolvency statute or procedure, which complaint, application, or petition is not timely contested in good faith by that Loan Party by appropriate proceedings or, if so contested, is not dismissed within sixty (60) days of when filed.

10.13. TERMINATION OF GUARANTY. The termination or attempted termination of any Facility Guarantee by any Facility Guarantor.

10.14. CHALLENGE TO LOAN DOCUMENTS

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

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

10.15. CHANGE IN CONTROL. Any Change in Control.

ARTICLE 11 - RIGHTS AND REMEDIES UPON DEFAULT:

11.1 ACCELERATION. Upon the occurrence of any Event of Default as described in Section 10.12, all Indebtedness of the Loan Parties to the Revolving Credit Lenders shall be immediately due and payable. Upon the occurrence and continuance of any Event of Default other than as described in
Section 10.12, the Administrative Agent may (and on the issuance of Acceleration Notice(s) requisite to the causing of Acceleration, the Administrative Agent shall) declare all Indebtedness of the Borrowers to the Revolving Credit Lenders to be immediately due and payable and the Agent may exercise all of the Agents' Rights and Remedies as the applicable Agent from time to time thereafter determine as appropriate.

11.2. RIGHTS OF ENFORCEMENT. Subject to the terms of the Intercreditor Agreement, the Collateral Agents shall have all of the rights and remedies of a secured party upon default under the UCC, in addition to which the Collateral Agents shall have all and each of the following rights and remedies:

(a) To give notice to any bank at which any DDA or Collection Account is maintained and in which Proceeds of Collateral are deposited, to turn over such Proceeds directly to the Agent.

(b) To give notice to any customs broker of any of the Borrowers to follow the instructions of the Collateral Agents as provided in any written agreement or undertaking of such broker in favor of the Collateral Agents.

(c) To collect the Receivables Collateral with or without the taking of possession of any of the Collateral.

(d) To take possession of all or any portion of the Collateral.

(e) To sell, lease, or otherwise dispose of any or all of the Collateral, in its then condition or following such preparation or processing as the Collateral Agents deems advisable and with or without the taking of possession of any of the Collateral.

(f) To conduct one or more going out of business sales which include the sale or other disposition of the Collateral.

(g) To apply the Receivables Collateral or the Proceeds of the Collateral towards (but not necessarily in complete satisfaction of) the Liabilities.

(h) To exercise all or any of the rights, remedies, powers, privileges, and discretions under all or any of the Loan Documents.

11.3. SALE OF COLLATERAL.

After the occurrence and during the continuance of an Event of Default:

(a) Any sale or other disposition of the Collateral may be at public or private sale upon such terms and in such manner as the Collateral Agents deem advisable, having due regard to compliance with any statute or regulation which might affect, limit, or apply to the Collateral Agents' disposition of the Collateral.

(b) The Collateral Agents, in the exercise of the Collateral Agents' rights and remedies upon default, may conduct one or more going out of business sales, in the Collateral Agents' own right or by one or more agents and contractors. Such sale(s) may be conducted upon any premises owned, leased, or occupied by any Borrower. The Collateral Agents and any such agents or contractors, in conjunction with any such sale, may augment the Inventory with other goods (all of which other goods shall remain the sole property of the Collateral Agents or such agents or contractors). Any amounts realized from the sale of such goods which constitute augmentations to the Inventory (net of an allocable share of the costs and expenses incurred in their disposition) shall be the sole property of the Collateral Agents or such agents or contractors and neither any Borrower nor any Person claiming under or in right of any Borrower shall have any interest therein. Upon request of the Lead Borrower, the Collateral Agents shall promptly furnish, or cause to be furnished, to the Lead Borrower a reconciliation of the amounts received from the augmentation of the Inventory and the allocation of costs and expenses thereto.

(c) Unless the Collateral is perishable or threatens to decline speedily in value, or is of a type customarily sold on a recognized market (in which event the Collateral Agents shall provide the Lead Borrower such notice as may be practicable under the circumstances), the Collateral Agents shall give the Lead Borrower at least ten (10) days prior notice, by authenticated record, of the date, time, and place of any proposed public sale, and of the date after which any private sale or other disposition of the Collateral may be made. Each Borrower agrees that such written notice shall satisfy all requirements for notice to that Borrower which are imposed under the UCC or other applicable law with respect to the exercise of the Collateral Agents' rights and remedies upon default.

(d) The Agent and any Revolving Credit Lender may purchase the Collateral, or any portion of it at any sale held under this Article.

(e) The Collateral Agents shall deliver the proceeds of the Collateral Agents' exercise of its rights and remedies upon default to the Administrative Agent for application pursuant to Section 13.6 hereof.

11.4. OCCUPATION OF BUSINESS LOCATION. In connection with the Collateral Agents' exercise of the Collateral Agents' rights under this Article 11, the Collateral Agents may enter upon, occupy, and use any premises owned or occupied by each Borrower, and may exclude each Borrower from such premises or portion thereof as may have been so entered upon,

occupied, or used by the Collateral Agents. The Collateral Agents shall not be required to remove any of the Collateral from any such premises upon the Collateral Agents' taking possession thereof, and may render any Collateral unusable to the Borrowers. In no event shall the Collateral Agents be liable to any Borrower for use or occupancy by the Collateral Agents of any premises pursuant to this Article 11, nor for any charge (such as wages for any Borrowers' employees and utilities) incurred in connection with the Collateral Agents' exercise of the Agent's Rights and Remedies.

11.5. GRANT OF NONEXCLUSIVE LICENSE. In connection with the Collateral Agents' exercise of the Collateral Agents' rights under this Article 11, each Borrower hereby grants to the Collateral Agents a royalty free nonexclusive irrevocable license to use, apply, and affix any trademark, trade name, logo, or the like in which any Borrower now or hereafter has rights, such license being with respect to the Collateral Agents' exercise of the rights hereunder including, without limitation, in connection with any completion of the manufacture of Inventory or sale or other disposition of Inventory.

11.6. ASSEMBLY OF COLLATERAL. In connection with the Collateral Agents' exercise of the Collateral Agents' rights under this Article 11, the Collateral Agents may require any Borrower to assemble the Collateral and make it available to the Collateral Agents at the Borrowers' sole risk and expense at a place or places which are reasonably convenient to both the Collateral Agents and the Lead Borrower.

11.7. RIGHTS AND REMEDIES. The rights, remedies, powers, privileges, and discretions of the Agent hereunder (herein, the "AGENTS' RIGHTS AND REMEDIES") shall be cumulative and not exclusive of any rights or remedies which it would otherwise have. No delay or omission by the Agent in exercising or enforcing any of the Agents' Rights and Remedies shall operate as, or constitute, a waiver thereof. No waiver by the Agent of any Event of Default or of any default under any other agreement shall operate as a waiver of any other default hereunder or under any other agreement. No single or partial exercise of any of the Agents' Rights or Remedies, and no express or implied agreement or transaction of whatever nature entered into between the Agent and any Person, at any time, shall preclude the other or further exercise of the Agents' Rights and Remedies. No waiver by any Agent of any of the Agents' Rights and Remedies on any one occasion shall be deemed a waiver on any subsequent occasion, nor shall it be deemed a continuing waiver. The Agents' Rights and Remedies may be exercised at such time or times and in such order of preference as the Agent may determine. The Agents' Rights and Remedies may be exercised without resort or regard to any other source of satisfaction of the Liabilities.

ARTICLE 12 - REVOLVING CREDIT FUNDINGS AND DISTRIBUTIONS:

12.1. REVOLVING CREDIT FUNDING PROCEDURES. Subject to Section 12.2:

(a) The Administrative Agent shall advise each Revolving Credit Lender, no later than 12:30 p.m. on a date on which any Revolving Credit Loan (other than a SwingLine Loan) is to be made on that date. Such advice, in each instance, may be by telephone or facsimile transmission, provided that if such advice is by telephone, it shall be confirmed in writing. Advice of a Revolving Credit Loan shall include the amount of and interest rate applicable to the subject Revolving Credit Loan.

(b) Subject to that Revolving Credit Lender's Revolving Credit Dollar Commitment, each Revolving Credit Lender, by no later than 3:00 p.m. on the day on which the subject Revolving Credit Loan is to be made, shall Transfer that Revolving Credit Lender's Revolving Credit Commitment Percentage of the subject Revolving Credit Loan to the Administrative Agent in immediately available funds.

12.2. SWINGLINE LOANS.

(a) In the event that, when a Base Margin Rate Revolving Credit Loan is requested, the aggregate unpaid balance of the SwingLine Loan is less than the SwingLine Loan Ceiling, then the SwingLine Lender may advise the Administrative Agent that the SwingLine Lender has determined to include up to the amount of the requested Revolving Credit Loan as part of the SwingLine Loan. In such event, the SwingLine Lender shall Transfer the amount of the requested Revolving Credit Loan to the Administrative Agent.

(b) The SwingLine Loan shall be converted to a Revolving Credit Loan in which all Revolving Credit Lenders participate as follows:

(i) At any time and from time to time, but no less frequently than once during each five (5) Business Day period, the SwingLine Lender may advise the Administrative Agent that all, or any part of the SwingLine Loan is to be converted to a Revolving Credit Loan in which all Revolving Credit Lenders participate.

(ii) At the times set forth in Section 12.4, the then entire unpaid principal balance of the SwingLine Loan shall be converted to a Revolving Credit Loan in which all Revolving Credit Lenders participate.

(iii) At the initiation of a Liquidation, the then entire unpaid principal balance of the SwingLine Loan shall be converted to a Revolving Credit Loan in which all Revolving Credit Lenders participate.

In either such event, the Administrative Agent shall advise each Revolving Credit Lender of such conversion as if, and with the same effect as if such conversion were the making of a Revolving Credit Loan as provided in Section 12.1.

(c) The SwingLine Lender, in separate capacities, may also be the Administrative Agent and a Revolving Credit Lender.

(d) The SwingLine Lender, in its capacity as SwingLine Lender, is not a "Revolving Credit Lender" for any of the following purposes:

(i) Except as otherwise specifically provided in the relevant Section, any distribution pursuant to Section 13.6.

(ii) Determination of whether the requisite Loan Commitments have Consented to action requiring such Consent.

12.3. ADMINISTRATIVE AGENT'S COVERING OF FUNDINGS:

(a) Each Revolving Credit Lender shall make available to the Administrative Agent, as provided herein, that Revolving Credit Lender's Revolving Credit Commitment Percentage of the following:

(i) Each Revolving Credit Loan, up to the maximum amount of that Revolving Credit Lender's Revolving Credit Dollar Commitment of the Revolving Credit Loans.

(ii) Up to the maximum amount of that Revolving Credit Lender's Revolving Credit Dollar Commitment of each drawing under a L/C and Banker's Acceptance (to the extent that such drawing under a L/C or Banker's Acceptance is not "covered" by a Revolving Credit Loan as provided herein).

(b) In all circumstances, the Administrative Agent may:

(i) Assume that each Revolving Credit Lender, subject to Section 12.3(a), timely shall make available to the Administrative Agent that Revolving Credit Lender's Revolving Credit Commitment Percentage of each Revolving Credit Loan, notice of which is provided pursuant to Section 12.1 and shall make available, to the extent not "covered" by a Revolving Credit Loan, that Revolving Credit Lender's Revolving Credit Commitment Percentage of any honoring of an L/C or a Banker's Acceptance.

(ii) In reliance upon such assumption, make available the corresponding amount to the Borrowers (but the Administrative Agent shall not be obligated to make such amount available to the Borrowers until actual receipt thereof from the Revolving Credit Lenders).

(iii) Assume that each Revolving Credit Lender timely shall pay, and shall make available, to the Administrative Agent all other amounts which that Revolving Credit Lender is obligated to so pay and/or make available hereunder or under any of the Loan Documents.

(c) In the event that, in reliance upon any of such assumptions, the Administrative Agent makes available a Revolving Credit Lender's Revolving Credit Commitment Percentage of one or more Revolving Credit Loans, or any other amount to be made available hereunder or under any of the Loan Documents, which amount a Revolving Credit Lender (a "DELINQUENT REVOLVING CREDIT LENDER") fails to provide to the Administrative Agent within one (1) Business Day of written notice of such failure, then:

(i) The amount which had been made available by the Administrative Agent is an "ADMINISTRATIVE AGENT'S COVER" (and is so referred to herein).

(ii) All interest paid by the Borrowers on account of the Revolving Credit Loan or coverage of the subject drawing of a L/C or Banker's Acceptance which consist of the Administrative Agent's Cover shall be retained by the Administrative Agent until the Administrative Agent's Cover, with interest, has been paid.

(iii) The Delinquent Revolving Credit Lender shall pay to the Administrative Agent, on demand, interest at a rate equal to the prevailing Federal Funds Effective Rate on any Administrative Agent's Cover in respect of that Delinquent Revolving Credit Lender.

(iv) The Administrative Agent shall have succeeded to all rights to payment to which the Delinquent Revolving Credit Lender otherwise would have been entitled hereunder in respect of those amounts paid by or in respect of the Borrowers on account of the Administrative Agent's Cover together with interest until it is repaid. Such payments shall be deemed made first towards the amounts in respect of which the Administrative Agent's Cover was provided and only then towards amounts in which the Delinquent Revolving Credit Lender is then participating. For purposes of distributions to be made pursuant to
Section 12.4(a) (which relates to ordinary course distributions) or
Section 13.6 (which relates to distributions of proceeds of a Liquidation) below, amounts shall be deemed distributable to a Delinquent Revolving Credit Lender (and consequently, to the Administrative Agent to the extent to which the Administrative Agent is then entitled) at the highest level of distribution (if applicable) at which the Delinquent Revolving Credit Lender would otherwise have been entitled to a distribution.

(v) Subject to Subsection 12.3(c)(iv), the Delinquent Revolving Credit Lender shall be entitled to receive any payments from the Borrowers to which the Delinquent Revolving Credit Lender is then entitled, provided however there shall be deducted from such amount and retained by the Administrative Agent any interest to which the Administrative Agent is then entitled on account of Section 12.3(c)(ii), above.

(d) A Delinquent Revolving Credit Lender shall not be relieved of any obligation of such Delinquent Revolving Credit Lender hereunder (all and each of which shall

constitute continuing obligations on the part of any Delinquent Revolving Credit Lender).

(e) A Delinquent Revolving Credit Lender may cure its status as a Delinquent Revolving Credit Lender by paying the Administrative Agent the aggregate of the following:

(i) The Administrative Agent's Cover (to the extent not previously repaid by the Borrowers and retained by the Administrative Agent in accordance with Subsection 12.3(c)(iv), above) with respect to that Delinquent Revolving Credit Lender.

Plus

(ii) The aggregate of the amount payable under Subsection 12.3(c)(iii), above (which relates to interest to be paid by that Delinquent Revolving Credit Lender).

Plus

(iii) All such costs and expenses as may be incurred by the Administrative Agent in the enforcement of the Administrative Agent's rights against such Delinquent Revolving Credit Lender.

12.4. ORDINARY COURSE DISTRIBUTIONS. (This Section 12.4 applies unless the provisions of Section 13.6 (which relates to distributions in the event of a Liquidation) becomes operative).

(a) Weekly, on each Thursday (or more frequently at the Administrative Agent's option) the Administrative Agent and each Revolving Credit Lender shall settle up on amounts advanced under the Revolving Credit and payments received on account of the Revolving Credit (including, without limitation, collected funds received in the Administrative Agent's Accounts and not released to the Operating Accounts as provided herein).

(b) The Administrative Agent shall distribute to the SwingLine Lender and to each Revolving Credit Lender, such Person's respective pro-rata share of payments of interest and fees on account of the Revolving Credit when actually received and collected by the Administrative Agent. For purposes of calculating interest due to a Revolving Credit Lender, that Revolving Credit Lender shall be entitled to receive interest on the actual amount contributed by that Revolving Credit Lender towards the principal balance of the Revolving Credit Loans outstanding during the applicable period covered by the interest payment made by the Borrowers. Any net principal reductions to the Revolving Credit Loans received by the Administrative Agent in accordance with the Loan Documents during such period shall not reduce such actual amount so contributed, for purposes of calculation of interest due to that Revolving Credit Lender, until the Administrative Agent has distributed to that Revolving Credit Lender its pro-

rata share thereof.

(c) No Revolving Credit Lender shall have any interest in, or right to receive any part of, the Underwriting Fee or the Collateral Monitoring Fee to be paid by the Borrowers to the Administrative Agent pursuant to this Agreement.

(d) Any amount received by the Administrative Agent as reimbursement for any cost or expense (including without limitation, reasonable attorneys' fees) shall be distributed by the Administrative Agent to that Person which is entitled to such reimbursement as provided in this Agreement (and if such Person(s) is (are) the Revolving Credit Lenders, pro-rata based upon their respective Revolving Credit Commitment Percentages at the date on which the expense, in respect of which such reimbursement is being made, was incurred).

(e) Each distribution pursuant to this Section 12.4 is subject to Section 12.3(c), above.

ARTICLE 13 - ACCELERATION AND LIQUIDATION:

13.1. ACCELERATION NOTICES

(a) The Administrative Agent may give the Revolving Credit Lenders an Acceleration Notice at any time following the occurrence of an Event of Default.

(b) The SuperMajority Lenders may give the Administrative Agent an Acceleration Notice at any time following the occurrence of an Event of Default. Such notice may be by multiple counterparts, provided that counterparts executed by the requisite Revolving Credit Lenders are received by the Administrative Agent within a period of five (5) consecutive Business Days.

13.2. ACCELERATION Unless stayed by judicial or statutory process, the Administrative Agent shall Accelerate the Liabilities on account of the Revolving Credit within a commercially reasonable time following:

(a) The Administrative Agent's giving of an Acceleration Notice to the Revolving Credit Lenders as provided in Section 13.1(a).

(b) The Administrative Agent's receipt of an Acceleration Notice from the SuperMajority Lenders, in compliance with Section 13.1(b) .

13.3. INITIATION OF LIQUIDATION Unless stayed by judicial or statutory process, a Liquidation shall be initiated by the Administrative Agent within a commercially reasonable time

following Acceleration of Liabilities on account of the Revolving Credit.

13.4. ACTIONS AT AND FOLLOWING INITIATION OF LIQUIDATION

(a) At the initiation of a Liquidation:

(i) The unpaid principal balance of the SwingLine Loan (if any) shall be converted, pursuant to Section 12.2(b)(iii), to a Revolving Credit Loan in which all Revolving Credit Lenders participate.

(ii) The Administrative Agent and the Revolving Credit Lenders shall "net out" each Revolving Credit Lender's respective contributions towards the Revolving Credit Loans, so that each Revolving Credit Lender holds that Revolving Credit Lender's Revolving Credit Commitment Percentage of the Revolving Credit Loans and advances.

(b) Following the initiation of a Liquidation, each Revolving Credit Lender shall contribute, towards any L/C and Banker's Acceptance thereafter honored and not immediately reimbursed by the Borrowers, that Revolving Credit Lender's Revolving Credit Commitment Percentage of such honoring.

13.5. COLLATERAL AGENTS' CONDUCT OF LIQUIDATION

(a) Any Liquidation shall be conducted by the Collateral Agents, subject to the direction of the SuperMajority Lenders.

(b) The Collateral Agents may establish one or more Nominees to "bid in" or otherwise acquire ownership to any Post Foreclosure Asset.

(c) The Collateral Agents shall manage the Nominee and manage and dispose of any Post Foreclosure Assets with a view towards the realization of the economic benefits of the ownership of the Post Foreclosure Assets and in such regard, the Collateral Agents and/or the Nominee may operate, repair, manage, maintain, develop, and dispose of any Post Foreclosure Asset in such manner as the Collateral Agents determine as appropriate under the circumstances.

(d) The Collateral Agents may decline to undertake or to continue taking a course of action or to execute an action plan (whether proposed by the Collateral Agents or any Revolving Credit Lender) unless indemnified to the Collateral Agents' satisfaction by the Revolving Credit Lenders against any and all liability and expense which may be incurred by the Collateral Agents by reason of taking or continuing to take that course of action or action plan.

(e) Each Revolving Credit Lender shall execute all such instruments and documents not inconsistent with the provisions of this Agreement as the Collateral Agents and/or the Nominee reasonably may request with respect to the creation and governance of any

Nominee, the conduct of the Liquidation, and the management and disposition of any Post Foreclosure Asset.

13.6. DISTRIBUTION OF LIQUIDATION PROCEEDS:

(a) The Collateral Agents may establish one or more reasonably funded reserve accounts into which proceeds of the conduct of any Liquidation may be deposited in anticipation of future expenses which may be incurred by the Collateral Agents in the exercise of rights as a secured creditor of the Borrowers and prior claims which the Collateral Agents anticipate may need to be paid.

(b) The Collateral Agents shall distribute the net proceeds of Liquidation to the Administrative Agent for application in accordance with the relative priorities set forth in Section 13.7, but subject to the terms of the Intercreditor Agreement.

(c) Each Revolving Credit Lender, on the written request of the Collateral Agents and/or any Nominee, not more frequently than once each month, shall reimburse the Collateral Agents and/or any Nominee, pro-rata, for any cost or expense reasonably incurred by the Collateral Agents and/or the Nominee in the conduct of a Liquidation, which amount is not covered out of current proceeds of the Liquidation, which reimbursement shall be paid over to and distributed by the Collateral Agents.

13.7. RELATIVE PRIORITIES TO PROCEEDS OF LIQUIDATION

(a) All distributions of proceeds of a Liquidation shall be net of payment over to the Collateral Agents as reimbursement for all reasonable third party costs and expenses incurred by the Collateral Agents and to Lenders' Special Counsel and to any funded reserve established pursuant to Section 13.6(a).

(b) Subject to the terms of the Intercreditor Agreement and the provisions of Section 13.7(c) below, the proceeds of a Liquidation, net of those amounts described in Section 12.3(c)(iv), shall be distributed based on the following priorities:

(i) To the SwingLine Lender, on account of any SwingLine loans not converted to Revolving Credit Loans pursuant to Section 13.4(a)(i); and then

(ii) To the Revolving Credit Lenders (other than any Delinquent Revolving Credit Lender), pro-rata, to the unpaid principal balance of the Revolving Credit; and then

(iii) To the Revolving Credit Lenders (other than any Delinquent Revolving Credit Lender), pro-rata, to accrued interest on the

Revolving Credit; and then

(iv) To the Revolving Credit Lenders (other than any Delinquent Revolving Credit Lender), pro-rata, to those fees distributable hereunder to the Revolving Credit Lenders; and then

(v) To any Delinquent Revolving Credit Lenders, pro-rata to amounts to which such Delinquent Revolving Credit Lenders otherwise would have been entitled pursuant to Sections 13.7(b)(ii), 13.7(b)(iii), 13.7(b)(iv); and then

(vi) To the Revolving Credit Lenders, pro-rata, to the extent of the Revolving Credit Early Termination Fee; and then

(vii) To any other Liabilities, including any obligations due on account of Hedge Agreements.

(c) Notwithstanding anything to the contrary herein contained, all proceeds received from the Collateral of a Division shall first be applied to the Revolving Credit Loans, L/Cs, Banker's Acceptances, interest, fees and other Liabilities of such Division before application to any other Liabilities.

ARTICLE 14 - THE AGENT:

14.1. APPOINTMENT OF THE AGENT

(a) Each Lender appoints and designates NCCF as the "Administrative Agent" hereunder and under the Loan Documents.

(b) Each Lender appoints and designates NCCF and FRF as the "Collateral Agents" hereunder and under the Loan Documents.

(c) Each Revolving Credit Lender authorizes the Agent:

(i) To execute those of the Loan Documents and all other instruments relating thereto to which any Agent is a party.

(ii) To take such action on behalf of the Revolving Credit Lenders and to exercise all such powers as are expressly delegated to such Agent hereunder and in the Loan Documents and all related documents, together with such other powers as are reasonably incident thereto.

14.2. RESPONSIBILITIES OF AGENT

(a) The Agent shall not have any duties or responsibilities to, or any fiduciary relationship with, any Revolving Credit Lender except for those expressly set forth in this Agreement.

(b) No Agent or any of their respective Affiliates shall be responsible to any Revolving Credit Lender for any of the following:

(i) Any recitals, statements, representations or warranties made by any Borrower or any other Person.

(ii) Any appraisals or other assessments of the assets of any Borrower or of any other Person responsible for or on account of the Liabilities.

(iii) The value, validity, effectiveness, genuineness, enforceability, or sufficiency of the Loan Agreement, the Loan Documents or any other document referred to or provided for therein.

(iv) Any failure by any Borrower or any other Person (other than the applicable Agent) to perform its respective obligations under the Loan Documents.

(c) Each Agent may employ attorneys, accountants, and other professionals and agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such attorneys, accountants, and other professionals or agents or attorneys-in-fact selected by the Agent with reasonable care. No such attorney, accountant, other professional, agents, or attorney-in-fact shall be responsible for any action taken or omitted to be taken by any other such Person.

(d) No Agent, or any of their respective directors, officers, or employees shall be responsible for any action taken or omitted to be taken or omitted to be taken by any other of them in connection herewith in reliance upon advice of its counsel nor, in any other event except for any action taken or omitted to be taken as to which a final judicial determination has been or is made (in a proceeding in which such Person has had an opportunity to be heard) that such Person had acted in a grossly negligent manner, in actual bad faith, or in willful misconduct.

(e) No Agent shall have any responsibility in any event for more funds than such Agent actually receives and collects.

(f) Each Agent, in its separate capacity as a Lender, shall have the same rights and powers hereunder as any other Lender.

14.3. CONCERNING DISTRIBUTIONS BY THE AGENT

(a) The Administrative Agent in its reasonable discretion based upon any Agent's determination of the likelihood that additional payments will be received, expenses incurred, and/or claims made by third parties to all or a portion of such proceeds, may delay the distribution of any payment received on account of the Liabilities.

(b) The Administrative Agent may disburse funds prior to determining that the sums which the Agent expects to receive have been finally and unconditionally paid to any Agent. If and to the extent that the Administrative Agent does disburse funds and it later becomes apparent that an Agent did not then receive a payment in an amount equal to the sum paid out, then any Revolving Credit Lender to whom the Administrative Agent made the funds available, on demand from the Administrative Agent, shall refund to the Administrative Agent the sum paid to that Person.

(c) If, in the opinion of the Agent, the distribution of any amount received by the Agent might involve any Agent in liability, or might be prohibited hereby, or might be questioned by any Person, then the Administrative Agent may refrain from making distribution until the Agent's right to make distribution has been adjudicated by a court of competent jurisdiction.

(d) The proceeds of any Revolving Credit Lender's exercise of any right of, or in the nature of, set-off shall be deemed, First, to the extent that a Revolving Credit Lender is entitled to any distribution hereunder, to constitute such distribution and Second, shall be shared with the other Revolving Credit Lenders as if distributed pursuant to (and shall be deemed as distributions under) Section 13.7.

(e) Each Revolving Credit Lender recognizes that the crediting of the Borrowers with the "proceeds" of any transaction in which a Post Foreclosure Asset is acquired is a non-cash transaction and that, in consequence, no distribution of such "proceeds" will be made by the Administrative Agent to any Revolving Credit Lender.

(f) In the event that (x) a court of competent jurisdiction shall adjudge that any amount received and distributed by the Agents is to be repaid or disgorged or (y) those Lenders adversely affected thereby determine to effect such repayment or disgorgement, then each Revolving Credit Lender to which any such distribution shall have been made shall repay, to the Agents which had made such distribution, that Revolving Credit Lender's pro-rata share of the amount so adjudged or determined to be repaid or disgorged.

14.4. DISPUTE RESOLUTION Any dispute among the Revolving Credit Lenders and/or any Agent concerning the interpretation, administration, or enforcement of the financing arrangements contemplated by this or any other Loan Document or the interpretation or administration of this or any other Loan Document which cannot be resolved amicably shall be resolved in the United States District Court for the District of Ohio, sitting in Cleveland, Ohio, or in the courts of Cuyahoga County, Ohio, to the jurisdiction of which courts each Revolving

Credit Lender hereto hereby submits.

14.5. DISTRIBUTIONS OF NOTICES AND OF DOCUMENTS The Administrative Agent will forward to each Revolving Credit Lender, promptly after the Administrative Agent's receipt thereof, a copy of each notice or other document furnished to the Administrative Agent pursuant to this Agreement, including monthly, quarterly, and annual financial statements received from the Lead Borrower pursuant to Article 5 of this Agreement, other than any of the following:

(a) Routine communications associated with requests for Revolving Credit Loans and/or the issuance of L/Cs and Banker's Acceptances.

(b) Routine or nonmaterial communications.

(c) Any notice or document required by any of the Loan Documents to be furnished directly to the Revolving Credit Lenders by the Lead Borrower.

(d) Any notice or document of which the Administrative Agent has knowledge that such notice or document had been forwarded to the Revolving Credit Lenders other than by the Administrative Agent.

14.6. CONFIDENTIAL INFORMATION

(a) Each Revolving Credit Lender will maintain, as confidential, all of the following:

(i) Proprietary approaches, techniques, and methods of analysis which are applied by the Agent in the administration of the credit facility contemplated by this Agreement.

(ii) Proprietary forms and formats utilized by the Agent in providing reports to the Revolving Credit Lenders pursuant hereto, which forms or formats are not of general currency.

(b) Nothing included herein shall prohibit the disclosure of any such information as may be required to be provided by judicial process or by regulatory authorities having jurisdiction over any party to this Agreement.

14.7. RELIANCE BY AGENT Each Agent shall be entitled to rely upon any certificate, notice or other document (including any cable, telegram, telex, or facsimile) reasonably believed by such Agent to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of attorneys, accountants and other experts selected by the Agent. As to any matters not expressly provided for in this Agreement, any Loan Document, or in any other document referred to therein, the

Agent shall in all events be fully protected in acting, or in refraining from acting, in accordance with the applicable Consent required by this Agreement. Instructions given with the requisite Consent shall be binding on all Revolving Credit Lenders.

14.8. NON-RELIANCE ON AGENT AND OTHER REVOLVING CREDIT LENDERS

(a) Each Revolving Credit Lender represents to all other Revolving Credit Lenders and to each Agent that such Revolving Credit Lender:

(i) Independently and without reliance on any representation or act by any Agent or by any other Revolving Credit Lender, and based on such documents and information as that Revolving Credit Lender has deemed appropriate, has made such Revolving Credit Lender's own appraisal of the financial condition and affairs of the Borrowers and decision to enter into this Agreement.

(ii) Has relied upon that Revolving Credit Lender's review of the Loan Documents by that Revolving Credit Lender and by counsel to that Revolving Credit Lender as that Revolving Credit Lender deemed appropriate under the circumstances.

(b) Each Revolving Credit Lender agrees that such Revolving Credit Lender, independently and without reliance upon any Agent or any other Revolving Credit Lender, and based upon such documents and information as such Revolving Credit Lender shall deem appropriate at the time, will continue to make such Revolving Credit Lender's own appraisals of the financial condition and affairs of the Borrowers when determining whether to take or not to take any discretionary action under this Agreement.

(c) Each Agent, in the discharge of that Agent's duties hereunder, shall not be required to make inquiry of, or to inspect the properties or books of, any Person.

(d) Except for notices, reports, and other documents and information expressly required to be furnished to the Revolving Credit Lenders by the Administrative Agent hereunder (as to which, see Section 14.5), no Agent shall have any affirmative duty or responsibility to provide any Lender with any credit or other information concerning any Person, which information may come into the possession of the Agent or any Affiliate of any Agent.

(e) Each Revolving Credit Lender, at such Revolving Credit Lender's request, shall have reasonable access to all nonprivileged documents in the possession of any Agent, which documents relate to the Agent's performance of their respective duties hereunder.

14.9. INDEMNIFICATION Without limiting the liabilities of the Borrowers under this Agreement or any of the other Loan Documents, each Revolving Credit Lender shall indemnify each Agent, pro-rata, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including

attorneys' reasonable fees and expenses and other out-of-pocket expenditures) which may at any time be imposed on, incurred by, or asserted against such Agent and in any way relating to or arising out of this Agreement or any other Loan Document or any documents contemplated by or referred to therein or the transactions contemplated thereby or the enforcement of any of terms hereof or thereof or of any such other documents, provided, however, no Revolving Credit Lender shall be liable for any of the foregoing to the extent that any of the foregoing arises from any action taken or omitted to be taken by an Agent as to which a final judicial determination has been or is made (in a proceeding in which such Agent has had an opportunity to be heard) that such Agent had acted in a grossly negligent manner, in actual bad faith, or in willful misconduct.

14.10. RESIGNATION OF AGENT

(a) Any Agent may resign at any time by giving 30 days prior written notice thereof to the Revolving Credit Lenders. Upon receipt of any such notice of resignation, the SuperMajority Lenders shall have the right to appoint a successor to such Agent (and if no Event of Default has occurred and is continuing, with the consent of the Lead Borrower, not to be unreasonably withheld and, in any event, deemed given by the Lead Borrower if no written objection is provided by the Lead Borrower to the (resigning) Agent within ten
(10) Business Days notice of such proposed appointment). If a successor Agent shall not have been so appointed and accepted such appointment within 30 days after the giving of notice by the resigning Agent, then the resigning Agent may appoint a successor Agent, which shall be a financial institution having a combined capital and surplus in excess of $100,000,000. The consent of the Lead Borrower otherwise required by this Section 14.10(a) shall not be required if an Event of Default has occurred and is continuing.

(b) Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor shall thereupon succeed to, and become vested with, all the rights, powers, privileges, and duties of the (resigning) Agent so replaced, and the (resigning) Agent shall be discharged from the (resigning) Agent's duties and obligations hereunder, other than on account of any responsibility for any action taken or omitted to be taken by the (resigning) Agent as to which a final judicial determination has been or is made (in a proceeding in which the (resigning) Person has had an opportunity to be heard) that such Person had acted in a grossly negligent manner or in bad faith, or in willful misconduct.

(c) After any retiring Agent's resignation, the provisions of this Agreement and of all other Loan Documents shall continue in effect for the retiring Person's benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent.

14.11 CO-LEAD ARRANGERS, DOCUMENTATION AGENT AND SYNDICATION AGENT

Notwithstanding the provisions of this Agreement or any of the other Loan Documents, the Co-Lead Arrangers, the Documentation Agent, and the Syndication Agent shall have no

powers, rights, duties, responsibilities or liabilities with respect to this Agreement and the other Loan Documents other than confidentiality provisions contained herein.

ARTICLE 15 - ACTION BY AGENT - CONSENTS - AMENDMENTS - WAIVERS:

15.1. ADMINISTRATION OF CREDIT FACILITIES

(a) Except as otherwise specifically provided in this Agreement, each Agent may take any action with respect to the credit facility contemplated by the Loan Documents as the applicable Agent determines to be appropriate, provided, however, no Agent is under any affirmative obligation to take any action which it is not required by this Agreement or the Loan Documents specifically to so take.

(b) Except as specifically provided in the following Sections of this Agreement, whenever a Loan Document or this Agreement provides that action may be taken or omitted to be taken in an Agent's reasonable, good faith discretion, the Agent shall have the sole right to take, or refrain from taking, such action without, and notwithstanding, any vote of the Revolving Credit Lenders:

15.2             Majority Lenders
15.3             SuperMajority Lenders
15.4             Certain Consent
15.5             Unanimous Consent
15.6             Consent of SwingLine Lender
15.7             Consent of the Agent

(c) The rights granted to the Revolving Credit Lenders in those sections referenced in Section 15.1(b) shall not otherwise limit or impair any Agent's exercise of its reasonable, good faith discretion under the Loan Documents.

15.2. ACTIONS REQUIRING OR ON DIRECTION OF MAJORITY LENDERS

Except as otherwise provided in this Agreement, the Consent or direction of the Majority Lenders is required for any amendment, waiver, or modification of any Loan Document.

15.3. ACTIONS REQUIRING OR ON DIRECTION OF SUPERMAJORITY LENDERS

The Consent or direction of the SuperMajority Lenders is required as follows:

(a) The SuperMajority Lenders may direct the Administrative Agent to permit Protective OverAdvances to be outstanding for more than 45 consecutive Business Days or more than twice in any twelve month period (the Revolving Credit Lenders recognizing that, except as

described in this Section 15.3(a), any loan or advance under the Revolving Credit which results in a Protective OverAdvance may be made by the Administrative Agent in its reasonable, good faith discretion without the Consent of the Revolving Credit Lenders, whether or not a Default exists, and that each Revolving Credit Lender shall be bound thereby).

(b) The SuperMajority Lenders may direct the Administrative Agent to suspend the Revolving Credit, if any Default is then occurring, following which direction, and for as long as a Default is then occurring, the only Revolving Credit Loans which may be made are the following:

(i) Protective OverAdvances not otherwise prohibited as provided in 15.3(a).

(ii) Revolving Credit Loans made to "cover" the honoring of L/C's and Banker's Acceptances.

(iii) Revolving Credit Loans made with Consent of the SuperMajority Lenders.

(c) The SuperMajority Lenders may undertake the following if an Event of Default has occurred and is continuing:

(i) Give the Administrative Agent an Acceleration Notice in accordance with Section 13.1(b).

(ii) Direct the Administrative Agent to increase the rate of interest to the default rate of interest as provided in, and to the extent permitted by, this Agreement.

15.4. ACTION REQUIRING CERTAIN CONSENT The Consent or direction of the following is required for the following actions:

(a) Any forgiveness of all or any portion of any payment Liability: All Revolving Credit Lenders whose payment Liability is being so forgiven: (other than any Delinquent Revolving Credit Lender).

(b) Any decrease in any interest rate or fee payable under any of the Loan Documents (other than any fee payable to the Administrative Agent (for which the consent of the Administrative Agent shall be required): All Revolving Credit Lenders adversely affected thereby (other than any Delinquent Revolving Credit Lender).

(c) Any postponement of the scheduled time for payment of any amount payable under any of the Loan Documents: All Revolving Credit Lenders adversely affected thereby (other than any Delinquent Revolving Credit Lender).

(d) Volitional Disgorgement as described in 14.3(f): Each Revolving Credit Lender (other than any Delinquent Revolving Credit Lender) which is adversely affected thereby.

(e) Increase in the SwingLine Ceiling: The consent of the SwingLine Lender and the Majority Lenders.

15.5. ACTIONS REQUIRING OR DIRECTED BY UNANIMOUS CONSENT None of the following may take place except with Unanimous Consent:

(a) Any release of a material portion of the Collateral, but such Consent to such release is not required if any of the following conditions is satisfied:

(i) Such release is otherwise required or provided for in the Loan Documents.

(ii) Such release is being made to facilitate a Liquidation.

(iii) No OverLoan exists immediately after giving effect to the application to the Loan Account of the net proceeds received on account of the transaction in which such release is made.

(b) Any amendment of the Definitions of "Borrowing Base", "DSW/Shonac Borrowing Base", "Filene's Borrowing Base", "VC Borrowing Base", "Excess Availability Reserve", "Availability", "DSW/Shonac Availability", "Filene's Availability" or "VC Availability" or of any Definition of any component thereof, such that more credit would be available to a Borrower, based on the same assets, as would have been available to such Borrower immediately prior to such amendment, it being understood, however, that:

(i) The foregoing shall not limit the adjustment by the Collateral Agents of any Reserve or the Inventory Advance Rate in the Collateral Agents' administration of the Revolving Credit as otherwise permitted by this Agreement.

(ii) The foregoing shall not prevent the Administrative Agent, in its administration of the Revolving Credit, from restoring any component of the Borrowing Base, DSW/Shonac Borrowing Base, Filene's Borrowing Base, or VC Borrowing Base which had been lowered by the Administrative Agent back to the value of such component, as stated in this Agreement or to an intermediate value.

(c) Any waiver, amendment, or modification which has the effect of increasing any Revolving Credit Dollar Commitment, Revolving Credit Commitment Percentage, or the Revolving Credit Ceiling, except that no Consent shall be required for

any such increase which is the result of the application of the following Sections of this Agreement:

(i) Section 15.10 (which relates to NonConsenting Revolving Credit Lenders).

(ii) Section 16.1 (which relates to assignments and assumptions).

(d) Any release of any Person obligated on account of the Liabilities.

(e) The making of any Revolving Credit Loan which, when made, exceeds Availability and is not a Protective OverAdvance, subject, however, to the following:

(i) No Consent is required in connection with the making of any Revolving Credit Loan to "cover" any honoring of a drawing under any L/C or any Banker's Acceptance.

(ii) Each Lender recognizes that subsequent to the making of a Revolving Credit Loan which does not constitute a Protective OverAdvance, the unpaid principal balance of the Loan Account may exceed Borrowing Base on account of changed circumstances beyond the control of the Agent (such as a drop in collateral value).

(f) Any amendment which has the effect of limiting the Administrative Agent's right or ability to make Protective OverAdvances.

(g) The waiver of the obligation of the Borrowers to reduce the unpaid principal balance of loans under the Revolving Credit to an amount so that no OverLoan (other than a Protective OverAdvance) is outstanding.

(h) Any amendment of this Article 15.

(i) Any subordination of the Liabilities to any material obligation of any Borrower, unless such subordination is otherwise required pursuant to this or is permitted by this Agreement.

(j) Amendment of any of the following Definitions:

"Majority Lender" "Maturity Date" "Protective OverAdvance" "SuperMajority Lenders "Unanimous Consent"

15.6. ACTIONS REQUIRING SWINGLINE LENDER CONSENT No action, amendment, or waiver of compliance with, any provision of the Loan Documents or of this Agreement which affects the SwingLine Lender may be undertaken without the Consent of the SwingLine Lender.

15.7. ACTIONS REQUIRING AGENT'S CONSENT

(a) No action, amendment, or waiver of compliance with, any provision of the Loan Documents or of this Agreement which affects any Agent in its capacity as Agent may be undertaken without the written consent of such Agent.

(b) No action referenced herein which affects the rights, duties, obligations, or liabilities of any Agent shall be effective without the written consent of such Agent.

15.8. MISCELLANEOUS ACTIONS

(a) Notwithstanding any other provision of this Agreement, no single Revolving Credit Lender independently may exercise any right of action or enforcement against or with respect to any Borrower.

(b) Each Agent shall be fully justified in failing or refusing to take action under this Agreement or any Loan Document on behalf of any Revolving Credit Lender unless such Agent shall first

(i) receive such clear, unambiguous, written instructions as such Agent deem appropriate; and

(ii) be indemnified to such Agent's satisfaction by the Revolving Credit Lenders against any and all liability and expense which may be incurred by such Agent by reason of taking or continuing to take any such action, unless such action had been grossly negligent, in willful misconduct, or in bad faith.

(c) The Agent may establish reasonable procedures for the providing of direction and instructions from the Revolving Credit Lenders to the Agent, including its reliance on multiple counterparts, facsimile transmissions, and time limits within which such direction and instructions must be received in order to be included in a determination of whether the requisite Lenders have provided their direction, Consent, or instructions.

15.9. ACTIONS REQUIRING LEAD BORROWER'S CONSENT

(a) The Lead Borrower's consent is required for any amendment of this Agreement, except that each of the following Articles of this Agreement may be amended

without the consent of the Lead Borrower:

12             Revolving Credit Fundings and Distributions
13             Acceleration and Liquidation (other than any
               modifications to the requisite percentage of
               Revolving Credit Lenders which may furnish an
               Acceleration Notice under Section 13.1(b))
14             The Agent (PROVIDED THAT the provisions of
               Section 14.10(a) relating to the Lead Borrower's
               consent to a successor Agent in certain circumstances
               may not be amended without the Lead Borrower's consent).
15             Action By Agents - Consents - Amendments - Waivers
               (other than as provided in Section 15.9(b))
16             Assignments and Participations (PROVIDED THAT the
               provisions of Section 16.1(a)(i) relating to the Lead
               Borrower's consent to an assignment in certain
               circumstances may not be amended without the Lead
               Borrower's consent).

         (b) Subject to  Section 15.9(c), the following Sections of

Article 15 may not be amended without the consent of the Lead Borrower:

and further provided that no provision of any Article listed in Section 15.9(a) that (i) obligates any of the Agents to exercise reasonable, good faith discretion, or (ii) imposes liability on any Person for acting in a grossly negligent manner, in actual bad faith or willful misconduct, or (iii) imposes any confidentiality obligation under this Agreement on any Person, may be amended without the consent of the Lead Borrower.

(c) The Lead Borrower's consent to the amendment of those provisions referenced in Section 15.9(b)

(i) Shall be deemed given unless written objection is made, within seven (7) Business Days following the Administrative Agent's giving notice to the Lead Borrower of the proposed amendment; and

(ii) shall not be required following the occurrence of any Event of Default.

15.10. NONCONSENTING REVOLVING CREDIT LENDER

(a) In the event that a Revolving Credit Lender (in this
Section 15.10, a "NONCONSENTING REVOLVING CREDIT LENDER") does not provide its Consent to a proposal by an Agent to take action which requires consent under this Article 15, then one or more Revolving Credit Lenders who provided Consent to such action may require the assignment, without recourse and in accordance with the procedures outlined in Section 16.1, below, of the NonConsenting Revolving Credit Lender's Loan Commitment hereunder on fifteen (15) days written notice to the Administrative Agent and to the NonConsenting Revolving Credit Lender.

(b) At the end of such fifteen (15) days, and provided that the NonConsenting Revolving Credit Lender delivers the Revolving Credit Note held by the NonConsenting Revolving Credit Lender to the Administrative Agent (or a lost note affidavit and indemnity reasonably acceptable to the Administrative Agent), the Revolving Credit Lenders who have given such written notice shall Transfer the following to the NonConsenting Revolving Credit Lender:

(i) Such NonConsenting Revolving Credit Lender's pro-rata share of the principal and interest of the Revolving Credit Loans to the date of such assignment.

(ii) All fees distributable hereunder to the NonConsenting Revolving Credit Lender to the date of such assignment.

(iii) Any out-of-pocket costs and expenses for which the NonConsenting Revolving Credit Lender is entitled to reimbursement from the Borrowers.

(c) In the event that the NonConsenting Revolving Credit Lender fails to deliver to the Administrative Agent the Revolving Credit Note held by the NonConsenting Revolving Credit Lender (or a lost note affidavit and indemnity) as provided in Section 15.10(b), then:

(i) The amount otherwise to be Transferred to the NonConsenting Revolving Credit Lender shall be Transferred to the Administrative Agent and held by the Administrative Agent, without interest, to be turned over to the NonConsenting Revolving Credit Lender upon delivery of the Revolving Credit Note held by that NonConsenting Revolving Credit Lender or a lost note affidavit and indemnity.

(ii) The Revolving Credit Note held by the NonConsenting Revolving Credit Lender shall have no force or effect whatsoever.

(iii) The NonConsenting Revolving Credit Lender shall cease to be a "Revolving Credit Lender".

(iv) The Revolving Credit Lender(s) which have Transferred the amount to the Administrative Agent as described above shall have succeeded to all rights and

become subject to all of the obligations of the NonConsenting Revolving Credit Lender as "Revolving Credit Lender".

(d) In the event that more than one (1) Revolving Credit Lender wishes to require such assignment, the NonConsenting Revolving Credit Lender's Loan Commitment hereunder shall be divided among such Revolving Credit Lenders, pro-rata based upon their respective Revolving Credit Commitment Percentages, with the Administrative Agent coordinating such transaction.

(e) The Administrative Agent shall coordinate the retirement of the Revolving Credit Note held by the NonConsenting Revolving Credit Lender and the issuance of Revolving Credit Notes to those Revolving Credit Lenders which "take-out" such NonConsenting Revolving Credit Lender, provided, however, no processing fee otherwise to be paid as provided in Section 16.2(b) shall be due under such circumstances.

ARTICLE 16 - ASSIGNMENTS BY REVOLVING CREDIT LENDERS:

16.1. ASSIGNMENTS AND ASSUMPTIONS:

(a) Except as provided herein, each Revolving Credit Lender (in this Section 16.1(a), an "ASSIGNING REVOLVING CREDIT LENDER") may assign to one or more Eligible Assignees (in this Section 16.1(a), each an "ASSIGNEE REVOLVING CREDIT LENDER") all or a portion of that Revolving Credit Lender's interests, rights and obligations under this Agreement and the Loan Documents (including all or a portion of its Revolving Credit Dollar Commitment) and the same portion of the Revolving Credit Loans at the time owing to it, and of the Revolving Credit Note held by the Assigning Revolving Credit Lender, provided that:

(i) The Administrative Agent and, subject to the provisions of Section 2.23(d) hereof, the Lead Borrower, shall have given its prior written consent to such assignment, which consent shall not be unreasonably withheld, but need not be given if the proposed assignment would result in any resulting Revolving Credit Lender's having a Revolving Credit Dollar Commitment of less than the "minimum hold" amount specified in Section 16.1(a)(iii).

(ii) Each such assignment shall be of a constant, and not a varying, percentage of all the Assigning Revolving Credit Lender's rights and obligations under this Agreement.

(iii) Following the effectiveness of such assignment, the Assigning Revolving Credit Lender's Revolving Credit Dollar Commitment (if not an assignment of all of the Assigning Revolving Credit Lender's Loan Commitment) shall not be less than $5,000,000.00.

16.2. ASSIGNMENT PROCEDURES. (This Section 16.2 describes the procedures to be

followed in connection with an assignment effected pursuant to this Article 16 and permitted by Section 16.1).

(a) The parties to such an assignment shall execute and deliver to the Administrative Agent, for recording in the Register, an Assignment and Acceptance substantially in the form of EXHIBIT 16.1, annexed hereto.

(b) The Assigning Revolving Credit Lender shall deliver to the Administrative Agent, with such Assignment and Acceptance, the Revolving Credit Note held by the subject Assigning Revolving Credit Lender and the Administrative Agent's processing fee of $3,500.00, provided, however, no such processing fee shall be due where the Assigning Revolving Credit Lender is one of the Revolving Credit Lenders at the initial execution of this Agreement.

(c) The Administrative Agent shall maintain a copy of each Assignment and Acceptance delivered to it and a register or similar list (the "REGISTER") for the recordation of the names and addresses of the Revolving Credit Lenders and of the Revolving Credit Dollar Commitment and Revolving Credit Commitment Percentage of each Revolving Credit Lender. The Register shall be available for inspection by the Revolving Credit Lenders at any reasonable time and from time to time upon reasonable prior notice. In the absence of manifest error, the entries in the Register shall be conclusive and binding on all Revolving Credit Lenders. The Administrative Agent and the Revolving Credit Lenders may treat each Person whose name is recorded in the Register as a "Revolving Credit Lender" hereunder for all purposes of this Agreement.

(d) The Assigning Revolving Credit Lender and Assignee Revolving Credit Lender, directly between themselves, shall make all appropriate adjustments in payments for periods prior to the effective date of an Assignment and Assumption.

16.3. EFFECT OF ASSIGNMENT.

(a) From and after the effective date specified in an Assignment and Acceptance which has been executed, delivered, and recorded
(which effective date the Administrative Agent may delay by up to five (5) Business Days after the delivery of such Assignment and Acceptance):

(i) The Assignee Revolving Credit Lender:

(A) Shall be a party to this Agreement and the Loan Documents (and to any amendments thereof) as fully as if the Assignee Revolving Credit Lender had executed each..

(B) Shall have the rights of a Revolving Credit Lender

hereunder to the extent of the Revolving Credit Dollar Commitment and Revolving Credit Commitment Percentage assigned by such Assignment and Acceptance.

(ii) The Assigning Revolving Credit Lender shall be released from the Assigning Revolving Credit Lender's obligations under this Agreement and the Loan Documents to the extent of the Loan Commitment assigned by such Assignment and Acceptance.

(iii) The Administrative Agent shall undertake to obtain and distribute replacement Revolving Credit Notes to the subject Assigning Revolving Credit Lender and Assignee Revolving Credit Lender.

(b) By executing and delivering an Assignment and Acceptance, the parties thereto confirm to and agree with each other and with all parties to this Agreement as to those matters which are set forth in the subject Assignment and Acceptance.

ARTICLE 17 - NOTICES:

17.1. NOTICE ADDRESSES. All notices, demands, and other communications made in respect of any Loan Document (other than a request for a loan or advance or other financial accommodation under the Revolving Credit) shall be made to the following addresses, each of which may be changed upon seven (7) days written notice to all others given by certified mail, return receipt requested:

                                   Riemer & Braunstein LLP
                                   Three Center Plaza
                                   Boston, Massachusetts  02108
                                   Attention:   David S. Berman, Esquire
                                   Fax:         (617) 880-3456

If to the Lead Borrower

And All Borrowers:

Value City Department Stores, Inc.
3241 Westerville Road

Columbus, Ohio 43224 Attention: James. A. McGrady Fax: (614) 473-2721

With a copy to:

Schottenstein Stores Corporation
1800 Moler Road
Columbus, Ohio 43207
Attention: Irwin A. Bain, Esquire
Fax: (614) 443-0972

With a copy to:

Porter, Wright, Morris & Arthur LLP
41 S. High Street
Columbus, Ohio 43215
Attention:   Robert J. Tannous, Esquire
             and Timothy E. Grady, Esquire
Fax:         (614) 227-2100

17.2. NOTICE GIVEN.

(a) Except as otherwise specifically provided herein, notices shall be deemed made and correspondence received, as follows (all times being local to the place of delivery or receipt):

(i) By certified mail, return receipt requested:

the date when actually received.

(ii) By recognized overnight express delivery: the Business Day following the day when sent.

(iii) By Hand: If delivered on a Business Day after 9:00 AM and no later than three (3) hours prior to the close of customary business hours of the recipient, when delivered. Otherwise, at the opening of the then next Business Day.

(iv) By Facsimile transmission (which must include a header on which the party sending such transmission is indicated): If sent on a Business Day after 9:00 AM and no later than three (3) hours prior to the close of customary business hours of the recipient, one
(1) hour after being sent. Otherwise, at the opening of the then next Business Day.

17.3. WIRE INSTRUCTIONS. NOTICE GIVEN. Subject to change in the same manner that a notice address may be changed (as to which, see Section 17.1), wire transfers to the Administrative Agent shall be made in accordance with the following wire instructions:

Account Name     : National City Commercial Finance, Inc.
Account Number   : 3790116
Reference        : Value City

ARTICLE 18 - TERM:

18.1. TERMINATION OF REVOLVING CREDIT. The Revolving Credit shall remain in effect (subject to suspension as provided in Section 2.6 hereof) until the Termination Date.

18.2. ACTIONS ON TERMINATION.
(a) On the Termination Date, the Borrowers shall pay the Administrative Agent (whether or not then due), in immediately available funds, all Liabilities including, without limitation: the following:

(i) The entire balance of the Loan Account (including the unpaid principal balance of the Revolving Credit Loans, and the SwingLine Loan ).

(ii) Any then remaining installments of the Collateral Monitoring Fee.

(iii) Any payments due on account of the indemnification obligations included in Section 2.11(f).

(iv) Any accrued and unpaid Unused Line Fee.

(v) Any applicable Revolving Credit Early Termination Fee.

(vi) All unreimbursed costs and expenses of each Agent and of Lenders' Special Counsel for which each Borrower is responsible.

(vii) All other Liabilities.

(b) On the Termination Date, the Borrowers shall also shall make such arrangements concerning any L/Cs and Banker's Acceptances then outstanding as are reasonably satisfactory to the Administrative Agent.

(c) Until such payment (Section 18.2(a)) and arrangements concerning L/Cs

and Banker's Acceptances (Section 18.2(b)), all provisions of this Agreement, other than those included in Article 2 which place any obligation on the Administrative Agent or any Revolving Credit Lender to make any loans or advances or to provide any financial accommodations to any Borrower shall remain in full force and effect until all Liabilities shall have been paid in full.

(d) On the Termination Date, and upon satisfaction by the Loan Parties of the terms of Section 18.2(a) and (b), above, the Collateral Agents shall release the Collateral Interests granted the Collateral Agents by the Borrowers hereunder, which may be upon such conditions and indemnifications as the Collateral Agents may reasonably require.

ARTICLE 19 - GENERAL:

19.1. PROTECTION OF COLLATERAL. No Agent has any duty as to the collection or protection of the Collateral beyond the safe custody of such of the Collateral as may come into the possession of such Agent.

19.2. PUBLICITY. Subject to the prior approval of the Lead Borrower (which approval shall not be unreasonably withheld or delayed), the Administrative Agent may issue a "tombstone" notice of the establishment of the credit facility contemplated by this Agreement and may make reference to each Borrower (and may utilize any logo or other distinctive symbol associated with each Borrower) in connection with any advertising, promotion, or marketing (including reference in any "case study" of the creditor facility contemplated hereby) undertaken by the Administrative Agent.

19.3. CONFIDENTIALITY. Each of the Agents, the Issuer, the Co-Lead Arrangers, the Syndication Agent, the Revolving Credit Lenders, the SwingLine Lender, and any Person subject to this Section 19.3 by the terms of this Agreement (or behalf of itself, and each of its directors, officers, and employees) agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement and any actual or prospective counterparty or advisors to any swap or derivative transactions relating to the Loan Parties and the Liabilities (subject to an agreement executed for the benefit of the Lead Borrower which contains provisions substantially the same as those of this Section 19.3, (g) with the consent of the Loan Parties or (h) to the extent such Information (i) becomes publicly available other than as

a result of a breach of this Section or (ii) becomes legally available to the Agents, the Issuer, the Co-Lead Arrangers or any Revolving Credit Lender on a nonconfidential basis from a source other than the Loan Parties. For the purposes of this Section, the term "INFORMATION" means all information received from the Loan Parties relating to their business, other than any such information that is available to the Agents, the Issuer, the Co-Lead Arrangers or any Revolving Credit Lender on a nonconfidential basis prior to disclosure by the Loan Parties, PROVIDED that, in the case of information received from the Loan Parties after the date hereof, such information is identified at the time of delivery as confidential or of the type of information, such as business plans or financial information as is customarily confidential. Any Person required to maintain the confidentiality of Information as provided in this
Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information that is of a similar nature. The confidentiality provisions contained in this Agreement shall survive the termination, assignment or invalidation of this Agreement, or of any of the rights and obligations contained herein or therein.

19.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the Borrowers and their respective representatives, successors, and assigns and shall enure to the benefit of each Agent and each Revolving Credit Lender and their respective successors and assigns, provided, however, no trustee or other fiduciary appointed with respect to any Borrower shall have any rights hereunder. In the event that any Agent or any Revolving Credit Lender assigns or transfers its rights under this Agreement, the assignee shall thereupon succeed to and become vested with all rights, powers, privileges, and duties of such assignor hereunder and such assignor shall thereupon be discharged and relieved from its duties and obligations hereunder.

19.5. SEVERABILITY. Any determination that any provision of this Agreement or any application thereof is invalid, illegal, or unenforceable in any respect in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or the validity, legality, or enforceability of any other provision of this Agreement.

19.6. AMENDMENTS. COURSE OF DEALING.

(a) This Agreement and the other Loan Documents incorporate all discussions and negotiations between each Borrower and each Agent and each Revolving Credit Lender, either express or implied, concerning the matters included herein and in such other instruments, any custom, usage, or course of dealings to the contrary notwithstanding. No such discussions, negotiations, custom, usage, or course of dealings shall limit, modify, or otherwise affect the provisions hereof or thereof. No failure by any Agent or any Revolving Credit Lender to give notice to the Lead Borrower of any Borrower's having failed to observe and comply with any warranty or covenant included in any Loan Document shall constitute a waiver of such warranty or covenant or the amendment of the subject Loan Document. No change made by any Agent to the manner by which Borrowing Base is determined shall obligate the Agent to continue to determine Borrowing Base in that manner.

(b) Each Borrower may undertake any action otherwise prohibited hereby, and may omit to take any action otherwise required hereby, upon and with the express prior written consent of the Administrative Agent. Subject to Article 15, no consent, modification, amendment, or waiver of any provision of any Loan Document shall be effective unless executed in writing by or on behalf of the party to be charged with such modification, amendment, or waiver (and if such party is the Administrative Agent then by a duly authorized officer thereof). Any modification, amendment, or waiver provided by the Administrative Agent shall be in reliance upon all representations and warranties theretofore made to the Administrative Agent by or on behalf of the Borrowers (and any guarantor, endorser, or surety of the Liabilities) and consequently may be rescinded in the event that any of such representations or warranties was not true and complete in all material respects when given.

19.7. POWER OF ATTORNEY. In connection with all powers of attorney included in this Agreement (which may be exercised only after the occurrence and during the continuance of an Event of Default), each Borrower hereby grants unto the Administrative Agent (acting through any of its officers) full power to do any and all things necessary or appropriate in connection with the exercise of such powers as fully and effectually as that Borrower might or could do, hereby ratifying all that said attorney shall do or cause to be done by virtue of this Agreement. No power of attorney set forth in this Agreement shall be affected by any disability or incapacity suffered by any Borrower and each shall survive the same. All powers conferred upon each Agent by this Agreement, being coupled with an interest, shall be irrevocable until this Agreement is terminated by a written instrument executed by a duly authorized officer of each Agent. The Administrative Agent, as agent for the Borrowers under any power of attorney included in this Agreement and the other Loan Documents, is not a fiduciary for any Borrower, but instead, in exercising any one or more rights with respect to such powers of attorney, may do so for the sole and exclusive benefit of the Revolving Credit Lenders, and not for the benefit of any Borrower. The Borrowers acknowledge and agree that the provisions of Title 20, Pennsylvania Consolidated Statutes Section 5601 ET SEQ., as amended (including, without limitation, Act 39 of 1999) shall not be applicable to any one or more powers of attorney contained in any Loan Document previously, concurrently or in the future executed and delivered by the Borrowers.

19.8. APPLICATION OF PROCEEDS. The proceeds of any collection, sale, or disposition of the Collateral, or of any other payments received hereunder, shall be applied towards the Liabilities in such order and manner as the Administrative Agent determines in its sole reasonable, good faith discretion, consistent, however, with Sections 13.6 and 13.7 and any other applicable provisions of this Agreement. The Borrowers shall remain liable for any deficiency remaining following such application.

19.9. INCREASED COSTS. If, after the date hereof, as a result of any change in any Requirement of Law, or change of the interpretation or application thereof by any court or by any governmental or other authority or entity charged with the administration thereof, whether or not

having the force of law, which:

(a) subjects any Revolving Credit Lender to any taxes or changes the basis of taxation, or increases any existing taxes, on payments of principal, interest or other amounts payable by any Borrower to any Agent or any Revolving Credit Lender under this Agreement (except for taxes on any Agent or any Revolving Credit Lender based on net income or capital imposed by the jurisdiction in which the principal or lending offices of such Agent or that Revolving Credit Lender are located);

(b) imposes, modifies or deems applicable any reserve, cash margin, special deposit or similar requirements against assets held by, or deposits in or for the account of or loans by or any other acquisition of funds by the relevant funding office of any Revolving Credit Lender;

(c) imposes on any Revolving Credit Lender any other condition with respect to any Loan Document; or

(d) imposes on any Revolving Credit Lender a requirement to maintain or allocate capital in relation to the Liabilities;

and the result of any of the foregoing, in such Revolving Credit Lender's reasonable opinion, is to increase the cost to that Revolving Credit Lender of making or maintaining any loan, advance or financial accommodation or to reduce the income receivable by that Revolving Credit Lender in respect of any loan, advance or financial accommodation by an amount which that Revolving Credit Lender deems to be material, then upon written notice from the Administrative Agent, from time to time, to the Lead Borrower (such notice to set out in reasonable detail the facts giving rise to and a summary calculation of such increased cost or reduced income), the Borrowers shall forthwith pay to the Administrative Agent, for the benefit of the subject Revolving Credit Lender, upon receipt of such notice, that amount which shall compensate the subject Revolving Credit Lender for such additional cost or reduction in income.

19.10. REPLACEMENT OF REVOLVING CREDIT LENDER. If (a) any Revolving Credit Lender incurs increased costs and requests compensation under Section 2.19(d) or Section 19.9, (b) any Revolving Credit Lender is a Delinquent Revolving Credit Lender, then the Lead Borrower may

(a) request such Revolving Credit Lender or Issuer to use reasonable efforts to designate a different lending office for funding or booking its loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches, or Affiliates, if in the judgment of such Revolving Credit Lender or Issuer, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.19(d) or Section 19.9 hereof, and (ii) would not subject such Revolving Credit Lender or Issuer to any unreimbursed cost or expense, and would not otherwise be disadvantageous to such Revolving Credit Lender or Issuer. The

Lead Borrower shall pay all reasonable costs and expenses incurred by such Revolving Credit Lender or Issuer in connection with any such designation of assignment; and

(b) at its sole expense and effort, upon notice to such Revolving Credit Lender and the Administrative Agent, require such Revolving Credit Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Article 16), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Revolving Credit Lender, if a Revolving Credit Lender accepts such assignment), PROVIDED that (i) if such assignee is not an existing Revolving Credit Lender, the Lead Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Revolving Credit Lender shall have received payment of an amount equal to the outstanding principal of its Revolving Credit Loans and participations in unreimbursed drawings under L/Cs and Banker's Acceptances and SwingLine Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Lead Borrower (in the case of all other amounts) and (iii) such assignment will result in a reduction in such compensation, payments or costs. A Revolving Credit Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Revolving Credit Lender or otherwise, the circumstances entitling the Lead Borrower to require such assignment and delegation cease to apply.

19.11. COSTS AND EXPENSES OF THE AGENT AND ISSUER.

(a) The Borrowers shall pay from time to time on demand all Costs of Collection and all reasonable costs, expenses, and disbursements (including reasonable attorneys' fees and expenses) which are incurred by each Agent or the Issuer in connection with the preparation, negotiation, execution, and delivery of this Agreement and of any other Loan Documents, and all other reasonable costs, expenses, and disbursements which may be incurred in connection with or in respect to the credit facility contemplated hereby or which otherwise are incurred with respect to the Liabilities.

(b) The Borrowers shall pay from time to time on demand all reasonable costs and expenses (including reasonable attorneys' fees and expenses) incurred, following the occurrence of any Event of Default, by the Revolving Credit Lenders to Lenders' Special Counsel.

(c) Each Borrower authorizes the Administrative Agent to pay all such fees and expenses and in the Administrative Agent's reasonable, good faith discretion, to add such fees and expenses to the Loan Account.

(d) The undertaking on the part of each Borrower in this
Section 19.11 shall survive payment of the Liabilities and/or any termination, release, or discharge executed by any Agent in favor of any Borrower, other than a termination, release, or discharge which makes

specific reference to this Section 19.11.

19.12. COPIES AND FACSIMILES. Each Loan Document and all documents and papers which relates thereto which have been or may be hereinafter furnished any Agent or any Revolving Credit Lender may be reproduced by that Revolving Credit Lender or by any Agent by any photographic, microfilm, xerographic, digital imaging, or other process, and such Person making such reproduction may destroy any document so reproduced. Any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made in the regular course of business). Any facsimile which bears proof of transmission shall be binding on the party which or on whose behalf such transmission was initiated and likewise shall be so admissible in evidence as if the original of such facsimile had been delivered to the party which or on whose behalf such transmission was received.

19.13. NEW YORK LAW. This Agreement and all rights and obligations hereunder, including matters of construction, validity, and performance, shall be governed by the law of State of New York.

19.14. CONSENT TO JURISDICTION.

(a) Each Borrower agrees that any legal action, proceeding, case, or controversy against any Borrower with respect to any Loan Document may be brought in the courts of Franklin County, Ohio or in the United States District Court, District of Ohio, sitting in Columbus, Ohio, as the Administrative Agent may elect in the Administrative Agent's sole reasonable, good faith discretion. By execution and delivery of this Agreement, each Borrower, for itself and in respect of its property, accepts, submits, and consents generally and unconditionally, to the jurisdiction of the aforesaid courts.

(b) Each Borrower WAIVES any objection based on forum non conveniens and any objection to venue of any action or proceeding instituted under any of the Loan Documents and consents to the granting of such legal or equitable remedy as is deemed appropriate by the Court.

(c) Nothing herein shall affect the right of any Agent to bring legal actions or proceedings in any other competent jurisdiction.

(d) Each Borrower agrees that any action commenced by any Borrower asserting any claim arising under or in connection with this Agreement or any other Loan Document shall be brought solely in the courts of Franklin County, Ohio or in the United States District Court, District of Ohio, sitting in Columbus, Ohio, and that such Courts shall have exclusive jurisdiction with respect to any such action.

19.15. INDEMNIFICATION. Each Borrower shall indemnify, defend, and hold each

Agent, the Issuer, and each Revolving Credit Lender and any Participant and any of their respective employees, officers, agents, Subsidiaries, and Affiliates (each, an "INDEMNIFIED PERSON") harmless of and from any claim brought or threatened against any Indemnified Person by any Borrower, any guarantor or endorser of the Liabilities, or any other Person (as well as from reasonable attorneys' fees, expenses, and disbursements in connection therewith) on account of the relationship of the Borrowers or of any guarantor or endorser of the Liabilities, including all costs, expenses, liabilities, and damages as may be suffered by any Indemnified Person in connection with (x) the Collateral; (y) the occurrence of any Event of Default; or (z) the exercise of any rights or remedies under any of the Loan Documents (each of claims which may be defended, compromised, settled, or pursued by the Indemnified Person with counsel of the Lender's selection, but at the expense of the Borrowers) other than any claim as to which a final determination is made in a judicial proceeding (in which the Agent and any other Indemnified Person has had an opportunity to be heard), which determination includes a specific finding that the Indemnified Person seeking indemnification had acted in a grossly negligent manner or in actual bad faith or in willful misconduct. This indemnification shall survive payment of the Liabilities and/or any termination, release, or discharge executed by any Agent in favor of the Borrowers, other than a termination, release, or discharge duly executed on behalf of the Agent which makes specific reference to this
Section 19.15.

19.16. RULES OF CONSTRUCTION. The following rules of construction shall be applied in the interpretation, construction, and enforcement of this Agreement and of the other Loan Documents:

(a) Unless otherwise specifically provided for herein (and then only to the extent so provided), interest and any fee or charge which is stated as a per annum percentage shall be calculated based on a 360 day year and actual days elapsed.

(b) Words in the singular include the plural and words in the plural include the singular.

(c) Unless otherwise specifically provided for herein or in a specific Loan Document (and then only to the extent so provided), as between the parties hereto or to any Loan Document, the definitions of the following terms, as included in the UCC, are deemed to be as follows for purposes of the performance of obligations arising under or in respect of any Loan Document:

(i) "Authenticate" means "signed".

(ii) "Record" means written information in a tangible form.

(d) Titles, headings (indicated by being UNDERLINED or shown in SMALL CAPITALS) and any Table of Contents are solely for convenience of reference; do not constitute a part of the instrument in which included; and do not affect such instrument's meaning,

construction, or effect.

(e) The words "includes" and "including" are not limiting.

(f) Text which follows the words "including, without limitation" (or similar words) is illustrative and not limitational.

(g) Text which is shown in italics (except for parenthesized italicized text), shown in BOLD, shown IN ALL CAPITAL LETTERS, or in any combination of the foregoing, shall be deemed to be conspicuous.

(h) The words "may not" are prohibitive and not permissive.

(i) Any reference to a Person's "knowledge" (or words of similar import) are to such Person's knowledge assuming that such Person has undertaken reasonable and diligent investigation with respect to the subject of such "knowledge" (whether or not such investigation has actually been undertaken).

(j) Terms which are defined in one section of any Loan Document are used with such definition throughout the instrument in which so defined.

(k) The term "Dollars" and the symbol "$" each refers to United States Dollars.

(l) Unless limited by reference to a particular Section or provision, any reference to "herein", "hereof", or "within" is to the entire Loan Document in which such reference is made.

(m) References to "this Agreement" or to any other Loan Document is to the subject instrument as amended to the date on which application of such reference is being made.

(n) Except as otherwise specifically provided, all references to time are to Cleveland, Ohio time.

(o) In the determination of any notice, grace, or other period of time prescribed or allowed hereunder:

(i) Unless otherwise provided (A) the day of the act, event, or default from which the designated period of time begins to run shall not be included and the last day of the period so computed shall be included unless such last day is not a Business Day, in which event the last day of the relevant period shall be the then next Business Day and (B) the period so computed shall end at 5:00 PM on the relevant Business Day.

(ii) The word "from" means "from and including".

(iii) The words "to" and "until" each mean "to, but excluding".

(iv) The word "through" means "to and including".

(p) The Loan Documents shall be construed and interpreted in a harmonious manner and in keeping with the intentions set forth in Section 19.17 hereof, provided, however, in the event of any inconsistency between the provisions of this Agreement and any other Loan Document, the provisions of this Agreement shall govern and control.

19.17. AGENT'S CONSENT. Unless otherwise explicitly provided herein, any Agent's consent to any action of any Borrower which is prohibited unless such consent is given may be given or refused by such Agent in its sole reasonable, good faith discretion and without reference to Section 2.17 hereof.

19.18. PARTICIPATIONS. Each Revolving Credit Lender may sell participations to one or more financial institutions (each, a "PARTICIPANT") in that Revolving Credit Lender's interests herein provided that no such participation shall include any provision which accords that Participant with any rights, vis a vis any Agent, with respect to any requirement herein for approval by a requisite number or proportion of the Revolving Credit Lenders. No such sale of a participation shall relieve a Revolving Credit Lender from that Revolving Credit Lender's obligations hereunder nor obligate any Agent to any Person other than a Revolving Credit Lender.

19.19. RIGHT OF SET-OFF. Any and all deposits or other sums at any time credited by or due to any Borrower from any Agent or any Revolving Credit Lender or any Participant or from any Affiliate of any of the foregoing, and any cash, securities, instruments or other property of any Borrower in the possession of any of the foregoing (other than in Exempt DDA accounts), whether for safekeeping or otherwise (regardless of the reason such Person had received the same) shall at all times constitute security for all Liabilities and for any and all obligations of each Borrower to such Agent and such Revolving Credit Lender or any Participant or such Affiliate, and (a) after the occurrence and during the continuance of an Event of Default, or (b) after the service of process upon any Agent or any Revolving Credit Lender or any Participant seeking to attach, by trustee, mesne, or other process, any funds of any Loan Party on deposit with, or assets of any Loan Party in the possession of, such Agent or that Revolving Credit or such Participant, in excess of Five Hundred Thousand Dollars ($500,000.00), may be applied or set off against the Liabilities and against such obligations at any time, whether or not such are then due and whether or not other collateral is then available to the Agent or that Revolving Credit Lender.

19.20. PLEDGES TO FEDERAL RESERVE BANKS. Nothing included in this Agreement shall prevent or limit any Revolving Credit Lender, to the extent that such Revolving Credit

Lender is subject to any of the twelve Federal Reserve Banks organized under ss.4 of the Federal Reserve Act (12 U.S.C. ss.341) from pledging all or any portion of that Lender's interest and rights under this Agreement, provided, however, neither such pledge nor the enforcement thereof shall release the pledging Revolving Credit Lender from any of its obligations hereunder or under any of the Loan Documents.

19.21. MAXIMUM INTEREST RATE. Regardless of any provision of any Loan Document, neither any Agent nor any Revolving Credit Lender shall be entitled to contract for, charge, receive, collect, or apply as interest on any Liability, any amount in excess of the maximum rate imposed by Applicable Law. Any payment which is made which, if treated as interest on a Liability would result in such interest's exceeding such maximum rate shall be held, to the extent of such excess, as additional collateral for the Liabilities as if such excess were "Collateral."

19.22. WAIVERS.

(a) Each Borrower (and all guarantors, endorsers, and sureties of the Liabilities) make each of the waivers included in Section 19.22(b), below, knowingly, voluntarily, and intentionally, and understands that each Agent and each Revolving Credit Lender, in establishing the facilities contemplated hereby and in providing loans and other financial accommodations to or for the account of the Borrowers as provided herein, whether not or in the future, is relying on such waivers.

(b) EACH BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND SURETY RESPECTIVELY WAIVES THE FOLLOWING:

(i) Except as otherwise specifically required hereby, notice of non-payment, demand, presentment, protest and all forms of demand and notice, both with respect to the Liabilities and the Collateral.

(ii) Except as otherwise specifically required hereby, the right to notice and/or hearing prior to any Agent's exercising of the Agent's rights upon default.

(iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN WHICH ANY AGENT OR ANY REVOLVING CREDIT LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST ANY AGENT OR ANY REVOLVING CREDIT LENDER OR IN WHICH ANY AGENT OR ANY REVOLVING CREDIT LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF, ANY RELATIONSHIP AMONGST OR BETWEEN ANY BORROWER OR ANY OTHER PERSON AND EACH AGENT AND EACH REVOLVING CREDIT LENDER LIKEWISE WAIVES THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY).

(iv) Any defense, counterclaim, set-off, recoupment, or other basis on which the amount of any Liability, as stated on the books and records of any Agent, could be reduced or claimed to be paid otherwise than in accordance with the tenor of and written terms of such Liability.

(v) Any claim to consequential, special, or punitive damages.

19.23. ADDITIONAL WAIVERS.

(a) The Liabilities are the joint and several obligations of each Loan Party. To the fullest extent permitted by applicable law, the obligations of each Loan Party hereunder shall not be affected by (i) the failure of any Agent or any Revolving Credit Lender to assert any claim or demand or to enforce or exercise any right or remedy against any other Loan Party under the provisions of this Agreement, any other Loan Document or otherwise, (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, this Agreement, any other Loan Document, or any other agreement, including with respect to any other Borrower of the Liabilities, or (iii) the failure to perfect any security interest in, or the release of, any of the security held by or on behalf of the Collateral Agents or any Revolving Credit Lender.

(b) The obligations of each Loan Party hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Liabilities), including any claim of waiver, release, surrender, alteration or compromise of any of the Liabilities, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Liabilities or otherwise. Without limiting the generality of the foregoing, the obligations of each Loan Party hereunder shall not be discharged or impaired or otherwise affected by the failure of any Agent or any Revolving Credit Lender to assert any claim or demand or to enforce any remedy under this Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Liabilities, or by any other act or omission that may or might in any manner or to any extent vary the risk of any Loan Party or that would otherwise operate as a discharge of any Loan Party as a matter of law or equity (other than the indefeasible payment in full in cash of all the Liabilities).

(c) To the fullest extent permitted by applicable law, each Loan Party waives any defense based on or arising out of any defense of any other Loan Party or the unenforceability of the Liabilities or any part thereof from any cause, or the cessation from any cause of the liability of any other Loan Party, other than the indefeasible payment in full in cash of all the Liabilities. Each Agent and the Revolving Credit Lenders may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any

part of the Liabilities, make any other accommodation with any other Loan Party, or exercise any other right or remedy available to them against any other Loan Party, without affecting or impairing in any way the liability of any Loan Party hereunder except to the extent that all the Liabilities have been indefeasibly paid in full in cash. Pursuant to applicable law, each Loan Party waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Loan Party against any other Loan Party, as the case may be, or any security.

(d) Upon payment by any Loan Party of any Liabilities, all rights of such Loan Party against any other Loan Party arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Liabilities, as more particularly set forth in an Indemnity, Subrogation and Contribution Agreement to be entered into amongst the Loan Parties. In addition, any indebtedness of any Loan Party now or hereafter held by any other Loan Party is hereby subordinated in right of payment to the prior payment in full of the Liabilities. None of the Loan Parties will demand, sue for, or otherwise attempt to collect any such indebtedness. If any amount shall erroneously be paid to any Loan Party on account of (a) such subrogation, contribution, reimbursement, indemnity or similar right or (b) any such indebtedness of any Loan Party, such amount shall be held in trust for the benefit of the Agent and the Revolving Credit Lenders and shall forthwith be paid to the Administrative Agent to be credited against the payment of the Liabilities, whether matured or unmatured, in accordance with the terms of the Loan Documents.

[REMAINDER OF PAGE INTENTIONALLY BLANK]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as a sealed instrument as of the day and year first above written.

VALUE CITY DEPARTMENT STORES, INC.
("LEAD BORROWER")

By:   /s/ James A. McGrady
   ----------------------------------
Name: James A. McGrady
Title: Chief Financial Officer

"OTHER BORROWERS":

SHONAC CORPORATION

By:   /s/ James A. McGrady
   ----------------------------------
Name: James A. McGrady
Title: Chief Financial Officer

DSW SHOE WAREHOUSE, INC.

By:   /s/ James A. McGrady
   ----------------------------------
Name: James A. McGrady
Title: Chief Financial Officer

GRAMEX RETAIL STORES, INC.

By:   /s/ James A. McGrady
   ----------------------------------
Name: James A. McGrady
Title: Chief Financial Officer

FILENE'S BASEMENT, INC.

By:   /s/ James A. McGrady
   ----------------------------------
Name: James A. McGrady

Title: Chief Financial Officer

VALUE CITY LIMITED PARTNERSHIP

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

By:   /s/ James A. McGrady
   ----------------------------------
Name: James A. McGrady
Title: Chief Financial Officer

VALUE CITY OF MICHIGAN, INC.

By:   /s/ James A. McGrady
   ----------------------------------
Name: James A. McGrady
Title: Chief Financial Officer

GB RETAILERS, INC.

By:   /s/ James A. McGrady
   ----------------------------------
Name: James A. McGrady
Title: Chief Financial Officer

VCM, LTD.

By: GB Retailers, Inc., its Sole Member

By:   /s/ James A. McGrady
   ----------------------------------
Name: James A. McGrady
Title: Chief Financial Officer

NATIONAL CITY COMMERCIAL FINANCE, INC.
(ADMINISTRATIVE AGENT, COLLATERAL AGENT AND
REVOLVING CREDIT LENDER)

By:  /s/ Carla Kehres
   --------------------------------------------
Name: Carla Kehres
Title: Vice President

NATIONAL CITY BANK
(ISSUER)

FLEET RETAIL FINANCE INC.
(COLLATERAL AGENT AND REVOLVING CREDIT LENDER)

WELLS FARGO RETAIL FINANCE LLC

THE CIT GROUP/BUSINESS CREDIT, INC.

AMSOUTH BANK

GENERAL ELECTRIC CAPITAL CORPORATION

HSBC BUSINESS CREDIT (USA), INC.

IBJ WHITEHALL RETAIL FINANCE,
A Division of IBJ Whitehall Business Credit Corporation

LASALLE BANK NATIONAL ASSOCIATION

PNC BANK, National Association

THE PROVIDENT BANK

SIEMENS FINANCIAL SERVICES, INC.

Exhibit 10.2

FINANCING AGREEMENT

DATED AS OF JUNE, 11 2002

BY AND AMONG

VALUE CITY DEPARTMENT STORES, INC.,
SHONAC CORPORATION,
DSW SHOE WAREHOUSE, INC.,
GRAMEX RETAIL STORES, INC.,
FILENE'S BASEMENT, INC.,
VALUE CITY LIMITED PARTNERSHIP,
VALUE CITY OF MICHIGAN, INC.,
GB RETAILERS, INC., AND
VCM, LTD.

AS BORROWERS

THE LENDERS FROM TIME TO TIME PARTY HERETO,

AND

CERBERUS PARTNERS, L.P.

AS AGENT

                                TABLE OF CONTENTS
                                -----------------


ARTICLE I DEFINITIONS; CERTAIN TERMS..........................................1

         Section 1.01          Definitions....................................1
         Section 1.02          Terms Generally...............................24
         Section 1.03          Accounting and Other Terms....................24
         Section 1.04          Time References...............................24

ARTICLE II THE LOANS.........................................................25

         Section 2.01          Commitments...................................25
         Section 2.02          Making the Loans..............................25
         Section 2.03          Notes; Repayment of Loans.....................26
         Section 2.04          Interest......................................26
         Section 2.05          Prepayment of Loans...........................27
         Section 2.06          Fees..........................................29
         Section 2.07          Securitization................................30
         Section 2.08          Taxes.........................................30

ARTICLE III FEES, PAYMENTS AND OTHER COMPENSATION............................32

         Section 3.01          Audit and Collateral Monitoring Fees..........32
         Section 3.02          Payments; Computations and Statements.........32
         Section 3.03          Sharing of Payments, Etc......................33
         Section 3.04          Apportionment of Payments.....................34
         Section 3.05          Increased Costs and Reduced Return............34
         Section 3.06          Joint and Several Liability of the Borrowers..36

ARTICLE IV CONDITIONS TO LOANS...............................................37

         Section 4.01          Conditions Precedent to Effectiveness.........37

ARTICLE V REPRESENTATIONS AND WARRANTIES.....................................42

         Section 5.01          Representations and Warranties................42

ARTICLE VI COVENANTS OF THE LOAN PARTIES.....................................53

         Section 6.01          Affirmative Covenants.........................53
         Section 6.02          Negative Covenants............................58

ARTICLE VII Reporting Requirements...........................................67

         Section 7.01          Maintain Records..............................67
         Section 7.02          Access to Records.............................67
         Section 7.03          Prompt Notice to Administrative Agent.........68
         Section 7.04          Weekly Reports................................69
         Section 7.05          Monthly Reports...............................69
         Section 7.06          Quarterly Reports.............................69
         Section 7.07          Annual Reports................................70


                                      -ii-

         Section 7.08          Officer's Certificates........................70
         Section 7.09          Inventories, Appraisals and Audits............71
         Section 7.10          Additional Financial Information..............71
         Section 7.11          Format of Information.........................72

ARTICLE VIII USE OF COLLATERAL...............................................72

         Section 8.01          Use of Inventory Control......................72
         Section 8.02          Inventory Quality.............................72
         Section 8.03          Adjustments and Allowances....................73
         Section 8.04          Validity of Accounts..........................73
         Section 8.05          Notification to Account Debtors...............73
         Section 8.06          Appointment as Attorney-In-Fact...............73
         Section 8.07          No Obligation To Act..........................74

ARTICLE IX EVENTS OF DEFAULT.................................................74

         Section 9.01          Events of Default.............................74

ARTICLE X AGENT..............................................................78

         Section 10.01         Appointment...................................78
         Section 10.02         Nature of Duties..............................79
         Section 10.03         Rights; Exculpation, Etc......................79
         Section 10.04         Reliance......................................80
         Section 10.05         Indemnification...............................80
         Section 10.06         Agent Individually............................80
         Section 10.07         Successor Agent...............................81
         Section 10.08         Collateral Matters............................81
         Section 10.09         Agency for Perfection.........................82

ARTICLE XI GUARANTY..........................................................83

         Section 11.01         Guaranty......................................83
         Section 11.02         Guaranty Absolute.............................83
         Section 11.03         Waiver........................................84
         Section 11.04         Continuing Guaranty; Assignments..............84
         Section 11.05         Subrogation...................................84

ARTICLE XII MISCELLANEOUS....................................................85

         Section 12.01         Notices, Etc..................................85
         Section 12.02         Amendments, Etc...............................86
         Section 12.03         No Waiver; Remedies, Etc......................87
         Section 12.04         Expenses; Taxes; Attorneys' Fees..............87
         Section 12.05         Right of Set-off..............................88
         Section 12.06         Severability..................................88
         Section 12.07         Assignments and Participations................88
         Section 12.08         Counterparts..................................91
         Section 12.09         Governing Law.................................92


                                      -iii-

         Section 12.10         Consent to Jurisdiction; Service of Process
                               and Venue.....................................92
         Section 12.11         Waiver of Jury Trial, Etc.....................92
         Section 12.12         Consent by the Agent and Lenders..............93
         Section 12.13         No Party Deemed Drafter.......................93
         Section 12.14         Reinstatement; Certain Payments...............93
         Section 12.15         Indemnification...............................93
         Section 12.16         Parent, as Agent for Borrowers................94
         Section 12.17         Records.......................................95
         Section 12.18         Binding Effect................................95
         Section 12.19         Maximum Interest..............................95
         Section 12.20         Confidentiality...............................96
         Section 12.21         Integration...................................97

ARTICLE XIII ISSUANCE OF EQUITY INTERESTS TO LENDERS.........................97

         Section 13.01         Authorization and Issuance of Warrants........97
         Section 13.02         Securities Act Matters........................98
         Section 13.03         Certain Taxes.................................99
         Section 13.04         Cancellation and Issuance.....................99


                                      -iv-

SCHEDULES AND EXHIBITS:
----------------------

Schedule 1.01(A)                Lenders and Lenders' Commitments
Schedule 5.01(e)(i)             Capitalization
Schedule 5.01(e)(ii)            Subsidiaries
Schedule 5.01(f)                Litigation; Commercial Tort Claims
Schedule 5.01(i)                ERISA
Schedule 5.01(j)                Taxes
Schedule 5.01(o)(i)             Consignment Property
Schedule 5.01(o)(ii)            Real Property
Schedule 5.01(q)                Capital Leases
Schedule 5.01(r)                Environmental Matters
Schedule 5.01(s)                Insurance
Schedule 5.01(v)                Bank Accounts
Schedule 5.01(w)                Intellectual Property
Schedule 5.01(x)                Material Contracts
Schedule 5.01(z)                Labor Contracts
Schedule 5.01(cc)               Locations of Inventory; Place of Business; Chief
                                Executive Office; State of Incorporation; FEIN;
                                Organizational ID Number
Schedule 5.01(dd)               Tradenames
Schedule 5.01(ee)               Collateral Locations
Schedule 5.01(kk)               Unrestricted Subsidiaries
Schedule 6.02(a)                Permitted Liens
Schedule 6.02(b)                Permitted Indebtedness
Schedule 6.02(c)                Permitted Dispositions
Schedule 6.02(e)                Existing and Permitted Investments
Schedule 6.02(e)(vi)(F)         Intercompany Loans
Schedule 6.02(e)(vi)(H)         Existing Loans
Schedule 6.02(j)                Limitations on Dividends and Other Payment
                                Restrictions
Schedule 7.05                   Monthly Financial Reporting Requirements

Exhibit A                       Form of Note
Exhibit B                       Form of Notice of Borrowing
Exhibit C                       Form of Notice of Election
Exhibit D                       Form of Guaranty
Exhibit E                       Form of Security Agreement
Exhibit F                       Form of Pledge Agreement
Exhibit G                       Form of Borrowing Base Certificate
Exhibit H                       Form of Opinion of Counsel
Exhibit I                       Form of Assignment and Acceptance
Exhibit J                       Form of Warrant
Exhibit K                       Form of Registered Note Language

FINANCING AGREEMENT

Financing Agreement, dated as of June 11, 2002, by and among Value City Department Stores, Inc., an Ohio corporation (the "PARENT"), Shonac Corporation, an Ohio corporation ("SHONAC"), DSW Shoe Warehouse, Inc., a Missouri corporation ("DSW"), Gramex Retail Stores, Inc., a Delaware corporation ("GRAMEX"), VCM, Ltd., an Ohio limited liability company ("VCM"), Filene's Basement, Inc., a Delaware corporation ("FILENE'S"), GB Retailers, Inc., a Delaware corporation ("GB"), Value City Limited Partnership, an Ohio limited partnership ("VCLP"), Value City of Michigan, Inc., a Michigan corporation ("VC MICHIGAN", and together with the Parent, Shonac, DSW, Gramex, VCM, Filene's, GB and VCLP, each a "BORROWER" and collectively, the "BORROWERS"), certain subsidiaries of the Parent (other than a Borrower) whose names appear on the signature pages hereof (each a "GUARANTOR" and collectively, the "Guarantors"), the lenders from time to time party hereto (each a "LENDER" and collectively, the "LENDERS"), and Cerberus Partners, L.P., a limited partnership formed under the laws of the State of Delaware ("CP"), as agent for the Lenders (in such capacity together with its successors and assigns, the "AGENT").

RECITALS

The Borrowers have asked the Lenders to extend credit to the Borrowers consisting of two term loans, each in an aggregate principal amount of $50,000,000. The proceeds of the term loans shall be used (i) to repay certain existing obligations of the Parent under the Existing Credit Facilities (as hereinafter defined), and (ii) to pay certain costs and expenses in connection with the transactions contemplated hereby. The Lenders are severally, and not jointly, willing to extend such credit to the Borrowers subject to the terms and conditions hereinafter set forth.

In consideration of the premises and the covenants and agreements contained herein, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS; CERTAIN TERMS

Section 1.01 DEFINITIONS. As used in this Agreement, the following terms shall have the respective meanings indicated below, such meanings to be applicable equally to both the singular and plural forms of such terms:

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

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

"ACTION" has the meaning specified therefor in Section 12.12.

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

"ADMINISTRATIVE BORROWER" has the meaning specified therefor in Section 12.16.

"AFFILIATE" means (i) with respect to any Person, any other Person that directly or, alone or with a group of related Persons whose interests taken as a whole, indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person; (ii) any Person which is a parent, brother-sister or subsidiary of a Borrower, whose enterprise's tax returns or financial statements are consolidated with those of a Borrower, which is a member of the same controlled group of corporations (within the meaning of Section 1563(a)(1), (2) and (3) of the Internal Revenue Code or 1986, as amended from time to time) of which any Borrower is a member, or Controls or is Controlled by any Borrower; and (iii) with respect to the Loan Parties, without limiting the provisions of clauses (i) and (ii) hereof, "Affiliate" includes SSC. Notwithstanding anything to the contrary contained herein, in no event shall the Agent or any Lender be considered an "Affiliate" of a Loan Party as a result of being party to this Agreement or the transactions contemplated hereby

"AGENT" has the meaning specified therefor in the preamble hereto.

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

"AGENT'S ACCOUNT" means an account at a bank designated by the Agent from time to time as the account into which the Loan Parties shall make certain payments to the Agent for the benefit of the Agent and the Lenders under this Agreement and the other Loan Documents.

"AGREEMENT" means this Financing Agreement, including all amendments, modifications and supplements and any exhibits or schedules to any of the foregoing, and shall refer to the Agreement as the same may be in effect at the time such reference becomes operative.

"ANNIVERSARY FEE" has the meaning specified therefor in
Section 2.06(b).

"APPLICABLE LAW" means, as to any Person, (i) all statutes, rules, regulations, orders or other requirements having the force of law, and
(ii) all court orders and injunctions, arbitrator's decisions and/or similar rulings, in each instance ((i) and (ii)) of or by any Federal, state, municipal or other governmental authority, or court, tribunal, panel or other body which has or claims jurisdiction over such Person, or any property of such Person, or of any other Person for whose conduct such Person would be responsible.

"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into by an assigning Lender and an assignee, and accepted by the Agent, in accordance with Section 12.07 hereof and substantially in the form of Exhibit I hereto or such other form acceptable to the Agent.

"AUTHORIZED OFFICER" means, with respect to any Person, the chief executive officer, chief financial officer, president, executive vice president, controller or treasurer of such Person.

"BANKRUPTCY CODE" means the United States Bankruptcy Code (11 U.S.C. ss. 101, ET SEQ.), as amended from time to time, and any successor statute.

"BOARD" means the Board of Governors of the Federal Reserve System of the United States.

"BOARD OF DIRECTORS" means the board of directors of the Parent as of the Effective Date.

"BORROWER" has the meaning specified therefor in the preamble hereto.

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

"BUSINESS DAY" means any day other than (i) a Saturday or Sunday, (ii) any day on which banks in New York City generally are not open to the general public for the purpose of conducting commercial banking business, or
(iii) a day on which the principal office of the Agent is not open to the general public to conduct business.

"BUSINESS PLAN" means the business plan for the Loan Parties for the fiscal years 2002 through and including 2004 dated March 19, 2002, as set forth in that certain confidential side letter from the Parent to the Agent.

"CAPITAL EXPENDITURES" means, with respect to any Person for any period, the sum of (i) the aggregate of all expenditures by such Person and its Subsidiaries during such period that in accordance with GAAP are or should be included in "property, plant and equipment" or in a similar fixed asset account on its balance sheet, whether such expenditures are paid in cash or financed and including all Capitalized Lease Obligations paid or payable during such period; and (ii) to the extent not covered by clause (i) above, the aggregate of all expenditures by such Person and its Subsidiaries during such period to acquire by purchase or otherwise the business or fixed assets of, or the Capital Stock of, any other Person.

"CAPITAL GUIDELINE" means any law, rule, regulation, policy, guideline or directive (whether or not having the force of law and whether or not the failure to comply therewith would be unlawful) of any central bank or Governmental Authority (i) regarding capital adequacy, capital ratios, capital requirements, the calculation of a bank's capital or similar matters, or (ii) affecting the amount of capital required to be obtained or maintained by any Lender, any Person controlling any Lender or the manner in which any Lender, any Person controlling any Lender, allocates capital to any of its contingent liabilities (including letters of credit), advances, acceptances, commitments, assets or liabilities.

"CAPITAL STOCK" means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock; and (ii) with respect to any Person that is not a corporation, any and all partnership, membership or other equity interests of such Person.

"CAPITALIZED LEASE" means, with respect to any Person, any lease of real or personal property by such Person as lessee which is (i) required under GAAP to be capitalized on

the balance sheet of such Person; or (ii) a transaction of a type commonly known as a "synthetic lease" (i.e. a lease transaction that is treated as an operating lease for accounting purposes but with respect to which payments of rent are intended to be treated as payments of principal and interest on a loan for Federal income tax purposes).

"CAPITALIZED LEASE OBLIGATIONS" means, with respect to any Person, obligations of such Person and its Subsidiaries under Capitalized Leases, and, for purposes hereof, the amount of any such obligation shall be the capitalized amount thereof determined in accordance with GAAP.

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

"CLOSING FEE" has the meaning specified therefor in Section 2.06(a).

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

"COMMITMENT" means, with respect to each Lender, the sum of such Lender's Term Loan B Commitment and Term Loan C Commitment.

"COMMON STOCK" means the common stock, no par value, of the Parent.

"COMPETITIVE BUSINESS" means any business or enterprise consisting of (i) operation of off-price discount department stores; (ii) operation of retail furniture stores and related accessories; (iii) operation of designer and name-brand shoe stores; (iv) operation of licensed shoe departments; (v) furniture manufacturing; or (vi) bedding manufacturing.

"CONTINGENT OBLIGATION" means, with respect to any Person, any obligation of such Person guaranteeing or intended to guarantee any Indebtedness ("PRIMARY OBLIGATIONS") of any other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including, without limitation, (i) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of a primary obligor; (ii) the obligation to make take-

or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement (other than such agreements to purchase goods in the ordinary course of business); (iii) any obligation of such Person, whether or not contingent, (A) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (B) (other than such agreements to purchase goods in the ordinary course of business) to advance or supply funds (1) for the purchase or payment of any such primary obligation or
(2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (C) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (D) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof (other than such agreements to purchase goods in the ordinary course of business); PROVIDED, HOWEVER, that the term "Contingent Obligation" shall not include (1) any product warranties or (2) obligations, warranties and indemnities not relating to Indebtedness which have been made or undertaken, in each case, extended in the ordinary course of business.

"CONTROL", "CONTROLS", "CONTROLLED BY", or "UNDER COMMON CONTROL WITH" means the possession, direct or indirect of the power to cause the direction of the management and policies of a Person whether through the ownership of voting securities, by contract or otherwise. A Person shall be deemed to have control of another Person if it is a "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13-d-5 under the Exchange Act) or a member of a "group" that is the beneficial owner, directly or indirectly, of 20% or more of the voting stock of or equity interest in such Person.

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

"CONVERTIBLE LENDERS" means the lenders party to the Convertible Loan Agreement.

"CONVERTIBLE LOAN AGENT" means Cerberus Partners, L.P., as agent to the Convertible Lenders.

"CONVERTIBLE LOAN AGREEMENT" means the Senior Subordinated Convertible Loan Agreement, dated as of March 15, 2000, as amended from time to time and as amended and restated by the Senior Convertible Loan Agreement, dated as of June 11, 2002, by and among the Parent, the Guarantors (as defined therein), the Convertible Loan Agent and the Convertible Lenders.

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

"CP" has the meaning specified therefor in the preamble hereto.

"DEFAULT" means an event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default.

"DISPOSITION" means any transaction, or series of related transactions, pursuant to which any Person or any of its Subsidiaries sells, assigns, transfers or otherwise disposes of any property or assets (whether now owned or hereafter acquired) to any other Person, in each case, whether or not the consideration therefor consists of cash, securities or other assets owned by the acquiring Person, EXCLUDING any sales of Inventory in the ordinary course of business on ordinary business terms.

"DIVISION(S)" means the various business segments of the Borrowers, being the DSW/Shonac Business, the Filene's Business and the Value City Business.

"DOLLAR," "DOLLARS" and the symbol "$" each means lawful money of the United States of America.

"DSW/SHONAC BUSINESS" means, collectively, the businesses operated by DSW and Shonac.

"EFFECTIVE DATE" means the date, on or before June 11, 2002, on which all of the conditions precedent set forth in Section 4.01 are satisfied or waived and the Loans are made.

"ELIGIBLE ASSIGNEE" means any Federal, state or foreign banking institution, or any private entity or commercial institution primarily engaged in the business of making commercial loans, and shall in no event include a Person that is engaged in a Competitive Business with any Loan Party, and as long as SSC remains in Control of the Borrowers, an "Eligible Assignee" shall in no event include a Person which is engaged in a Competitive Business or a Related Business with SSC.

"EMPLOYEE BENEFIT PLAN" means an employee benefit pension benefit plan that is covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Internal Revenue Code of 1986, as amended from time to time, and as to which a Borrower or any ERISA Affiliate may have any liability.

"ENVIRONMENTAL ACTIONS" means any complaint, summons, citation, notice, directive, order, claim, litigation, investigation, judicial or administrative proceeding, judgment, letter, or other communication from any Person or Governmental Authority involving violations of Environmental Laws or Releases of Hazardous Materials (i) from any assets, properties or businesses owned or operated by any Loan Party or any of its Subsidiaries or any predecessor in interest; or (ii) onto any facilities which received Hazardous Materials generated by any Loan Party or any of its Subsidiaries or any predecessor in interest.

"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. ss. 9601, ET SEQ.), the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801, ET SEQ.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901, ET SEQ.), the Federal Clean Water Act (33 U.S.C. ss. 1251 ET SEQ.), the Clean Air Act (42 U.S.C. ss. 7401 ET SEQ.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 ET SEQ.) and the Occupational Safety and Health Act (29 U.S.C. ss. 651 ET SEQ.), as such laws may be

amended or otherwise modified from time to time, and any other present or future Federal, state, local or foreign statute, ordinance, rule, regulation, order, judgment, decree, permit, license or other binding determination of any Governmental Authority imposing liability or establishing standards of conduct for protection of the environment or other government restrictions relating to the protection of the environment or the Release, deposit, or migration of any Hazardous Materials into the environment.

"ENVIRONMENTAL LIABILITIES AND COSTS" means all liabilities, monetary obligations, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, reasonable costs, and expenses (including all reasonable fees, disbursements and expenses of counsel, experts, and consultants and costs of investigations and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand by any Governmental Authority or any third party, and which relate to any environmental condition or a Release of Hazardous Materials from or onto (i) any property presently or formerly owned by any Loan Party or any of its Subsidiaries; or (ii) any facility which received Hazardous Materials generated by any Loan Party or any of its Subsidiaries.

"ENVIRONMENTAL LIEN" means any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs.

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

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time.

"ERISA AFFILIATE" means any Person which is under common control with a Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes any Borrower and which would be treated as a single employer under Section 414 of the Internal Revenue Code of 1986, as amended from time to time.

"EVENT OF DEFAULT" means any of the events set forth in
Section 9.01. An "Event of Default" shall be deemed to have occurred and to be continuing unless and until that Event of Default has been duly waived by the Agent in writing or cured to the satisfaction of the Agent.

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

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

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as amended, modified, succeeded or replaced from time to time.

"EXISTING CREDIT FACILITIES" means the National Credit Facility and the SSC Credit Facility.

"EXISTING LENDERS" means the lenders party to the Existing Credit Facilities.

"EXTRAORDINARY RECEIPTS" means any cash received by the Parent or any of its Subsidiaries not in the ordinary course of business (and not consisting of proceeds described in Section 2.05(b)(i), (ii) or (iii) hereof), including, without limitation, (i) foreign, United States, state or local tax refunds; (ii) pension plan reversions; (iii) proceeds of insurance; (iv) judgments, proceeds of settlements or other consideration of any kind in connection with any cause of action; and (v) condemnation awards (and payments in lieu thereof).

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

"FILENE'S BUSINESS" means the businesses operated by Filene's.

"FINAL MATURITY DATE" means June 11, 2005, or such earlier date on which any Loan shall become due and payable in accordance with the terms of this Agreement and the other Loan Documents.

"FINANCIAL STATEMENTS" means (i) the audited consolidated balance sheet of the Parent and its Subsidiaries for the Fiscal Year ended February 2, 2002, and the related consolidated statement of operations, shareholders' equity and cash flows for the Fiscal Year then ended; and (ii) the unaudited consolidated balance sheet of the Parent and its Subsidiaries for the three months ended May 2, 2002, and the related consolidated statement of operations, shareholder's equity and cash flows for the three months then ended.

"FISCAL YEAR" means the fiscal year of the Parent and its Subsidiaries ending on the Saturday nearest January 31st of each year.

"FIXTURE FILINGS" means UCC-1 financing statements perfecting the Agent's security interests in the fixtures and fittings in the real property covered by the Mortgages.

"GAAP" means generally accepted accounting principles in effect from time to time in the United States, applied on a consistent basis, PROVIDED that for the purpose of Article VII hereof and the definitions used therein, "GAAP" shall mean generally accepted accounting principles in effect on the date hereof and consistent with those used in the preparation of the Financial Statements, PROVIDED, FURTHER, that if there occurs after the date of this Agreement any change in GAAP that affects in any respect the calculation of any covenant contained in Article VII hereof, the Agent and the Administrative Borrower shall negotiate in good faith amendments to the provisions of this Agreement that relate to the calculation of such covenant with the intent

of having the respective positions of the Lenders and the Borrowers after such change in GAAP conform as nearly as possible to their respective positions as of the date of this Agreement.

"GOVERNMENTAL AUTHORITY" means any nation or government, any Federal, state, city, town, municipality, county, local or other political subdivision thereof or thereto and any department, commission, board, bureau, instrumentality, agency or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

"GUARANTEED OBLIGATIONS" has the meaning specified therefor in
Section 11.01.

"GUARANTOR" means (i) each Subsidiary of the Parent (other than a Borrower) that is signatory hereto, and (ii) each other Person which guarantees, pursuant to Section 6.01(a) or otherwise, all or any part of the Obligations.

"GUARANTY" means (i) the Guaranty of each Guarantor party hereto contained in Article XI hereof; and (ii) each Guaranty substantially in the form of Exhibit D, made by any other Guarantor in favor of the Agent for the benefit of the Lenders, pursuant to Section 6.01(a) or otherwise.

"HAZARDOUS MATERIAL" means (i) any element, compound or chemical that is defined, listed or otherwise classified as a contaminant, pollutant, toxic pollutant, toxic or hazardous substance, extremely hazardous substance or chemical, hazardous waste, special waste, or solid waste under Environmental Laws or that is reasonably likely to cause immediately, or at some reasonably foreseeable future time, harm to or have an adverse effect on, the environment or risk to human health or safety, including, without limitation, any pollutant, contaminant, waste, hazardous waste, toxic substance or dangerous good which is defined or identified in any Environmental Law and which is present in the environment in such quantity or state that it contravenes any Environmental Law; (ii) petroleum and its refined products; (iii) polychlorinated biphenyls; (iv) any substance exhibiting a hazardous waste characteristic, including, without limitation, corrosivity, ignitability, toxicity or reactivity as well as any radioactive or explosive materials; and
(v) any raw materials, building components (including, without limitation, asbestos-containing materials) and manufactured products containing hazardous substances listed or classified as such under Environmental Laws.

"HEDGING AGREEMENT" means any interest rate, foreign currency, commodity or equity swap, collar, cap, floor or forward rate agreement, or other agreement or arrangement designed to protect against fluctuations in interest rates or currency, commodity or equity values (including, without limitation, any option with respect to any of the foregoing and any combination of the foregoing agreements or arrangements), and any confirmation executed in connection with any such agreement or arrangement, including, without limitation, the NCB Hedging Agreement.

"HIGHEST LAWFUL RATE" means, with respect to the Agent or any Lender, the maximum non-usurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Obligations under laws applicable to the Agent or such Lender which are currently in effect or, to the extent allowed by law, under

such Applicable Laws which may hereafter be in effect and which allow a higher maximum non-usurious interest rate than Applicable Laws now allow.

"INDEBTEDNESS" means, without duplication, all obligations, including Contingent Obligations, that in accordance with GAAP should be classified upon the balance sheet of any Borrower and/or the consolidated balance sheet of the Borrowers as liabilities, other than trade payables, deferred rent, or accrued expenses incurred in the ordinary course of business or to which reference should be made by footnotes thereto, including, in any event and whether or not so classified, (i) all obligations in respect of money borrowed (including any indebtedness which is non-recourse to the credit of such Person but which is secured by a Lien on any asset of such Person) whether or not evidenced by a promissory note, bond, debenture or other written obligation to pay money; (ii) all obligations evidenced by bonds, notes, debentures or other similar instruments; (iii) all obligations in connection with Hedging Agreements; (iv) all obligations in connection with any letter of credit or acceptance transaction (including, without limitation, the face amount of all letters of credit and acceptances issued for the account of such Person or reimbursement on account of which such Person would be obligated); (v) all obligations in connection with the sale or discount of accounts receivable or chattel paper of such Person; (vi) all obligations on account of deposits or advances other than deferred rent incurred in the ordinary course of business;
(vii) all obligations as lessee under Capitalized Leases; and (viii) all obligations in connection with any sale and leaseback transaction. "Indebtedness" also includes: (x) Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; (y) any guaranty, endorsement, suretyship or other undertaking in respect of Indebtedness pursuant to which that Person may be liable on account of any obligation of any third party; and (z) the Indebtedness of a partnership or joint venture for which such Person is liable as a general partner or joint venturer.

"INDEMNIFIED MATTERS" has the meaning specified therefor in
Section 12.15.

"INDEMNITEES" has the meaning specified therefor in Section 12.15.

"INSOLVENCY PROCEEDING" means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, or extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

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

"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended from time to time, (or any successor statute thereto) and the regulations thereunder.

"INVENTORY" means, with respect to any Person, all goods and merchandise of such Person, including, without limitation, all raw materials, work-in-process, packaging, supplies,

materials and finished goods of every nature used or usable in connection with the shipping, storing, advertising or sale of such goods and merchandise, whether now owned or hereafter acquired, and all such other property the sale or other disposition of which would give rise to Accounts Receivable or cash.

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

"LEASE" means any lease of real property to which any Loan Party or any of its Subsidiaries is a party as lessor or lessee.

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

"LENDER" has the meaning specified therefor in the preamble hereto.

"LENDER'S ACCOUNT" means an account at a bank designated by each Lender from time to time into which the Loan Parties shall make certain payments to such Lender under this Agreement.

"LIABILITIES" has the meaning specified therefor in Section 2.07.

"LIEN" means any mortgage, deed of trust, pledge, lien (statutory or otherwise), security interest, charge or other encumbrance or security or preferential arrangement of any nature, including, without limitation, any conditional sale or title retention arrangement, any Capitalized Lease and any assignment, deposit arrangement or financing lease intended as, or having the effect of, security.

"LOAN" means any Term B Loan or Term C Loan made by the Agent or a Lender to the Borrowers pursuant to Article II hereof.

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

"LOAN PARTY" means any Borrower or any Guarantor.

"MATERIAL ACCOUNTING CHANGE" means any change in GAAP applicable to accounting periods subsequent to the Borrowers' fiscal year most recently completed prior to the execution of this Agreement, which change has a material effect on the Borrowers' Consolidated

financial condition or operating results, as reflected on financial statements and reports prepared by or for the Borrowers, when compared with such condition or results as if such change had not taken place.

"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(i) the business, operations, property, assets or financial condition of (x) the Loan Parties taken as a whole or (y) the Value City Business taken as a whole (including those portions of Shonac that operate as part of the Value City Business) or (ii) the validity or enforceability of this Agreement or any of the other Loan Documents or any of the material rights or remedies of the Agent or the Lenders hereunder or thereunder.

"MATERIAL CONTRACT" means, with respect to any Person, (i) each contract or agreement (other than Leases, intercompany agreements, benefit and pension plans, stock option plans and labor and employment contracts) to which such Person or any of its Subsidiaries is a party involving aggregate consideration payable to or by such Person or such Subsidiary of $1,000,000 or more annually (other than purchase orders in the ordinary course of the business of such Person or such Subsidiary and other than contracts that by their terms may be terminated by such Person or Subsidiary in the ordinary course of its business upon less than 60 days' notice without penalty or premium) and (ii) all other contracts or agreements material to the business, operations, condition (financial or otherwise), performance, prospects or properties of such Person or such Subsidiary.

"MEETING" has the meaning specified therefore in Section 6.01(k).

"MOODY'S" means Moody's Investors Service, Inc. and any successor thereto.

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

"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which any Loan Party or any of its ERISA Affiliates has contributed to, or has been obligated to contribute, at any time during the preceding six (6) years.

"NATIONAL CREDIT FACILITY" means the Amended and Restated Credit Agreement, dated March 15, 2000, among the Parent, National City Bank and certain lenders party thereto.

"NCB HEDGING AGREEMENT" means the Hedging Agreement between the Parent and National City Bank dated as of March 28, 2000.

"NET CASH PROCEEDS" means (i) with respect to any Disposition by any Person or any of its Subsidiaries, the amount of cash received from time to time (whether as initial consideration or through the payment or disposition of deferred consideration) by or on behalf of such Person or such Subsidiary, in connection therewith after deducting therefrom only (A) the amount of any Indebtedness secured by any Lien permitted by Section 6.02(a) on any asset (other than Indebtedness assumed by the purchaser of such asset) which is required to be, and is,

repaid in connection with such Disposition (other than Indebtedness under this Agreement), (B) reasonable costs and expenses related thereto incurred by such Person or such Subsidiary in connection therewith, (C) transfer taxes paid to any taxing authorities by such Person or such Subsidiary in connection therewith, and (D) net income taxes to be paid in connection with such Disposition; and (ii) with respect to the issuance or incurrence of any Indebtedness by any Person or any of its Subsidiaries, or the sale or issuance by any Person or any of its Subsidiaries of any shares of its Capital Stock, the aggregate amount of cash received from time to time (whether as initial consideration or through the payment or disposition of deferred consideration) by or on behalf of such Person or such Subsidiary in connection therewith, after deducting therefrom only (A) reasonable costs and expenses related thereto incurred by such Person or such Subsidiary in connection therewith, (B) transfer taxes paid by such Person or such Subsidiary in connection therewith and (C) net income taxes to be paid in connection therewith; in each case of clause (i) and
(ii) to the extent, but only to the extent, that the amounts so deducted are properly attributable to such transaction or to the asset that is the subject thereof.

"NOTE" means a promissory note of the Borrower, substantially in the form of Exhibit A hereto, made payable to the order of a Lender and evidencing the Indebtedness resulting from the making by such Lender of the Pro Rata Share of its Loans.

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

"NOTICE OF ELECTION" has the meaning specified therefore in
Section 2.04(c).

"OBLIGATIONS" means all present and future indebtedness, obligations, and liabilities of each Loan Party to the Agent and the Lenders under the Loan Documents, whether or not the right of payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured, unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 9.01. Without limiting the generality of the foregoing, the Obligations of each Loan Party under the Loan Documents include (i) the obligation to pay principal, interest, including any PIK Interest, charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by such Person under the Loan Documents; and (ii) the obligation of such Person to reimburse any amount in respect of any of the foregoing that the Agent may elect to pay or advance on behalf of such Person.

"OPERATING LEASE OBLIGATIONS" means all obligations for the payment of rent for any real or personal property under leases or agreements to lease, other than Capitalized Lease Obligations.

"OTHER TAXES" has the meaning specified therefore in Section 2.08.

"PARENT" has the meaning specified therefor in the preamble hereto.

"PARTICIPANT REGISTER" has the meaning specified therefor in
Section 12.07(b)(v).

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

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

"PERMITTED ACQUISITION" means (i) any Acquisition the cash consideration for which is less than $3,000,000 in the aggregate in any fiscal year of the Borrowers and which satisfies the conditions set forth in clauses
(f), (g), (h) and (i) below; and (ii) an Acquisition in which each of the following conditions are satisfied: (a) no Default or Event of Default then exists or would arise from the consummation of such Acquisition; (b) such Acquisition shall have been approved by the Board of Directors of the Person (or similar governing body if such Person is not a corporation) which is the subject of such Acquisition and such Person shall not have announced that it will oppose such Acquisition or shall not have commenced any action which alleges that such Acquisition will violate Applicable Law; (c) the Administrative Borrower shall have furnished the Agent with ten (10) days' prior notice of such intended Acquisition and shall have furnished the Agent with a current draft of the Acquisition agreement and other Acquisition documents, a summary of any due diligence undertaken by the Borrowers in connection with such Acquisition, appropriate financial statements of the Person which is the subject of such Acquisition, pro forma projected financial statements for the twelve (12) month period following such Acquisition after giving effect to such Acquisition (including balance sheets, cash flows and income statements by month for the acquired Person, individually, and on a consolidated basis with all Loan Parties), and such other information as the Agent may reasonably require, each of which shall be reasonably satisfactory to the Agent; (d) the structure of the Acquisition shall be acceptable to the Agent in its reasonable judgment; if an Acquisition of capital stock or other equity interests, after consummation of such Acquisition, a Borrower shall own directly or indirectly a majority of the equity interests in the Person being acquired and shall Control a majority of any voting interests, and/or shall otherwise Control the governance of the Person being acquired; (e) the Agent shall have received (i) the results of appraisals of the assets (or the assets of the Person) to be acquired in such Acquisition and of a commercial finance examination of the Person that is (or whose assets are) being acquired, and (ii) such other due diligence as the Agent may reasonably require, all of the results of the foregoing to be reasonably satisfactory to the Agent; (f) any assets acquired shall be utilized only in, and if the Acquisition involves a merger, consolidation or stock acquisition, the Person which is the subject of such Acquisition shall be engaged only in, a Permitted Business; (g) if the Person which is the subject of such Acquisition will be maintained as a Subsidiary of the Borrower, such Subsidiary shall have executed such documents as may be necessary to be joined as a "Borrower" or "Guarantor" hereunder, as determined by the Agent, and the Agent shall have received subject to the terms of the Intercreditor Agreement a first priority security and mortgage interest (subject to Permitted Liens) in such Subsidiary's capital stock, inventory, accounts, equipment, real estate, leaseholds, and other property of the same nature as constitutes Collateral under this Agreement in order to secure the Obligations; (h) the total consideration paid for all Acquisitions (whether in cash, tangible property, notes or other property (other than capital stock of the Parent)) after the Effective Date, shall not exceed in the aggregate the sum of $15,000,000; and (i) Excess Availability immediately prior to such Acquisition, immediately after giving effect thereto, and projected Excess Availability on a pro forma projected basis for the twelve (12) months immediately following such Acquisition, shall not be less than $70,000,000.

"PERMITTED BUSINESS" means the business of owning and operating a chain of retail department stores selling clothing apparel, housewares, home furnishings, toys, sporting goods,

jewelry, shoes, health and beauty care items or any of the foregoing, and engaging in certain related licensing and other retail and wholesale businesses reasonably related thereto, including, but not limited to, any retail lease department operation.

"PERMITTED DISPOSITION" means any of the following: (i) licenses of intellectual property or licensed departments of a Loan Party or any of its Subsidiaries in the ordinary course of business; (ii) Leases or subleases of Leases, to the extent at any point in time such Leases or subleases have, in the aggregate, anticipated minimum fixed annual rental payments of not more than $3,000,000; (iii) sales, assignments, transfers, conveyances or other dispositions of any or all of the Property specified in Schedule 6.02(c) hereof; PROVIDED that in connection with a sale or similar disposition of any such Property, if a Loan Party receives a note or similar obligation as all or part of the consideration therefor, such Loan Party shall secure such note or obligation with a Mortgage or similar Lien on such Property and pledge such note or other obligation to the Agent as security for the Obligations pursuant to the terms of the Loan Documents; (iv) sales of Inventory and Equipment in connection with store closures permitted in accordance with the provisions of Section 6.02(c)(vii) hereof, PROVIDED that all sales of Inventory in connection with store closings (x) after the occurrence and during the continuance of an Event of Default or (y) consisting of more than fifteen (15) retail stores at the same time, shall be in accordance with liquidation agreements and with liquidators reasonably acceptable to the Agent; and (v) (x) the sale of any property, land or building (including any related receivables or other intangible assets) to any Person which is not a Subsidiary of a Borrower, or (y) the sale of the entire capital stock (or other equity interests) and Indebtedness of any Subsidiary owned by a Loan Party to any Person which is not a Subsidiary of a Borrower, or (z) the consummation of any other asset sale with a Person who is not a Subsidiary of a Borrower, PROVIDED that: (A) the consideration for such transaction represents fair value, and at least 90% of such consideration consists of cash, PROVIDED that in connection with a sale or similar disposition of any such Property, if a Loan Party receives a note or similar obligations as all or part of the consideration therefor, such Loan Party shall secure such note or obligation with a Mortgage or similar Lien on such property and pledge such note or other obligation to the Agent as security for the Obligations pursuant to the terms of the Loan Documents; (B) the aggregate consideration for all such transactions completed in any fiscal year does not exceed $500,000; (C) the aggregate consideration for all such transactions completed after the Effective Date does not exceed $1,500,000; and (D) other than in connection with a transaction, the aggregate consideration for which is equal to an amount less than $500,000, at least five (5) Business Days prior to the date of completion of such transaction such Loan Party shall have delivered to the Agent an officer's certificate executed on behalf of such Loan Party by an Authorized Officer of such Loan Party, which certificate shall contain a description of the proposed transaction, the date such transaction is scheduled to be consummated, the estimated purchase price or other consideration for such transaction, financial information pertaining to compliance with the preceding clause (A), and which shall (if requested by the Agent) include a certified copy of the draft or definitive documentation pertaining thereto.

"PERMITTED INDEBTEDNESS" means any of the following: (i) Indebtedness incurred under this Agreement and the other Loan Documents; (ii) any Indebtedness incurred under the Revolving Credit Facility and the Convertible Loan Agreement; (iii) Indebtedness on account of Equipment or improvements to real property acquired in compliance with the requirements of subparagraph (xiii) of the definition of Permitted Liens, the incurrence of which would not

otherwise be prohibited by this Agreement; PROVIDED, that such Indebtedness shall not exceed $10,000,000 in the aggregate at any time outstanding; (iv) (a) Indebtedness consisting of all obligations of a Loan Party or any Subsidiary as lessee under Capitalized Leases, and (b) Indebtedness consisting of all obligations of a Loan Party or any Subsidiary under any lease (x) that is accounted for by the lessee as an operating lease and (y) under which the lessee is intended to be the "owner" of the leased property for Federal income tax purposes; PROVIDED, that (A) at the time of any incurrence thereof after the date hereof, and after giving effect thereto, no Event of Default shall have occurred and be continuing or would result therefrom, and (B) the aggregate outstanding principal amount (using the obligations in lieu of principal amount, in the case of any Capitalized Lease, or present value, based on the implicit interest rate, in lieu of principal amount, in the case of any lease described above in part (b)) of Indebtedness permitted by this clause (iv) shall not exceed $10,000,000 aggregate principal amount outstanding at any time; (v) Indebtedness of the Loan Parties and any Subsidiary under (a) the NCB Hedging Agreement, and (b) Hedging Agreements with any Revolving Credit Lender or an Affiliate of a Revolving Credit Lender PROVIDED that (1) such agreement is non-speculative in nature, and (2) the Loan Parties have received the written consent of the Agent (which consent shall not be unreasonably withheld) prior to entering into such agreement; (vi) the Indebtedness listed on Schedule 6.02(b), annexed hereto; (vii) Indebtedness to sellers in connection with Permitted Acquisitions; (viii) intercompany indebtedness between and among the Parent and the other Loan Parties; (ix) Indebtedness to creditors of the former Filene's incurred in connection with the acquisition of Filene's, such Indebtedness not to exceed $6,000,000; (x) Indebtedness with respect to indemnities, warranties, statutory obligations, and surety, appeal and supersedeas bonds incurred in the ordinary course of business; (xi) Indebtedness in respect of overdraft protections and otherwise in connection with deposit accounts; and (xii) Indebtedness arising out of the refinancing, extension, renewal or refunding of any Indebtedness permitted under this Agreement, provided that the principal amount of such Indebtedness is not increased from the amount outstanding at the time of such refinancing.

"PERMITTED INVESTMENTS" means each of the following: (i) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing not more than one year from the date of acquisition thereof; (ii) investments in commercial paper maturing not more than one year from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from Standard & Poor's or from Moody's Investment Services, Inc.; (iii) investments in certificates of deposit, banker's acceptances and time deposits maturing not more than one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any financial institution organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000; (iv) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (i) above (without regard to the limitation on maturity contained in such clause) and entered into with a financial institution satisfying the criteria described in clause (iii) above; (v) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor's or

from Moody's Investment Services, Inc.; (vi) investments in money market funds, substantially all the assets of which are comprised of securities of the types described in clauses (i) through (vi) above; (vii) investments acquired by a Loan Party or any of its Subsidiaries (x) in exchange for any other investment held by such Loan Party or any such Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other investment, or (y) as a result of a foreclosure by such Loan Party or any of its Subsidiaries with respect to any secured investment or other transfer of title with respect to any secured investment in default; (viii) investments by a Loan Party in the capital of any wholly-owned subsidiary of such Loan Party, including without limitation, any Permitted Acquisitions, provided that the provisions of Section 6.01(a) hereof have been complied with respect to such Subsidiary; (ix) to the extent not permitted by the foregoing clauses, existing investments in any Subsidiaries (and any increases thereof attributable to increases in retained earnings); (x) to the extent not permitted by the foregoing clauses, the existing investments described on Schedule 6.02(e) hereto; (xi) investments of a Loan Party and any Subsidiary in Hedging Agreements permitted by clause (v) of the definition of Permitted Indebtedness;
(xii) investments of any Person which are outstanding at the time such Person becomes a Subsidiary of a Loan Party as a result of Permitted Acquisition, but not any increase in the amount thereof; and (xiii) any other investments (whether in the form of cash or contribution of property, and if in the form of a contribution of property, such property shall be valued for purposes of this clause at the fair value thereof) in any corporation, partnership, limited liability company, joint venture or other business entity, which is not itself a Subsidiary of a Borrower or owned or Controlled by any director, officer or employee of a Borrower or any of its Subsidiaries, not otherwise permitted by the foregoing clauses, made after the Effective Date, shall be permitted to be incurred if (a) no Event of Default shall have occurred and be continuing, or would result therefrom, and (b) the aggregate cumulative amount of such investments (together with any loans and advances permitted under Sections 6.02(e)(vi)(D) and (E)) does not exceed $6,000,000.

"PERMITTED LIENS" means any of the following: (i) Liens for taxes not yet delinquent or which are being contested in good faith by appropriate proceedings, PROVIDED that adequate reserves with respect thereto are maintained on the books of the Borrowers in accordance with GAAP, and PROVIDED further that, no notice of tax lien has been filed with respect thereto; (ii) Liens in respect of property or assets imposed by law in the ordinary course of business, such as carrier's, warehousemen's, mechanics', materialmen's, repairmen's, landlord's or similar Liens arising in the ordinary course of business which (x) are not overdue in accordance with customary business practices and consistent with the applicable Loan Party's prior practices, and do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Loan Parties, or (y) are being contested in good faith by a Loan Party, by appropriate proceedings diligently instituted and conducted and without danger of any material risk to the Collateral and adequate reserves or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (iii) Liens, pledges or deposits in connection with workers' compensation, unemployment insurance and other types of social security; (iv) deposits to secure the performance of tenders, bids, sales, trade and government contracts, leases, statutory obligations, surety, appeal, and supersedeas bonds, warranty, advance payment, customs, performance and return-of-money bonds and other obligations of a like nature in the ordinary course of business (exclusive of obligations in respect of the payment of borrowed money) whether pursuant to statutory requirements, common law or consensual arrangements; (v)

easements, rights of way, leases, zoning or deed restrictions, licenses, covenants, building restrictions, minor defects or irregularities in title and other similar real estate encumbrances incurred in the ordinary course of business that in the aggregate do not materially interfere with the conduct of the business of the Loan Parties; defects and irregularities in titles, survey exceptions, encumbrances, easements or reservations of others for rights-of-way, roads, pipelines, railroad crossings, services, utilities or other similar purposes; outstanding mineral rights or reservations (including rights with respect to the removal of material resource) which do not materially diminish the value of the surface estate, assuming usage of such surface estate similar to that being carried on by any Loan Party as of the Effective Date; (vi) any interest or title of a lessor under any lease entered into by any Loan Party in the ordinary course of business not in violation of the Loan Documents; (vii) any interest or title of any lessee under any leases or subleases of real property of a Loan Party not in violation of the requirements of the Loan Documents, provided that all such Liens do not in the aggregate materially detract from the value of such Loan Party's property or materially impair the use thereof in the operation of such Loan Party's business; (viii) Liens arising from financing statements regarding property subject to Capitalized Leases not in violation of the requirements of the Loan Documents, provided that such Liens are only in respect of the property subject to, and secure only, the respective lease; (ix) rights of consignors of goods to a Loan Party as consignee; (x) Liens arising from judgments, decrees or attachments in existence less than 30 days after the entry thereof, with respect to which execution has been stayed and with respect to which payment in full above any applicable deductible is covered by insurance or a bond, or in circumstances not constituting an Event of Default under Section 9.01(j)(i); (xi) Liens created by this Agreement or the other Loan Documents; (xii) Liens (x) listed on Schedule 6.02(a), annexed hereto, or (y) arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any such Lien, provided that the principal amount of such Indebtedness is not increased and such Indebtedness is not secured by any additional assets; (xiii) Liens which are placed upon Equipment or improvements to real property (including the associated real property) used in the ordinary course of business of a Loan Party or any Subsidiary (x) at the time of (or within 90 days after) the acquisition of such Equipment or the completion of such improvements by such Loan Party or any such Subsidiary to secure Indebtedness incurred to pay or finance all or a portion of the purchase price or other cost thereof, provided that the Lien on the Equipment so acquired or the real property so improved does not encumber any other asset of such Loan Party or any such Subsidiary; or (y) are existing on Equipment or real property at the time acquired by a Loan Party or any Subsidiary or on assets of a Person at the time such Person first becomes a Subsidiary of the Borrower; PROVIDED, that (A) any such Lien was not created at the time of or in contemplation of the acquisition of such assets or Person by a Loan Party or any Subsidiaries, (B) in the case of any such acquisition of a Person, any such Lien attaches only to the Equipment or real estate, as applicable, of such Person, and (C) in the case of any such acquisition of Equipment or real estate by a Loan Party or any Subsidiary, any such Lien attaches only to the property and assets so acquired and not to any other property or assets of such Loan Party or any such Subsidiary; PROVIDED, that the Liens outstanding from time to time under this clause (xiii) shall not secure any Indebtedness other than Permitted Indebtedness described in clause (iii) of such definition; (xiv) Liens securing Indebtedness assumed in connection with, or continuing to exist after, but not incurred in connection with, or contemplation of, a Permitted Acquisition, which Liens were in effect prior to the consummation of the Permitted Acquisition; PROVIDED, that such Liens may not extend to any Collateral of the Loan Parties, or the Inventory, Accounts

Receivable or General Intangibles of the Person so acquired; and (xv) a Lien granted by any Loan Party in connection with the Revolving Credit Facility or the Convertible Loan.

"PERSON" shall have the meaning given to such term as defined in Section 13(d)(3) of the Securities Exchange Act.

"PIK INTEREST" means, as at any date of determination, the amount of all interest accrued with respect to the Loans that has been paid-in-kind by being added to the outstanding principal balance thereof in accordance with Section 2.04.

"PIK OPTION CHANGE DATE" means the second anniversary of the Effective Date.

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

"POST-DEFAULT RATE" means a rate of interest per annum equal to the rate of interest otherwise in effect from time to time pursuant to the terms of this Agreement, plus 3%.

"PRO RATA SHARE" means (i) with respect to a Lender's obligation to make the Term Loan B and receive payments of interest, PIK Interest, fees, and principal with respect thereto, the percentage obtained by dividing (x) such Lender's Term Loan B Commitment, by (y) the Total Term Loan B Commitment, PROVIDED that if the Total Term Loan B Commitment has been reduced to zero, the numerator shall be the aggregate unpaid principal amount of such Lender's portion of the Term Loan B and the denominator shall be the aggregate unpaid principal amount of the Term Loan B; (ii) with respect to a Lender's obligation to make the Term Loan C and receive payments of interest, PIK Interest, fees, and principal with respect thereto, the percentage obtained by dividing (x) such Lender's Term Loan C Commitment, by (y) the Total Term Loan C Commitment, PROVIDED that if the Total Term Loan C Commitment has been reduced to zero, the numerator shall be the aggregate unpaid principal amount of such Lender's portion of the Term Loan C and the denominator shall be the aggregate unpaid principal amount of the Term Loan C; and (iii) with respect to all other matters (including, without limitation, the indemnification obligations arising under Section 10.05), the percentage obtained by dividing (x) the unpaid principal amount of such Lender's Commitment, by (y) the aggregate unpaid principal amount of the Total Commitment.

"PROPERTY" means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.

"PROXY" has the meaning specified therefor in Section 5.01(nn).

"RATING AGENCIES" has the meaning specified therefor in
Section 2.07.

"REFERENCE BANK" means JPMorgan Chase Bank, its successors or any other commercial bank designated by the Agent to the Administrative Borrower from time to time.

"REFERENCE RATE" means the rate of interest publicly announced by the Reference Bank in New York, New York from time to time as its reference rate, base rate or prime rate.

The reference rate, base rate or prime rate is determined from time to time by the Reference Bank as a means of pricing some loans to its borrowers and neither is tied to any external rate of interest or index nor necessarily reflects the lowest rate of interest actually charged by the Reference Bank to any particular class or category of customers. Each change in the Reference Rate shall be effective from and including the date such change is publicly announced as being effective.

"REGISTER" has the meaning specified therefor in Section 12.07(b)(ii).

"REGISTERED LOAN" has the meaning specified therefor in
Section 12.07(b)(ii).

"REGISTERED NOTE" has the meaning specified therefor in
Section 2.03(c).

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

"REGULATION T", "REGULATION U" and "REGULATION X" mean, respectively, Regulations T, U and X of the Board or any successor, as the same may be amended or supplemented from time to time.

"RELATED BUSINESS" means any business or enterprise consisting of asset maximization services or asset valuation services.

"RELEASE" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, seeping, migrating, dumping or disposing of any Hazardous Material (including the abandonment or discarding of barrels, containers and other closed receptacles containing any Hazardous Material) into the indoor or outdoor environment, including, without limitation, the movement of Hazardous Materials through or in the ambient air, soil, surface or ground water, or property.

"REMEDIAL ACTION" means all actions taken to (i) clean up, remove, remediate, contain, treat, monitor, assess, evaluate or in any other way address Hazardous Materials in the indoor or outdoor environment; (ii) prevent or minimize a Release or threatened Release of Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; (iii) perform pre-remedial studies and investigations and post-remedial operation and maintenance activities; or (iv) perform any other actions authorized by 42 U.S.C. ss. 9601.

"REPORTABLE EVENT" means an event described in Section 4043 of ERISA (other than an event not subject to the provision for 30-day notice to the PBGC under the regulations promulgated under such Section).

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

"REQUISITE APPROVAL" means the affirmative vote of at least a majority of the shares of Common Stock (voting as one class, with each share of Common Stock having one vote) voting regarding the issuance of the Warrants with greater than fifty percent (50%) of the issued and outstanding shares of Common Stock voting.

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

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

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

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

"SEC" means the Securities and Exchange Commission or any other similar or successor agency of the Federal government administering the Securities Act.

"SECURITIES ACT" means the Securities Act of 1933, as amended, or any similar Federal statute, and the rules and regulations of the SEC thereunder, all as the same shall be in effect from time to time.

"SECURITIZATION" has the meaning specified therefor in Section 2.07.

"SECURITIZATION PARTIES" has the meaning specified therefor in
Section 2.07.

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

"SOLVENT" means, with respect to any Person on a particular date, that on such date (i) the fair value of the property of such Person is not less than the total amount of the liabilities of such Person; (ii) 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 existing debts as they become absolute and matured; (iii) 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; (iv) 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 (v) 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. The determination of whether a Person is Solvent shall take into account all such Person's properties and liabilities regardless of whether, or the amount at which, any such

property or liability is included on a balance sheet of such Person prepared in accordance with GAAP, including properties such as contingent contribution or subrogation rights, business prospects, distribution channels and goodwill. The determination of the sum of a Person's properties at a fair valuation or the present fair saleable value of a Person's properties shall be made on a going concern basis unless, at the time of such determination, the liquidation of the business in which such properties are used or useful is in process or is demonstrably imminent. In computing the amount of contingent or unrealized properties or contingent or unliquidated liabilities at any time, such properties and liabilities will be computed at the amounts which, in light of all the facts and circumstances existing at such time, represent the amount that reasonably can be expected to become realized properties or matured liabilities, as the case may be. In computing the amount that would be required to pay a person's probable liability on its existing debts as they become absolute and matured, reasonable valuation techniques, including a present value analysis, shall be applied using such rates over such periods as are appropriate under the circumstances, and it is understood that, in appropriate circumstances, the present value of Contingent Liabilities may be zero.

"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.

"SSC" means Schottenstein Stores Corporation.

"SSC ASSIGNMENT" means the sale and assignment to the Agent of a 50% interest in the Parent's obligations under the Convertible Loan Agreement.

"SSC ASSIGNMENT AGREEMENT" means the Assignment Agreement dated June 11, 2002 by and between CP and SSC in connection with the SSC Assignment.

"SSC ASSIGNMENT DOCUMENTS" means the SSC Assignment Agreement and any other agreement, instrument or other document executed and delivered pursuant to the SSC Assignment.

"SSC CREDIT FACILITY" means the Credit Agreement, dated December 11, 2000, between the Parent, as borrower and SSC, as lender, in a maximum principal amount of up to $100,000,000.

"SUBSIDIARY" means, with respect to any Person at any date, any corporation, limited or general partnership, limited liability company, trust, estate, association, joint venture or other business entity (i) the accounts of which would be consolidated with those of such Person in such Person's consolidated financial statements if such financial statements were prepared in accordance with GAAP or (ii) of which more than 50% of (A) the outstanding Capital Stock having (in the absence of contingencies) ordinary voting power to elect a majority of the board of directors or other managing body of such Person, (B) in the case of a partnership or limited liability company, the interest in the capital or profits of such partnership or limited liability company or (C) in the case of a trust, estate, association, joint venture or other entity, the beneficial interest in such trust, estate, association or other entity business is, at the time of determination, owned or controlled directly or indirectly through one or more intermediaries, by such Person.

"TAXES" has the meaning set forth in Section 2.08.

"TERM LOAN B" means a loan made by the Agent or the Term Loan B Lenders to the Borrowers on the Effective Date pursuant to Section 2.01(a)(i).

"TERM LOAN B COMMITMENT" means, with respect to each Term Loan B Lender, the commitment of such Term Loan B Lender to make its portion of the Term Loan B to the Borrowers in the principal amount set forth in Schedule 1.01(A) hereto, as the same may be terminated or reduced from time to time in accordance with the terms of this Agreement.

"TERM LOAN B LENDER" means any Lender holding a Term Loan B Commitment greater than zero, as identified on Schedule 1.01(A) hereto, together with permitted successors and assigns.

"TERM LOAN C" means a loan made by the Agent or Term Loan C Lenders to the Borrowers on the Effective Date pursuant to Section 2.01(a)(ii).

"TERM LOAN C COMMITMENT" means, with respect to each Term Loan C Lender, the commitment of such Term Loan C Lender to make its portion of the Term Loan C to the Borrowers in the principal amount set forth in Schedule 1.01(A) hereto, as the same may be terminated or reduced from time to time in accordance with the terms of this Agreement.

"TERM LOAN C LENDER" means any Lender holding a Term Loan C Commitment greater than zero, as identified on Schedule 1.01(A) hereto, together with permitted successors and assigns.

"TOTAL COMMITMENT" means the sum of each Lender's Commitment.

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

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

"UNRESTRICTED SUBSIDIARY" has the meaning specified therefor in Section 5.01(kk).

"VALUE CITY BUSINESS" means the Borrowers' business other than the DSW/Shonac Business and the Filene's Business.

"WARRANT DEADLINE DATE" means October 31, 2002; provided, however, that in the event the Meeting is delayed as a result of a unilateral action by SSC or a shareholder of SSC, the Warrant Deadline Date shall be December 31, 2002.

"WARRANTS" has the meaning assigned to such term in Section 13.01.

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

Section 1.02 TERMS GENERALLY. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. References in this Agreement to "determination" by the Agent include good faith estimates by the Agent (in the case of quantitative determinations) and good faith beliefs by the Agent (in the case of qualitative determinations).

Section 1.03 ACCOUNTING AND OTHER TERMS. Unless otherwise expressly provided herein, each accounting term used herein shall have the meaning given it under GAAP applied on a basis consistent with those used in preparing the Financial Statements. All terms used in this Agreement which are defined in Article 8 or Article 9 of the Uniform Commercial Code as in effect from time to time in the State of New York (the "UNIFORM COMMERCIAL CODE") and which are not otherwise defined herein shall have the same meanings herein as set forth therein, provided that terms used herein which are defined in the Uniform Commercial Code as in effect in the State of New York on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute.

Section 1.04 TIME REFERENCES. Unless otherwise indicated herein, all references to time of day refer to Eastern Standard Time or Eastern daylight saving time, as in effect in New York City on such day. For purposes of the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding"; PROVIDED, HOWEVER, that with respect to a computation of fees or interest payable to the Agent or any Lender, such period shall in any event consist of at least one full day.

ARTICLE II

THE LOANS

Section 2.01 COMMITMENTS. (a) Subject to the terms and conditions and relying upon the representations and warranties set forth herein:

(i) each Term Loan B Lender severally agrees to make a Term Loan B to the Borrowers on the Effective Date, in an aggregate principal amount not to exceed the amount of such Term Loan B Lender's Term Loan B Commitment; and

(ii) each Term Loan C Lender severally agrees to make a Term Loan C to the Borrowers on the Effective Date, in an aggregate principal amount not to exceed the amount of such Term Loan C Lender's Term Loan C Commitment.

(b) Any principal amount of the Loans which is borrowed under this Section 2.01 and prepaid or repaid may not be reborrowed.

Section 2.02 MAKING THE LOANS. (a) The Administrative Borrower shall give the Agent prior telephonic notice (immediately confirmed in writing, in substantially the form of Exhibit B hereto (a "NOTICE OF BORROWING")), not later than 2:00 P.M. (New York City time) on the date which is two (2) Business Days prior to the Effective Date (or such shorter period as the Agent is willing to accommodate, but in no event later than 2:00 P.M. (New York City time) on the Effective Date). Such Notice of Borrowing shall be irrevocable and shall specify
(i) the principal amount of the proposed Loan, (ii) the use of the proceeds of such proposed Loan, and (iii) the proposed borrowing date, which must be the Effective Date. The Agent and the Lenders may act without liability upon the basis of written, telecopied or telephonic notice believed by the Agent in good faith to be from the Administrative Borrower (or from any Authorized Officer thereof designated in writing purportedly from the Administrative Borrower to the Agent). Each Borrower hereby waives the right to dispute the Agent's record of the terms of any such telephonic Notice of Borrowing. The Agent and each Lender shall be entitled to rely conclusively on any Authorized Officer's authority to request a Loan on behalf of the Borrowers until the Agent receives written notice to the contrary. The Agent and the Lenders shall have no duty to verify the authenticity of the signature appearing on any written Notice of Borrowing. The Agent will make the proceeds of such Loans available to the Borrowers on the Effective Date by causing an amount, in immediately available funds, to be deposited in an account designated by the Administrative Borrower to the Agent at a commercial bank reasonably satisfactory to the Agent, and/or disbursed to such other Persons as the Administrative Borrower shall so direct the Agent in the Notice of Borrowing.

(b) Each Notice of Borrowing pursuant to this Section 2.02 shall be irrevocable and the Borrowers shall be bound to make a borrowing in accordance therewith.

(c) Except as otherwise provided in this subsection 2.02(c), all Loans under this Agreement shall be made by the Lenders simultaneously and in accordance with their respective Commitments, it being understood that no Lender shall be responsible for any default by any other Lender in that other Lender's obligations to make a Loan requested hereunder, nor

shall the Commitment of any Lender be increased or decreased as a result of the default by any other Lender in that other Lender's obligation to make a Loan requested hereunder, and each Lender shall be obligated to make the Loans required to be made by it by the terms of this Agreement regardless of the failure by any other Lender to make such Loan.

Section 2.03 NOTES; REPAYMENT OF LOANS.

(a) The obligations of the Borrowers to repay the Loans and interest thereon shall be evidenced by Notes, duly executed on behalf of the Borrowers, dated the Effective Date, and delivered to and made payable to the order of each Lender in a principal amount equal to such Lender's Commitments.

(b) The Borrowers shall repay the principal amount of the Loans (including all PIK Interest added thereto) on the Final Maturity Date together with all such other amounts as may be necessary to pay in full, in cash, all Obligations to the Lenders in the manner set forth in Section 3.02(b).

(c) Each Loan recorded on the Register may not be evidenced by promissory notes other than a Note which is a Registered Note. Upon the registration of the Loans, any promissory note (other than a Registered Note) evidencing the same shall be null and void and shall be returned to the Borrowers. The Borrowers agree, at the request of the Agent, to execute and deliver to each Lender, a promissory note in registered form (a "REGISTERED NOTE") to evidence such Registered Loan (i.e., containing the registered note language set forth in Exhibit K hereto) and registered as provided in Section
12.07. Once recorded in the Register, the Loan or Loans evidenced by such Note may not be removed from the Register so long as it remains outstanding and a Registered Note may not be exchanged for a promissory note that is not a Registered Note.

Section 2.04 INTEREST. (a) RATE. Each Loan shall bear interest on the principal amount thereof from time to time outstanding, from the Effective Date until such principal amount becomes due, at an interest rate per annum equal to (i) prior to the PIK Option Change Date, (A) if paid in cash, 14%, and (B) if paid in PIK Interest, 15%, and (ii) on and after the PIK Option Change Date, (A) as to any portion of the interest on the Loans required to be paid in cash pursuant to Section 2.04(c), 15%, (B) as to any portion of the interest on the Loans not required to be paid in cash pursuant to Section 2.04(c) that the Borrowers elect, pursuant to the Notice of Election to pay, and actually pay, in cash, 15%, and (C) as to any portion of the interest on the Loans paid in PIK Interest 15.5%; PROVIDED, HOWEVER, that if the Warrants are not issued on or prior to the Warrant Deadline Date, each Loan shall bear interest on the principal amount thereof, from the Warrant Deadline Date until the date such Warrants are issued, at an interest rate per annum equal to the interest rate otherwise in effect pursuant to the terms of this Agreement plus four percent (4%). For the avoidance of doubt, each of the parties hereto hereby agrees that if the Borrowers elect, pursuant to the Notice of Election, to pay the interest due on the Loan in PIK Interest and such interest payment or portion thereof is subsequently paid in cash, the rate applicable to PIK Interest shall nevertheless apply to such payment.

(b) DEFAULT INTEREST. To the extent permitted by law, upon the occurrence and during the continuance of an Event of Default, the principal of, and all accrued

and unpaid interest on, all Loans, fees, indemnities or any other Obligations of the Loan Parties under this Agreement and the other Loan Documents, shall bear interest, from the date such Event of Default occurred until the date such Event of Default is cured or waived in writing in accordance herewith, at a rate per annum equal at all times to the Post-Default Rate. Notwithstanding anything to the contrary contained herein, interest at the Post-Default Rate shall be payable in cash on demand in the manner set forth in Section 3.02(b).

(c) INTEREST PAYMENT. Interest on the Loans shall be payable monthly in arrears, on the first day of each month, commencing on the first day of the month following the month in which the Loans are made and at Final Maturity (whether upon demand, by acceleration or otherwise), (i) prior to the PIK Option Change Date, at the option of the Borrowers, either (A) in cash, or (B) in PIK Interest, the amount of which shall be accrued and added to the outstanding principal amount of the Loans at such time and payable at Final Maturity, and (ii) on and after the PIK Option Change Date, at the option of the Borrowers, either (A) entirely in cash, or (B) in a combination of cash and PIK Interest (the amount of any such PIK Interest shall be accrued and added to the outstanding principal amount of the Loans at such time and payable at Final Maturity), PROVIDED, HOWEVER, that at least 50% of the interest payable at any time is paid in cash. The Administrative Borrower shall give the Agent and each of the Lenders prior telephonic notice (immediately confirmed in writing in substantially the form of Exhibit C hereto (a "NOTICE OF ELECTION")) not later than two (2) Business Days prior to any date on which a payment of interest is required pursuant to this Section 2.04(c), specifying the amount of interest to be paid in cash and the amount to be paid in PIK Interest. Such Notice of Election shall be irrevocable.

(d) GENERAL. All interest shall be computed on the basis of a year of 360 days for the actual number of days, including the first day but excluding the last day, elapsed.

Section 2.05 PREPAYMENT OF LOANS.

(a) OPTIONAL PREPAYMENT.

(i) TERM LOAN B. Subject to the terms of the Intercreditor Agreement, the Borrowers may, upon at least five (5) Business Days' prior written notice to the Agent, prepay the principal of the Term Loan B, in whole or in part. Each prepayment made pursuant to this clause (a)(i), if made within the first twelve (12) months following the Effective Date shall be in an amount equal to 101.5% of the principal amount to be prepaid. All prepayments made pursuant to this clause (a) shall be accompanied by the payment of accrued interest to the date of such payment and each such prepayment shall be applied, first to accrued cash interest, then to PIK Interest and then to principal.

(ii) TERM LOAN C. Subject to the terms of the Intercreditor Agreement, the Borrowers may, upon at least five (5) Business Days' prior written notice to the Agent, prepay the principal of the Term Loan C, in whole or in part. Each prepayment made pursuant to this clause (a)(ii) shall be in an amount equal to the applicable percentage set forth below of the principal amount to be prepaid:

PREPAYMENT DATE                                           PREMIUM
----------------------------------------------------     ----------
     Effective Date through June 10, 2003:                103.0%
     June 11, 2003 through December 11, 2003:             102.0%
     Thereafter:                                          100.0%

All prepayments made pursuant to this clause (a) shall be accompanied by the payment of accrued interest to the date of such payment and each such prepayment shall be applied, first to accrued cash interest, then to PIK Interest and then to principal.

(b) MANDATORY PREPAYMENT.

(i) Immediately upon any Disposition by any Loan Party or its Subsidiaries pursuant to Section 6.02(c), and subject to the terms of the Intercreditor Agreement, the Borrowers shall prepay the outstanding principal amount of the Loans in an amount equal to 100% of the Net Cash Proceeds received by such Person in connection with such Disposition to the extent that the aggregate amount of Net Cash Proceeds received by all Loan Parties and their Subsidiaries (and not paid to the Agent as a prepayment of the Loans) shall exceed $1,000,000 for all such Dispositions in any Fiscal Year. Nothing contained in this subsection (i) shall permit any Loan Party or any of its Subsidiaries to make a Disposition of any property other than in accordance with Section 6.02(c).

(ii) Upon the loss, destruction or taking by condemnation of any Collateral, and subject to the terms of the Intercreditor Agreement, the Borrowers shall prepay the outstanding principal of the Loans in an amount equal to 100% of the Net Cash Proceeds of the insurance or other proceeds received by any Loan Party in connection therewith, PROVIDED, that, except during the continuance of an Event of Default, the insurance or other proceeds received by any Borrower in connection therewith shall not be required to be so prepaid on such date to the extent such proceeds are used to replace or restore the properties or assets used in a Permitted Business in respect of which such proceeds were paid if the Administrative Borrower delivers a certificate to the Agents within 30 days of such event stating that such proceeds shall be used to replace or restore any such properties or assets to be used in a Permitted Business within a period specified in such certificate not to exceed 365 days after the receipt of such proceeds (which certificate shall set forth estimates of the proceeds to be so expended) and if all or any portion of such proceeds not so applied to the repayment of the Loans are not so used within the period specified in the relevant certificate furnished pursuant hereto, such remaining portion shall prepay the outstanding principal of the Loans on the last day of such specified period.

(iii) Upon the issuance or incurrence by any Loan Party or any of its Subsidiaries of any Indebtedness (other than Permitted Indebtedness), or the sale or issuance by any Loan Party or any of its Subsidiaries of any shares of its Capital Stock (other than pursuant to stock option plans for employees, officers and directors), and

subject to the terms of the Intercreditor Agreement, the Borrowers shall prepay the outstanding amount of the Loans in an amount equal to 100% of the Net Cash Proceeds received by such Person in connection therewith. The provisions of this subsection (iii) shall not be deemed to be implied consent to any such issuance, incurrence or sale otherwise prohibited by the terms and conditions of this Agreement.

(iv) Except as set forth in Section 2.05(b)(ii), upon the receipt by any Loan Party or any of its Subsidiaries of any Extraordinary Receipts in excess of $1,000,000 in any Fiscal Year, and subject to the terms of the Intercreditor Agreement, the Borrowers shall prepay the outstanding principal of the Loans in an amount equal to 100% of such Extraordinary Receipts, net of any reasonable expenses incurred in collecting such Extraordinary Receipts.

(c) APPLICATION OF PAYMENTS. Each prepayment pursuant to subsections (b)(i) through (b)(iv) above shall be applied pro rata to the Term Loan B and the Term Loan C.

(d) INTEREST AND FEES. Any prepayment made pursuant to this Section 2.05 shall be accompanied by accrued interest on the principal amount being prepaid to the date of prepayment, and if such prepayment would reduce the amount of the outstanding Loans to zero, such prepayment shall be accompanied by the payment of all fees accrued to such date.

(e) CUMULATIVE PREPAYMENTS. Except as otherwise expressly provided in this Section 2.05, payments with respect to any subsection of this Section 2.05 are in addition to payments made or required to be made under any other subsection of this Section 2.05.

(f) REFINANCING. Notwithstanding anything to the contrary contained in this Section, Borrowers may not prepay the Loans in full if more than 80% of the proceeds of such proposed prepayment is derived from the issuance or incurrence of Indebtedness.

(g) PREPAYMENT PRIOR TO ISSUANCE OF WARRANTS. Notwithstanding anything to the contrary contained herein, in the event that the Loans are repaid in full or this Agreement is otherwise terminated (whether as a result of an optional prepayment, by acceleration or otherwise) prior to the issuance of the Warrants, the Borrowers shall pay to the Agent, for the benefit of the Lenders, in addition to all other amounts payable in respect of the Obligations, a fee in an amount equal to five percent (5%) of the principal amount of the Loans outstanding on the Effective Date. For the avoidance of doubt, it is hereby agreed that upon payment of the fee set forth in this
Section 2.05(g), the Parent shall have no further obligation to issue the Warrants.

Section 2.06 FEES.

(a) CLOSING FEE. On or prior to the Effective Date, the Borrowers shall pay to the Agent for the account of the Lenders, in accordance with their Pro Rata Shares, a non-refundable closing fee (the "CLOSING FEE") equal to $2,562,500, which shall be deemed fully earned when paid.

(b) ANNIVERSARY FEE. The Borrowers shall pay to the Agent for the account of the Term Loan B Lenders, in accordance with their Pro Rata Share of the Term Loan B Commitments, a non-refundable anniversary fee (the "ANNIVERSARY FEE") equal to a percentage of the Term Loan B principal amount outstanding, including PIK Interest, which shall be deemed fully earned when paid and which shall be payable on each anniversary of the Effective Date in the percentages as set forth below:

                                    PERCENTAGE OF
   ANNIVERSARY DATE                    PRINCIPAL
----------------------              --------------
     June 11, 2003                       1.0%
     June 11, 2004                       2.0%
     June 11, 2005                       3.0%

Section 2.07 SECURITIZATION. The Loan Parties hereby acknowledge that the Lenders and their Affiliates may sell or securitize the Loans (a "SECURITIZATION") through the pledge of the Loans as collateral security for loans to the Lenders or their Affiliates or through the sale of the Loans or the issuance of direct or indirect interests in the Loans, which loans to the Lenders or their Affiliates or direct or indirect interests will be rated by Moody's, Standard & Poor's or one or more other rating agencies (the "RATING AGENCIES"). The Loan Parties shall cooperate with the Lenders and their Affiliates to effect the Securitization including, without limitation, by (a) subject to Section 2.15 of the Intercreditor Agreement, amending this Agreement and the other Loan Documents, and executing such additional documents, as reasonably requested by the Lenders in connection with the Securitization, PROVIDED that (i) any such amendment or additional documentation does not impose material additional costs on the Loan Parties and (ii) any such amendment or additional documentation does not materially adversely affect the rights, or materially increase the obligations, of the Loan Parties under the Loan Documents or change or affect in a manner adverse to the Loan Parties the financial terms of the Loans, (b) providing such information as may be reasonably requested by the Lenders in connection with the rating of the Loans or the Securitization, and (c) providing in connection with any rating of the Loans a certificate (i) agreeing to indemnify the Lenders and their Affiliates, any of the Rating Agencies, or any party providing credit support or otherwise participating in the Securitization (collectively, the "SECURITIZATION PARTIES") for any losses, claims, damages or liabilities (the "LIABILITIES") to which the Lenders, their Affiliates or such Securitization Parties may become subject insofar as the Liabilities arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Loan Document or in any writing delivered by or on behalf of any Loan Party to the Lenders in connection with any Loan Document or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein, or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and such indemnity shall survive any transfer by the Lenders or their successors or assigns of the Loans and (ii) agreeing to reimburse the Lenders and their Affiliates for any legal or other expenses reasonably incurred by such Persons in connection with defending the Liabilities.

Section 2.08 TAXES. (a) All payments made by any Loan Party hereunder or under any other Loan Document shall be made without set-off, counterclaim, deduction or other

defense. All such payments shall be made free and clear of and without deduction for any present or future income, franchise, sales, use, excise, stamp or other taxes, levies, imposts, deductions, charges, fees, withholdings, restrictions or conditions of any nature now or hereafter imposed, levied, collected, withheld or assessed by any jurisdiction (whether pursuant to Federal, state, local or foreign law) or by any political subdivision or taxing authority thereof or therein, and all interest, penalties or additional amounts, excluding taxes on the net income of any Lender or the Agent imposed by the jurisdiction in which such Lender or such Agent is organized or any political subdivision thereof or taxing authority thereof or any jurisdiction in which such Person's principal office is located or any political subdivision thereof or taxing authority thereof (such nonexcluded taxes, levies, imposts, deductions, charges, fees, withholdings, restrictions, conditions, interest, penalties and additional amounts being hereinafter collectively referred to as "TAXES"). If any Loan Party shall be required to deduct or to withhold any Taxes from or in respect of any amount payable hereunder or under any other Loan Document:

(i) the amount so payable shall be increased so that after making all required deductions and withholdings (including Taxes on amounts payable pursuant to this sentence) the Lenders or the Agent, as the case may be, receive an amount equal to the sum they would have received had no such deduction or withholding been made;

(ii) such Loan Party shall make such deduction or withholding;

(iii) such Loan Party shall pay the full amount deducted or withheld to the relevant taxation authority in accordance with Applicable Law; and

(iv) whenever any Taxes are payable by any Loan Party, as promptly as possible thereafter, such Loan Party shall send the Lenders and the Agent an official receipt (or, if an official receipt is not available, such other documentation as shall be satisfactory to the Lenders or the Agent, as the case may be) evidencing payment of the amount or amounts so deducted or withheld. In addition, each Loan Party agrees to pay any present or future taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery, performance, recordation or filing of, or otherwise with respect to, this Agreement or any other Loan Document other than the foregoing excluded taxes (hereinafter referred to as "OTHER TAXES").

(b) The Loan Parties hereby jointly and severally agree to indemnify and hold the Lenders and the Agent harmless from and against Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.08) paid by any Lender or the Agent and any liability (including penalties, interest and expenses for nonpayment, late payment or otherwise) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Such indemnification shall be paid within 10 days from the date on which any the Agent, on behalf of the Lenders, makes written demand therefor, which demand shall identify in reasonable detail the nature and amount of such Taxes or Other Taxes.

(c) Each Lender that is organized in a jurisdiction outside the United States hereby agrees that it shall, no later than the Effective Date or, in the case of a Lender

which becomes a party hereto pursuant to Section 12.07 hereof after the Effective Date, the date upon which such Lender becomes a party hereto (and from time to time thereafter upon the reasonable request of the Administrative Borrower or the Agent, but only if such Lender is legally able to do so), deliver to the Administrative Borrower and the Agent either (i) two accurate, complete and signed copies of either (x) U.S. Internal Revenue Service Form W-8ECI or successor form, or (y) U.S. Internal Revenue Service Form W-8BEN or successor form, in each case, indicating that such Lender is on the date of delivery thereof entitled to receive payments of interest hereunder free from, or subject to a reduced rate of, withholding of United States Federal income tax or (ii) in the case of such a Lender that is entitled to claim exemption from withholding of United States Federal income tax under Section 871(h) or Section 881(c) of the Internal Revenue Code, (x) a certificate to the effect that such Lender is (A) not a "bank" within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (B) not a "10 percent shareholder" of the Parent within the meaning of Section 881(c)(3)(B) of the Internal Revenue Code and (C) not a controller foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Internal Revenue Code and (y) two accurate, complete and signed copies of U.S. Internal Revenue Service Form W-8BEN or successor form.

(d) If any Loan Party fails to perform any of its obligations under this Section 2.08, the Loan Parties shall indemnify the Lenders and the Agent for any taxes, interest or penalties that may become payable as a result of any such failure. The obligations of the Loan Parties under this Section 2.08 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

ARTICLE III

FEES, PAYMENTS AND OTHER COMPENSATION

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

Section 3.02 PAYMENTS; COMPUTATIONS AND STATEMENTS. (a) The Borrowers will make each payment under this Agreement not later than 12:00 noon (New York City time) on the day when due, in lawful money of the United States of America and in immediately available funds, in the manner set forth in clause
(b) below. All payments received after 12:00 noon (New York City time) on any Business Day will be credited on the next succeeding Business Day. All payments shall be made by the Borrowers without set-off, counterclaim, deduction or other defense to the Agent and the Lenders. Whenever any payment to be made under any such Loan Document shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. All computations of fees shall be made by the Agent on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such fees are

payable. Each determination by the Agent of an interest payment amount or fees hereunder shall be rebuttably presumed to be accurate, in the absence of manifest error.

(b) (i) Other than during the continuance of an Event of Default, the Borrowers shall make each payment relating to the payment of principal and interest in respect of the Loans directly to the Lender's Account of each Lender to whom payment is required to be made, in like funds and in accordance with each Lender's Pro Rata Share of such payment. The Borrowers shall make all other payments under this Agreement to the Agent's Account for distribution to the Lenders in accordance with clause (iii) below.

(ii) Upon the occurrence and during the continuance of an Event of Default, the Borrowers shall make all payments under this Agreement to the Agent's Account for distribution to the Lenders in accordance with clause (iii) below.

(iii) Upon the receipt of any payment under this Agreement, the Agent will promptly (and in any case, not later than five (5) Business Days) thereafter, cause to be distributed to the Lenders to whom payment is required to be made, (A) in the case of payments relating to principal and interest, in like funds in accordance with their Pro Rata Shares, and (B) in the case of the payment of any other amount payable to any Lender, in like funds; PROVIDED, HOWEVER, that this clause shall not apply to any payment made under this Agreement that is solely for the account of the Agent.

(c) The Agent shall provide the Administrative Borrower, promptly after the end of each calendar month, a summary statement (in the form from time to time used by the Agent) of the amounts and dates of all payments on account of the Loans to the Borrowers during such month and the Loans to which such payments were applied, the amount of interest accrued on the Loans to the Borrowers during such month, the amount of PIK Interest added to the principal of the Loans during such month, and the amount and nature of any other fees, commissions, expenses and other Obligations incurred during such month. All entries on any such statement shall be presumed to be correct and, thirty (30) days after the same is sent, shall be rebuttably presumed to be accurate, absent manifest error. For purposes of such statement, the Agent shall have the right to conclude, absent evidence to the contrary (i) that no payments have been made by the Borrowers and no requests for payments have been made to the Borrowers by any Lender other than in accordance with this Agreement, and
(ii) all payments of principal and interest required to be made directly to any Lender's Account have been made pursuant to the terms of this Agreement.

Section 3.03 SHARING OF PAYMENTS, ETC. Except as provided in Sections 2.02 and 3.02(b) hereof, if any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of any Obligation in excess of its ratable share of payments on account of similar obligations obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in such similar obligations held by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; PROVIDED, HOWEVER, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share

(according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender of any interest or other amount paid by the purchasing Lender in respect of the total amount so recovered). The Borrowers agree that any Lender so purchasing a participation from another Lender pursuant to this Section 3.03 may, to the fullest extent permitted by law, exercise all of its rights (including the Lender's right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrowers in the amount of such participation.

Section 3.04 APPORTIONMENT OF PAYMENTS. Subject to Section 2.02 hereof and to any written agreement among the Agent and/or the Lenders:

(a) All payments of principal, interest and PIK Interest in respect of outstanding Loans, all payments of fees (other than the fees set forth in Section 2.06 hereof and the audit and collateral monitoring fee provided for in Section 3.01) and all other payments in respect of any other Obligations, shall be allocated by the Agent among such of the Lenders as are entitled thereto, in proportion to their respective Pro Rata Shares or otherwise as provided herein or, in respect of payments not made on account of Loans, as designated by the Person making payment when the payment is made.

(b) After the occurrence and during the continuance of an Event of Default, the Agent may apply all payments in respect of any Obligations and all proceeds of the Collateral, subject to the provisions of this Agreement, (i) FIRST, ratably to pay the Obligations in respect of any fees, expense reimbursements, indemnities and other amounts then due to the Agent until paid in full; (ii) SECOND, ratably to pay the Obligations in respect of any fees and indemnities then due to the Lenders until paid in full; (III) THIRD, ratably to pay interest due in respect of the Loans until paid in full;
(iv) FOURTH, ratably to pay PIK Interest due in respect of the Loans until paid in full; (v) FIFTH, ratably to pay the principal of the Loans until paid in full; and (viii) SIXTH, to the ratable payment of all other Obligations then due and payable.

(c) In each instance, so long as no Event of Default has occurred and is continuing, Section 3.04(b) shall not be deemed to apply to any payment by the Borrowers specified by the Administrative Borrower to the Agent to be for the prepayment of all or part of the principal of the Term Loans in accordance with the terms and conditions of Section 2.05.

(d) For purposes of Section 3.04(b), "paid in full" with respect to interest shall include interest accrued after the commencement of any Insolvency Proceeding irrespective of whether a claim for such interest is allowable in such Insolvency Proceeding.

(e) In the event of a direct conflict between the priority provisions of this Section 3.04 and other provisions contained in any other Loan Document, it is the intention of the parties hereto that both such priority provisions in such documents shall be read together and construed, to the fullest extent possible, to be in concert with each other. In the event of any actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of this Section 3.04 shall control and govern.

Section 3.05 INCREASED COSTS AND REDUCED RETURN. (a) If any Lender or the Agent shall have determined that the adoption or implementation of, or any change in, any law,

rule, treaty or regulation, or any policy, guideline or directive of, or any change in, the interpretation or administration thereof by, any court, central bank or other administrative or Governmental Authority, or compliance by any Lender or the Agent or any Person controlling any such Lender or the Agent with any directive of, or guideline from, any central bank or other Governmental Authority or the introduction of, or change in, any accounting principles applicable to any Lender or the Agent or any Person controlling any such Lender or the Agent (in each case, whether or not having the force of law), shall (i) subject any Lender or the Agent, or any Person controlling any such Lender or the Agent to any tax, duty or other charge with respect to this Agreement or any Loan made by such Lender or the Agent, or change the basis of taxation of payments to any Lender or the Agent or any Person controlling any such Lender or the Agent of any amounts payable hereunder (except for taxes on the overall net income of any Lender or the Agent or any Person controlling any such Lender or the Agent), (ii) impose, modify or deem applicable any reserve, special deposit or similar requirement against any Loan, or against assets of or held by, or deposits with or for the account of, or credit extended by, any Lender or the Agent or any Person controlling any such Lender or the Agent or (iii) impose on any Lender or the Agent or any Person controlling any such Lender or the Agent or any other condition regarding this Agreement or any Loan, and the result of any event referred to in clauses (i), (ii) or (iii) above shall be to increase the cost to any Lender or the Agent of making any Loan, or agreeing to make any Loan, or to reduce any amount received or receivable by any Lender or the Agent hereunder, then, within ten (10) days after demand and receipt of a detailed calculation and statement of cause by the Agent, on behalf of the affected Lenders, the Borrowers shall pay to the Agent, for the benefit of the affected Lenders, such additional amounts as will compensate such Lenders for such increased costs or reductions in amount.

(b) If any Lender or the Agent shall have determined that any Capital Guideline or the adoption or implementation of, or any change in, any Capital Guideline by the Governmental Authority charged with the interpretation or administration thereof, or compliance by any Lender or the Agent or any Person controlling such Lender or the Agent with any Capital Guideline or with any request or directive of any such Governmental Authority with respect to any Capital Guideline, or the implementation of, or any change in, any applicable accounting principles (in each case, whether or not having the force of law), either (i) affects or would affect the amount of capital required or expected to be maintained by any Lender or the Agent or any Person controlling such Lender or the Agent, and any Lender or the Agent determines that the amount of such capital is increased as a direct or indirect consequence of any Loans made or maintained, or any guaranty or participation with respect thereto, any Lender's or the Agent's or any such other controlling Person's other obligations hereunder; or (ii) has or would have the effect of reducing the rate of return on any Lender's or the Agent's any such other controlling Person's capital to a level below that which such Lender or the Agent or such controlling Person could have achieved but for such circumstances as a consequence of any Loans made or maintained, or any guaranty or participation with respect thereto or any agreement to make Loans, or such Lender's or the Agent's or such other controlling Person's other obligations hereunder (in each case, taking into consideration, such Lender's, Agent's or other controlling Person's policies with respect to capital adequacy), then, within ten (10) days after demand and receipt of a detailed calculation and statement of cause by the Agent, on behalf of the affected Lenders, the Borrowers shall pay to the Agent, for the benefit of such affected Lenders, from time to time such additional amounts as will compensate such Lenders for such cost of

maintaining such increased capital or such reduction in the rate of return on such Lender's or the Agent's or such other controlling Person's capital.

(c) All amounts payable under this Section 3.05 shall bear interest from the date that is ten (10) days after the date of demand by any Lender or the Agent until payment in full to such Lender or the Agent at the Reference Rate. A certificate of the Agent, on behalf of the affected Lenders, claiming compensation under this Section 3.05, specifying the event herein above described and the nature of such event shall be submitted by the Agent, on behalf of the affected Lenders, to the Administrative Borrower, setting forth the additional amount due and an explanation of the calculation thereof, and the Agent's reasons for invoking the provisions of this Section 3.05, and shall be rebuttably presumed to be correct, absent manifest error.

(d) If any Lender incurs increased costs and requests compensation under this Section 3.05, then the Administrative Borrower may (i) request such Lender use reasonable efforts to designate a different lending office for booking its loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches, or Affiliates, if in the judgment of such Lender, such designation or assignment (A) would eliminate or reduce amounts payable pursuant to Section 3.05 hereof, and (B) would not subject such Lender to any unreimbursed cost or expense, and would not otherwise be disadvantageous to such Lender. The Administrative Borrower shall pay all reasonable costs and expenses incurred by such Lender in connection with any such designation of assignment; and (ii) at its sole expense and effort, upon notice to such Lender and the Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 12.07), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that (A) if such assignee is not an existing Lender, the Administrative Borrower shall have received the prior written consent of the Agent, which consent shall not unreasonably be withheld, (B) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Administrative Borrower (in the case of all other amounts, which shall be paid to the Agent for distribution to such Lender) and (C) such assignment will result in a reduction in such compensation, payments or costs. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Administrative Borrower to require such assignment and delegation cease to apply.

Section 3.06 JOINT AND SEVERAL LIABILITY OF THE BORROWERS. (a) Notwithstanding anything in this Agreement or any other Loan Document to the contrary, each of the Borrowers hereby accepts joint and several liability hereunder and under the other Loan Documents in consideration of the financial accommodations to be provided by the Agent and the Lenders under this Agreement and the other Loan Documents, for the mutual benefit, directly and indirectly, of each of the Borrowers and in consideration of the undertakings of the other Borrowers to accept joint and several liability for the Obligations. Each of the Borrowers, jointly and severally, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrowers, with respect to the payment and

performance of all of the Obligations (including, without limitation, any Obligations arising under this Section 3.06), it being the intention of the parties hereto that all of the Obligations shall be the joint and several obligations of each of the Borrowers without preferences or distinction among them. If and to the extent that any of the Borrowers shall fail to make any payment with respect to any of the Obligations as and when due or to perform any of the Obligations in accordance with the terms thereof, then in each such event, the other Borrowers will make such payment with respect to, or perform, such Obligation. Subject to the terms and conditions hereof, the Obligations of each of the Borrowers under the provisions of this Section 3.06 constitute the absolute and unconditional, full recourse Obligations of each of the Borrowers, enforceable against each such Borrower to the full extent of its properties and assets, irrespective of the validity, regularity or enforceability of this Agreement, the other Loan Documents or any other circumstances whatsoever.

(b) The provisions of this Section 3.06 are made for the benefit of the Agent, the Lenders and their successors and assigns, and may be enforced by them from time to time against any or all of the Borrowers as often as occasion therefor may arise and without requirement on the part of the Agent, the Lenders or such successors or assigns first to marshal any of its or their claims or to exercise any of its or their rights against any of the other Borrowers or to exhaust any remedies available to it or them against any of the other Borrowers or to resort to any other source or means of obtaining payment of any of the Obligations hereunder or to elect any other remedy. The provisions of this Section 3.06 shall remain in effect until all of the Obligations shall have been paid in full or otherwise fully satisfied.

(c) Each of the Borrowers hereby agrees that it will not enforce any of its rights of contribution or subrogation against the other Borrowers with respect to any liability incurred by it hereunder or under any of the other Loan Documents, any payments made by it to the Agent or the Lenders with respect to any of the Obligations or any Collateral, until such time as all of the Obligations have been paid in full in cash. Any claim which any Borrower may have against any other Borrower with respect to any payments to the Agent or the Lenders hereunder or under any other Loan Documents are hereby expressly made subordinate and junior in right of payment, without limitation as to any increases in the Obligations arising hereunder or thereunder, to the prior payment in full in cash of the Obligations.

ARTICLE IV

CONDITIONS TO LOANS

Section 4.01 CONDITIONS PRECEDENT TO EFFECTIVENESS. This Agreement shall become effective as of the Business Day (the "EFFECTIVE DATE") when each of the following conditions precedent shall have been satisfied in a manner satisfactory to the Agent:

(a) PAYMENT OF FEES, ETC. The Borrowers shall have paid on or before the date of this Agreement all fees, costs, expenses and taxes then payable pursuant to Sections 2.06 and 12.04.

(b) REPRESENTATIONS AND WARRANTIES; NO EVENT OF DEFAULT. The following statements shall be true and correct: (i) the representations and warranties contained in

Article V and in each other Loan Document, certificate or other writing delivered to the Agent or any Lender pursuant hereto or thereto on or prior to the Effective Date are true and correct on and as of the Effective Date as though made on and as of such date; and (ii) no Default or Event of Default shall have occurred and be continuing on the Effective Date or would result from this Agreement or the other Loan Documents becoming effective in accordance with its or their respective terms.

(c) LEGALITY. The making of the Loans shall not contravene any law, rule or regulation applicable to the Agent or any Lender.

(d) DELIVERY OF DOCUMENTS. The Agent shall have received on or before the Effective Date the following, each in form and substance satisfactory to the Agent and, unless indicated otherwise, dated the Effective Date, and all conditions precedent to the effectiveness of such documents (where applicable) shall have been satisfied:

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

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

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

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

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

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

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

(viii) certified copies of request for copies of information on Form UCC-11, listing all effective financing statements which name as debtor any Loan Party and which are filed in the offices referred to in paragraph (x) below, together with copies of such financing statements, none of which, except for Permitted Liens and as otherwise agreed in writing by the Agent, shall cover any of the Collateral and the results

of searches for any tax Lien and judgment Lien filed against such Person or its property, which results, except for Permitted Liens and as otherwise agreed to in writing by the Agent, shall not show any such Liens;

(ix) payoff letters and termination and release agreements with respect to the Existing Credit Facilities and all related documents, duly executed by the Loan Parties and the Existing Lenders thereto, together with a satisfaction of mortgage for each mortgage filed by the Existing Lender and UCC-3 termination statements for all UCC-1 financing statements filed by the Existing Lenders and covering any portion of the Collateral;

(x) a UCC Filing Authorization Letter, duly executed by each Loan Party, together with appropriate financing statements on Form UCC-1, duly executed by each Loan Party and duly filed in such office or offices as may be necessary or, in the opinion of the Agent, desirable to perfect the security interests purported to be created by each Security Agreement, each Pledge Agreement and each Mortgage;

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

(xii) the Intercreditor Agreement, in form and substance satisfactory to the Agent, duly executed by the Borrowers, the Agent, the Lenders, the Revolving Credit Facility Agent and the Revolving Credit Facility Lenders;

(xiii) copies of the Proxies in favor of the Parent, duly executed by SSC and certified as true and correct copies thereof by an Authorized Officer of the Parent, which Proxies shall be in form and substance satisfactory to the Agent;

(xiv) the Registration Rights Agreement;

(xv) an opinion of Porter, Wright, Morris & Arthur LLP, counsel to the Loan Parties, substantially in the form of Exhibit H and as to such other matters as the Agent may reasonably request (including, without limitation, the Warrants) as well as opinions of local counsel with respect to Borrowers or Guarantors formed in Michigan and Missouri;

(xvi) a certificate of the appropriate official(s) of the state of organization and each state of foreign qualification of each Loan Party certifying as to the subsistence in good standing of, and the payment of taxes by, such Loan Party in such states;

(xvii) a true and complete copy of the charter, certificate of formation, certificate of limited partnership or other publicly filed organizational document of each Loan Party certified as of a recent date not more than thirty (30) days prior to the Effective Date (except as otherwise agreed by the Agent) by an appropriate official of the state of organization of such Loan Party, which shall set forth the same

complete name of such Loan Party as is set forth herein and the organizational number, if an organizational number is issued in such jurisdiction, and Federal employee identification number as of the Effective Date of such Loan Party;

(xviii) a copy of the by-laws, limited liability company agreement, operating agreement, agreement of limited partnership or other organizational document of each Loan Party, together with all amendments thereto, certified as of the Effective Date by an Authorized Officer of such Loan Party;

(xix) a copy of the resolutions of each Loan Party, certified as of the Effective Date by an Authorized Officer thereof, authorizing (A) the borrowings hereunder and the transactions contemplated by the Loan Documents to which such Loan Party is or will be a party, and (B) the execution, delivery and performance by such Loan Party of each Loan Document to which such Loan Party is or will be a party and the execution and delivery of the other documents to be delivered by such Person in connection herewith and therewith, including, without limitation, in the case of the Parent, the Warrants;

(xx) a certificate of an Authorized Officer of each Loan Party, certifying the names and true signatures of the representatives of such Loan Party authorized to sign each Loan Document to which such Loan Party is or will be a party and the other documents to be executed and delivered by such Loan Party in connection herewith and therewith, together with evidence of the incumbency of such authorized officers;

(xxi) a certificate of an Authorized Officer of the Administrative Borrower, certifying the names and true signatures of the persons that are authorized to provide the Notice of Borrowing and all other notices under this Agreement and the other Loan Documents;

(xxii) certificate of the chief financial officer of the Parent, certifying as to the Solvency the Loan Parties taken as a whole, which certificate shall be satisfactory in form and substance to the Agent;

(xxiii) a certificate of an Authorized Officer of each Loan Party, certifying as to the matters set forth in subsection
(b) of this Section 4.01;

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

(xxv) a copy of the Financial Statements and other such financial information regarding the Loan Parties, as the Agent or the Lenders may request, including, but not limited to interim Financial Statements;

(xxvi) a copy of the Business Plan, certified as true and correct by an Authorized Officer of the Administrative Borrower;

(xxvii) copies of the Material Contracts as in effect on the Effective Date, certified as true and correct copies thereof by an Authorized Officer of the Administrative Borrower, together with a certificate of an Authorized Officer of the Administrative Borrower stating that such agreements remain in full force and effect and that none of the Loan Parties has breached or defaulted on any of its obligations under such agreements in any material respect;

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

(xxix) evidence of completion of certain documentation as requested by the Agent in connection with Collateral consisting of intellectual property; and

(xxx) such other agreements, instruments, approvals, opinions and other documents, each satisfactory to the Agent in form and substance, as the Agent may reasonably request.

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

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

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

(h) MANAGEMENT. The Lenders shall be satisfied with the ongoing management of each Loan Party and the Agent shall have received satisfactory reference checks for key management of each Loan Party.

(i) DUE DILIGENCE. The Agent shall have completed its business and legal due diligence with respect to each Loan Party and the results thereof shall be acceptable to the Agent, in its sole and absolute discretion.

(j) WARRANT STOCK. The Parent shall have reserved out of its authorized and unissued Common Stock, solely for the purpose of effecting the exercise of the Warrants, 2,954,793 shares of Common Stock issuable upon the exercise of the Warrants to provide for the issuance of the Warrant Stock in accordance with the terms of the Warrants. The Warrant Stock shall have been authorized for listing on the New York Stock Exchange upon the official notice of its issuance.

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

(l) FUNDING. Each of CP and SSC (and/or its shareholders) shall have agreed to fund its Term B Loan Commitment and its Term C Loan Commitment.

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

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

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

ARTICLE V

REPRESENTATIONS AND WARRANTIES

Section 5.01 REPRESENTATIONS AND WARRANTIES. Each Loan Party hereby represents and warrants to the Agent and the Lenders as follows:

(a) ORGANIZATION; GOOD STANDING, ETC. Each Loan Party
(i) is a corporation, limited liability company or limited partnership duly organized, validly existing and in good standing under the laws of the state or jurisdiction of its organization; (ii) has all requisite power and authority to conduct its business as now conducted and as presently contemplated and, in the case of the Borrowers, to make the borrowings hereunder, and to execute and deliver each Loan Document to which it is a party, and to consummate the transactions contemplated thereby; and (iii) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, except where the failure to so qualify is not reasonably likely to have a Material Adverse Effect.

(b) AUTHORIZATION, ETC. The execution, delivery and performance by each Loan Party of each Loan Document to which it is or will be a party (i) have been duly

authorized by all necessary action, other than the receipt of the Requisite Approval in connection with the issuance of the Warrants; (ii) do not and will not contravene in any material respect its charter or by-laws, its limited liability company or operating agreement or its certificate of partnership or partnership agreement, as applicable, or any Applicable Law or any contractual restriction binding on or otherwise affecting it or any of its properties; (iii) do not and will not result in or require the creation of any Lien (other than pursuant to any Loan Document) upon or with respect to any of its properties; and (iv) do not and will not result in any default, noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal of any material permit, license, authorization or approval applicable to its operations or any of its properties.

(c) GOVERNMENTAL APPROVALS. No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority is required in connection with the due execution, delivery and performance by any Loan Party of any Loan Document to which it is or will be a party.

(d) ENFORCEABILITY OF LOAN DOCUMENTS. This Agreement is, and each other Loan Document to which any Loan Party is or will be a party, when delivered hereunder, will be, a legal, valid and binding obligation of such Person, enforceable against such Person in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability.

(e) CAPITALIZATION; SUBSIDIARIES.

(i) On the Effective Date, after giving effect to the transactions contemplated hereby to occur on the Effective Date, the authorized Capital Stock of the Parent and the issued and outstanding Capital Stock of the Parent are as set forth on Schedule 5.01(e)(i). All of the issued and outstanding shares of Capital Stock of the Parent have been validly issued and are fully paid and nonassessable, and the holders thereof are not entitled to any preemptive, first refusal or other similar rights. There are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Warrants or, upon exercise of any Warrant, the issuance of Warrant Shares, except for anti-dilution provisions which have been validly waived on or prior to the date hereof in respect of the issuance of the Warrants and, upon exercise of any Warrant, the issuance of Warrant Shares. The Warrants will be duly authorized upon receipt of the Requisite Approval, and, upon issuance in accordance with the terms hereof, will be validly issued, fully paid and non-assessable, free from all taxes, liens and charges with respect to the issue thereof, and shall not be subject to preemptive rights or other similar rights of stockholders of the Parent. The Warrant Shares have been duly authorized and reserved for issuance upon exercise of the Warrants, and upon such exercise, will be validly issued, fully paid and non-assessable, free from all taxes, liens and charges with respect to the issue thereof, and will not be subject to preemptive rights or other similar rights of stockholders of the Parent.

(ii) Schedule 5.01(e)(ii) is a complete and correct description of the name, jurisdiction of incorporation and ownership of the outstanding Capital Stock of each of the Subsidiaries of the Parent in existence on the date hereof. All of the issued

and outstanding shares of Capital Stock of such Subsidiaries have been validly issued and are fully paid and nonassessable, and the holders thereof are not entitled to any preemptive, first refusal or other similar rights. Except as indicated on such Schedule, all such Capital Stock is owned by the Parent or one or more of its wholly-owned Subsidiaries, free and clear of all Liens. Except as indicated on such Schedules there are no outstanding debt or equity securities of the Parent or any of its Subsidiaries and no outstanding obligations of the Parent or any of its Subsidiaries convertible into or exchangeable for, or warrants, options or other rights for the purchase or acquisition from the Parent or any of its Subsidiaries, or other obligations of any Subsidiary to issue, directly or indirectly, any shares of Capital Stock of any Subsidiary of the Parent.

(f) LITIGATION; COMMERCIAL TORT CLAIMS. Except as set forth in Schedule 5.01(f), (i) there is no pending or, to the best knowledge of any Loan Party, threatened action, suit or proceeding affecting any Loan Party before any court or other Governmental Authority or any arbitrator that (A) if adversely determined, could have a Material Adverse Effect or (B) relates to this Agreement or any other Loan Document or any transaction contemplated hereby or thereby and (ii) as of the Effective Date, none of the Loan Parties holds any commercial tort claims in respect of which a claim has been filed in a court of law or a written notice by an attorney has been given to a potential defendant.

(g) FINANCIAL CONDITION.

(i) All financial statements furnished to the Agent and to each Lender by the Loan Parties on a consolidated basis have been prepared in accordance with GAAP consistently applied (PROVIDED, HOWEVER, that unaudited financial statements are subject to normal year-end adjustments and to the absence of footnotes). All financial statements furnished to the Agent and to each Lender by the Loan Parties present fairly the condition of the Loan Parties at the date(s) thereof and the results of operations and cash flows (to the extent cash flows are required to be prepared) for the period(s) covered (PROVIDED, HOWEVER, that unaudited financial statements are subject to normal year end adjustments and to the absence of footnotes). There has been no change in the consolidated financial condition, results of operations, or cash flows of the Loan Parties since the date(s) of such financial statements, other than changes in the ordinary course of business, which changes have not been materially adverse, either singularly or in the aggregate.

(ii) No Loan Party has any material Contingent Obligations or material obligation under any Lease or Capitalized Lease which is not noted in the Loan Parties' Consolidated financial statements furnished to the Agent and to each Lender prior to the execution of this Agreement.

(h) COMPLIANCE WITH LAW, ETC. No Loan Party is in violation or has received notice of any violation of its organizational documents, any law, rule, regulation, judgment or order of any Governmental Authority applicable to it or any of its property or assets, or any material term of any agreement or instrument (including, without limitation, any Material Contract) binding on or otherwise affecting it or any of its properties, except where such

violation is not reasonably likely to have a Material Adverse Effect and no default or event of default has occurred and is continuing.

(i) ERISA. Except to the extent that such action is not reasonably likely to have a Material Adverse Effect, neither any Loan Party nor any ERISA Affiliate has within the past three (3) years:

(i) violated or failed to be in full compliance with any Loan Party's Employee Benefit Plan;

(ii) failed timely to file all reports and filings required by ERISA to be filed by any Loan Party;

(iii) engaged in any nonexempt "prohibited transactions" or "reportable events" (respectively as described in ERISA);

(iv) engaged in, or committed, any act such that a tax or penalty reasonably could be imposed upon any Loan Party on account thereof pursuant to ERISA;

(v) incurred any material accumulated funding deficiency within the meaning of ERISA;

(vi) terminated any Employee Benefit Plan such that a Lien could be asserted against any assets of any Loan Party on account thereof pursuant to ERISA; or

(vii) failed to make any required contribution or payment to, or made a complete or partial withdrawal from, any Employee Benefit Plan which is a multiemployer plan within the meaning of
Section 4001(a) of ERISA.

(j) TAXES, ETC.

(i) To the best knowledge of the Parent, all Federal and all material state and local tax returns and other reports required by Applicable Law to be filed by any Loan Party have been filed, or extensions have been obtained, and all taxes, assessments and other governmental charges imposed upon any Loan Party or any property of any Loan Party and which have become due and payable on or prior to the date hereof have been paid, except to the extent contested in good faith by proper proceedings which stay the imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to which adequate reserves have been set aside for the payment thereof on the Financial Statements in accordance with GAAP.

(ii) Except as described on Schedule 5.01(j):

(A) currently no Loan Party has received from any taxing authority any request to perform any examination of or with respect to any Loan Party nor any other written or verbal notice in any way relating to any

claimed failure by any Loan Party to comply with all Applicable Law concerning payment of any taxes or other amounts in the nature of taxes in excess of $500,000 in any one instance;

(B) no agreement exists which waives or extends any statute of limitations applicable to the right of any taxing authority to assert a deficiency or make any other claim for or in respect to Federal income taxes; and

(C) no issue has been raised in any tax examination of any Loan Party which reasonably could be expected to result in the assertion of a deficiency for any fiscal year open for examination, assessment, or claim by any taxing authority in excess of $500,000 in the aggregate for all Loan Parties.

(k) REGULATIONS T, U AND X. No Loan Party is or will be engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation T, U or X), and no 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.

(l) NATURE OF BUSINESS. No Loan Party is engaged in any business other than a Permitted Business.

(m) ADVERSE AGREEMENTS, ETC. To the best of such Loan Party's knowledge, no Loan Party is a party to any agreement or instrument, or subject to any charter, limited liability company agreement, partnership agreement or other corporate, partnership or limited liability company restriction or any judgment, order, regulation, ruling or other requirement of a court or other Governmental Authority, which is reasonably likely to have a Material Adverse Effect.

(n) PERMITS, ETC. Each Loan Party has, and is in compliance with, all permits, licenses, authorizations, approvals, entitlements and accreditations required for such Person lawfully to own, lease, manage or operate, or to acquire, each business currently owned, leased, managed or operated, or to be acquired, by such Person except where failure to so have or to so comply is not reasonably likely to have a Material Adverse Effect. No condition exists or event has occurred which, in itself or with the giving of notice or lapse of time or both, would result in the suspension, revocation, impairment, forfeiture or non-renewal of any such permit, license, authorization, approval, entitlement or accreditation, and there is no claim that any of the foregoing are not in full force and effect.

(o) PROPERTIES. (i) Each Loan Party has good and marketable title to, valid leasehold interests in, or valid licenses to use, all property and assets material to its business, free and clear of all Liens, except Permitted Liens. All such properties and assets are in good working order and condition, ordinary wear and tear excepted. No Loan Party has possession of any property on consignment to that Loan Party, except as listed on Schedule 5.01(o)(i), and those as to which the Loan Parties notify the Agent in accordance with the provisions of Section 7.03.

(ii) Schedule 5.01(o)(ii) sets forth a complete and accurate list, as of the Effective Date, of the location, by state and street address, of all real property owned or leased by each Loan Party and the name and address of the landlord with respect thereto. As of the Effective Date, each Loan Party has valid leasehold interests in the Leases described on Schedule 5.01(o)(ii) to which it is a party. Except as otherwise indicated on Schedule 5.01(o)(ii), there are no Leases for which any Affiliate of any Loan Party is the lessor. Each such Lease is valid and enforceable in accordance with its terms in all material respects and is in full force and effect. No consent or approval of any landlord or other third party in connection with any such Lease is necessary for any Loan Party to enter into and execute the Loan Documents to which it is a party, except as set forth on Schedule 5.01(o)(ii). No Loan Party and to the best knowledge of any Loan Party, no other party to any such Lease is in material default of its obligations thereunder, and no Loan Party (or any other party to any such Lease) has at any time delivered or received any notice of default which remains uncured under any such Lease and, as of the Effective Date, no event has occurred which, with the giving of notice or the passage of time or both, would constitute a material default under any such Lease.

(p) FULL DISCLOSURE. Each Loan Party has disclosed to the Agent all agreements, instruments and corporate or other restrictions to which it is subject, and all other matters known to it, that, individually or in the aggregate, is reasonably likely to result in a Material Adverse Effect. None of the documents, instruments, agreements, other reports, financial statements, certificates or other information furnished by or on behalf of any Loan Party to the Agent in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which it was made, not misleading; PROVIDED, that, with respect to projected financial information, each Loan Party represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. There is no contingent liability or fact that is reasonably likely to have a Material Adverse Effect which has not been set forth in a footnote included in the Financial Statements or a Schedule hereto.

(q) LEASES. Schedule 5.01(q), annexed hereto, sets forth as of the Effective Date a schedule of all presently effective Capitalized Leases. (Schedule 5.01(o)(ii) includes a list of all other presently effective Leases). Each of such Leases and Capitalized Leases is in full force and effect. No Loan Party, to the best of its knowledge, is in default or violation of any such Leases or Capitalized Leases, except where such violation is not reasonably likely to have a Material Adverse Effect. No Loan Party has received any notice or threat of cancellation of any such Lease or Capitalized Lease, which cancellation (together with all other similar cancellations) is reasonably likely to have a Material Adverse Effect.

(r) ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.01(r), (i) the operations of each Loan Party are in material compliance with all Environmental Laws; (ii) to the best of each Loan Party's knowledge, there has been no Release at any of the properties owned or operated by any Loan Party or a predecessor in interest, or at any disposal or treatment facility which received Hazardous Materials generated by any Loan Party or any predecessor in interest which is reasonably likely to have a Material Adverse Effect; (iii) no Environmental Action has been asserted against any Loan Party or any predecessor in interest nor does any Loan

Party have knowledge or notice of any threatened or pending Environmental Action against any Loan Party or any predecessor in interest which is reasonably likely to have a Material Adverse Effect; (iv) no Loan Party has knowledge of any Environmental Actions that have been asserted against any facilities that may have received Hazardous Materials generated by any Loan Party or any predecessor in interest which are reasonably likely to have a Material Adverse Effect; (v) to the best of each Loan Party's knowledge, no property now or formerly owned or operated by a Loan Party has been used as a treatment or disposal site for any Hazardous Material; (vi) no Loan Party has failed to report to the proper Governmental Authority any Release which is required to be so reported by any Environmental Laws which is reasonably likely to have a Material Adverse Effect;
(vii) each Loan Party holds all licenses, permits and approvals required under any Environmental Laws in connection with the operation of the business carried on by it, except for such licenses, permits and approvals as to which a Loan Party's failure to maintain or comply with is not reasonably likely to have a Material Adverse Effect; and (viii) no Loan Party has received any notification pursuant to any Environmental Laws that (A) any work, repairs, construction or Capital Expenditures are required to be made as a condition of continued compliance with any Environmental Laws, or any license, permit or approval issued pursuant thereto or (B) any license, permit or approval referred to above is about to be reviewed, made, subject to limitations or conditions, revoked, withdrawn or terminated, in each case, except as is not reasonably likely to have a Material Adverse Effect.

(s) INSURANCE. Schedule 5.01(s) sets forth a list of all insurance maintained by each Loan Party or under which any Loan Party is the named insured on the Effective Date. Each of such policies is in full force and effect and meets each of the requirements set forth in Section 6.01(e). To the best of such Loan Party's knowledge, neither the issuer of any such policy nor any Loan Party is in default or violation of such policy.

(t) USE OF PROCEEDS. The proceeds of the Loans shall be used to (i) refinance the Existing Credit Facilities of the Borrowers; and
(ii) pay fees and expenses in connection therewith.

(u) SOLVENCY. After giving effect to the transactions contemplated by this Agreement and before and after giving effect to each Loan, each Loan Party is, and the Loan Parties on a consolidated basis are, Solvent.

(v) LOCATION OF BANK ACCOUNTS. Schedule 5.01(v) sets forth a complete and accurate list as of the Effective Date of all deposit, checking and other bank accounts, all securities and other accounts maintained with any broker dealer and all other similar accounts maintained by each Loan Party, together with a description thereof (I.E., the bank or broker dealer at which such deposit or other account is maintained, the account number and a contact person at such bank or broker dealer).

(w) INTELLECTUAL PROPERTY. Except as set forth on Schedule 5.01(w), each Loan Party owns or licenses or otherwise has the right to use all material licenses, permits, patents, patent applications, trademarks, trademark applications, service marks, tradenames, copyrights, copyright applications, franchises, authorizations, non-governmental licenses and permits and other intellectual property rights that are necessary for the operation of its business, without infringement upon or conflict with the rights of any other Person with respect thereto,

except for such infringements and conflicts which, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect. Set forth on Schedule 5.01(w) is a complete and accurate list as of the Effective Date of all such material licenses, permits, patents, patent applications, trademarks, trademark applications, service marks, tradenames, copyrights, copyright applications, franchises, authorizations, non-governmental licenses and permits and other intellectual property rights of each Loan Party. To the best knowledge of each Loan Party, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by any Loan Party infringes upon or conflicts with any rights owned by any other Person, and no claim or litigation regarding any of the foregoing is pending or threatened, except for such infringements and conflicts which are not reasonably likely to have a Material Adverse Effect. To the best knowledge of each Loan Party, no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or proposed, which is reasonably likely to have a Material Adverse Effect.

(x) MATERIAL CONTRACTS AND LICENSES. Schedule 5.01(x) sets forth a complete and accurate list as of the Effective Date of all Material Contracts and all material licenses of each Loan Party, showing the parties and subject matter thereof. Each such Material Contract and license (i) is in full force and effect and is binding upon and enforceable against each Loan Party that is a party thereto and, to the best knowledge of such Loan Party, all other parties thereto in accordance with its terms, and (ii) is not in default due to or has not been violated by, the action of any Loan Party or, to the best knowledge of any Loan Party, any other party thereto, except where such default is not reasonably likely to have a Material Adverse Effect. No Loan Party has received any notice or threat of cancellation of any such Material Contract or license which cancellation (together with all similar cancellations) is reasonably likely to have a Material Adverse Effect.

(y) HOLDING COMPANY AND INVESTMENT COMPANY ACTS. None of the Loan Parties is (i) a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935, as amended; or (ii) an "investment company" or an "affiliated person" or "promoter" of, or "principal underwriter" of or for, an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended.

(z) LABOR RELATIONS.

(i) As of the Effective Date, no Loan Party has been, and none is presently a party to any collective bargaining or other labor contract except as listed on Schedule 5.01(z), annexed hereto.

(ii) There is not presently pending and, to any Loan Party's knowledge, there is not threatened any of the following, except to the extent any of the following is not reasonably likely to have a Material Adverse Effect:

(A) any strike, slowdown, picketing, work stoppage, or employee grievance process;

] (B) any proceeding against or affecting any Loan Party relating to the alleged violation of any Applicable Law pertaining to labor relations or before the National Labor Relations Board, the Equal Employment Opportunity Commission, or any comparable governmental body, organizational activity, or other labor or employment dispute against or affecting any Loan Party, which, if determined adversely to that Loan Party, is reasonably likely to have a Material Adverse Effect on that Loan Party;

(C) any lockout of any employees by any Loan Party (and no such action is contemplated by any Loan Party); or

(D) any application for the certification of a collective bargaining agent.

(iii) No event has occurred or circumstance exists which could provide the basis for any work stoppage or other labor dispute that would be reasonably likely to have a Material Adverse Effect.

(iv) Each Loan Party:

(A) has complied with all Applicable Law relating to employment, equal employment opportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining, the payment of social security and similar taxes, occupational safety and health, and plant closing, except where such non-compliance is not reasonably likely to have a Material Adverse Effect; and

(B) is not liable for the payment of compensation, damages, taxes, fines, penalties, or other amounts, however designated, for that Loan Party's failure to comply with any Applicable Law referenced in Section 5.01(z)(iv)(A) which is reasonably likely to have a Material Adverse Effect.

(aa) NO BANKRUPTCY FILING. No Loan Party is contemplating either an Insolvency Proceeding or the liquidation of all or a major portion of such Loan Party's assets or property, and no Loan Party has any knowledge of any Person contemplating an Insolvency Proceeding against it.

(bb) SEPARATE EXISTENCE. Except where the failure to observe, maintain or perform the following is not reasonably likely to have a Material Adverse Effect, all customary formalities regarding the corporate existence of each Loan Party will be observed.

(cc) NAME; JURISDICTION OF ORGANIZATION; ORGANIZATIONAL ID NUMBER; CHIEF PLACE OF BUSINESS; CHIEF EXECUTIVE OFFICE; FEIN. Schedule 5.01(cc) sets forth a complete and accurate list as of the date hereof of (i) the exact legal name of each Loan Party; (ii) the jurisdiction of organization of each Loan Party; (iii) the organizational identification number of each Loan Party as of the Effective Date (or indicates that such Loan Party has no organizational identification number); (iv) each place of business of each Loan Party; (v) the chief executive

office of each Loan Party; and (vi) the Federal employer identification number of each Loan Party as of the Effective Date.

(dd) TRADENAMES. Schedule 5.01(dd) hereto sets forth a complete and accurate list as of the Effective Date of (i) all names under which, to the knowledge of the Parent, any Loan Party has conducted its business in the past five (5) years; and (ii) all Persons with whom any Loan Party has consolidated or merged, or from whom any Loan Party has acquired in a single transaction or in a series of related transactions substantially all of such Person's assets in the past five (5) years.

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

(ff) SECURITY INTERESTS. Each Security Agreement creates in favor of the Agent, for the benefit of the Lenders, a legal, valid and enforceable security interest in the Collateral secured thereby. Upon the filing of the UCC-1 financing statements described in Section 4.01(d) and the recording of the Collateral Assignments for Security referred to in each Security Agreement in the United States Patent and Trademark Office and the United States Copyright Office, as applicable, such security interests in and Liens on the Collateral granted thereby shall be perfected security interests to the extent such security interests may be perfected by such filings, and no further recordings or filings are or will be required in connection with the creation, perfection or enforcement of such security interests and Liens, other than (i) the filing of continuation statements in accordance with Applicable Law, (ii) the recording of the Collateral Assignments for Security pursuant to each Security Agreement in the United States Patent and Trademark Office and the United States Copyright Office, as applicable, with respect to after-acquired U.S. patent and trademark applications and registrations and U.S. copyrights,
(iii) the recordation of appropriate evidence of the security interest in the appropriate foreign registry with respect to all foreign intellectual property, and (iv) control agreements for deposit accounts, liens on titles and similar items. Subject to Permitted Liens, such security interests in, and Liens on the Collateral shall be first-priority security interests; PROVIDED, HOWEVER, that any security interest in and Lien on Collateral that is Revolving Lender Primary Collateral (as defined in the Intercreditor Agreement) shall be a perfected, second-priority Lien on and security

interest (subject only to Permitted Liens and the prior Lien on and security interest in favor of the Revolving Credit Facility Agent for the benefit of the Revolving Credit Facility Lenders).

(gg) SCHEDULES. All of the information which is required to be scheduled to this Agreement is set forth on the Schedules attached hereto, is correct and accurate in all material respects and does not omit to state any information material thereto.

(hh) REPRESENTATIONS AND WARRANTIES IN DOCUMENTS; NO DEFAULT. All representations and warranties set forth in this Agreement and the other Loan Documents are true and correct in all material respects at the time as of which such representations were made and on the Effective Date. No Event of Default has occurred and is continuing and no condition exists which constitutes a Default or an Event of Default.

(ii) INDEBTEDNESS. The Loan Parties do not have any Indebtedness other than (i) Permitted Indebtedness, and (ii) a Loan Party's guaranties of Permitted Indebtedness.

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

(kk) UNRESTRICTED SUBSIDIARIES. Each Subsidiary of the Parent that is not a party to this Agreement is set forth on Schedule
5.01(kk) (the "UNRESTRICTED SUBSIDIARY"). Each Unrestricted Subsidiary is inactive or in the process of being liquidated or dissolved and the Unrestricted Subsidiaries do not, in the aggregate, have assets in excess of $500,000.

(ll) PROXY STATEMENT. The proxy statement described in Section 6.01(l), including any amendments or supplements thereto, shall not, at the time filed with the SEC, as of the date mailed to the Parent's shareholders or at the time of the Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Notwithstanding the foregoing, the Parent makes no representation or warranty with respect to any information provided by a Lender in writing specifically for use in the proxy statement. The proxy statement will comply as to form in all material respects with the provisions of the Exchange Act.

(mm) VOTING REQUIREMENTS. The Requisite Approval is the only vote of the holders of any class or series of the Parent's Capital Stock or other securities of the Parent necessary under Applicable Law or stock exchange (or similar self-regulatory organization) regulations to approve the issuance of the Warrants and the issuance of shares of Common Stock upon exercise thereof.

(nn) PROXY. The Parent has received irrevocable proxies from SSC (the "PROXIES") to vote 17,946,766 shares of Common Stock held by SSC in favor of the approval of the issuance of the Warrants. The shares of Common Stock that are subject to the Proxies constitute all Capital Stock of the Parent held by SSC.

ARTICLE VI

COVENANTS OF THE LOAN PARTIES

Section 6.01 AFFIRMATIVE COVENANTS. So long as any principal or interest on any Loan or any other Obligation (whether or not due) shall remain unpaid each Loan Party shall:

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

(b) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its Subsidiaries to comply, and use its assets in compliance with all Applicable Laws, rules, regulations and orders (including, without limitation, all Environmental Laws) except where the failure of such compliance will not have a Material Adverse Effect. Without limiting the foregoing such compliance shall include (i) paying before the same become delinquent all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or upon any of its properties, and (ii) paying all lawful claims, making all required withholdings, and filing all required reports and returns with Governmental Authorities which if unpaid, not withheld or unfiled might become a Lien or charge upon any of its properties, except (x) to the extent contested in good faith by proper proceedings which stay the imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP, or (y) for the inadvertent failure of a Loan Party to pay such lawful claims, make such withholdings or file such returns or reports so long as (A) the aggregate amount thereof does not exceed $500,000, (B) no Lien has been filed on account thereof and (C) promptly upon the date an Authorized Officer obtains knowledge or should have obtained knowledge thereof, the Loan Parties pay such claims, make such withholdings or file such returns or reports.

(c) PRESERVATION OF EXISTENCE, ETC. Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary except where the failure to so qualify would not have a Material Adverse Effect.

(d) MAINTENANCE OF PROPERTIES AND LEASES, ETC. (i) Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve the Collateral in good working order and condition (ordinary wear and tear and insured casualty excepted); and

(ii) comply, and cause each of its Subsidiaries to comply, in all material respects, at all times with the provisions of all Leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder.

(e) MAINTENANCE OF INSURANCE. Maintain, and cause each of its Subsidiaries to maintain, insurance (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with responsible and reputable insurance companies or associations (which shall include the companies presently providing such insurance, or such other companies as may be selected by the Administrative Borrower with the consent of the Agent, whose consent shall not be unreasonably withheld) with respect to its properties (including all real properties leased or owned by it) and business, in such amounts, in such form, for such periods and covering such risks as is required by any Governmental Authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated and in any event in amount, adequacy and scope reasonably satisfactory to the Agent. All policies covering the Collateral are to be made payable to the Agent for the benefit of the Lenders, as its interests may appear, in case of loss, under a standard non-contributory "lender" or "secured party" clause and

shall provide that the insurance, to the extent of the Agent's interest therein, shall not be impaired or invalidated, in whole or in part, by reason of any act or neglect of any Loan Party or by the failure of any Loan Party to comply with any warranty or condition of the policy and are to contain such other provisions as the Agent may reasonably require to fully protect the Lenders' interest in the Collateral and to obtain any payments to be made under such policies. Such policy shall not include an endorsement in favor of any other Person (other than the Revolving Credit Agent, the Convertible Loan Agent, the holder of any Permitted Liens and those Persons intended as beneficiaries of any builder's risk insurance). All certificates of insurance are to be delivered to the Agent and the policies are to be premium prepaid or with customary payment terms (which shall be complied with in a timely fashion by such Loan Parties), with the loss payable and additional insured endorsement in favor of the Agent and such other Persons as the Agent may designate from time to time, and shall provide for not less than thirty (30) days' prior written notice to the Agent of the exercise of any right of cancellation. The Borrowers shall furnish the Agent with certificates or other evidence satisfactory to the Agent regarding compliance by the Loan Parties with the foregoing requirements. If any Loan Party or any of its Subsidiaries fails to maintain such insurance, the Agent may arrange for such insurance, but at the Borrowers' expense and without any responsibility on the Agent's part for obtaining the insurance, the solvency of the insurance companies, the adequacy of the coverage, or the collection of claims; PROVIDED, HOWEVER, that the Agent's obtaining such insurance shall not constitute a waiver of any Event of Default occasioned by the Loan Parties' failure to have maintained such insurance. Upon the occurrence and during the continuance of an Event of Default and subject to the terms of the Intercreditor Agreement, the Agent shall have the sole right, in the name of the Lenders, any Loan Party and its Subsidiaries, to file claims under any insurance policies, to receive, receipt and give acquittance for any payments that may be payable thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments or other documents that may be necessary to effect the collection, compromise or settlement of any claims under any such insurance policies. The Administrative Borrower shall provide the Agent with prompt written notice of any change in the insurance policies owned by the Loan Parties, or under which any Loan Party is the named insured, from those in effect as of the Effective Date.

(f) OBTAINING OF PERMITS, ETC. Obtain, maintain and preserve, and cause each of its Subsidiaries to obtain, maintain and preserve, and take, and cause each of its Subsidiaries to take, all necessary action to timely renew, all permits, licenses, authorizations, approvals, entitlements and accreditations which are necessary or useful in the proper conduct of its business, except where the failure to do so is not reasonably likely to have a Material Adverse Effect.

(g) ENVIRONMENTAL. Except where a violation or failure is not reasonably likely to have a Material Adverse Effect, (i) keep any material property either owned or operated by it or any of its Subsidiaries free of any Environmental Liens; (ii) comply, and cause each of its Subsidiaries to comply, in all material respects with Environmental Laws and provide to the Agent any documentation of such compliance which the Agent may reasonably request; (iii) provide the Agent with written notice within five (5) days of any Release of a Hazardous Material in excess of any reportable quantity from or onto property at any time owned or operated by it or any of its Subsidiaries and take any Remedial Actions required to abate said Release; (iv) provide the Agent with written notice within ten (10) days of the receipt of any of

the following: (A) notice that a material Environmental Lien has been filed against any property of any Loan Party or any of its Subsidiaries; (B) commencement of any Environmental Action or notice that an Environmental Action will be filed against any Loan Party or any of its Subsidiaries which is reasonably likely to have a Material Adverse Effect; and (C) notice of a violation, citation or other administrative order to the extent that any of the foregoing are reasonably likely to have a Material Adverse Effect; and (v) defend, indemnify and hold harmless the Agent and the Lenders and their transferees, and their respective employees, agents, officers and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs or expenses (including, without limitation, attorney and consultant fees, investigation and laboratory fees, court costs and litigation expenses) arising out of (A) the generation, presence, disposal, Release or threatened Release of any Hazardous Materials on, under, in, originating or emanating from any property at any time owned or operated by any Loan Party or any of its Subsidiaries (or its predecessors in interest or title), (B) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to the presence or Release of such Hazardous Materials, (C) any request for information, investigation, lawsuit brought or threatened, settlement reached or order by a Governmental Authority relating to the presence or Release of such Hazardous Materials, (D) any violation of any Environmental Law and/or (E) any Environmental Action filed against the Agent or any Lender to the extent that any of the foregoing is reasonably likely to have a Material Adverse Effect.

(h) FURTHER ASSURANCES. Take such action and execute, acknowledge and deliver, and cause each of its Subsidiaries to take such action and execute, acknowledge and deliver, at its sole cost and expense, such agreements, instruments or other documents as the Agent may reasonably require from time to time in order (i) to carry out more effectively the purposes of this Agreement and the other Loan Documents, (ii) to subject to valid and perfected first priority Liens (subject to Permitted Liens) any of the Collateral of any Loan Party and its Subsidiaries, (iii) to establish and maintain the validity and effectiveness of any of the Loan Documents and the validity, perfection and priority of the Liens intended to be created thereby, and (iv) to better assure, convey, grant, assign, transfer and confirm unto the Agent and each Lender the rights now or hereafter intended to be granted to it under this Agreement or any other Loan Document. In furtherance of the foregoing, to the maximum extent permitted by Applicable Law, each Loan Party
(x) authorizes the Agent to execute any such agreements, instruments or other documents deemed reasonably necessary by the Agent in connection with this Agreement in such Loan Party's name and to file such agreements, instruments or other documents in any appropriate filing office, (y) authorizes the Agent to file any financing statement required hereunder or under any other Loan Document, and any continuation statement or amendment with respect thereto, in any appropriate filing office without the signature of such Loan Party, and (z) ratifies the filing of any financing statement, and any continuation statement or amendment with respect thereto, filed without the signature of such Loan Party prior to the date hereof.

(i) AFTER ACQUIRED REAL PROPERTY. Upon the acquisition by it or any of its Subsidiaries after the date hereof of any interest (whether fee or leasehold) in any real property (wherever located) (each such interest being an "AFTER ACQUIRED PROPERTY") (x) with a Current Value
(as defined below) in excess of $1,000,000 in the case of a fee interest, or (y) in the case of a leasehold interest, requiring the payment of annual minimum fixed rent exceeding

in the aggregate $750,000 (if the lease term (including extensions) is less than five years) or $250,000 (if the lease term (including extensions) is equal to or greater than five years), immediately so notify the Agent, setting forth with specificity a description of the interest acquired, the location of the real property, any structures or improvements thereon and either an appraisal or such Loan Party's good-faith estimate of the current value of such real property (for purposes of this Section, the "CURRENT VALUE"). The Agent shall notify such Loan Party whether it intends to require the Loan Party to use its reasonable best efforts (which shall not include the payment of any additional sums (other than incidental expenses) or the commencement of any legal action) to obtain a Mortgage and the other documents referred to below or in the case of leasehold, a leasehold Mortgage or Landlord's Agreement (pursuant to Section 6.01(i) hereof). Upon receipt of such notice requesting a Mortgage, the Person which has acquired such After Acquired Property shall promptly furnish to the Agent the following, each in form and substance satisfactory to the Agent: (i) a Mortgage with respect to such real property and related assets located at the After Acquired Property, each duly executed by such Person and in recordable form;
(ii) evidence of the recording of the Mortgage referred to in clause (i) above in such office or offices as may be necessary or, in the reasonable good faith opinion of the Agent, desirable to create and perfect a valid and enforceable first priority lien on the property purported to be covered thereby or to otherwise protect the rights of the Agent and the Lenders thereunder; (iii) in the case of a fee interest, a title insurance policy, a survey of such real property, certified to the Agent and to the issuer of the Title Insurance Policy by a licensed professional surveyor reasonably satisfactory to the Agent and a Phase I Environmental Site Assessment with respect to such real property, certified to the Agent by a company reasonably satisfactory to the Agent; (iv) in the case of a leasehold interest, a certified copy of the lease between the landlord and such Person with respect to such real property in which such Person has a leasehold interest, and the certificate of occupancy with respect thereto;
(v) in the case of a leasehold interest, an attornment and nondisturbance agreement between the landlord (and any fee mortgagee) with respect to such real property and the Agent; and (vi) such other documents or instruments (including, without limitation, guarantees and opinions of counsel) as the Agent may reasonably require, PROVIDED, HOWEVER, that nothing contained herein shall be deemed a modification of any other provisions of this Agreement restricting Acquisitions or investments by the Loan Parties. The Borrowers shall pay all reasonable fees and expenses, including reasonable attorneys' fees and expenses, and all title insurance charges and premiums, in connection with each Loan Party's obligations under this Section 6.01(i). Notwithstanding anything herein to the contrary, no Loan Party shall be restricted from acquiring After Acquired Property.

(j) CONDUCT OF BUSINESS. Conduct their business substantially in accordance with the Business Plan, or as otherwise approved by the Agent pursuant to Section 7.10 hereof. The foregoing shall not obligate the Borrower to achieve any specific financial performance and no financial covenants are intended to be imposed thereby.

(k) SHAREHOLDER MEETING. At the next annual meeting of shareholders of the Parent, which meeting shall occur on or before October 31, 2002, (the "MEETING"), the issuance of the Warrants shall be submitted to the shareholders for approval; PROVIDED, however, that in the event that a unilateral action by SSC or its shareholders results in the delay of the Meeting, then the Meeting shall occur on or before December 31, 2002. The Parent shall provide each shareholder entitled to vote at the Meeting with a proxy statement, which has been previously reviewed by the Agent and counsel of Agent's choice, soliciting each such

shareholder's affirmative vote at the Meeting in favor of the issuance of the Warrants. The Parent shall use its reasonable best efforts to solicit and obtain proxies from its shareholders and shall take all other action necessary and advisable to secure the vote of shareholders required by applicable law and the rules and regulations of the New York Stock Exchange to obtain their approval of the issuance of the Warrants. The Board of Directors of the Parent has unanimously approved the issuance of the Warrants and shall recommend that the shareholders of the Parent vote in favor of the approval of the issuance of the Warrants at the Meeting, and the Parent agrees that it shall include in the proxy statement such recommendation of the Board of Directors of the Parent that the shareholders of the Parent approve the issuance of the Warrants;

(l) PROXY. The Parent agrees to vote all shares of Common Stock subject to the Proxies in favor of the approval of the issuance of the Warrants; and

(m) WARRANT ISSUANCE. The Parent shall issue and deliver the Warrants promptly upon receipt of the Requisite Approval.

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

Section 6.02 NEGATIVE COVENANTS. So long as any principal of or interest on any Loan, or any other Obligation (whether or not due) shall remain unpaid, each Loan Party shall not:

(a) LIENS, ETC. (i) Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien upon or with respect to any of its properties, whether now owned or hereafter acquired; file or suffer to exist under the Uniform Commercial Code or any similar law or statute of any jurisdiction, a financing statement (or the equivalent thereof) that names it or any of its Subsidiaries as debtor; sign or suffer to exist any security agreement authorizing any secured party thereunder to file such financing statement (or the equivalent thereof); sell any of its property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable) with recourse to it or any of its Subsidiaries or assign or otherwise transfer, or permit any of its Subsidiaries to assign or otherwise transfer, any account or other right to receive income; other than, as to all of the above, Permitted Liens, or (ii) have possession of any property or consignment to that Loan Party, except as of the Effective Date as set forth on Schedule 5.01(o)(i), and after the Effective Date, those as to which the Loan Parties have notified the Agent, in accordance with Section 7.03.

(b) INDEBTEDNESS. Create, incur, assume, guarantee or suffer to exist, or otherwise become or remain liable with respect to, or permit any of its Subsidiaries to create, incur, assume, guarantee or suffer to exist or otherwise become or remain liable with respect to, any Indebtedness other than (i) Permitted Indebtedness and (ii) guaranties of Permitted Indebtedness of another Loan Party.

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

(A) if not Default or Event of Default shall have occurred and be continuing or would result thereform with the prior written consent of the Agent (which consent shall not be unreasonably withheld) any wholly-owned Subsidiary may merge, consolidate or amalgamate with or into a Borrower or with or into another wholly-owned Subsidiary of a Borrower, so long as in any merger, consolidation or amalgamation involving a Borrower, the Borrower is the surviving, continuing or resulting corporation, and no Default or Event of Default shall have occurred and be continuing or would result therefrom;

(B) if not Default or Event of Default shall have occurred and be continuing or would result thereform any Loan Party may liquidate or dissolve any Unrestricted Subsidiary so long as no Default or Event of Default shall have occurred and be continuing or would result therefrom;

(C) if not Default or Event of Default shall have occurred and be continuing or would result thereform any Loan Party may engage in any Acquisition which is a Permitted Acquisition, provided that all of the conditions contained in the definition of the term Permitted Acquisition are satisfied and no Default or Event of Default shall have occurred and be continuing or would result therefrom; and

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

(d) LINE OF BUSINESS. Engage in any business other than the business in which it is currently engaged or a business reasonably related thereto, or any retail lease department operation.

(e) LOANS; ADVANCES; INVESTMENTS, ETC. (i) Make or commit or agree to make any loan, advance guarantee of obligations, other extension of credit or capital contributions to, or hold or invest in or commit or agree to hold or invest in, or purchase or otherwise acquire any shares of the Capital Stock, bonds, notes, debentures or other securities of, or make or commit or agree to make any other investment in, any other Person; (ii) purchase or own any futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract; (iii) subordinate any debts or obligations owed to that Loan Party by any third party (but not by another Loan Party) to any other debts owed by such third party to any other Person; (iv) enter into leases of property or assets not constituting Permitted Acquisitions, unless such leases are not otherwise in violation of this Agreement; (v) organize or create any Affiliate other than in connection with a Permitted Acquisition; or (vi) acquire any assets other than in the ordinary course and conduct of that Loan Party's business as conducted at the execution of this Agreement, other than in connection with a Permitted Acquisition or as otherwise permitted in this Agreement, or permit any of its Subsidiaries to do any of the foregoing, except for:

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

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

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

(D) loans and advances to employees for business-related moving expenses, costs of replacement homes, business machines or supplies, automobiles and other similar expenses, in each case incurred in the ordinary course of business not to exceed (together with loans and advances under
Section 6.02(e)(E) and investments permitted under clause
(xiii) of the definition

of Permitted Investment) $6,000,000 in the aggregate outstanding to all employees at any one time;

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

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

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

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

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

(f) CAPITALIZED LEASE OBLIGATIONS. Create, incur or suffer to exist, or permit any of its Subsidiaries to create, incur or suffer to exist, any Capitalized Lease Obligations which would cause the aggregate amount of all obligations under Capitalized Leases entered into after the Effective Date owing by all Loan Parties and their Subsidiaries in any Fiscal Year to exceed the amount set forth in clause (iv) of the definition of Permitted Indebtedness.

(g) RESTRICTED PAYMENTS.

(i) Pay any cash dividend or other distribution, in respect of any class of such Loan Party's or any of its Subsidiaries' Capital Stock, other than dividends payable to another Loan Party or payable solely in the Capital Stock of such paying Loan Party;

(ii) make any repurchase, redemption, retirement, defeasance, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Capital Stock of any Loan Party or any direct or indirect parent of any Loan Party, now or hereafter outstanding; PROVIDED that the Loan Parties may make cash payments for any such purposes if:

(A) no Default or Event of Default shall have occurred and be continuing at the time of declaration or payment thereof;

(B) after giving effect to the making of any such cash payment, the aggregate amount so expended for such purposes subsequent to the Effective Date does not exceed $1,500,000; and

(C) after giving effect to the making of any such cash payment, the aggregate amount so expended for such purposes in any Fiscal Year of the Borrowers does not exceed $500,000.

(h) FEDERAL RESERVE REGULATIONS. Permit any Loan or the proceeds of any Loan under this Agreement to be used for any purpose that would cause such Loan to be a margin loan under the provisions of Regulation T, U or X of the Board.

(i) TRANSACTIONS WITH AFFILIATES. (i) Except as set forth in that certain confidential side letter from the Parent to the AGENT and for loans which may be made between Loan Parties permitted pursuant to Section 6.02(e) above, make any payment, nor give any value to any Affiliate except for leases, goods and services with such Affiliate for a price and on terms which shall be in the ordinary course of business at prices and on terms and conditions no less favorable to that Loan Party than those which would have been charged and imposed in an arm's-length transaction from unrelated third parties, except (A) sales of goods to an Affiliate for use or distribution outside of the United States of America which complies with the any applicable legal requirements of the Internal Revenue Code of 1986 and the Treasury Regulations, each as amended from time to time, PROVIDED, that such sales shall not exceed $500,000 in the aggregate in any Fiscal Year of the Borrowers, (B) loans, advances and other payments to officers and directors as part of their compensation which are entered into in the ordinary course of business and which are not otherwise prohibited under the Loan Documents, (C) other dividends and distributions to officers, directors and shareholders otherwise permitted under this Agreement, or (D) transactions between or among the Loan Parties not prohibited hereunder and not involving any other Affiliate; (ii) (A) without prior written consent of the Agent, amend, modify or waive any of the provisions of the instruments, documents or agreements described in the confidential side letter referred to in clause (i) above, the effect of which is to increase the payments or value to be furnished by a Loan Party to any Affiliate (other than for ordinary increases under such instruments, documents and agreements in the ordinary course of business, for which the Loan Parties are presently obligated to make payment in such instrument, document or agreement as in effect on the Effective Date) or which would cause such instruments, documents or agreements to be at prices and on terms and conditions no less favorable to that Loan Party than those which would have been charged and imposed in an arm's-length transaction from unrelated third parties, or (B) make any payments under such instruments, documents or agreements in advance of the date when due other than payments made to Affiliates to fund obligations or anticipated claims under medical claims, employee benefit plans or agreements, and other similar plans, all in accordance with current practice; and (iii) fail to use its best efforts to cause its Affiliates to execute and deliver to the Agent and the Lenders such documentation as the Agent may reasonably require to evidence the Affiliates' agreement with the provisions of this Section 6.02(i).

(j) LIMITATIONS ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES AND RESTRICTIONS ON OBLIGATIONS. Create or otherwise cause, incur, assume, suffer or permit to exist or become effective any consensual encumbrance or restriction of any kind on the ability of (i) any Loan Party to create or grant liens in favor of the Agent or to incur Obligations or (ii) any Subsidiary of any Loan Party (A) to pay dividends or to make any other distribution on any shares of Capital Stock of such Subsidiary owned by any Loan Party or any of its Subsidiaries, (B) to pay or prepay or to subordinate any Indebtedness owed to any Loan Party or any of its Subsidiaries,
(C) to make loans or advances to any Loan Party or any of its Subsidiaries or (D) to transfer any of its property or assets to any Loan Party or any of its Subsidiaries, or permit any of its Subsidiaries to do any of the foregoing; PROVIDED, HOWEVER, that nothing in any of clauses (A) through (D) of this
Section 6.02(j) shall prohibit or restrict compliance with:

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

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

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

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

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

(k) LIMITATION ON ISSUANCE OF CAPITAL STOCK. Issue or sell or enter into any agreement or arrangement for the issuance and sale of, or permit any of its Subsidiaries to issue or sell or enter into any agreement or arrangement for the issuance and sale of, any shares of its Capital Stock, any securities convertible into or exchangeable for its Capital Stock or any warrants, PROVIDED, that Parent may issue (i) the Warrant Stock, (ii) the shares issuable upon conversion of the Convertible Loan Agreement, (iii) up to 5,000,000 shares of Common Stock (and following the fifth anniversary of the Effective Date, up to an additional 5,000,000 shares of Common Stock) that are issued to Persons other than Affiliates of the Parent, including (A) shares of Common Stock or options exercisable therefor, issued or to be issued under the Parent's 2000 Stock Option Plan as in effect on the Effective Date or under any other employee stock option or purchase plan or plans, or pursuant to compensatory or incentive agreements, for officers, employees or consultants of the Parent or any of its Subsidiaries, in each case adopted or assumed after such date by the Parent's Board of Directors; provided in each case that the exercise or purchase price for any such share shall not be less than 95% of the fair market value (determined in good faith by the Parent's Board of Directors) of the Common Stock on the date

of the grant, and such additional number of shares as may become issuable pursuant to the terms of any such plans by reason of adjustments required pursuant to antidilution provisions applicable to such securities in order to reflect any subdivision or combination of Common Stock, by reclassification or otherwise, or any dividend on Common Stock payable in Common Stock, (B) shares of restricted stock issued by the Parent to executive officers of the Parent, and (C) shares of Common Stock issued by the Parent as charitable gifts.

(l) MODIFICATIONS OF INDEBTEDNESS, ORGANIZATIONAL DOCUMENTS AND CERTAIN OTHER AGREEMENTS, ETC. (i) Amend, modify or otherwise change (or permit the amendment, modification or other change) in any manner of any of the provisions of any of its or its Subsidiaries' Indebtedness or of any instrument or agreement (including, without limitation, any purchase agreement, indenture, loan agreement or security agreement) relating to any such Indebtedness if such amendment, modification or change (A) would shorten the final maturity or average life to maturity of, or require any payment to be made earlier than the date originally scheduled on, such Indebtedness or would increase the interest rate applicable to such Indebtedness, unless (x) Excess Availability, both immediately prior to, immediately after giving effect thereto and projected Excess Availability on a pro forma projected basis for the 12 months immediately following, such amendment, modification or change is at least $100 million, or (y) the total amount of such Indebtedness so amended, modified or changed since the Effective Date (together with the amounts permitted under clause (ii) hereof), does not exceed $500,000 in any Fiscal Year of the Borrowers, (B) would change the subordination provision, if any, of such Indebtedness, or (C) would otherwise be adverse to the Lenders in any respect;
(ii) except for the Obligations and except as otherwise explicitly permitted herein, make any voluntary or optional payment, prepayment, redemption, defeasance, sinking fund payment or other acquisition for value of any of its or its Subsidiaries' Indebtedness (including, without limitation, by way of depositing money or securities with the trustee therefor before the date required for the purpose of paying any portion of such Indebtedness when due), or refund, refinance, replace or exchange any other Indebtedness for any such Indebtedness (except to the extent such Indebtedness is otherwise expressly permitted by the definition of "Permitted Indebtedness"), or make any payment, prepayment, redemption, defeasance, sinking fund payment or repurchase of any outstanding Indebtedness as a result of any asset sale, change of control, issuance and sale of debt or equity securities or similar event, or give any notice with respect to any of the foregoing, unless (x) Excess Availability, both immediately prior to, immediately after giving effect thereto and projected Excess Availability on a pro forma projected basis for the 12 months immediately following, such payment is at least $100 million, or (y) the total amount of such Indebtedness so paid since the Effective Date (together with the amounts permitted under clause (i)(A) hereof), does not exceed $500,000 in any Fiscal Year of the Borrowers; (iii) except as permitted by Section 6.02(c), amend, modify or otherwise change its name, jurisdiction of organization, organizational identification number or FEIN; (iv) amend, modify or otherwise change its certificate of incorporation or bylaws (or other similar organizational documents), including, without limitation, by the filing or modification of any certificate of designation, or any agreement or arrangement entered into by it, with respect to any of its Capital Stock (including any shareholders' agreement), or enter into any new agreement with respect to any of its Capital Stock, except any such amendments, modifications or changes or any such new agreements or arrangements pursuant to this clause (iv) that either individually or in the aggregate, could not have a Material Adverse Effect; (v) amend, modify, waive or otherwise change (or permit the amendment, modification, waiver or other change in any manner) of any provisions in the

Revolving Credit Facility Documents relating to (A) Availability, Excess Availability, Excess Availability Reserve, Gross Availability or the Borrowing Base (as each is defined in the Revolving Credit Facility) which amendment has or could have the effect of increasing Availability, Excess Availability, Gross Availability or the Borrowing Base or decreasing the Availability Reserve, (B) the Credit Card Advance Rate, the Inventory Advance Rate, the Appraised Inventory Percentage or the Appraised Inventory Liquidation Value (as each is defined in the Revolving Credit Facility), in each case, to an amount in excess of the rates set forth in the Revolving Credit Facility as in effect on the date hereof, (C) the definition of Cash Control Event and the related provisions contained in Article VII of the Revolving Credit Agreement, (D) the provisions of the Revolving Credit Agreement relating to the Term Loan Debt, and (E) any covenants or Events of Default contained in the Revolving Credit Agreement, if such amendments imposes any additional or more restrictive representations, covenants (financial or otherwise) or events of default than is contained in the Revolving Credit Agreements in effect on the date hereof, and, if, notwithstanding the foregoing, such amendment is made, the Administrative Borrower shall promptly notify, and furnish a copy thereof to the Agent; (vi) agree to any material amendment or other material change to or waiver of any of its rights under any Material Contract without the consent of the Agent (which consent shall not be unreasonably withheld); or (vii) alter, modify or amend any Lease in a manner which is reasonably likely to have a Material Adverse Effect.

(m) INVESTMENT COMPANY ACT OF 1940. Engage in any business, enter into any transaction, use any securities or take any other action or permit any of its Subsidiaries to do any of the foregoing, that would cause it or any of its Subsidiaries to become subject to the registration requirements of the Investment Company Act of 1940, as amended, by virtue of being an "investment company" or a company "controlled" by an "investment company" not entitled to an exemption within the meaning of such Act.

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

(o) ERISA. Do or permit any ERISA Affiliate to do any of the following, if as a result thereof, such Loan Party or ERISA Affiliate will, or could reasonably be expected to, incur liability that is reasonably likely to have a Material Adverse Effect:

(i) violate or fail to be in full compliance with any Loan Party's Employee Benefit Plan;

(ii) fail timely to file all reports and filings required by ERISA to be filed by any Loan Party;

(iii) engage in any nonexempt "prohibited transactions" or "reportable events" (respectively as described in ERISA);

(iv) engage in, or commit any act such that a tax or penalty reasonably could be imposed upon any Loan Party on account thereof pursuant to ERISA;

(v) incur any material accumulated funding deficiency within the meaning of ERISA;

(vi) terminate any Employee Benefit Plan such that a Lien could be asserted against any assets of any Loan Party on account thereof pursuant to ERISA; or

(vii) fail to make any required contribution or payment to, or make a complete or partial withdrawal from, any Employee Benefit Plan which is a multiemployer plan within the meaning of
Section 4001(a) of ERISA.

(p) ENVIRONMENTAL. Knowingly or negligently permit the use, handling, generation, storage, treatment, Release or disposal of Hazardous Materials at any property owned or leased by it or any of its Subsidiaries, except in compliance with Environmental Laws and so long as such use, handling, generation, storage, treatment, Release or disposal of Hazardous Materials is not reasonably likely to result in a Material Adverse Effect.

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

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

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

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

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

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

(s) UNRESTRICTED SUBSIDIARIES. Permit any Unrestricted Subsidiary at any time to carry on any business activity or have any assets in excess of $500,000 in the aggregate;

(t) INTELLECTUAL PROPERTY. Conduct its business so as to infringe the patents, industrial designs, trademarks, trade names, trade styles, brand names, service marks, logos, copyrights, trade secrets, know-how, confidential information, or other intellectual or proprietary property of any third Person, except where such infringement is not reasonably likely to have a Material Adverse Effect.

ARTICLE VII

REPORTING REQUIREMENTS

Section 7.01 MAINTAIN RECORDS. The Loan Parties shall:

(a) At all times, keep proper books of account, in which full, true, and accurate entries shall be made of all of the Loan Parties' financial transactions, all in accordance with GAAP applied consistently with prior periods to fairly reflect the consolidated financial condition of the Loan Parties at the close of, and its results of operations for, the periods in question.

(b) Timely provide the Agent with those financial reports, statements, and schedules required by this Article VII or otherwise, each of which reports, statements and schedules shall be prepared, to the extent applicable, in accordance with GAAP applied consistently with prior periods to fairly reflect the Consolidated financial condition of the Loan Parties at the close of, and the results of operations for, the period(s) covered therein.

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

(d) At all times, retain (i) Deloitte and Touche, LLP, or such other nationally recognized independent certified public accountants who are reasonably satisfactory to SSC (as long as it remains in Control of the Borrowers) and the Agent, and instruct such accountants, subject to the terms of such accountants' internal policies, and subject to the confidentiality provisions of this Agreement, to fully cooperate with, and be available to, the Agent to discuss the Loan Parties' financial performance, financial condition, operating results, controls, and such other matters, within the scope of the retention of such accountants, as may be raised by the Agent.

(e) Not change any Loan Party's Fiscal Year.

Section 7.02 ACCESS TO RECORDS.

(a) Each Loan Party shall accord the Agent with reasonable access during normal business hours from time to time as the Agent may require to all properties owned by or over which any Loan Party has control. The Agent shall have the right, and each Loan Party will permit the Agent from time to time as the Agent may request, to examine, inspect, copy, and make extracts from any and all of the Loan Parties' books, records, electronically

stored data, papers, and files. Each Loan Party shall make that Loan Party's copying facilities available to the Agent.

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

(c) The Agent from time to time may designate one or more representatives to exercise the Agent's rights under this Section 7.02 as fully as if the Agent were doing so; PROVIDED, that the Agent shall not designate a Person which is in a Competitive Business.

Section 7.03 PROMPT NOTICE TO ADMINISTRATIVE AGENT.

(a) The Administrative Borrower shall provide the Agent with written notice promptly upon the occurrence of any of the following events, which written notice shall be with reasonable particularity as to the facts and circumstances in respect of which such notice is being given (i) any change in any Loan Party's president, chief executive officer, chief operating officer, and chief financial officer (without regard to the title(s) actually given to the Persons discharging the duties customarily discharged by officers with those titles); (ii) any ceasing of any Loan Party's payment of the debts of that Loan Party generally as they mature, in the ordinary course, to its creditors (other than its ceasing of making of such payments on account of a dispute which, if adversely determined to the Loan Parties is not reasonably likely to have a Material Adverse Effect); (iii) any failure by any Loan Party to pay rent at any of that Loan Party's locations, which failure continues for more than three (3) days following the last day on which such rent was payable unless such failure is not reasonably likely to have a Material Adverse Effect;
(iv) any material adverse change in the business, operations, or financial affairs of any Borrower; (v) the occurrence of any Default; (vi) any intention on the part of any Loan Party to discharge that Loan Party's present independent accountants or any withdrawal or resignation by such independent accountants from their acting in such capacity (as to which, see Section 7.01(d)); (vii) any litigation which, if determined adversely to any Loan Party, is reasonably likely to have a Material Adverse Effect; (viii) any intention of a Borrower to enter into a consignment arrangement or licensing or other similar agreement
(whether for intellectual property, leased departments in stores or otherwise) with any other Person; (ix) any additional or amended collective bargaining or other labor contract entered into after the Effective Date; (x)any Material Accounting Changes; (xi) any material adverse change relating to the type, quantity or quality of the Collateral or the Lien granted thereon; (xii) any event, occurrence or circumstance not specifically described herein that is reasonably likely to have a Material Adverse Effect; (xiii) any Loan Party's entering into a license agreement after the Effective Date; (xiv) any Loan Party's entering into a Capitalized Lease after the Effective Date; and (xv) any Loan Party's entering into a Lease after the Effective Date.

(b) The Administrative Borrower shall (i) provide the Agent, when so distributed, with copies of any materials distributed to the shareholders of the Parent; (ii) provide the Agent (A) when filed, copies of all filings with the SEC. Such copies may be provided in electronic format; (B) when received, copies of all correspondence from the SEC, other than routine general communications from the SEC; and (C) should any of the information on any of the Schedules hereto become misleading in any material respect, promptly advise the Agent in writing with such revisions or updates as may be necessary or appropriate to update or correct the same; PROVIDED, HOWEVER, that no such Schedule shall be deemed to have been amended, modified or superseded by any such correction or update, nor shall any breach of any representation or warranty resulting from the inaccuracy or incompleteness of such Schedule be deemed to have been cured or waived, unless and until the Agent, in its discretion shall have accepted in writing such revisions; (iii) at the request of Agent, from time to time, provide the Agent with copies of all advertising (including copies of all print advertising and duplicate tapes of all video and radio advertising); and (iv)provide the Agent, when received by and Loan Party, with a copy of any management letter or similar communications from any independent accountant of any Loan Party.

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

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

Section 7.06 QUARTERLY REPORTS. Quarterly, within forty-five
(45) days following the end of each of the Loan Parties' fiscal quarters, the Administrative Borrower shall provide the Agent with the following:

(a) An original counterpart of a management prepared financial statement (which shall be prepared in the same manner and using the same assumptions as set forth in the forecasts furnished to, and approved by, the Agent pursuant to the provisions of Section 7.10(c) hereof) for (A) the Loan Parties on a consolidated basis, (B) the DSW/Shonac Business, (C) the Filene's Business, and (D) the Value City Business, in each case for the fiscal quarter most recently ended, and for the period from the beginning of the Loan Parties' then current fiscal year through the end of the subject quarter, with comparative information for the same period of the previous fiscal year, which statement shall include a balance sheet, statement of operations and cash flows and comparisons for the corresponding quarter of the then immediately previous year, as well as to the Loan Party's forecast;

(b) A list of all leases entered into or terminated during such quarter; and

(c) The officer's compliance certificate described in
Section 7.08.

Section 7.07 ANNUAL REPORTS.

(a) Annually, within ninety (90) days following the end of the Loan Parties' fiscal year, the Administrative Borrower shall furnish the Agent with the following: (i) an original signed counterpart of the Loan Parties' consolidated annual financial statement, which statement shall have been prepared by, and bear the unqualified opinion of, the Parent's independent certified public accountants (i.e. said statement shall be "certified" by such accountants) and shall include, at a minimum (with comparative information for the then prior fiscal year) a balance sheet, statement of operations, statement of changes in shareholders' equity, and cash flows; (ii) a consolidating annual financial statement for (x) the DSW/Shonac Business, (y) the Filene's Business, and (z) the Value City Business which shall include (with comparative information for the then prior fiscal year) a balance sheet, statement of changes in shareholders' equity, and cash flows; and (iii) the officer's compliance certificate described in Section 7.08.

(b) No later than fifteen (15) days prior to the end of each of the Loan Parties' fiscal years, the Administrative Borrower shall give written notice to such independent certified accountants (with a copy of such notice, when sent, to the Agent) that such annual financial statement will be delivered by the Administrative Borrower to the Agent and that the Administrative Borrower has been advised that the Agent and each Lender will rely thereon with respect to the administration of, and transactions under, the credit facilities contemplated by this Agreement.

Section 7.08 OFFICER'S CERTIFICATES. The Administrative Borrower shall cause either the Administrative Borrower's chief executive officer, president, executive vice president, chief financial officer, controller, or treasurer (collectively, an "AUTHORIZED OFFICER"), in each instance, to provide such Person's Certificate with those monthly financial statements to be provided within thirty (30) days of the end of each month and with those to be provided quarterly and annual statements to be furnished pursuant to this Agreement, which Certificate shall:

(a) Indicate that (i) with respect to the Consolidated financial statement, the subject statement was prepared in accordance with GAAP consistently applied, and (ii) with respect to all financial statements, presents fairly the financial condition of the applicable Loan Parties at the close of, and the results of the applicable Loan Parties' operations and cash flows (where such cash flows are required to be provided) for, the period(s) presented, SUBJECT, HOWEVER, to the following: (x) usual year end adjustments (this exception shall note be included in the Certificate which accompanies such annual statement); and (y) Material Accounting Changes, in which event, such Certificate shall include a schedule (in reasonable detail) of the effect of each such Material Accounting Change.

(b) Indicate either that (i) no Default has occurred and is continuing, or (ii) if such an event has occurred, its nature (in reasonable detail) and the steps (if any) being taken or contemplated by the Loan Parties to be taken on account thereof.

Section 7.09 INVENTORIES, APPRAISALS AND AUDITS.

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

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

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

(d) If made available to any Loan Party, the Agent shall receive copies of the results of any commercial finance field examination of the Loan Parties' books and records conducted during any period in which this Agreement is in effect.

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

Section 7.10 ADDITIONAL FINANCIAL INFORMATION.

(a) In addition to all other information required to be provided pursuant to this Article VII, the Administrative Borrower promptly shall provide the Agent with such other and additional information concerning the Loan Parties, the Collateral, the operation of the Loan Parties' business, and the Loan Parties' financial condition, including original counterparts of financial reports and statements, as the Agent may from time to time reasonably request from the Administrative Borrower.

(b) The Administrative Borrower shall, upon the Agent's request, provide the Agent, from time to time hereafter, with updated forecasts of the Loan Parties' anticipated performance and operating results for the current fiscal year. Such forecasts shall be in a format consistent with the format previously provided to the Agent.

(c) In all events, the Administrative Borrower, no sooner than ninety (90) nor later than sixty (60) days prior to the end of each of the Loan Parties' fiscal years, shall provide the Agent with an updated and extended forecast which shall go out at least through the end of the then next fiscal year and shall include a statement of operations, balance sheet, and statement of cash flow, by month, each consolidated (with consolidating schedules by Division) and each prepared in conformity with GAAP and consistent with the Loan Parties' then current accounting practices.

(d) When available the "Annual Budget", as approved by the Administrative Borrower's Board of Directors, shall be provided to the Agent. The Annual Budget shall be subject to the approval of the Agent (whose approval shall not be unreasonably withheld) only if the Annual Budget varies in a material way from the Business Plan for such fiscal year.

(e) Each Loan Party recognizes that all commercial finance examinations, inventories, analysis, financial information, and other materials which the Agent may obtain, develop, or receive with respect to the Loan Parties (other than appraisals and inventories received from third parties) are confidential to the Agent and that, except as otherwise provided herein, no Loan Party is entitled to receipt of any of such commercial finance examinations, inventories, analysis, financial information, and other materials, nor copies or extracts thereof or therefrom.

Section 7.11 FORMAT OF INFORMATION. All information required to be delivered pursuant to this Article VII may be delivered by and in electronic format.

ARTICLE VIII

USE OF COLLATERAL

Section 8.01 USE OF INVENTORY CONTROL.

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

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

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

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

Section 8.04 VALIDITY OF ACCOUNTS.

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

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

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

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

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

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

(b) Sign change of address forms to change the address to which each Borrowers' mail is to be sent to such address as the Agent shall designate (after which copies of

all such mail shall be promptly furnished to the Administrative Borrower); receive and open each Borrowers' mail; remove any Collateral and proceeds of Collateral therefrom and turn over the balance of such mail either to the Administrative Borrower or to any trustee in bankruptcy or receiver of the Administrative Borrower, or other legal representative of a Borrower whom the Agent determines to be the appropriate Person to whom to so turn over such mail;

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

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

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

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

(g) Use, license or transfer any or all General Intangibles of each Borrower.

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

ARTICLE IX

EVENTS OF DEFAULT

Section 9.01 EVENTS OF DEFAULT. The occurrence of any event described in this Article IX respectively shall constitute an Event of Default herein. The occurrence of any Event of Default shall also constitute, without notice or demand, a default under all other agreements between the Agent or any Lender and any Loan Party and instruments and papers heretofore, now, or hereafter given the Agent or any Lender by any Loan Party in connection with any of the Loan Documents. An Event of Default shall occur upon:

(a) The failure by any Loan Party to pay when due any principal of, interest on, or fees in respect of, the Loans;

(b) The failure by any Loan Party to pay when due (or upon demand, if payable on demand) any payment Obligation other than any payment Obligation on account of the principal of, or interest on, or fees in respect of the Loans;

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

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

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

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

(e) the failure by any Loan Party, within twenty (20) days following the earlier of any Authorized Officer's knowledge of a breach of any covenant or Obligation not described in any of clauses (a) through (d) above, or of its receipt of written notice from the Agent of the breach of any of such covenants or Obligations, provided that if such failure cannot be reasonably cured within such twenty (20) day period and the Loan Parties have diligently proceeded, and continue to diligently proceed, to effectuate a cure of such failure, such failure shall not be an Event of Default hereunder unless
(i) such failure is not cured within twenty (20) days after the expiration of such initial twenty (20) day period, or (b) such failure, in the reasonable judgment of the Agent, is reasonably likely to have a Material Adverse Effect;

(f) the determination by the Agent that any representation or warranty at any time made by any Loan Party to the Agent or any Lender was not true or complete in all material respects when given;

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

(h) the occurrence of any breach of any covenant or Obligation imposed by, or of any default under, any agreement between the Agent or any Lender and any Loan Party or instrument given by any Loan Party to any Agent or any Lender relating to Indebtedness of any Loan Party in excess of $1,000,000 in the aggregate and the expiration, without cure, of any applicable grace period (notwithstanding that the Agent or Lender may not have exercised all or any of its rights on account of such breach or default);

(i) the occurrence of any uninsured loss, theft, damage, or destruction of or to any material portion of the Collateral;

(j) (i) the entry of any judgment in excess of Two Million Five Hundred Thousand Dollars ($2,500,000.00) against any Loan Party, which judgment (A) is not covered by insurance (as to which the insurer has not notified the applicable Loan Party of the insurer's reservation of rights) or (B) is not satisfied, stayed (if a money judgment) or appealed from (with execution or similar process stayed) within thirty (30) days of its entry;

(ii) the entry of any order or the imposition of any other process having the force of law, the effect of which is to restrain the conduct by any Borrower of its business in the ordinary course and which is reasonably likely to have a Material Adverse Effect;

(k) any act by, against, or relating to any Loan Party, or its property or assets, which act constitutes the determination, by any Loan Party, to initiate a program of substantial or total self-liquidation; application for, consent to, or sufferance of the appointment of a receiver, trustee, or other Person, pursuant to court action or otherwise, over all, or any part of any Loan Party's property; the granting of any trust mortgage or execution of an assignment for the benefit of the creditors of any Loan Party, or the occurrence of any other voluntary or involuntary liquidation or extension of debt agreement for any Loan Party; the offering by or entering into by any Loan Party of any composition, extension, or any other arrangement seeking relief generally from or extension of the debts of any Loan Party; or the initiation of any judicial or non-judicial proceeding or agreement by, against, or including any Loan Party which seeks or intends to accomplish a reorganization or arrangement with creditors; and/or the initiation by or

on behalf of any Loan Party of the liquidation or winding up of all or any part of any Loan Party's business or operations except that any of the foregoing actions which are commenced against a Loan Party shall not be deemed an Event of Default hereunder as long as such action is timely contested in good faith by that Loan Party by appropriate proceedings and is dismissed within 60 days of the institution of the foregoing;

(l) the failure by any Loan Party to generally pay the debts of that Loan Party as they mature; adjudication of bankruptcy or insolvency relative to any Loan Party; the entry of an order for relief or similar order with respect to any Loan Party in any proceeding pursuant to the Bankruptcy Code or any other Federal bankruptcy law; the filing of any complaint, application, or petition by any Loan Party initiating any matter in which any Loan Party is or may be granted any relief from the debts of that Loan Party pursuant to the Bankruptcy Code or any other insolvency statute or procedure; the filing of any complaint, application, or petition against any Loan Party initiating any matter in which that Loan Party is or may be granted any relief from the debts of that Loan Party pursuant to the Bankruptcy Code or any other insolvency statute or procedure, which complaint, application, or petition is not timely contested in good faith by that Loan Party by appropriate proceedings or, if so contested, is not dismissed within 60 days of when filed;

(m) the termination or attempted termination of any Guaranty by any Guarantor;

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

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

(o) any Change in Control; or

(p) an event or development occurs which, as determined by the Agent in its discretion, has, or could reasonably be expected to have, a Material Adverse Effect,

then, and in any such event, the Agent may, with the consent or at the direction of the Required Lenders, by notice to the Administrative Borrower, (i) declare all or any portion of the Loans and other Obligations then outstanding to be due and payable, whereupon all or such portion of the aggregate principal of all Loans and other Obligations, all accrued and unpaid interest thereon, all fees and all other amounts payable under this Agreement and the other Loan Documents shall become due and payable immediately, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by each Loan Party and (ii) exercise any and all of its other rights and remedies under Applicable Law, hereunder and

under the other Loan Documents; PROVIDED, HOWEVER, that upon the occurrence and during the continuance of any Event of Default described in subsection (k) or
(l) of this Section 9.01, without any notice to any Loan Party or any other Person or any act by the Agent or any Lender, all Commitments shall automatically terminate and all Loans then outstanding, together with all accrued and unpaid interest and PIK Interest thereon, all fees and all other amounts due under this Agreement and the other Loan Documents shall become due and payable automatically and immediately, without presentment, demand, protest or notice of any kind, all of which are expressly waived by each Loan Party.

ARTICLE X

AGENT

Section 10.01 APPOINTMENT. Each Lender (and each subsequent maker of any Loan by its making thereof) hereby irrevocably appoints and authorizes the Agent to perform the duties of the Agent as set forth in this Agreement including: (i) to receive on behalf of each Lender any payment of principal of or interest on the Loans outstanding hereunder and all other amounts accrued hereunder for the account of the Lenders and paid to the Agent, and, subject to Sections 2.02 and 3.02 of this Agreement, to distribute promptly to each Lender its Pro Rata Share of all payments so received; (ii) to distribute to each Lender copies of all material notices and agreements received by the Agent and not required to be delivered to each Lender pursuant to the terms of this Agreement, provided that the Agent shall not have any liability to the Lenders for the Agent's inadvertent failure to distribute any such notices or agreements to the Lenders; (iii) to maintain, in accordance with its customary business practices, ledgers and records reflecting the status of the Obligations, the Loans, and related matters and to maintain, in accordance with its customary business practices, ledgers and records reflecting the status of the Collateral and related matters; (iv) to execute or file any and all financing or similar statements or notices, amendments, renewals, supplements, documents, instruments, proofs of claim, notices and other written agreements with respect to this Agreement or any other Loan Document; (v) to make the Loans and Agent Advances, for the Agent or on behalf of the applicable Lenders as provided in this Agreement or any other Loan Document; (vi) to perform, exercise, and enforce any and all other rights and remedies of the Lenders with respect to the Loan Parties, the Obligations, or otherwise related to any of same to the extent reasonably incidental to the exercise by the Agent of the rights and remedies specifically authorized to be exercised by the Agent by the terms of this Agreement or any other Loan Document, or as directed by the Required Lenders; (vii) to incur and pay such fees necessary or appropriate for the performance and fulfillment of its functions and powers pursuant to this Agreement or any other Loan Document; and (viii) subject to Section 10.03 of this Agreement, to take such action as the Agent deems appropriate on its behalf to administer the Loans and the Loan Documents and to exercise such other powers delegated to the Agent by the terms hereof or the other Loan Documents (including, without limitation, the power to give or to refuse to give notices, waivers, consents, approvals and instructions and the power to make or to refuse to make determinations and calculations) together with such powers as are reasonably incidental thereto to carry out the purposes hereof and thereof. As to any matters not expressly provided for by this Agreement and the other Loan Documents (including, without limitation, enforcement or collection of the Loans), the Agent shall not be required to exercise any discretion or take any action, which, in the reasonable opinion of the Agent, exposes the Agent to liability or which is contrary to this

Agreement or any other Loan Document or Applicable Law. The Lenders hereby agree that the Required Lenders shall make all decisions concerning (A) waivers, (B) amendments, (C) remedial action, including, without limitation, the right to call a default, accelerate, take action to realize upon any Collateral, and (D) performance by the Lenders or enforcement of the rights of the Lenders hereunder and under the Intercreditor Agreement; PROVIDED, HOWEVER, that the foregoing shall not limit the rights of all Lenders under Section 12.02 hereof.

Section 10.02 NATURE OF DUTIES. The Agent shall have no duties or responsibilities except those expressly set forth in this Agreement or in the other Loan Documents. The duties of the Agent shall be mechanical and administrative in nature. Neither the Agent nor the Lenders shall have by reason of this Agreement or any other Loan Document a fiduciary relationship in respect of any other Lender. Nothing in this Agreement or any other Loan Document, express or implied, is intended to or shall be construed to impose upon the Agent or the Required Lenders any obligations in respect of this Agreement or any other Loan Document except as expressly set forth herein or therein. Each Lender shall make its own independent investigation of the financial condition and affairs of the Loan Parties in connection with the making and the continuance of the Loans hereunder and shall make its own appraisal of the creditworthiness of the Loan Parties and the value of the Collateral, and neither the Agent nor the Required Lenders shall have any duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the initial Loan hereunder or at any time or times thereafter, provided that, upon the reasonable request of a Lender, the Agent shall provide to such Lender any documents or reports delivered to the Agent by the Loan Parties pursuant to the terms of this Agreement or any other Loan Document.

Section 10.03 RIGHTS; EXCULPATION, ETC. Neither the Agent nor the Lenders, nor any of their respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by them under or in connection with this Agreement or the other Loan Documents, except for their own gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. Without limiting the generality of the foregoing, the Agent and the Lenders (i) may treat the payee of any Loan as the owner thereof until the Agent receives written notice of the assignment or transfer thereof, pursuant to Section 12.07 hereof, signed by such payee and in form satisfactory to the Agent; (ii) may consult with legal counsel (including, without limitation, counsel to the Agent or counsel to the Loan Parties), independent public accountants, and other experts selected by any of them and shall not be liable for any action taken or omitted to be taken in reasonable good faith by any of them in accordance with the advice of such counsel or experts; (iii) make no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, certificates, warranties or representations made in or in connection with this Agreement or the other Loan Documents; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the other Loan Documents on the part of any Person, the existence or possible existence of any Default or Event of Default, or to inspect the Collateral or other property (including, without limitation, the books and records) of any Person; (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and (vi) shall not be deemed to have made any representation or warranty regarding the existence, value or

collectibility of the Collateral, the existence, priority or perfection of the Agent's Lien thereon, or any certificate prepared by any Loan Party in connection therewith, nor shall the Agent or the Required Lenders be responsible or liable to the Lenders for any failure to monitor or maintain any portion of the Collateral. Neither the Agent nor the Required Lenders shall be liable for any apportionment or distribution of payments made in good faith pursuant to
Section 3.04. The Agent may at any time (but shall not be required to) request instructions from the Required Lenders with respect to any actions or approvals which by the terms of this Agreement or of any of the other Loan Documents the Agent is permitted or required to take or to grant, and if such instructions are promptly requested, the Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval under any of the Loan Documents until it shall have received such instructions from the Required Lenders. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Agent as a result of the Agent acting or refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of the Required Lenders, or against the Required Lenders on the same basis for which a right of action could be brought against the Agent in connection with such acting or refraining from acting, except to the extent such action or lack of action is determined by a court of competent jurisdiction, pursuant to a final judgment, to have constituted gross negligence or willful misconduct.

Section 10.04 RELIANCE. The Agent shall be entitled to rely upon any written notices, statements, certificates, orders or other documents or any telephone message believed by it in reasonable good faith to be genuine and correct and to have been signed, sent or made by the proper Person, and with respect to all matters pertaining to this Agreement or any of the other Loan Documents and its duties hereunder or thereunder, upon advice of counsel selected by it.

Section 10.05 INDEMNIFICATION. To the extent that the Agent is not reimbursed and indemnified by any Loan Party, the Lenders will reimburse and indemnify the Agent from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any of the other Loan Documents (it being understood that the foregoing shall not be deemed to include principal, interest or fees owed by a Loan Party to the Agent) or any action taken or omitted by the Agent under this Agreement or any of the other Loan Documents, in proportion to each Lender's Pro Rata Share, including, without limitation, advances and disbursements made pursuant to Section 10.08; PROVIDED, HOWEVER, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances or disbursements for which there has been a final judicial determination that such liability resulted from the Agent's gross negligence or willful misconduct. The obligations of the Lenders under this Section 10.05 shall survive the payment in full of the Loans and the termination of this Agreement.

Section 10.06 AGENT INDIVIDUALLY. With respect to its Pro Rata Share of the Total Commitment hereunder and the Loans made by it, the Agent shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender or maker of a Loan. The term "Lenders" or "Required Lenders" or any similar terms shall, unless the context clearly otherwise indicates, include the Agent in its individual capacity as a Lender. The Agent and its Affiliates may accept

deposits from, lend money to, and generally engage in any kind of banking, trust or other business with any Borrower as if it were not acting as the Agent pursuant hereto without any duty to account to the other Lenders.

Section 10.07 SUCCESSOR AGENT. (a) The Agent may resign from the performance of all its functions and duties hereunder and under the other Loan Documents at any time by giving at least thirty (30) Business Days' prior written notice to the Administrative Borrower and each Lender. Such resignation shall take effect upon the acceptance by a successor Agent of appointment pursuant to clauses (b) and (c) below or as otherwise provided below.

(b) Upon any such notice of resignation, the Administrative Borrowers shall appoint a successor Agent acceptable to SSC. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the Agent, and the Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. After the Agent's resignation hereunder as the Agent, the provisions of this Article X 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 and the other Loan Documents.

(c) If a successor Agent shall not have been so appointed within said thirty (30) Business Day period, the Agent shall then appoint a successor Agent who shall serve as the Agent until such time, if any, as the Administrative Borrower (with the consent of SSC) appoints a successor Agent as provided above.

Section 10.08 COLLATERAL MATTERS.

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

(b) The Lenders hereby irrevocably authorize the Agent, at its option and in its discretion, to release any Lien granted to or held by the Agent upon any Collateral upon termination of the Total Commitment and payment and satisfaction of all Loans and all

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

(c) Without in any manner limiting the Agent's authority to act without any specific or further authorization or consent by the Lenders (as set forth in Section 10.08(b)), each Lender agrees to confirm in writing, upon request by the Agent, the authority to release Collateral conferred upon the Agent under Section 10.08(b). Upon receipt by the Agent of confirmation from the Lenders of its authority to release any particular item or types of Collateral, and upon prior written request by any Loan Party, the Agent shall (and is hereby irrevocably authorized by the Lenders to) execute such documents as may be necessary to evidence the release of the Liens granted to the Agent for the benefit of the Lenders upon such Collateral; PROVIDED, HOWEVER, that (i) the Agent shall not be required to execute any such document on terms which, in the Agent's opinion, would expose the Agent to liability or create any obligations or entail any consequence other than the release of such Liens without recourse or warranty, and (ii) such release shall not in any manner discharge, affect or impair the Obligations or any Lien upon (or obligations of any Loan Party in respect of) all interests in the Collateral retained by any Loan Party.

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

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

ARTICLE XI

GUARANTY

Section 11.01 GUARANTY. Each Guarantor hereby unconditionally and irrevocably guarantees the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all Obligations of the Borrowers now or hereafter existing under any Loan Document, whether for principal, interest (including, without limitation, all interest that accrues after the commencement of any Insolvency Proceeding of any Borrower), fees, commissions, indemnifications or otherwise (such obligations, to the extent not paid by the Borrowers, being the "GUARANTEED OBLIGATIONS"), and agrees to pay any and all expenses (including reasonable counsel fees and expenses) incurred by the Agent and the Lenders in enforcing any rights under the Guaranty set forth in this Article XI. Without limiting the generality of the foregoing, each Guarantor's liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by the Borrowers to the Agent and the Lenders under any Loan Document but for the fact that they are unenforceable or not allowable due to the existence of an Insolvency Proceeding involving any Borrower.

Section 11.02 GUARANTY ABSOLUTE. Each Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Agent or the Lenders with respect thereto. The Obligations of each Guarantor under this Article XI are independent of the Guaranteed Obligations, and a separate action or actions may be brought and prosecuted against each Guarantor to enforce such Obligations, irrespective of whether any action is brought against any Loan Party or whether any Loan Party is joined in any such action or actions. The liability of each Guarantor under this Article XI shall be irrevocable, absolute and unconditional irrespective of, and each Guarantor hereby irrevocably waives any defenses it may now or hereafter have in any way relating to, any or all of the following:

(a) Any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto;

(b) Any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Loan Party or otherwise;

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

(d) Any change, restructuring or termination of the corporate, limited liability company or partnership structure or existence of any Loan Party; or

(e) Any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Agent or the Lenders that might otherwise constitute a defense available to, or a discharge of, any Loan Party or any other Guarantor or surety.

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

Section 11.03 WAIVER. Each Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Article XI and any requirement that the Agent or the Lenders exhaust any right or take any action against any Loan Party or any other Person or any Collateral. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated herein and that the waiver set forth in this Section 11.03 is knowingly made in contemplation of such benefits. Each Guarantor hereby waives any right to revoke this Article XI, and acknowledges that this Article XI is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.

Section 11.04 CONTINUING GUARANTY; ASSIGNMENTS. This Article XI is a continuing guaranty and shall (a) remain in full force and effect until the later of the cash payment in full of the Guaranteed Obligations (other than indemnification obligations as to which no claim has been made) and all other amounts payable under this Article XI and the Final Maturity Date, (b) be binding upon each Guarantor, its successors and assigns and (c) inure to the benefit of and be enforceable by the Agent and the Lenders and their successors, pledgees, transferees and assigns. Without limiting the generality of the foregoing clause (c), any Lender may pledge, assign or otherwise transfer all or any portion of its rights and obligations under this Agreement (including, without limitation, all or any portion of its Commitments and its Loans owing to it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted such Lender herein or otherwise, in each case as provided in Section 12.07.

Section 11.05 SUBROGATION. No Guarantor will exercise any rights that it may now or hereafter acquire against any Loan Party or any other Guarantor that arise from the existence, payment, performance or enforcement of such Guarantor's obligations under this Article XI, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Agent and the Lenders against any Loan Party or any other Guarantor or any Collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from any Loan Party or any other Guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security solely on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this

Article XI shall have been paid in full in cash and the Final Maturity Date shall have occurred. If any amount shall be paid to any Guarantor in violation of the immediately preceding sentence at any time prior to the later of the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Article XI and the Final Maturity Date, such amount shall be held in trust for the benefit of the Agent and the Lenders and shall forthwith be paid to the Agent and the Lenders to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Article XI, whether matured or unmatured, in accordance with the terms of this Agreement, or to be held as Collateral for any Guaranteed Obligations or other amounts payable under this Article XI thereafter arising. If (i) any Guarantor shall make payment to the Agent and the Lenders of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Article XI shall be paid in full in cash and (iii) the Final Maturity Date shall have occurred, the Agent and the Lenders will, at such Guarantor's request and expense, execute and deliver to such Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Guaranteed Obligations resulting from such payment by such Guarantor.

ARTICLE XII

MISCELLANEOUS

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

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

with a copy to:

Schottenstein Stores Corporation 1800 Moler Road
Columbus, OH 43207
Attention: Irwin A. Bain, Esq.

Telephone: 614-449-4332

Telecopier: 614-443-0927

and

Porter Wright Morris & Arthur LLP 41 South High Street
Columbus, OH 43215
Attention: Robert J. Tannous, Esq. and Timothy E. Grady, Esq.

Telephone: 614-227-1953

Telecopier: 614-227-2100

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

Cerberus Partners, L.P.

450 Park Avenue, 28th Floor
New York, New York 10022

Attention: Lenard Tessler Telephone: (212) 909-1464 Telecopier: (212) 755-3009

with a copy to:

Schulte Roth & Zabel LLP 919 Third Avenue
New York, New York 10022 Attention: Nancy Finkelstein, Esq.

Telephone: 212-756-2419

Telecopier: 212-593-5955

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

Section 12.02 AMENDMENTS, ETC. Subject to Section 6.02(l), no amendment or waiver of any provision of any Loan Document, including this Agreement, and no consent to any departure by any Loan Party therefrom, shall in any event be effective unless the same shall be in writing and signed by the Agent, the Required Lenders and the Borrowers, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given, PROVIDED, HOWEVER, that no amendment, waiver or consent shall
(i) increase the Commitment of any Lender, reduce the principal of, or interest on, the Loans payable to any Lender, reduce the amount of any fee payable for the account of any Lender, or postpone or extend any date fixed for any payment of principal of, or interest or fees on the Loans payable to any Lender, in each case without the written consent of any Lender affected thereby, (ii) increase the Total Commitment without the written consent of each Lender, (iii) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans that is required for the Lenders or any of them to take any action hereunder, (iv) amend the definition of "Pro Rata Share", (v) release all or a substantial portion of the Collateral (except as otherwise provided in this Agreement and the other Loan Documents), subordinate any Lien granted in favor of the Agent for the benefit of the Lenders, or release any Borrower or any Guarantor or (vi) amend, modify or waive Section 3.04 or this Section 12.02 of this Agreement, in each case, without the written consent of each Lender. Notwithstanding the foregoing, no amendment, waiver or

consent shall, unless in writing and signed by the Agent, affect the rights or duties of the Agent (but not in its capacity as a Lender) under this Agreement or the other Loan Documents.

Section 12.03 NO WAIVER; REMEDIES, ETC. No failure on the part of the Agent or any Lender to exercise, and no delay in exercising, any right hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right under any Loan Document preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies of the Agent and the Lenders provided herein and in the other Loan Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. The rights of the Agent and the Lenders under any Loan Document against any party thereto are not conditional or contingent on any attempt by the Agent and the Lenders to exercise any of their rights under any other Loan Document against such party or against any other Person.

Section 12.04 EXPENSES; TAXES; ATTORNEYS' FEES. The Borrowers will pay within ten (10) days after demand therefor (which demand shall include a statement of the nature thereof), all costs and expenses incurred by or on behalf of the Agent (and, in the case of clauses (b) through (m) below, each Lender), regardless of whether the transactions contemplated hereby are consummated, including, without limitation, reasonable fees, costs, client charges and expenses of counsel for the Agent (and, in the case of clauses (b) through (m) below, each Lender), accounting, due diligence, periodic field audits, physical counts, valuations, investigations, searches and filings, monitoring of assets, appraisals of Collateral, title searches and reviewing environmental assessments, miscellaneous disbursements, examination, travel, lodging and meals, arising from or relating to the following: (a) the negotiation, preparation, execution, delivery, performance and administration of this Agreement and the other Loan Documents (including, without limitation, the preparation of any additional Loan Documents pursuant to Section 6.01(b) or the review of any of the agreements, instruments and documents referred to in
Section 6.01(f)); (b) any requested amendments, waivers or consents to this Agreement or the other Loan Documents whether or not such documents become effective or are given; (c) the preservation and protection of any of the Lenders' rights under this Agreement or the other Loan Documents; (d) the defense of any claim or action asserted or brought against the Agent or any Lender by any Person that arises from or relates to this Agreement, any other Loan Document, the Agent's or the Lenders' claims against any Loan Party, or any and all matters in connection therewith; (e) the commencement or defense of, or intervention in, any court proceeding arising from or related to this Agreement or any other Loan Document; (f) the filing of any petition, complaint, answer, motion or other pleading by the Agent or any Lender, or the taking of any action in respect of the Collateral or other security, in connection with this Agreement or any other Loan Document; (g) the protection, collection, lease, sale, taking possession of or liquidation of, any Collateral or other security in connection with this Agreement or any other Loan Document; (h) any attempt to enforce any Lien or security interest in any Collateral or other security in connection with this Agreement or any other Loan Document; (i) any attempt to collect from any Loan Party; (j) all liabilities and costs arising from or in connection with the past, present or future operations of any Loan Party involving any damage to real or personal property or natural resources or harm or injury alleged to have resulted from any Release of Hazardous Materials on, upon or into such property; (k) any Environmental Liabilities and Costs incurred in connection with the investigation, removal, cleanup and/or remediation of any Hazardous Materials present or arising out of the operations

of any facility of any Loan Party; (l) any Environmental Liabilities and Costs incurred in connection with any Environmental Lien; or (m) the receipt by the Agent or any Lender of any advice from professionals with respect to any of the foregoing; PROVIDED THAT with respect to clauses (d), (e) and (f) above, such costs and expenses shall not include those costs and expenses that have been determined by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Lender or Agent, as the case may be. Without limitation of the foregoing or any other provision of any Loan Document:
(x) the Borrowers agree to pay all stamp, document, transfer, recording or filing taxes or fees and similar impositions now or hereafter determined by the Agent or any Lender to be payable in connection with this Agreement or any other Loan Document, and the Borrowers agree to save the Agent and each Lender harmless from and against any and all present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such taxes, fees or impositions unless such omission is the result of the gross negligence or willful misconduct of any Lender; (y) the Borrowers agree to pay all broker and investment banking fees that may become due in connection with the transactions contemplated by this Agreement and the other Loan Documents (the Agent and the Lenders represent and warrant that no brokers have been engaged or retained by any of them in connection with the transactions evidenced by the Loan Documents); and (z) if the Borrowers fail to perform any covenant or agreement contained herein or in any other Loan Document, the Agent may itself perform or cause performance of such covenant or agreement, and the expenses of the Agent incurred in connection therewith shall be reimbursed on demand by the Borrowers.

Section 12.05 RIGHT OF SET-OFF. Upon the occurrence and during the continuance of any Event of Default, the Agent or any Lender may, and is hereby authorized to, at any time and from time to time, without notice to any Loan Party (any such notice being expressly waived by the Loan Parties) and to the fullest extent permitted by law, 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 the Agent or such Lender to or for the credit or the account of any Loan Party against any and all obligations of the Loan Parties either now or hereafter existing under any Loan Document, irrespective of whether or not the Agent or such Lender shall have made any demand hereunder or thereunder and although such obligations may be contingent or unmatured. The Agent and each Lender agree to notify such Loan Party promptly after any such set-off and application made by the Agent or such Lender provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Agent and the Lenders under this
Section 12.05 are in addition to the other rights and remedies (including other rights of set-off) which the Agent and the Lenders may have under this Agreement or any other Loan Documents of law or otherwise.

Section 12.06 SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

Section 12.07 ASSIGNMENTS AND PARTICIPATIONS. (a) This Agreement and the other Loan Documents shall be binding upon and inure to the benefit of each Loan Party and the Agent and each Lender and their respective successors and assigns; PROVIDED, HOWEVER, that none of the Loan Parties may assign or transfer any of its rights hereunder without the prior written

consent of each Lender and any such assignment without the Lenders' prior written consent shall be null and void.

(b) Each Lender may, with the written consent of the Agent (and, other than during the continuance of an Event of Default, with the written consent of the Administrative Borrower if such Lender is assigning its rights and obligations to a Person that is not an Eligible Assignee, which consent shall not be unreasonably withheld), assign to one or more other lenders or other entities all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments and the Loans made by it); PROVIDED, HOWEVER, that (i) such assignment is in an amount which is at least $5,000,000 or a multiple of $1,000,000 in excess thereof (or the remainder of such Lender's Commitment) (except such minimum amount shall not apply to an assignment by a Lender to an Affiliate of such Lender or a fund or account managed by such Lender or an Affiliate of such Lender or, in the case of SSC, a shareholder of such Lender), (ii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance, an Assignment and Acceptance, together with any promissory note subject to such assignment and such parties shall deliver to the Agent a processing and recordation fee of $5,000 (except the payment of such fee shall not be required in connection with an assignment by a Lender to an Affiliate of such Lender or a fund or account managed by such Lender or an Affiliate of such Lender, or, in the case of SSC, a shareholder of such Lender) and (iii) no written consent of the Agent shall be required in connection with any assignment by a Lender to an Affiliate of such Lender or a fund or account managed by such Lender or an Affiliate of such Lender, or in the case of SSC, a shareholder of such Lender. Upon such execution, delivery and acceptance, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least three (3) Business Days after the delivery thereof to the Agent (or such shorter period as shall be agreed to by the Agent and the parties to such assignment), (A) the assignee thereunder shall become a "Lender" hereunder and, in addition to the rights and obligations hereunder held by it immediately prior to such effective date, have the rights and obligations hereunder that have been assigned to it pursuant to such Assignment and Acceptance and (B) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto).

(i) By executing and delivering an Assignment and Acceptance, the assigning Lender and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (A) other than as provided in such Assignment and Acceptance, the assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any other Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document furnished pursuant hereto; PROVIDED, that such assigning Lender's obligations and responsibilities under the confidentiality provisions of this Agreement shall continue despite any assignment by such assigning Lender; (B) the assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or any

of its Subsidiaries or the performance or observance by any Loan Party of any of its obligations under this Agreement or any other Loan Document furnished pursuant hereto; (C) such assignee confirms that it has received a copy of this Agreement and the other Loan Documents, together with such other documents and information it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (D) such assignee will, independently and without reliance upon the assigning Lender, the Agent or any Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents; (E) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof and thereof, together with such powers as are reasonably incidental hereto and thereto; and (F) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement and the other Loan Documents are required to be performed by it as a Lender.

(ii) The Borrowers authorize the Agent, and the Agent agrees, to maintain, or cause to be maintained at the Payment Office, a copy of each Assignment and Acceptance delivered to and accepted by it and a register (the "REGISTER") for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amount of the Loans (the "REGISTERED Loans") owing to each Lender from time to time. The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrowers, the Agent and the Lenders shall treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Administrative Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice.

(iii) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee, together with any promissory notes subject to such assignment, the Agent shall, if the Agent consents to such assignment and if such Assignment and Acceptance has been completed (A) accept such Assignment and Acceptance and (B) record the information contained therein in the Register.

(iv) In addition to the other requirements contained in this Section 12.07, a Registered Loan (and the registered note, if any, evidencing the same) may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register (and each registered note shall expressly so provide). Any assignment or sale of all or part of such Registered Loan (and the registered note, if any, evidencing the same) may be effected only by registration of such assignment or sale on the Register, together with the surrender of the registered note, if any, evidencing the same duly endorsed by (or accompanied by a written instrument of assignment or sale duly executed by) the holder of such registered note, whereupon, at the request of the designated assignee(s) or transferee(s), one or more new registered notes in the same aggregate principal amount shall be issued to the designated assignee(s) or transferee(s). Prior to the registration of assignment or sale of any Registered Loan (and the registered note, if any, evidencing the same), the Agent shall treat the Person in whose name such

Registered Loan (and the registered note, if any, evidencing the same) is registered as the owner thereof for the purpose of receiving all payments thereon and for all other purposes, notwithstanding notice to the contrary.

(v) In the event that any Lender sells participations in a Registered Loan, such Lender shall maintain a register on which it enters the name of all participants in the Registered Loans held by it (the "PARTICIPANT REGISTER"). A Registered Loan (and the registered note, if any, evidencing the same) may be participated in whole or in part only by registration of such participation on the Participant Register (and each registered note shall expressly so provide). Any participation of such Registered Loan (and the registered note, if any, evidencing the same) may be effected only by the registration of such participation on the Participant Register.

(vi) Any foreign Person who purchases or is assigned or participates in any portion of such Registered Loan shall provide the Agent and the assigning or selling Lender with a completed Internal Revenue Service Form W-8BEN (Certificate of Foreign Status) or a substantially similar form for such purchaser, participant or any other affiliate who is a holder of beneficial interests in the Registered Loan.

(c) Subject to the requirements of Applicable Law, each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of its Commitments and the Loans made by it); PROVIDED, that (i) such Lender's obligations under this Agreement (including without limitation, its Commitments hereunder) and the other Loan Documents shall remain unchanged; (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, and the Borrowers, 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 and the other Loan Documents; and (iii) a participant shall not be entitled to require such Lender to take or omit to take any action hereunder except (A) action directly effecting an extension of the maturity dates or decrease in the principal amount of the Loans, (B) action directly effecting an extension of the due dates or a decrease in the rate of interest payable on the Loans or the fees payable under this Agreement, or (C) actions directly effecting a release of all or a substantial portion of the Collateral or any Loan Party (except as set forth in
Section 10.08 of this Agreement or any other Loan Document). The Loan Parties agree that each participant shall be entitled to the benefits of Section 2.08 and Section 3.05 of this Agreement with respect to its participation in any portion of the Commitments and the Loans as if it was a Lender.

Section 12.08 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Agreement by telecopier shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telecopier also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart

shall not affect the validity, enforceability, and binding effect of this Agreement. The foregoing shall apply to each other Loan Document mutatis mutandis.

SECTION 12.09 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.

SECTION 12.10 CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE. 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 NEW YORK IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH LOAN PARTY HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT AND THE LENDERS TO SERVICE OF PROCESS IN ANY MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY LOAN PARTY IN ANY OTHER JURISDICTION. EACH LOAN PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY LOAN PARTY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH LOAN PARTY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

SECTION 12.11 WAIVER OF JURY TRIAL, ETC. EACH LOAN PARTY, THE AGENT AND EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH LOAN PARTY CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR ANY LENDER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR

COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS. EACH LOAN PARTY HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT.

SECTION 12.12 CONSENT BY THE AGENT AND LENDERS. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN TO THE CONTRARY, IF THE CONSENT, APPROVAL, SATISFACTION, DETERMINATION, JUDGMENT, ACCEPTANCE OR SIMILAR ACTION (AN "ACTION") OF THE AGENT SHALL BE PERMITTED OR REQUIRED PURSUANT TO ANY PROVISION HEREOF OR ANY PROVISION OF ANY OTHER AGREEMENT TO WHICH ANY LOAN PARTY IS A PARTY AND TO WHICH THE AGENT OR ANY LENDER HAS SUCCEEDED THERETO, SUCH ACTION SHALL BE REQUIRED TO BE IN WRITING AND MAY BE WITHHELD OR DENIED BY THE AGENT, IN ITS SOLE GOOD FAITH DISCRETION.

Section 12.13 NO PARTY DEEMED DRAFTER. Each of the parties hereto agrees that no party hereto shall be deemed to be the drafter of this Agreement.

Section 12.14 REINSTATEMENT; CERTAIN PAYMENTS. If any claim is ever made upon the Agent or any Lender for repayment or recovery of any amount or amounts received by the Agent or such Lender in payment or on account of any of the Obligations, the Agent or such Lender shall give prompt notice of such claim to each other Lender and the Administrative Borrower, and if the Agent or such Lender repays all or part of such amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over the Agent or such Lender or any of its property, or (ii) any good faith settlement or compromise of any such claim effected by the Agent or such Lender with any such claimant, then and in such event each Loan Party agrees that (A) any such judgment, decree, order, settlement or compromise shall be binding upon it notwithstanding the cancellation of any Indebtedness hereunder or under the other Loan Documents or the termination of this Agreement or the other Loan Documents, and (B) it shall be and remain liable to the Agent or such Lender hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by the Agent or such Lender.

Section 12.15 INDEMNIFICATION.

(a) GENERAL INDEMNITY. In addition to each Loan Party's other Obligations under this Agreement, each Loan Party agrees to, jointly and severally, defend, protect, indemnify and hold harmless the Agent and each Lender and all of their respective officers, directors, employees, attorneys, consultants and agents (collectively called the "INDEMNITEES") from and against any and all losses, damages, liabilities, obligations, penalties, reasonable fees, costs and expenses (including, without limitation, reasonable attorneys' fees, costs and expenses) incurred by such Indemnitees, whether prior to or from and after the Effective Date, whether direct, indirect or consequential, as a result of or arising from or relating to or in connection with any of the following: (i) the negotiation, preparation, execution or performance or enforcement of this Agreement, any other Loan Document or of any other document executed in connection with the transactions contemplated by this Agreement; (ii) the Agent's or any Lender's furnishing of funds to the Borrowers for the account of the Borrowers under this Agreement or the other Loan Documents, including, without limitation, the management of any such Loans;
(iii) any matter relating to the financing transactions contemplated by this Agreement or the other Loan Documents or by any document executed in

connection with the transactions contemplated by this Agreement or the other Loan Documents; or (iv) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto (collectively, the "INDEMNIFIED MATTERS"); PROVIDED, HOWEVER, that the Loan Parties shall not have any obligation to any Indemnitee under this subsection (a) for any Indemnified Matter caused by the gross negligence or willful misconduct of such Indemnitee, as determined by a final judgment of a court of competent jurisdiction.

(b) ENVIRONMENTAL INDEMNITY. Without limiting Section 12.15(a) hereof, each Loan Party agrees to, jointly and severally, defend, indemnify, and hold harmless the Indemnitees against any and all Environmental Liabilities and Costs and all other claims, demands, penalties, fines, liability (including strict liability), losses, damages, costs and expenses (including without limitation, reasonable legal fees and expenses, consultant fees and laboratory fees), arising out of (i) any Releases or threatened Releases (A) at any property presently or formerly owned or operated by any Loan Party or any Subsidiary of any Loan Party, or any predecessor in interest, or (B) of any Hazardous Materials generated and disposed of by any Loan Party or any Subsidiary of any Loan Party, or any predecessor in interest; (ii) any violations of Environmental Laws; (iii) any Environmental Action relating to any Loan Party or any Subsidiary of any Loan Party, or any predecessor in interest;
(iv) any personal injury (including wrongful death) or property damage (real or personal) arising out of exposure to Hazardous Materials used, handled, generated, transported or disposed by any Loan Party or any Subsidiary of any Loan Party, or any predecessor in interest; and (v) any breach of any warranty or representation regarding environmental matters made by the Loan Parties in
Section 6.01(g) or the breach of any covenant made by the Loan Parties in
Section 5.01(r). Notwithstanding the foregoing, the Loan Parties shall not have any obligation to any Indemnitee under this subsection (b) regarding any potential environmental matter covered hereunder which is caused by the gross negligence or willful misconduct of such Indemnitee, as determined by a final judgment of a court of competent jurisdiction.

(c) To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section 12.15 may be unenforceable because it is violative of any law or public policy, each Loan Party shall, jointly and severally, contribute the maximum portion which it is permitted to pay and satisfy under Applicable Law, to the payment and satisfaction of all Indemnified Matters incurred by the Indemnitees. The indemnities set forth in this Section 12.15 shall survive the repayment of the Obligations and discharge of any Liens granted under the Loan Documents.

Section 12.16 PARENT, AS AGENT FOR BORROWERS. Each Borrower hereby irrevocably appoints the Parent as the borrowing agent and attorney-in-fact for the Borrowers (the "ADMINISTRATIVE BORROWER") which appointment shall remain in full force and effect unless and until the Agent shall have received prior written notice signed by all of the Borrowers that such appointment has been revoked and that another Borrower has been appointed Administrative Borrower. Each Borrower hereby irrevocably appoints and authorizes the Administrative Borrower (i) to provide to the Agent and receive from the Agent all notices with respect to Loans obtained for the benefit of any Borrower and all other notices and instructions under this Agreement and (ii) to take such action as the Administrative Borrower deems appropriate on its behalf to obtain Loans and to exercise such other powers as are reasonably incidental thereto to carry out the purposes of this Agreement. It is understood that the handling

of the Loans and Collateral of the Borrowers in a combined fashion, as more fully set forth herein, is done solely as an accommodation to the Borrowers in order to utilize the collective borrowing powers of the Borrowers in the most efficient and economical manner and at their request, and that neither the Agent nor the Lenders shall incur liability to the Borrowers as a result hereof. Each of the Borrowers expects to derive benefit, directly or indirectly, from the handling of the Loans and the Collateral in a combined fashion since the successful operation of each Borrower is dependent on the continued successful performance of the integrated group. To induce the Agent and the Lenders to do so, and in consideration thereof, each of the Borrowers hereby jointly and severally agrees to indemnify the Indemnitees and hold the Indemnitees harmless against any and all liability, expense, loss or claim of damage or injury, made against such Indemnitee by any of the Borrowers or by any third party whosoever, arising from or incurred by reason of (a) the handling of the Loans and Collateral of the Borrowers as herein provided, (b) the Agent and the Lenders relying on any instructions of the Administrative Borrower, or (c) any other action taken by the Agent or any Lender hereunder or under the other Loan Documents; PROVIDED, HOWEVER, that the Loan Parties shall not have any obligation to any Indemnitee under this Section for any Indemnified Matter caused by the gross negligence or willful misconduct of such Indemnitee, as determined by a final judgment of a court of competent jurisdiction.

Section 12.17 RECORDS. The unpaid principal of and interest on the Loans, the interest rate or rates applicable to such unpaid principal and interest, the duration of such applicability, the Commitments, and the accrued and unpaid fees payable pursuant to Section 2.06 hereof, including, without limitation, the Closing Fee and the Anniversary Fee shall at all times be ascertained from the records of the Agent, which shall be rebuttably presumed to be correct, absent manifest error.

Section 12.18 BINDING EFFECT. This Agreement shall become effective when it shall have been executed by each Loan Party, the Agent and each Lender and when the conditions precedent set forth in Section 4.01 hereof have been satisfied or waived in writing by the Agent, and thereafter shall be binding upon and inure to the benefit of each Loan Party, the Agent and each Lender, and their respective successors and assigns, except that the Loan Parties shall not have the right to assign their rights hereunder or any interest herein without the prior written consent of each Lender, and any assignment by any Lender shall be governed by Section 12.07 hereof.

Section 12.19 MAXIMUM INTEREST. It is the intention of the parties hereto that the Agent and each Lender shall conform strictly to usury laws applicable to it. Accordingly, if the transactions contemplated hereby or by any other Loan Document would be usurious as to the Agent or any Lender under laws applicable to it (including the laws of the United States of America and the State of New York or any other jurisdiction whose laws may be mandatorily applicable to the Agent or such Lender notwithstanding the other provisions of this Agreement), then, in that event, notwithstanding anything to the contrary in this Agreement or any other Loan Document or any agreement entered into in connection with or as security for the Obligations, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest under law applicable to the Agent or any Lender that is contracted for, taken, reserved, charged or received by the Agent or such Lender under this Agreement or any other Loan Document or agreements or otherwise in connection with the Obligations shall under no circumstances exceed the

maximum amount allowed by such applicable law, any excess shall be canceled automatically and if theretofore paid shall be credited by the Agent or such Lender on the principal amount of the Obligations (or, to the extent that the principal amount of the Obligations shall have been or would thereby be paid in full, refunded by the Agent or such Lender, as applicable, to the Borrowers); and (ii) in the event that the maturity of the Obligations is accelerated by reason of any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to the Agent or any Lender may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in this Agreement or otherwise shall be canceled automatically by the Agent or such Lender, as applicable, as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by the Agent or such Lender, as applicable, on the principal amount of the Obligations (or, to the extent that the principal amount of the Obligations shall have been or would thereby be paid in full, refunded by the Agent or such Lender to the Borrowers). All sums paid or agreed to be paid to the Agent or any Lender for the use, forbearance or detention of sums due hereunder shall, to the extent permitted by law applicable to the Agent or such Lender, be amortized, prorated, allocated and spread throughout the full term of the Loans until payment in full so that the rate or amount of interest on account of any Loans hereunder does not exceed the maximum amount allowed by such applicable law. If at an time and from time to time (x) the amount of interest payable to the Agent or any Lender on any date shall be computed at the Highest Lawful Rate applicable to the Agent or such Lender pursuant to this Section 12.19 and (y) in respect of any subsequent interest computation period the amount of interest otherwise payable to the Agent or such Lender would be less than the amount of interest payable to the Agent or such Lender computed at the Highest Lawful Rate applicable to the Agent or such Lender, then the amount of interest payable to the Agent or such Lender in respect of such subsequent interest computation period shall continue to be computed at the Highest Lawful Rate applicable to the Agent or such Lender until the total amount of interest payable to the Agent or such Lender shall equal the total amount of interest which would have been payable to the Agent or such Lender if the total amount of interest had been computed without giving effect to this Section 12.19.

For purposes of this Section 12.19, the term "applicable law" shall mean that law in effect from time to time and applicable to the loan transaction between the Borrowers, on the one hand, and the Agent and the Lenders, on the other, that lawfully permits the charging and collection of the highest permissible, lawful non-usurious rate of interest on such loan transaction and this Agreement, including laws of the State of New York and, to the extent controlling, laws of the United States of America.

The right to accelerate the maturity of the Obligations does not include the right to accelerate any interest that has not accrued as of the date of acceleration.

Section 12.20 CONFIDENTIALITY. The Agent and each Lender agrees (on behalf of itself and each of its directors, officers and employees) to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of this nature and in accordance with safe and sound practices of comparable commercial finance companies, any non-public information supplied to it by the Loan Parties pursuant to this Agreement or the other Loan Documents which is identified in writing by the Loan Parties as being confidential at the time the same is delivered to such Person (or consists of information

(such as business plans and financial information) which is customarily confidential information) (and which at the time is not, and does not thereafter become, publicly available or legally available to such Person from another source (other than the Loan Parties) on a nonconfidential basis), PROVIDED that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for the Agent or any Lender, (iii) to examiners, auditors, accountants or Securitization Parties, so long as such Person first agrees, in writing, to be bound by confidentiality provisions similar in substance to this Section 12.20, (iv) in connection with any litigation to which the Agent or any Lender is a party or (v) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first agrees, in writing, to be bound by confidentiality provisions similar in substance to this Section 12.20. The Agent and each Lender agrees that, upon receipt of a request or identification of the requirement for disclosure pursuant to clause (iv) hereof, it will make reasonable efforts to keep the Loan Parties informed of such request or identification; PROVIDED, that the each Loan Party acknowledges that the Agent and each Lender may make disclosure as required or requested by any Governmental Authority or representative thereof and that the Agent and each Lender may be subject to review by Securitization Parties or other regulatory agencies and may be required to provide to, or otherwise make available for review by, the representatives of such parties or agencies any such non-public information.

Section 12.21 INTEGRATION. This Agreement, together with the other Loan Documents, reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, before the date hereof.

ARTICLE XIII

ISSUANCE OF EQUITY INTERESTS TO LENDERS

Section 13.01 AUTHORIZATION AND ISSUANCE OF WARRANTS. (a) Immediately following the receipt of the Requisite Approval, the Parent shall issue to the Term Loan C Lenders one or more warrant certificates covering the purchase of shares of Common Stock substantially in the form of Exhibit I hereto (such certificates, together with the rights to purchase Common Stock provided thereby and all warrant certificates covering such stock issued upon transfer, division or combination of, or in substitution for, any thereof, being herein called the "WARRANTS") in an aggregate amount equal to 8.75% of the issued and outstanding shares of Common Stock outstanding as of such date, excluding all outstanding convertible securities, warrant, options or other equity equivalents. It is understood and agreed that the Warrants contain provisions affecting the number of shares of Common Stock that may be acquired and the exercise price of the Warrants, and that such provisions are set forth in the Warrants

(b) The Warrants will cease to be exercisable on the date that is the tenth anniversary of the Effective Date.

Section 13.02 SECURITIES ACT MATTERS.

(a) Each of the Term Loan C Lenders severally represents and warrants to the Parent as of the date hereof and as of the date of the issuance of the Warrants that:

(i) Such Lender is acquiring the Warrants hereunder for its own account, without a view to the distribution thereof, all without prejudice, however, to the right of such Lender at any time, in accordance with this Agreement, lawfully to sell or otherwise to dispose of all or any part of the Warrants or Warrant Stock held by it.

(ii) Such Lender is an "accredited investor" within the meaning of Regulation D under the Securities Act.

(iii) Such Lender acknowledges that, subject to the Registration Rights Agreement (A) the Warrants and the Warrant Stock have not been registered under the Securities Act, in reliance on the non-public offering exemption contained in Section 4(2) of the Securities Act and Regulation D thereunder; (B) because the Warrants and the Warrant Stock are not so registered, such Lender must bear the economic risk of holding the Warrants and the Warrant Stock for an indefinite period of time unless the Warrants and the Warrant Stock are subsequently registered under the Securities Act or an exemption from such registration is available with respect thereto; (C) Rule 144 under the Securities Act may or may not be available for resales of the Warrants or the Warrant Stock in the future; (D) there is presently no trading market for the Warrants and there is no assurance that such market will exist in the future; and (E) while there is presently a trading market for the Warrant Stock, there is no assurance that such market will be in existence in the future.

(iv) If such Lender decides to dispose of the Warrants or the Warrant Stock, which it does not now contemplate, that such Lender can do so only in accordance and in compliance with the Securities Act and Rule 144 or another exemption from the registration requirements of the Securities Act, as then in effect or through an effective registration statement under the Securities Act.

(v) Such Lender acknowledges that (A) it has had ready access to any and all documents which he deems relevant to the acquisition of the Warrants and the Warrant Stock; (B) to such Lender's knowledge, no requested information, oral or written, has been withheld from such Lender by Parent; (C) Parent has made available to such Lender, during the course of the transaction and prior to the issuance of Warrant Stock the opportunity to ask questions of, and receive answers from, Parent and its officers concerning Parent, and to obtain any additional information, to the extent Parent possessed such information or could acquire it without unreasonable effort or expense, necessary to verify the accuracy of information contained in the written materials delivered to such Lender by Parent and concerning Parent; and (D) it has reviewed or had the opportunity to review all documents filed publicly of record by Parent with the Securities and Exchange Commission.

(vi) Such Lender will not sell or otherwise transfer the shares of the Warrant Stock in a public market transaction until the holding period for restricted securities set forth in Rule
144(d)(1), as it may be amended from time to time, has been satisfied or pursuant to an effective registration statement under the Securities Act or an exemption from the registration requirements of the Securities Act.

(b) The Parent represents and warrants to each of the Term Loan C Lenders as of the date hereof and as of the date of the issuance of the Warrants that:

(i) Assuming the truth and accuracy of such Lender's representations and warranties contained in Section 13.02(a), the issuance of the Warrants to hereunder and the issuance of shares of Common Stock to such Lender pursuant to the Warrants are exempt from the registration and prospectus delivery requirements of the Securities Act.

(ii) All stock and securities of the Parent heretofore issued and sold by the Parent were, and all securities of the Parent issued and sold by the Parent on and after the date hereof are or will be issued and sold in accordance with, or are or will be exempt from, the registration and prospectus delivery requirements of the Securities Act.

(c) The Parent agrees that neither it nor any Person acting on its behalf has offered or will offer the Warrants or Warrant Stock or any part thereof or any similar securities for issue or sale to, or has solicited or will solicit any offer to acquire any of the same from, any Person so as to bring the issuance and sale of the Warrants or Warrant Stock hereunder within the provisions of the registration and prospectus delivery requirements of the Securities Act.

Section 13.03 CERTAIN TAXES. The Parent shall pay all taxes (other than Federal, state or local income taxes (or other similar taxes based on income)) which may be payable in connection with the execution and delivery of this Agreement or the issuance of the Warrants or Warrant Stock hereunder or in connection with any modification of this Agreement or the Warrants and shall hold the Lenders harmless without limitation as to time against any and all liabilities with respect to all such taxes. The obligations of the Parent under this Section 13.03 shall survive any redemption, repurchase or acquisition of Warrants or Warrant Stock by the Parent, any termination of this Agreement, and any cancellation or termination of the Warrants. The parties hereto agree that for income tax purposes, the purchase price to be attributed to the Warrants issued to the Lenders hereunder on the date hereof is $1,000,000.

Section 13.04 CANCELLATION AND ISSUANCE. If any Term Loan C Lender assigns or otherwise transfers all or any of its Term Loan C (including by selling participations therein) to any Person, such Lender may request (upon 10 days' prior notice to the Parent) that (a) a number of Warrants held by such Lender be canceled on the date of such assignment and transfer and (b) a like number of Warrants be issued by the Parent to the Person to whom such Term Loan C is being assigned or otherwise transferred. Upon the date specified in such request:

(i) the Parent shall issue, and such Lender shall surrender (or cause to be surrendered) for cancellation, such number of Warrants as aforesaid, provided that such issuance shall not violate the Securities Act or any applicable state securities laws;

(ii) the Parent will deliver to each Person that receives a certificate for Warrants a favorable legal opinion from counsel to the Parent acceptable to such Person, covering the matters set forth in the opinion of counsel to the Parent and its Subsidiaries attached as Exhibit F hereto (to the extent relating to the Warrants);

(iii) each Person that receives Warrants will deliver a certificate to the Parent affirming the representations and warranties contained in Section 13.02(a) hereof as of such date; and

(iv) the Parent will deliver a certificate to each Person that receives Warrants affirming the representations and warranties contained in Section 13.02(b) hereof as of such date.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

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

VALUE CITY DEPARTMENT STORES, INC.,
an Ohio corporation

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

SHONAC CORPORATION,
an Ohio corporation

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

DSW SHOE WAREHOUSE, INC.,
a Missouri corporation

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

GRAMEX RETAIL STORES, INC.,
a Delaware corporation

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

FILENE'S BASEMENT, INC.,
a Delaware corporation

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

Value City Limited Partnership, an Ohio limited partnership

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

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

VALUE CITY OF MICHIGAN, INC.,
a Michigan corporation

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

GB RETAILERS, INC.,
a Delaware corporation

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

VCM, LTD., an Ohio limited liability company

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

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

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

VALUE CITY DEPARTMENT STORES SERVICES, INC.,
a Delaware corporation

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

WESTERVILLE ROAD GP, INC.,
a Delaware corporation

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

WESTERVILLE ROAD LP, INC.,
a Delaware corporation

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

CERBERUS PARTNERS, L.P.,
a Delaware limited partnership

Title:

SCHOTTENSTEIN STORES CORPORATION,
a Delaware corporation

Title:

Exhibit 10.3

$75,000,000

SENIOR SUBORDINATED CONVERTIBLE LOAN AGREEMENT

DATED AS OF MARCH 15, 2000, AS AMENDED FROM TIME TO TIME, AND AS
AMENDED AND RESTATED BY THIS

AMENDED AND RESTATED SENIOR CONVERTIBLE LOAN AGREEMENT

DATED AS JUNE 11, 2002

BY AND AMONG

VALUE CITY DEPARTMENT STORES, INC.,

AS BORROWER,

SHONAC CORPORATION,
DSW SHOE WAREHOUSE, INC.,
GRAMEX RETAIL STORES, INC.,
VCM, LTD.,
FILENE'S BASEMENT, INC.,
GB RETAILERS, INC.,
J.S. OVERLAND DELIVERY, INC.
VALUE CITY DEPARTMENT STORES SERVICES, INC.
VALUE CITY LIMITED PARTNERSHIP,
VALUE CITY OF MICHIGAN, INC.,
WESTERVILLE ROAD GP, INC. AND
WESTERVILLE ROAD LP, INC.

AS GUARANTORS,

THE LENDERS FROM TIME TO TIME PARTY HERETO,

AS LENDERS,

AND

SCHOTTENSTEIN STORES CORPORATION,

AS AGENT

TABLE OF CONTENTS

                                                                                                              PAGE

ARTICLE I DEFINITIONS; CERTAIN TERMS............................................................................2

         SECTION 1.01          DEFINITIONS......................................................................2
         SECTION 1.02          TERMS GENERALLY.................................................................21
         SECTION 1.03          ACCOUNTING AND OTHER TERMS......................................................21
         SECTION 1.04          TIME REFERENCES.................................................................21

ARTICLE II THE LOAN............................................................................................22

         SECTION 2.01          THE LOAN........................................................................22
         SECTION 2.02          NOTES; REPAYMENT OF LOAN........................................................22
         SECTION 2.03          INTEREST........................................................................22
         SECTION 2.04          PREPAYMENT OF LOAN..............................................................23
         SECTION 2.05          TAXES...........................................................................24

ARTICLE III FEES, PAYMENTS AND OTHER COMPENSATION..............................................................25

         SECTION 3.01          [INTENTIONALLY OMITTED.]........................................................25
         SECTION 3.02          PAYMENTS; COMPUTATIONS AND STATEMENTS...........................................25
         SECTION 3.03          SHARING OF PAYMENTS, ETC........................................................26
         SECTION 3.04          APPORTIONMENT OF PAYMENTS.......................................................27
         SECTION 3.05          INCREASED COSTS AND REDUCED RETURN..............................................27

ARTICLE IV CONDITIONS TO EFFECTIVENESS.........................................................................30

         SECTION 4.01          CONDITIONS PRECEDENT TO EFFECTIVENESS...........................................30

ARTICLE V REPRESENTATIONS AND WARRANTIES.......................................................................33

         SECTION 5.01          REPRESENTATIONS AND WARRANTIES..................................................33

ARTICLE VI COVENANTS OF THE LOAN PARTIES.......................................................................42

         SECTION 6.01          AFFIRMATIVE COVENANTS...........................................................42
         SECTION 6.02          NEGATIVE COVENANTS..............................................................45

ARTICLE VII REPORTING REQUIREMENTS.............................................................................53

         SECTION 7.01          MAINTAIN RECORDS................................................................53
         SECTION 7.02          ACCESS TO RECORDS...............................................................54
         SECTION 7.03          PROMPT NOTICE TO ADMINISTRATIVE AGENT...........................................54
         SECTION 7.04          [INTENTIONALLY OMITTED].........................................................55
         SECTION 7.05          [INTENTIONALLY OMITTED].........................................................55
         SECTION 7.06          QUARTERLY REPORTS...............................................................55
         SECTION 7.07          ANNUAL REPORTS..................................................................55

         SECTION 7.08          OFFICER'S CERTIFICATES..........................................................56
         SECTION 7.09          [INTENTIONALLY OMITTED].........................................................56
         SECTION 7.10          ADDITIONAL FINANCIAL INFORMATION................................................56
         SECTION 7.11          FORMAT OF INFORMATION...........................................................57

ARTICLE VIII [INTENTIONALLY OMITTED.]..........................................................................57


ARTICLE IX EVENTS OF DEFAULT...................................................................................57

         SECTION 9.01          EVENTS OF DEFAULT...............................................................57

ARTICLE X AGENT................................................................................................60

         SECTION 10.01         APPOINTMENT.....................................................................60
         SECTION 10.02         NATURE OF DUTIES................................................................61
         SECTION 10.03         RIGHTS; EXCULPATION, ETC........................................................62
         SECTION 10.04         RELIANCE........................................................................62
         SECTION 10.05         INDEMNIFICATION.................................................................63
         SECTION 10.06         AGENT INDIVIDUALLY..............................................................63
         SECTION 10.07         SUCCESSOR AGENT.................................................................63
         SECTION 10.08         [INTENTIONALLY OMITTED].........................................................64
         SECTION 10.09         [INTENTIONALLY OMITTED].........................................................64

ARTICLE XI GUARANTY............................................................................................64

         SECTION 11.01         GUARANTY........................................................................64
         SECTION 11.02         GUARANTY ABSOLUTE...............................................................64
         SECTION 11.03         WAIVER..........................................................................65
         SECTION 11.04         CONTINUING GUARANTY; ASSIGNMENTS................................................65
         SECTION 11.05         SUBROGATION.....................................................................65

ARTICLE XII MISCELLANEOUS......................................................................................66

         SECTION 12.01         NOTICES, ETC....................................................................66
         SECTION 12.02         AMENDMENTS, ETC.................................................................67
         SECTION 12.03         NO WAIVER; REMEDIES, ETC........................................................67
         SECTION 12.04         EXPENSES; TAXES; ATTORNEYS' FEES................................................68
         SECTION 12.05         RIGHT OF SET-OFF................................................................69
         SECTION 12.06         SEVERABILITY....................................................................69
         SECTION 12.07         ASSIGNMENTS AND PARTICIPATIONS..................................................69
         SECTION 12.08         COUNTERPARTS....................................................................72
         SECTION 12.09         GOVERNING LAW...................................................................72
         SECTION 12.10         CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE...........................72
         SECTION 12.11         WAIVER OF JURY TRIAL, ETC.......................................................73
         SECTION 12.12         CONSENT BY THE AGENT AND LENDERS................................................73
         SECTION 12.13         NO PARTY DEEMED DRAFTER.........................................................73
         SECTION 12.14         REINSTATEMENT; CERTAIN PAYMENTS.................................................73
         SECTION 12.15         INDEMNIFICATION.................................................................74

         SECTION 12.16         [INTENTIONALLY OMITTED.]........................................................75
         SECTION 12.17         RECORDS.........................................................................75
         SECTION 12.18         BINDING EFFECT..................................................................75
         SECTION 12.19         MAXIMUM INTEREST................................................................75
         SECTION 12.20         CONFIDENTIALITY.................................................................76
         SECTION 12.21         INTEGRATION.....................................................................77

ARTICLE XIII CONVERSION OF LOAN................................................................................77

         SECTION 13.01         CONVERSION PRIVILEGE AND CONVERSION PRICE.......................................77
         SECTION 13.02         EXERCISE OF CONVERSION PRIVILEGE................................................77
         SECTION 13.03         ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.............................78
         SECTION 13.04         NO IMPAIRMENT...................................................................84
         SECTION 13.05         ACCOUNTANTS' REPORT.............................................................84
         SECTION 13.06         COMMON STOCK RESERVED...........................................................84
         SECTION 13.07         NO REISSUANCE OF LOAN...........................................................84
         SECTION 13.08         ISSUE TAX.......................................................................84
         SECTION 13.09         CLOSING OF BOOKS................................................................85
         SECTION 13.10         DEFINITION OF COMMON STOCK......................................................85
         SECTION 13.11         FRACTIONS OF SHARES OF COMMON STOCK.............................................85
         SECTION 13.12         COVENANT AS TO COMMON STOCK.....................................................85

AMENDED AND RESTATED SENIOR CONVERTIBLE LOAN AGREEMENT

Senior Subordinated Convertible Loan Agreement, dated as of March 15, 2000, and amended and restated by this Amended and Restated Senior Convertible Loan Agreement, dated as of June 11, 2002 (the "Agreement"), among Value City Department Stores, Inc., an Ohio corporation (the "BORROWER"), Shonac Corporation, an Ohio corporation ("SHONAC"), DSW Shoe Warehouse, Inc., a Missouri corporation ("DSW"), Gramex Retail Stores, Inc., a Delaware corporation ("GRAMEX"), VCM, Ltd., an Ohio limited liability company ("VCM"), Filene's Basement, Inc., a Delaware corporation ("FILENE'S"), GB Retailers, Inc., a Delaware corporation ("GB"), J.S. Overland Delivery, Inc., a Delaware corporation ("JS"), Value City Department Stores Services, Inc., a Delaware corporation ("VC SERVICES"), Value City Limited Partnership, an Ohio limited partnership ("VCLP"), Value City of Michigan, Inc., a Michigan corporation ("VC MICHIGAN"), Westerville Road GP, Inc., a Delaware corporation ("WESTERVILLE GP"), Westerville Road LP, Inc., a Delaware corporation ("WESTERVILLE LP", and together with Shonac, DSW, Gramex, VCM, Filene's, GB, JS, VC Services, VCLP, VC Michigan and Westerville GP, each a "GUARANTOR", and collectively, the "GUARANTORS"), the lenders from time to time party hereto (each a "LENDER" and collectively, the "LENDERS"), and Schottenstein Stores Corporation, a Delaware corporation ("SSC"), as Agent for itself and the other Lenders (in such capacity, together with its successors, if any, the "AGENT").

RECITALS

WHEREAS, the Borrower and Prudential Securities Credit Corp., LLC ("PSCC"), as initial lender and as administrative agent, entered into the Senior Subordinated Convertible Loan Agreement, dated as of March 15, 2000 (the
"ORIGINAL LOAN AGREEMENT");

WHEREAS, as of December 11, 2000, PSCC assigned all of its right, title and interest under the Original Loan Agreement to SSC;

WHEREAS, the Borrower and SSC entered into (a) the Waiver and Amendment to the Senior Subordinated Convertible Loan Agreement, dated December 11, 2000,
(b) the Second Amendment to the Senior Subordinated Convertible Loan Agreement, dated January 1, 2001, and (c) the Third Amendment to the Senior Subordinated Convertible Loan Agreement, dated March 14, 2001, (d) the Fourth Amendment to the Senior Subordinated Convertible Loan Agreement dated September 10, 2001 (marked as the Third Amendment), (e) the Fifth Amendment to the Senior Subordinated Convertible Loan Agreement, dated November 2, 2001, and (f) the Sixth Amendment to the Senior Subordinated Convertible Loan Agreement, dated February 1, 2002, each of which amended the Original Loan Agreement;

WHEREAS, the Borrower has requested and the Agent and the Lenders have agreed to make certain revisions to the Original Loan Agreement;

WHEREAS, the parties hereto now desire to amend and restate the Original Loan Agreement on the terms and subject to the conditions set forth below:

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

ARTICLE I

DEFINITIONS; CERTAIN TERMS

Section 1.01 DEFINITIONS. As used in this Agreement, the following terms shall have the respective meanings indicated below, such meanings to be applicable equally to both the singular and plural forms of such terms:

"ACTION" has the meaning specified therefor in Section 12.12.

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

"AFFILIATE" means (i) with respect to any Person, any other Person that directly or, alone or with a group of related Persons whose interests taken as a whole, indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person; (ii) any Person which is a parent, brother-sister or subsidiary of a Key Loan Party, whose enterprise's tax returns or financial statements are consolidated with those of a Key Loan Party, which is a member of the same controlled group of corporations (within the meaning of Section 1563(a)(1), (2) and (3) of the Internal Revenue Code or 1986, as amended from time to time) of which any Key Loan Party is a member, or Controls or is Controlled by any Key Loan Party; and (iii) with respect to the Loan Parties, without limiting the provisions of clauses (i) and (ii) hereof, "Affiliate" includes SSC. Notwithstanding anything to the contrary contained herein, in no event shall the Agent or any Lender be considered an "Affiliate" of a Loan Party as a result of being party to this Agreement or the transactions contemplated hereby

"AGENT" has the meaning specified therefor in the preamble hereto.

"AGENT'S ACCOUNT" means an account at a bank designated by the Agent from time to time as the account into which the Loan Parties shall make certain payments to the Agent for the benefit of the Agent and the Lenders under this Agreement and the other Loan Documents.

"AGREEMENT" means this Amended and Restated Senior Convertible Loan Agreement, including all amendments, modifications and supplements and any exhibits or schedules to any of the foregoing, and shall refer to the Agreement as the same may be in effect at the time such reference becomes operative.

"APPLICABLE LAW" means, as to any Person, (i) all statutes, rules, regulations, orders or other requirements having the force of law, and (ii) all court orders and injunctions, arbitrator's decisions and/or similar rulings, in each instance ((i) and (ii)) of or by any Federal, state, municipal or other governmental authority, or court, tribunal, panel or other body which has or claims jurisdiction over such Person, or any property of such Person, or of any other Person for whose conduct such Person would be responsible.

"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into by an assigning Lender and an assignee, and accepted by the Agent, in accordance with Section 12.07 hereof and substantially in the form of Exhibit I hereto or such other form acceptable to the Agent.

"AUTHORIZED OFFICER" means, with respect to any Person, the chief executive officer, chief financial officer, president, executive vice president, controller or treasurer of such Person.

"BANKRUPTCY CODE" means the United States Bankruptcy Code (11 U.S.C. ss. 101, ET SEQ.), as amended from time to time, and any successor statute.

"BOARD" means the Board of Governors of the Federal Reserve System of the United States.

"BOARD OF DIRECTORS" means the board of directors of the Borrower as of the Effective Date.

"BORROWER" has the meaning specified therefor in the preamble hereto.

"BUSINESS DAY" means any day other than (i) a Saturday or Sunday, (ii) any day on which banks in New York City generally are not open to the general public for the purpose of conducting commercial banking business, or (iii) a day on which the principal office of the Agent is not open to the general public to conduct business.

"BUSINESS PLAN" means the business plan for the Loan Parties for the fiscal years 2002 through and including 2004 dated March 19, 2002, as set forth in that certain confidential side letter from the Borrower to the Agent.

"CAPITAL EXPENDITURES" means, with respect to any Person for any period, the sum of (i) the aggregate of all expenditures by such Person and its Subsidiaries during such period that in accordance with GAAP are or should be included in "property, plant and equipment" or in a similar fixed asset account on its balance sheet, whether such expenditures are paid in cash or financed and including all Capitalized Lease Obligations paid or payable during such period; and (ii) to the extent not covered by clause (i) above, the aggregate of all expenditures by such Person and its Subsidiaries during such period to acquire by purchase or otherwise the business or fixed assets of, or the Capital Stock of, any other Person.

"CAPITAL GUIDELINE" means any law, rule, regulation, policy, guideline or directive (whether or not having the force of law and whether or not the failure to comply therewith would be unlawful) of any central bank or Governmental Authority (i) regarding capital adequacy, capital ratios, capital requirements, the calculation of a bank's capital or similar matters, or (ii) affecting the amount of capital required to be obtained or maintained by any Lender, any Person controlling any Lender or the manner in which any Lender, any Person controlling any Lender, allocates capital to any of its contingent liabilities (including letters of credit), advances, acceptances, commitments, assets or liabilities.

"CAPITAL STOCK" means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not

voting) of corporate stock; and (ii) with respect to any Person that is not a corporation, any and all partnership, membership or other equity interests of such Person.

"CAPITALIZED LEASE" means, with respect to any Person, any lease of real or personal property by such Person as lessee which is (i) required under GAAP to be capitalized on the balance sheet of such Person; or (ii) a transaction of a type commonly known as a "synthetic lease" (i.e. a lease transaction that is treated as an operating lease for accounting purposes but with respect to which payments of rent are intended to be treated as payments of principal and interest on a loan for Federal income tax purposes).

"CAPITALIZED LEASE OBLIGATIONS" means, with respect to any Person, obligations of such Person and its Subsidiaries under Capitalized Leases, and, for purposes hereof, the amount of any such obligation shall be the capitalized amount thereof determined in accordance with GAAP.

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

"COMMON STOCK" means the common stock, no par value per share, of the Borrower.

"COMPETITIVE BUSINESS" means any business or enterprise consisting of
(i) operation of off-price discount department stores; (ii) operation of retail furniture stores and related accessories; (iii) operation of designer and name-brand shoe stores; (iv) operation of licensed shoe departments; (v) furniture manufacturing; or (vi) bedding manufacturing.

"CONTINGENT OBLIGATION" means, with respect to any Person, any obligation of such Person guaranteeing or intended to guarantee any Indebtedness ("PRIMARY OBLIGATIONS") of any other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including, without limitation, (i) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of a primary obligor; (ii) the obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement (other than such agreements to purchase goods in the ordinary course of business); (iii) any obligation of such Person, whether or not contingent, (A) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (B)

(other than such agreements to purchase goods in the ordinary course of business) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (C) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (D) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof (other than such agreements to purchase goods in the ordinary course of business); PROVIDED, HOWEVER, that the term "Contingent Obligation" shall not include (1) any product warranties or (2) obligations, warranties and indemnities not relating to Indebtedness which have been made or undertaken, in each case, extended in the ordinary course of business.

"CONTROL", "CONTROLS", "CONTROLLED BY", or "UNDER COMMON CONTROL WITH" means the possession, direct or indirect of the power to cause the direction of the management and policies of a Person whether through the ownership of voting securities, by contract or otherwise. A Person shall be deemed to have control of another Person if it is a "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13-d-5 under the Exchange Act) or a member of a "group" that is the beneficial owner, directly or indirectly, of 20% or more of the voting stock of or equity interest in such Person.

"CONVERSION DATE" has the meaning specified therefor in Section 13.02(a).

"CONVERSION NOTICE" has the meaning specified therefor in Section 13.02(a).

"CONVERSION PRICE" has the meaning specified therefor in Section 13.01(b).

"CONVERSION SHARES" has the meaning specified therefor in Section 13.01(a).

"CONVERTIBLE SECURITIES" means any evidences of indebtedness, shares (other than Common Stock) of capital stock or other securities directly or indirectly convertible into or exchangeable for Common Stock.

"CONVERTING LENDER" has the meaning specified therefor in Section 13.01(b).

"CURRENT MARKET PRICE" means, on any date specified herein, the average of the daily Market Price during the ten consecutive trading days before such date, except that, if on any such date the shares of Common Stock are not listed or admitted for trading on any national securities exchange or quoted in the over-the-counter market, the Current Market Price shall be the Market Price on such date.

"DEFAULT" means an event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default.

"DISPOSITION" means any transaction, or series of related transactions, pursuant to which any Person or any of its Subsidiaries sells, assigns, transfers or otherwise disposes of any property or assets (whether now owned or hereafter acquired) to any other Person, in each case, whether or not the consideration therefor consists of cash, securities or other assets owned by the

acquiring Person, EXCLUDING any sales of Inventory in the ordinary course of business on ordinary business terms.

"DIVISION(S)" means the various business segments of the Key Loan Parties, being the DSW/Shonac Business, the Filene's Business and the Value City Business.

"DOLLAR," "DOLLARS" and the symbol "$" each means lawful money of the United States of America.

"DSW/SHONAC BUSINESS" means, collectively, the businesses operated by DSW and Shonac.

"EBITDA" means, with respect to any Person for any period, the consolidated Net Income of such Person and its Subsidiaries for such period, PLUS without duplication, the sum of the following amounts of such Person and its Subsidiaries for such period to the extent deducted in determining consolidated Net Income of such Person and its Subsidiaries for such period: (A) Interest Expense, (B) federal, state, local and foreign income tax expense, (C) depreciation expense, (D) amortization expense and (E) expenses incurred in connection with certain refinancings of Indebtedness by the Borrower.

"EFFECTIVE DATE" means the date, on or before June 11, 2002, on which all of the conditions precedent set forth in Section 4.01 are satisfied or waived.

"ELIGIBLE ASSIGNEE" means any Federal, state or foreign banking institution, or any private entity or commercial institution primarily engaged in the business of making commercial loans, and shall in no event include a Person that is engaged in a Competitive Business with any Loan Party, and as long as SSC remains in Control of the Key Loan Parties, an "Eligible Assignee" shall in no event include a Person which is engaged in a Competitive Business or a Related Business with SSC.

"EMPLOYEE BENEFIT PLAN" means an employee benefit pension benefit plan that is covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Internal Revenue Code of 1986, as amended from time to time, and as to which a Key Loan Party or any ERISA Affiliate may have any liability.

"ENVIRONMENTAL ACTIONS" means any complaint, summons, citation, notice, directive, order, claim, litigation, investigation, judicial or administrative proceeding, judgment, letter, or other communication from any Person or Governmental Authority involving violations of Environmental Laws or Releases of Hazardous Materials (i) from any assets, properties or businesses owned or operated by any Loan Party or any of its Subsidiaries or any predecessor in interest; or (ii) onto any facilities which received Hazardous Materials generated by any Loan Party or any of its Subsidiaries or any predecessor in interest.

"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. ss. 9601, ET SEQ.), the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801, ET SEQ.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901, ET SEQ.), the Federal Clean Water Act (33 U.S.C. ss. 1251 ET SEQ.), the Clean Air Act (42 U.S.C. ss. 7401 ET SEQ.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 ET seq.)

and the Occupational Safety and Health Act (29 U.S.C. ss. 651 ET SEQ.), as such laws may be amended or otherwise modified from time to time, and any other present or future Federal, state, local or foreign statute, ordinance, rule, regulation, order, judgment, decree, permit, license or other binding determination of any Governmental Authority imposing liability or establishing standards of conduct for protection of the environment or other government restrictions relating to the protection of the environment or the Release, deposit, or migration of any Hazardous Materials into the environment.

"ENVIRONMENTAL LIABILITIES AND COSTS" means all liabilities, monetary obligations, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, reasonable costs, and expenses (including all reasonable fees, disbursements and expenses of counsel, experts, and consultants and costs of investigations and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand by any Governmental Authority or any third party, and which relate to any environmental condition or a Release of Hazardous Materials from or onto (i) any property presently or formerly owned by any Loan Party or any of its Subsidiaries; or
(ii) any facility which received Hazardous Materials generated by any Loan Party or any of its Subsidiaries.

"ENVIRONMENTAL LIEN" means any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs.

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

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time.

"ERISA AFFILIATE" means any Person which is under common control with a Key Loan Party within the meaning of Section 4001 of ERISA or is part of a group which includes any Key Loan Party and which would be treated as a single employer under Section 414 of the Internal Revenue Code of 1986, as amended from time to time.

"EVENT OF DEFAULT" means any of the events set forth in Section 9.01. An "Event of Default" shall be deemed to have occurred and to be continuing unless and until that Event of Default has been duly waived by the Agent or cured to the satisfaction of the Agent.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as amended, modified, succeeded or replaced from time to time.

"FAIR MARKET VALUE" means, on any date specified herein (i) in the case of cash, the dollar amount thereof, (ii) in the case of a security, the Current Market Price, and (iii) in all other cases, the fair value thereof (as of a date which is within 20 days of the date as of which the determination is to be made) determined in good faith by a committee of Borrower's Board of

Directors consisting of directors who are not Affiliates of Borrower, SSC or any other Lender; PROVIDED, HOWEVER, that at the request of a Lender, the Fair Market Value shall be determined in good faith by an independent investment banking firm selected jointly by Borrower and Lender or, if that selection cannot be made within ten days, by an independent investment banking firm selected by the American Arbitration Association in accordance with its rules, and PROVIDED, FURTHER, that Borrower shall pay all of the reasonable fees and expenses of any third parties incurred in connection with determining the Fair Market Value.

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

"FILENE'S BUSINESS" means the businesses operated by Filene's.

"FINAL MATURITY DATE" means June 10, 2009, or such earlier date on which the Loan shall become due and payable in accordance with the terms of this Agreement and the other Loan Documents.

"FINANCIAL STATEMENTS" means (i) the audited consolidated balance sheet of the Borrower and its Subsidiaries for the Fiscal Year ended February 2, 2002, and the related consolidated statement of operations, shareholders' equity and cash flows for the Fiscal Year then ended; and (ii) the unaudited consolidated balance sheet of the Borrower and its Subsidiaries for the three months ended May 2, 2002, and the related consolidated statement of operations, shareholder's equity and cash flows for the three months then ended.

"FISCAL YEAR" means the fiscal year of the Borrower and its Subsidiaries ending on the Saturday nearest January 31st of each year.

"GAAP" means generally accepted accounting principles in effect from time to time in the United States, applied on a consistent basis; PROVIDED, that for the purpose of Article VII hereof and the definitions used therein, "GAAP" shall mean generally accepted accounting principles in effect on the date hereof and consistent with those used in the preparation of the Financial Statements; PROVIDED, FURTHER, that if there occurs after the date of this Agreement any change in GAAP that affects in any respect the calculation of any covenant contained in Article VII hereof, the Agent and the Borrower shall negotiate in good faith amendments to the provisions of this Agreement that relate to the calculation of such covenant with the intent of having the respective positions of the Lenders and the Borrower after such change in GAAP conform as nearly as possible to their respective positions as of the date of this Agreement.

"GOVERNMENTAL AUTHORITY" means any nation or government, any Federal, state, city, town, municipality, county, local or other political subdivision thereof or thereto and any department, commission, board, bureau, instrumentality, agency or other entity exercising

executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

"GUARANTEED OBLIGATIONS" has the meaning specified therefor in Section 11.01.

"GUARANTOR" means (i) certain Subsidiaries of the Borrower that are signatories hereto, and (ii) each other Person which guarantees, pursuant to
Section 6.01(a) or otherwise, all or any part of the Obligations.

"GUARANTY" means (i) the Guaranty of each Guarantor party hereto contained in Article XI hereof; and (ii) each Guaranty substantially in the form of Exhibit D, made by any other Guarantor in favor of the Agent for the benefit of the Lenders, pursuant to Section 6.01(a) or otherwise.

"HAZARDOUS MATERIAL" means (i) any element, compound or chemical that is defined, listed or otherwise classified as a contaminant, pollutant, toxic pollutant, toxic or hazardous substance, extremely hazardous substance or chemical, hazardous waste, special waste, or solid waste under Environmental Laws or that is reasonably likely to cause immediately, or at some reasonably foreseeable future time, harm to or have an adverse effect on, the environment or risk to human health or safety, including, without limitation, any pollutant, contaminant, waste, hazardous waste, toxic substance or dangerous good which is defined or identified in any Environmental Law and which is present in the environment in such quantity or state that it contravenes any Environmental Law;
(ii) petroleum and its refined products; (iii) polychlorinated biphenyls; (iv) any substance exhibiting a hazardous waste characteristic, including, without limitation, corrosivity, ignitability, toxicity or reactivity as well as any radioactive or explosive materials; and (v) any raw materials, building components (including, without limitation, asbestos-containing materials) and manufactured products containing hazardous substances listed or classified as such under Environmental Laws.

"HEDGING AGREEMENT" means any interest rate, foreign currency, commodity or equity swap, collar, cap, floor or forward rate agreement, or other agreement or arrangement designed to protect against fluctuations in interest rates or currency, commodity or equity values (including, without limitation, any option with respect to any of the foregoing and any combination of the foregoing agreements or arrangements), and any confirmation executed in connection with any such agreement or arrangement, including, without limitation, the NCB Hedging Agreement.

"HIGHEST LAWFUL RATE" means, with respect to the Agent or any Lender, the maximum non-usurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Obligations under laws applicable to the Agent or such Lender which are currently in effect or, to the extent allowed by law, under such Applicable Laws which may hereafter be in effect and which allow a higher maximum non-usurious interest rate than Applicable Laws now allow.

"INDEBTEDNESS" means, without duplication, all obligations, including Contingent Obligations, that in accordance with GAAP should be classified upon the balance sheet of any Key Loan Party and/or the consolidated balance sheet of the Key loan Parties as liabilities, other

than trade payables, deferred rent, or accrued expenses incurred in the ordinary course of business or to which reference should be made by footnotes thereto, including, in any event and whether or not so classified, (i) all obligations in respect of money borrowed (including any indebtedness which is non-recourse to the credit of such Person but which is secured by a Lien on any asset of such Person) whether or not evidenced by a promissory note, bond, debenture or other written obligation to pay money; (ii) all obligations evidenced by bonds, notes, debentures or other similar instruments; (iii) all obligations in connection with Hedging Agreements; (iv) all obligations in connection with any letter of credit or acceptance transaction (including, without limitation, the face amount of all letters of credit and acceptances issued for the account of such Person or reimbursement on account of which such Person would be obligated); (v) all obligations in connection with the sale or discount of accounts receivable or chattel paper of such Person; (vi) all obligations on account of deposits or advances other than deferred rent incurred in the ordinary course of business;
(vii) all obligations as lessee under Capitalized Leases; and (viii) all obligations in connection with any sale and leaseback transaction. "Indebtedness" also includes: (x) Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; (y) any guaranty, endorsement, suretyship or other undertaking in respect of Indebtedness pursuant to which that Person may be liable on account of any obligation of any third party; and (z) the Indebtedness of a partnership or joint venture for which such Person is liable as a general partner or joint venturer.

"INDEMNIFIED MATTERS" has the meaning specified therefor in Section 12.15.

"INDEMNITEES" has the meaning specified therefor in Section 12.15.

"INSOLVENCY PROCEEDING" means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, or extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

"INTEREST EXPENSE" means, with respect to any Person for any period, gross interest expense of such Person and its Subsidiaries for such period determined on a consolidated basis and in accordance with GAAP (including, without limitation, interest expense paid to Affiliates of such Person).

"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended from time to time, (or any successor statute thereto) and the regulations thereunder.

"INVENTORY" means, with respect to any Person, all goods and merchandise of such Person, including, without limitation, all raw materials, work-in-process, packaging, supplies, materials and finished goods of every nature used or usable in connection with the shipping, storing, advertising or sale of such goods and merchandise, whether now owned or hereafter acquired, and all such other property the sale or other disposition of which would give rise to Accounts Receivable or cash.

"LEASE" means any lease of real property to which any Loan Party or any of its Subsidiaries is a party as lessor or lessee.

"LENDERS" means the financial institutions listed on the signature pages hereof, and each assignee that shall become a party hereto pursuant to
Section 12.07.

"LENDER'S ACCOUNT" means all an account at a bank designated by each Lender from time to time into which the Loan Parties shall make certain payments to such Lender under this Agreement.

"LIEN" means any mortgage, deed of trust, pledge, lien (statutory or otherwise), security interest, charge or other encumbrance or security or preferential arrangement of any nature, including, without limitation, any conditional sale or title retention arrangement, any Capitalized Lease and any assignment, deposit arrangement or financing lease intended as, or having the effect of, security.

"LISTING DEADLINE DATE" means October 31, 2002; PROVIDED, HOWEVER, that in the event the Meeting is delayed as a result of a unilateral action by SSC or a shareholder of SSC, the Listing Deadline Date shall be December 31, 2002.

"LOAN" means the loan made by Lenders to the Borrower pursuant to Article II hereof.

"LOAN DOCUMENT" means this Agreement, the Notes, the Registration Rights Agreement and any other agreement, instrument, and other document executed and delivered pursuant hereto or thereto or otherwise evidencing the Loan or any other Obligation.

"LOAN PARTY" means the Borrower or any Guarantor.

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

accordance with its rules, and PROVIDED, FURTHER, that Borrower shall pay all of the fees and expenses of any third parties incurred in connection with determining the Market Price.

"MATERIAL ACCOUNTING CHANGE" means any change in GAAP applicable to accounting periods subsequent to the Key Loan Parties' fiscal year most recently completed prior to the execution of this Agreement, which change has a material effect on the Key Loan Parties' Consolidated financial condition or operating results, as reflected on financial statements and reports prepared by or for the Key Loan Party, when compared with such condition or results as if such change had not taken place.

"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the business, operations, property, assets or financial condition of (x) the Loan Parties taken as a whole or (y) the Value City Business taken as a whole (including those portions of Shonac that operate as part of the Value City Business) or (ii) the validity or enforceability of this Agreement or any of the other Loan Documents or any of the material rights or remedies of the Agent or the Lenders hereunder or thereunder.

"MATERIAL CONTRACT" means, with respect to any Person, (i) each contract or agreement (other than Leases, intercompany agreements benefit and pension plans, stock option plans and labor and employment contracts) to which such Person or any of its Subsidiaries is a party involving aggregate consideration payable to or by such Person or such Subsidiary of $1,000,000 or more annually (other than purchase orders in the ordinary course of the business of such Person or such Subsidiary and other than contracts that by their terms may be terminated by such Person or Subsidiary in the ordinary course of its business upon less than 60 days' notice without penalty or premium) and (ii) all other contracts or agreements material to the business, operations, condition (financial or otherwise), performance, prospects or properties of such Person or such Subsidiary.

"MOODY'S" means Moody's Investors Service, Inc. and any successor thereto.

"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which any Loan Party or any of its ERISA Affiliates has contributed to, or has been obligated to contribute, at any time during the preceding six (6) years.

"NCB HEDGING AGREEMENT" means the Hedging Agreement between the Borrower and National City Bank dated as of March 28, 2000.

"NET INCOME" means, with respect to any Person for any period, the net income (loss) of such Person and its Subsidiaries for such period, determined on a consolidated basis and in accordance with GAAP, but excluding from the determination of Net Income (without duplication) (a) any extraordinary or non recurring gains or losses or gains or losses from Dispositions, (b) restructuring charges, (c) effects of discontinued operations and (d) interest income.

"NOTE" means a promissory note of the Borrower, substantially in the form of Exhibit A hereto, made payable to the order of a Lender and evidencing the Indebtedness resulting from the making by such Lender of its Pro Rata Share of the Loan.

"NOTICE OF ELECTION" has the meaning specified therefore in Section 2.03(c).

"NYSE" means the New York Stock Exchange.

"OBLIGATIONS" means all present and future indebtedness, obligations, and liabilities of each Loan Party to the Agent and the Lenders under the Loan Documents, whether or not the right of payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured, unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 9.01. Without limiting the generality of the foregoing, the Obligations of each Loan Party under the Loan Documents include (i) the obligation to pay principal, interest, including any PIK Interest, charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by such Person under the Loan Documents; and (ii) the obligation of such Person to reimburse any amount in respect of any of the foregoing that the Agent may elect to pay or advance on behalf of such Person.

"OLD NOTE" has the meaning specified in Section 2.01.

"OPTION" means options, warrants or other rights to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities.

"ORIGINAL LOAN AGREEMENT" has the meaning specified therefore in the preamble.

"OTHER TAXES" has the meaning specified therefore in Section 2.05.

"PARTICIPANT REGISTER" has the meaning specified therefor in Section 12.07(b)(v).

"PAYMENT OFFICE" means the Agent's office located at Schottenstein Stores Corporation, 1800 Moler Road, Columbus, Ohio, 43207, or at such other office or offices of the Agent as may be designated in writing from time to time by the Agent to the Borrower.

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

"PERMITTED ACQUISITION" means (i) any Acquisition the cash consideration for which is less than $3,000,000 in the aggregate in any fiscal year of the Key Loan Parties and which satisfies the conditions set forth in clauses (f), (g), (h) and (i) below; and (ii) an Acquisition in which each of the following conditions are satisfied: (a) no Default or Event of Default then exists or would arise from the consummation of such Acquisition; (b) such Acquisition shall have been approved by the Board of Directors of the Person (or similar governing body if such Person is not a corporation) which is the subject of such Acquisition and such Person shall not have announced that it will oppose such Acquisition or shall not have commenced any action which alleges that such Acquisition will violate Applicable Law; (c) the Borrower shall have furnished the Agent with ten (10) days' prior notice of such intended Acquisition and shall have furnished the Agent with a current draft of the Acquisition agreement and other Acquisition documents, a summary of any due diligence undertaken by the Key Loan Parties in connection with such Acquisition, appropriate financial statements of the Person which is the subject of such Acquisition, pro forma projected financial statements for the twelve (12)

month period following such Acquisition after giving effect to such Acquisition (including balance sheets, cash flows and income statements by month for the acquired Person, individually, and on a consolidated basis with all Loan Parties), and such other information as the Agent may reasonably require, each of which shall be reasonably satisfactory to the Agent; (d) the structure of the Acquisition shall be acceptable to the Agent in its reasonable judgment; if an Acquisition of capital stock or other equity interests, after consummation of such Acquisition, a Key Loan Party shall own directly or indirectly a majority of the equity interests in the Person being acquired and shall Control a majority of any voting interests, and/or shall otherwise Control the governance of the Person being acquired; (e) the Agent shall have received (i) the results of appraisals of the assets (or the assets of the Person) to be acquired in such Acquisition and of a commercial finance examination of the Person that is (or whose assets are) being acquired, and (ii) such other due diligence as the Agent may reasonably require, all of the results of the foregoing to be reasonably satisfactory to the Agent; (f) any assets acquired shall be utilized only in, and if the Acquisition involves a merger, consolidation or stock acquisition, the Person which is the subject of such Acquisition shall be engaged only in, a Permitted Business; (g) if the Person which is the subject of such Acquisition will be maintained as a Subsidiary of a Key Loan Party, such Subsidiary shall have executed such documents as may be necessary to be joined as a "Guarantor" hereunder; and (h) the total consideration paid for all Acquisitions (whether in cash, tangible property, notes or other property (other than capital stock of the Borrower)) after the Effective Date, shall not exceed in the aggregate the sum of $15,000,000.

"PERMITTED BUSINESS" means the business of owning and operating a chain of retail department stores selling clothing apparel, housewares, home furnishings, toys, sporting goods, jewelry, shoes, health and beauty care items or any of the foregoing, and engaging in certain related licensing and other retail and wholesale businesses reasonably related thereto, including, but not limited to, any retail lease department operation.

"PERMITTED DISPOSITION" means any of the following: (i) licenses of intellectual property or licensed departments of a Loan Party or any of its Subsidiaries in the ordinary course of business; (ii) Leases or subleases of Leases, to the extent at any point in time such Leases or subleases have, in the aggregate, anticipated minimum fixed annual rental payments of not more than $3,000,000; (iii) sales, assignments, transfers, conveyances or other dispositions of any or all of the Property specified in Schedule 6.02(c) hereof; PROVIDED that in connection with a sale or similar disposition of any such Property, if a Loan Party receives a note or similar obligation as all or part of the consideration therefor, such Loan Party shall secure such note or obligation with a Mortgage or similar Lien on such Property and pledge such note or other obligation to the Agent as security for the Obligations pursuant to the terms of the Loan Documents; (iv) sales of Inventory and Equipment in connection with store closures permitted in accordance with the provisions of Section 6.02(c)(vii) hereof, PROVIDED that all sales of Inventory in connection with store closings (x) after the occurrence and during the continuance of an Event of Default or (y) consisting of more than fifteen (15) retail stores at the same time, shall be in accordance with liquidation agreements and with liquidators reasonably acceptable to the Agent; and (v) (x) the sale of any property, land or building (including any related receivables or other intangible assets) to any Person which is not a Subsidiary of a Key Loan Party, or (y) the sale of the entire capital stock (or other equity interests) and Indebtedness of any Subsidiary owned by a Loan Party to any Person which is not a Subsidiary of a Key Loan Party, or (z) the consummation of any other asset sale with a Person who is not a Subsidiary of a Key Loan Party, PROVIDED that:

(A) the consideration for such transaction represents fair value, and at least 90% of such consideration consists of cash, PROVIDED that in connection with a sale or similar disposition of any such Property, if a Loan Party receives a note or similar obligations as all or part of the consideration therefor, such Loan Party shall secure such note or obligation with a Mortgage or similar Lien on such property and pledge such note or other obligation to the Agent as security for the Obligations pursuant to the terms of the Loan Documents; (B) the aggregate consideration for all such transactions completed in any fiscal year does not exceed $500,000; (C) the aggregate consideration for all such transactions completed after the Effective Date does not exceed $1,500,000; and (D) other than in connection with a transaction, the aggregate consideration for which is equal to an amount less than $500,000, at least five (5) Business Days prior to the date of completion of such transaction such Loan Party shall have delivered to the Agent an officer's certificate executed on behalf of such Loan Party by an Authorized Officer of such Loan Party, which certificate shall contain a description of the proposed transaction, the date such transaction is scheduled to be consummated, the estimated purchase price or other consideration for such transaction, financial information pertaining to compliance with the preceding clause (A), and which shall (if requested by the Agent) include a certified copy of the draft or definitive documentation pertaining thereto.

"PERMITTED INDEBTEDNESS" means any of the following: (i) Indebtedness incurred under this Agreement and the other Loan Documents; (ii) [Intentionally Omitted]; (iii) Indebtedness on account of Equipment or improvements to real property acquired in compliance with the requirements of subparagraph (xiii) of the definition of Permitted Liens, the incurrence of which would not otherwise be prohibited by this Agreement; PROVIDED, that such Indebtedness shall not exceed $10,000,000 in the aggregate at any time outstanding; (iv) (a) Indebtedness consisting of all obligations of a Loan Party or any Subsidiary as lessee under Capitalized Leases, and (b) Indebtedness consisting of all obligations of a Loan Party or any Subsidiary under any lease (x) that is accounted for by the lessee as an operating lease and (y) under which the lessee is intended to be the "owner" of the leased property for Federal income tax purposes; PROVIDED, that (A) at the time of any incurrence thereof after the date hereof, and after giving effect thereto, no Event of Default shall have occurred and be continuing or would result therefrom, and (B) the aggregate outstanding principal amount (using the obligations in lieu of principal amount, in the case of any Capitalized Lease, or present value, based on the implicit interest rate, in lieu of principal amount, in the case of any lease described above in part (b)) of Indebtedness permitted by this clause (iv) shall not exceed $10,000,000 aggregate principal amount outstanding at any time; (v) Indebtedness of the Loan Parties and any Subsidiary under the NCB Hedging Agreement, (vi) the Indebtedness listed on Schedule 6.02(b), annexed hereto;
(vii) Indebtedness to sellers in connection with Permitted Acquisitions; (viii) intercompany indebtedness between and among the Borrower and the other Loan Parties; (ix) Indebtedness to creditors of the former Filene's incurred in connection with the acquisition of Filene's, such Indebtedness not to exceed $6,000,000; (x) Indebtedness with respect to indemnities, warranties, statutory obligations, and surety, appeal and supersedeas bonds incurred in the ordinary course of business; (xi) Indebtedness in respect of overdraft protections and otherwise in connection with deposit accounts; and (xii) Indebtedness arising out of the refinancing, extension, renewal or refunding of any Indebtedness permitted under this Agreement, provided that the principal amount of such Indebtedness is not increased from the amount outstanding at the time of such refinancing.

"PERMITTED INVESTMENTS" means each of the following: (i) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing not more than one year from the date of acquisition thereof; (ii) investments in commercial paper maturing not more than one year from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from Standard & Poor's or from Moody's Investment Services, Inc.; (iii) investments in certificates of deposit, banker's acceptances and time deposits maturing not more than one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any financial institution organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000; (iv) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (i) above (without regard to the limitation on maturity contained in such clause) and entered into with a financial institution satisfying the criteria described in clause (iii) above; (v) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor's or from Moody's Investment Services, Inc.; (vi) investments in money market funds, substantially all the assets of which are comprised of securities of the types described in clauses (i) through (vi) above; (vii) investments acquired by a Loan Party or any of its Subsidiaries (x) in exchange for any other investment held by such Loan Party or any such Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other investment, or (y) as a result of a foreclosure by such Loan Party or any of its Subsidiaries with respect to any secured investment or other transfer of title with respect to any secured investment in default; (viii) investments by a Loan Party in the capital of any wholly-owned subsidiary of such Loan Party, including without limitation, any Permitted Acquisitions, provided that the provisions of Section 6.01(a) hereof have been complied with respect to such Subsidiary; (ix) to the extent not permitted by the foregoing clauses, existing investments in any Subsidiaries
(and any increases thereof attributable to increases in retained earnings); (x)
to the extent not permitted by the foregoing clauses, the existing investments described on Schedule 6.02(e) hereto; (xi) investments of a Loan Party and any Subsidiary in Hedging Agreements permitted by clause (v) of the definition of Permitted Indebtedness; (xii) investments of any Person which are outstanding at the time such Person becomes a Subsidiary of a Loan Party as a result of Permitted Acquisition, but not any increase in the amount thereof; and (xiii) any other investments (whether in the form of cash or contribution of property, and if in the form of a contribution of property, such property shall be valued for purposes of this clause at the fair value thereof) in any corporation, partnership, limited liability company, joint venture or other business entity, which is not itself a Subsidiary of a Key Loan Party or owned or Controlled by any director, officer or employee of a Key Loan Party or any of its Subsidiaries, not otherwise permitted by the foregoing clauses, made after the Effective Date, shall be permitted to be incurred if (a) no Event of Default shall have occurred and be continuing, or would result therefrom, and (b) the aggregate cumulative amount of such investments (together with any loans and advances permitted under Sections 6.02(e)(vi)(D) and (E)) does not exceed $6,000,000.

"PERMITTED LIENS" means any of the following: (i) Liens for taxes not yet delinquent or which are being contested in good faith by appropriate proceedings, PROVIDED that adequate reserves with respect thereto are maintained on the books of a Key Loan Party in accordance with GAAP, and PROVIDED further that, no notice of tax lien has been filed with respect thereto; (ii) Liens in respect of property or assets imposed by law in the ordinary course of business, such as carrier's, warehousemen's, mechanics', materialmen's, repairmen's, landlord's or similar Liens arising in the ordinary course of business which (x) are not overdue in accordance with customary business practices and consistent with the applicable Loan Party's prior practices, and do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Loan Parties, or
(y) are being contested in good faith by a Loan Party, by appropriate proceedings diligently instituted and conducted and without danger of any material risk to the property or assets of such Loan Party and adequate reserves or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (iii) Liens, pledges or deposits in connection with workers' compensation, unemployment insurance and other types of social security; (iv) deposits to secure the performance of tenders, bids, sales, trade and government contracts, leases, statutory obligations, surety, appeal, and supersedeas bonds, warranty, advance payment, customs, performance and return-of-money bonds and other obligations of a like nature in the ordinary course of business (exclusive of obligations in respect of the payment of borrowed money) whether pursuant to statutory requirements, common law or consensual arrangements; (v) easements, rights of way, leases, zoning or deed restrictions, licenses, covenants, building restrictions, minor defects or irregularities in title and other similar real estate encumbrances incurred in the ordinary course of business that in the aggregate do not materially interfere with the conduct of the business of the Loan Parties; defects and irregularities in titles, survey exceptions, encumbrances, easements or reservations of others for rights-of-way, roads, pipelines, railroad crossings, services, utilities or other similar purposes; outstanding mineral rights or reservations (including rights with respect to the removal of material resource) which do not materially diminish the value of the surface estate, assuming usage of such surface estate similar to that being carried on by any Loan Party as of the Effective Date; (vi) any interest or title of a lessor under any lease entered into by any Loan Party in the ordinary course of business not in violation of the Loan Documents; (vii) any interest or title of any lessee under any leases or subleases of real property of a Loan Party not in violation of the requirements of the Loan Documents, provided that all such Liens do not in the aggregate materially detract from the value of such Loan Party's property or materially impair the use thereof in the operation of such Loan Party's business; (viii) Liens arising from financing statements regarding property subject to Capitalized Leases not in violation of the requirements of the Loan Documents, provided that such Liens are only in respect of the property subject to, and secure only, the respective lease; (ix) rights of consignors of goods to a Loan Party as consignee; (x) Liens arising from judgments, decrees or attachments in existence less than 30 days after the entry thereof, with respect to which execution has been stayed and with respect to which payment in full above any applicable deductible is covered by insurance or a bond, or in circumstances not constituting an Event of Default under Section 9.01(j)(i);
(xi) Liens created by this Agreement or the other Loan Documents; (xii) Liens
(x) listed on Schedule 6.02(a), annexed hereto, or (y) arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any such Lien, provided that the principal amount of such Indebtedness is not increased and such Indebtedness is not secured by any additional assets; and
(xiii) Liens which

are placed upon Equipment or improvements to real property (including the associated real property) used in the ordinary course of business of a Loan Party or any Subsidiary (x) at the time of (or within 90 days after) the acquisition of such Equipment or the completion of such improvements by such Loan Party or any such Subsidiary to secure Indebtedness incurred to pay or finance all or a portion of the purchase price or other cost thereof, provided that the Lien on the Equipment so acquired or the real property so improved does not encumber any other asset of such Loan Party or any such Subsidiary; or (y) are existing on Equipment or real property at the time acquired by a Loan Party or any Subsidiary or on assets of a Person at the time such Person first becomes a Subsidiary of the Borrower; PROVIDED, that (A) any such Lien was not created at the time of or in contemplation of the acquisition of such assets or Person by a Loan Party or any Subsidiaries, (B) in the case of any such acquisition of a Person, any such Lien attaches only to the Equipment or real estate, as applicable, of such Person, and (C) in the case of any such acquisition of Equipment or real estate by a Loan Party or any Subsidiary, any such Lien attaches only to the property and assets so acquired and not to any other property or assets of such Loan Party or any such Subsidiary; PROVIDED, that the Liens outstanding from time to time under this clause (xiii) shall not secure any Indebtedness other than Permitted Indebtedness described in clause (iii) of such definition.

"PERSON" shall have the meaning given to such term as defined in
Section 13(d)(3) of the Securities Exchange Act.

"PIK INTEREST" means, as at any date of determination, the amount of all interest accrued with respect to the Loan that has been paid-in-kind by being added to the outstanding principal balance thereof on a monthly basis in accordance with Section 2.03.

"PIK OPTION CHANGE DATE" means the second anniversary of the Effective Date.

"POST-DEFAULT RATE" means a rate of interest per annum equal to the rate of interest otherwise in effect from time to time pursuant to the terms of this Agreement plus 3%.

"PRO RATA SHARE" means the percentage obtained by dividing (i) the aggregate unpaid principal amount of such Lender's portion of the Loan, by (ii) the aggregate unpaid principal amount of the Loan.

"PROPERTY" means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.

"PROXY" has the meaning specified therefor in Section 5.01(nn).

"REFERENCE BANK" means JPMorgan Chase Bank, its successors or any other commercial bank designated by the Agent to the Borrower from time to time.

"REFERENCE RATE" means the rate of interest publicly announced by the Reference Bank in New York, New York from time to time as its reference rate, base rate or prime rate. The reference rate, base rate or prime rate is determined from time to time by the Reference Bank as a means of pricing some loans to its borrowers and neither is tied to any external rate of interest or index nor necessarily reflects the lowest rate of interest actually charged by the Reference Bank to any particular class or category of customers. Each change in the Reference

Rate shall be effective from and including the date such change is publicly announced as being effective.

"REGISTER" has the meaning specified therefor in Section 12.07(b)(ii).

"REGISTERED LOAN" has the meaning specified therefor in Section 12.07(b)(ii).

"REGISTERED NOTE" has the meaning specified therefor in Section 2.02(c).

"REGISTRATION RIGHTS AGREEMENT" means the registration rights agreement, dated as of March 15, 2000 by and between the Borrower and PSCC (whose interest thereunder was subsequently assigned to SSC on December 11, 2000).

"REGULATION T", "REGULATION U" and "REGULATION X" mean, respectively, Regulations T, U and X of the Board or any successor, as the same may be amended or supplemented from time to time.

"RELATED BUSINESS" means any business or enterprise consisting of asset maximization services or asset valuation services.

"RELEASE" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, seeping, migrating, dumping or disposing of any Hazardous Material (including the abandonment or discarding of barrels, containers and other closed receptacles containing any Hazardous Material) into the indoor or outdoor environment, including, without limitation, the movement of Hazardous Materials through or in the ambient air, soil, surface or ground water, or property.

"REMEDIAL ACTION" means all actions taken to (i) clean up, remove, remediate, contain, treat, monitor, assess, evaluate or in any other way address Hazardous Materials in the indoor or outdoor environment; (ii) prevent or minimize a Release or threatened Release of Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; (iii) perform pre-remedial studies and investigations and post-remedial operation and maintenance activities; or (iv) perform any other actions authorized by 42 U.S.C. ss. 9601.

"REPORTABLE EVENT" means an event described in Section 4043 of ERISA (other than an event not subject to the provision for 30-day notice to the PBGC under the regulations promulgated under such Section).

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

"REQUISITE APPROVAL" means the affirmative vote of at least a majority of the shares of Common Stock (voting as one class, with each share of Common Stock having one vote) voting regarding the issuance of the Conversion Shares in excess of 19.9% of the issued and outstanding Common Stock on the Effective Date with greater than fifty percent (50%) of the issued and outstanding shares of Common Stock voting.

"SEC" means the Securities and Exchange Commission or any other similar or successor agency of the Federal government administering the Securities Act.

"SECURITIES ACT" means the Securities Act of 1933, as amended, or any similar Federal statute, and the rules and regulations of the SEC thereunder, all as the same shall be in effect from time to time.

"SOLVENT" means, with respect to any Person on a particular date, that on such date (i) the fair value of the property of such Person is not less than the total amount of the liabilities of such Person; (ii) 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 existing debts as they become absolute and matured; (iii) 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; (iv) 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 (v) 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. The determination of whether a Person is Solvent shall take into account all such Person's properties and liabilities regardless of whether, or the amount at which, any such property or liability is included on a balance sheet of such Person prepared in accordance with GAAP, including properties such as contingent contribution or subrogation rights, business prospects, distribution channels and goodwill. The determination of the sum of a Person's properties at a fair valuation or the present fair saleable value of a Person's properties shall be made on a going concern basis unless, at the time of such determination, the liquidation of the business in which such properties are used or useful is in process or is demonstrably imminent. In computing the amount of contingent or unrealized properties or contingent or unliquidated liabilities at any time, such properties and liabilities will be computed at the amounts which, in light of all the facts and circumstances existing at such time, represent the amount that reasonably can be expected to become realized properties or matured liabilities, as the case may be. In computing the amount that would be required to pay a person's probable liability on its existing debts as they become absolute and matured, reasonable valuation techniques, including a present value analysis, shall be applied using such rates over such periods as are appropriate under the circumstances, and it is understood that, in appropriate circumstances, the present value of Contingent Liabilities may be zero.

"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.

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

"SUBSIDIARY" means, with respect to any Person at any date, any corporation, limited or general partnership, limited liability company, trust, estate, association, joint venture or other business entity (i) the accounts of which would be consolidated with those of such Person in such Person's consolidated financial statements if such financial statements were prepared in accordance with GAAP or (ii) of which more than 50% of (A) the outstanding Capital Stock having (in the absence of contingencies) ordinary voting power to elect a majority of the board of directors or other managing body of such Person, (B) in the case of a partnership

or limited liability company, the interest in the capital or profits of such partnership or limited liability company or (C) in the case of a trust, estate, association, joint venture or other entity, the beneficial interest in such trust, estate, association or other entity business is, at the time of determination, owned or controlled directly or indirectly through one or more intermediaries, by such Person.

"TAXES" has the meaning set forth in Section 2.05.

"UNRESTRICTED SUBSIDIARY" has the meaning specified therefor in Section 5.01(kk).

"VALUE CITY BUSINESS" means the Key Loan Parties' business other than the DSW/Shonac Business and the Filene's Business.

Section 1.02 TERMS GENERALLY. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. References in this Agreement to "determination" by the Agent include good faith estimates by the Agent (in the case of quantitative determinations) and good faith beliefs by the Agent (in the case of qualitative determinations).

Section 1.03 ACCOUNTING AND OTHER TERMS. Unless otherwise expressly provided herein, each accounting term used herein shall have the meaning given it under GAAP applied on a basis consistent with those used in preparing the Financial Statements.

Section 1.04 TIME REFERENCES. Unless otherwise indicated herein, all references to time of day refer to Eastern Standard Time or Eastern daylight saving time, as in effect in New York City on such day. For purposes of the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding"; PROVIDED, HOWEVER, that with respect to a computation of fees or interest payable to the Agent or any Lender, such period shall in any event consist of at least one full day.

ARTICLE II

THE LOAN

Section 2.01 THE LOAN. (a) The Lenders have made Advances (as defined in the Original Loan Agreement) to the Borrower under the Original Loan Agreement, of which $75,000,000 of the Advances remain outstanding on the Effective Date (immediately prior to the effectiveness of this Agreement). The Borrower acknowledges and agrees that upon the effectiveness of this Agreement, the aggregate principal amount of such Advances shall automatically and immediately be deemed to constitute the "Loan" to the Borrower by the Lenders under this Agreement. It is the intention of the parties hereto that this Agreement and the consolidation and substitution of the Note for the existing "Notes" referred to in the Original Loan Agreement (the "OLD NOTE") shall not in any way constitute (i) a forgiveness of the indebtedness of the Borrower under the Old Note, (ii) a release of the Borrower from such obligations, or (iii) a novation of the Old Note.

(b) Any principal amount of the Loan which is prepaid or repaid may not be reborrowed.

Section 2.02 NOTES; REPAYMENT OF LOAN.

(a) The obligations of the Borrower to repay the Loan and interest thereon shall be evidenced by Notes, duly executed on behalf of the Borrower, dated the Effective Date, and delivered to and made payable to the order of each Lender in a principal amount equal to such Lender's Pro Rata Share of the Loan as set forth on Schedule 1.01A.

(b) The Borrower shall repay the principal amount of the Loan (including all PIK Interest added thereto) on the Final Maturity Date together with all such other amounts as may be necessary to pay in full, in cash, all Obligations to the Lenders.

(c) The Loan may not be evidenced by promissory notes other than a Note which is a Registered Note. Upon the registration of the Loan, any promissory note (other than a Registered Note) evidencing the same shall be null and void and shall be returned to the Borrower. The Borrower agrees, at the request of the Agent, to execute and deliver to each Lender, a promissory note in registered form (a "REGISTERED NOTE") to evidence such Registered Loan (i.e., containing the registered note language set forth in Exhibit K hereto) and registered as provided in Section 12.07. Once recorded in the Register, the Loan evidenced by such Note may not be removed from the Register so long as it remains outstanding and a Registered Note may not be exchanged for a promissory note that is not a Registered Note.

Section 2.03 INTEREST. (a) RATE. The Loan shall bear interest on the principal amount thereof from time to time outstanding, from the Effective Date until such principal amount becomes due, at an interest rate per annum equal to 10%; PROVIDED, HOWEVER, that if the Requisite Approval is not obtained and all of the Conversion Shares are not approved for listing on the NYSE on or prior to the Listing Deadline Date, the Loan shall bear interest on the principal amount thereof, from the Listing Deadline Date until the date such Requisite Approval is obtained and such Conversion Shares are listed on the NYSE, at an interest rate per annum equal to the interest rate otherwise in effect pursuant to the terms of this Agreement plus five

percent (5%).

(b) DEFAULT INTEREST. To the extent permitted by law, upon the occurrence and during the continuance of an Event of Default, the principal of, and all accrued and unpaid interest on, the Loan and all fees, indemnities or any other Obligations of the Loan Parties under this Agreement and the other Loan Documents, shall bear interest, from the date such Event of Default occurred until the date such Event of Default is cured or waived in writing in accordance herewith, at a rate per annum equal at all times to the Post-Default Rate.

(c) INTEREST PAYMENT. Interest on the Loan shall be payable quarterly in arrears, on the last day of January, April, July and October in each year, commencing on July 31, 2002 and on the Final Maturity Date (whether upon demand, by acceleration or otherwise), (i) prior to the PIK Option Change Date, at the option of the Borrower, either (A) in cash, or (B) in PIK Interest, the amount of which shall be accrued and added to the outstanding principal amount of the Loan quarterly in arrears and shall be payable at Final Maturity, and (ii) on and after the PIK Option Change Date, at the option of the Borrower, either (A) entirely in cash, or (B) in a combination of cash and PIK Interest (the amount of any such PIK Interest shall be accrued and added to the outstanding principal amount of the Loan quarterly in arrears and shall be payable at Final Maturity), PROVIDED, HOWEVER, that after the PIK Option Change Date, at least 50% of the interest payable at any time shall be paid in cash. The Borrower shall give the Agent and each of the Lenders prior telephonic notice (immediately confirmed in writing in substantially the form of Exhibit C hereto (a "NOTICE OF ELECTION")) not later than two (2) Business Days prior to any date on which a payment of interest is required pursuant to this Section 2.03(c), specifying the amount of interest to be paid in cash and the amount to be paid in PIK Interest. Such Notice of Election shall be irrevocable. Notwithstanding anything to the contrary contained herein, interest at the Post-Default Rate shall be payable in cash on demand.

(d) GENERAL. All interest shall be computed on the basis of a year of 360 days for the actual number of days, including the first day but excluding the last day, elapsed.

Section 2.04 PREPAYMENT OF LOAN.

(a) OPTIONAL PREPAYMENT. Prior to June 10, 2007, the Borrower shall not have any right to prepay the Loan. After June 10, 2007, the Borrower may, upon at least 30, but not more than 60 Business Days' written notice to the Agent (such notice being irrevocable), stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given, the Borrower shall, prepay the Loan, in whole or in part, together with accrued interest to the date of such prepayment on the principal amount prepaid and any amounts owing in connection therewith; PROVIDED, HOWEVER, that each partial prepayment shall be in an aggregate principal amount not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof. Any portion of the Loan that is prepaid may not be reborrowed, in whole or in part.

(b) INTEREST AND FEES. Any prepayment made pursuant to this
Section 2.04 shall be accompanied by accrued interest on the principal amount being prepaid to the date of prepayment, and if such prepayment would reduce the amount of the outstanding Loan to zero, such prepayment shall be accompanied by the payment of all fees accrued to such date pursuant to the terms of this Agreement.

(c) CUMULATIVE PREPAYMENTS. Except as otherwise expressly provided in this Section 2.04, payments with respect to any subsection of this
Section 2.04 are in addition to payments made or required to be made under any other provision of this Agreement.

Section 2.05 TAXES. (a) All payments made by any Loan Party hereunder or under any other Loan Document shall be made without set-off, counterclaim, deduction or other defense. All such payments shall be made free and clear of and without deduction for any present or future income, franchise, sales, use, excise, stamp or other taxes, levies, imposts, deductions, charges, fees, withholdings, restrictions or conditions of any nature now or hereafter imposed, levied, collected, withheld or assessed by any jurisdiction (whether pursuant to Federal, state, local or foreign law) or by any political subdivision or taxing authority thereof or therein, and all interest, penalties or additional amounts, excluding taxes on the net income of any Lender or the Agent imposed by the jurisdiction in which such Lender or such Agent is organized or any political subdivision thereof or taxing authority thereof or any jurisdiction in which such Person's principal office is located or any political subdivision thereof or taxing authority thereof (such nonexcluded taxes, levies, imposts, deductions, charges, fees, withholdings, restrictions, conditions, interest, penalties and additional amounts being hereinafter collectively referred to as "TAXES"). If any Loan Party shall be required to deduct or to withhold any Taxes from or in respect of any amount payable hereunder or under any other Loan Document:

(i) the amount so payable shall be increased so that after making all required deductions and withholdings (including Taxes on amounts payable pursuant to this sentence) the Lenders or the Agent, as the case may be, receive an amount equal to the sum they would have received had no such deduction or withholding been made;

(ii) such Loan Party shall make such deduction or withholding;

(iii) such Loan Party shall pay the full amount deducted or withheld to the relevant taxation authority in accordance with Applicable Law; and

(iv) whenever any Taxes are payable by any Loan Party, as promptly as possible thereafter, such Loan Party shall send the Lenders and the Agent an official receipt (or, if an official receipt is not available, such other documentation as shall be satisfactory to the Lenders or the Agent, as the case may be) evidencing payment of the amount or amounts so deducted or withheld. In addition, each Loan Party agrees to pay any present or future taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery, performance, recordation or filing of, or otherwise with respect to, this Agreement or any other Loan Document other than the foregoing excluded taxes (hereinafter referred to as "OTHER TAXES").

(b) The Loan Parties hereby jointly and severally agree to indemnify and hold the Lenders and the Agent harmless from and against Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.05) paid by any Lender or the Agent and any liability (including penalties, interest and expenses for nonpayment, late payment or otherwise) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Such indemnification shall be paid within 10 days from the date on which any the Agent, on

behalf of the Lenders, makes written demand therefor, which demand shall identify in reasonable detail the nature and amount of such Taxes or Other Taxes.

(c) Each Lender that is organized in a jurisdiction outside the United States hereby agrees that it shall, no later than the Effective Date or, in the case of a Lender which becomes a party hereto pursuant to Section 12.07 hereof after the Effective Date, the date upon which such Lender becomes a party hereto (and from time to time thereafter upon the reasonable request of the Borrower or the Agent, but only if such Lender is legally able to do so), deliver to the Borrower and the Agent either (i) two accurate, complete and signed copies of either (x) U.S. Internal Revenue Service Form W-8ECI or successor form, or (y) U.S. Internal Revenue Service Form W-8BEN or successor form, in each case, indicating that such Lender is on the date of delivery thereof entitled to receive payments of interest hereunder free from, or subject to a reduced rate of, withholding of United States Federal income tax or (ii) in the case of such a Lender that is entitled to claim exemption from withholding of United States Federal income tax under Section 871(h) or Section 881(c) of the Internal Revenue Code, (x) a certificate to the effect that such Lender is (A) not a "bank" within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (B) not a "10 percent shareholder" of the Borrower within the meaning of Section 881(c)(3)(B) of the Internal Revenue Code and (C) not a controller foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Internal Revenue Code and (y) two accurate, complete and signed copies of U.S. Internal Revenue Service Form W-8BEN or successor form.

(d) If any Loan Party fails to perform any of its obligations under this Section 2.05, the Loan Parties shall indemnify the Lenders and the Agent for any taxes, interest or penalties that may become payable as a result of any such failure. The obligations of the Loan Parties under this Section 2.05 shall survive the termination of this Agreement and the payment of the Loan and all other amounts payable hereunder.

ARTICLE III

FEES, PAYMENTS AND OTHER COMPENSATION

Section 3.01 [Intentionally Omitted.]

Section 3.02 PAYMENTS; COMPUTATIONS AND STATEMENTS. (a) The Borrower will make each payment under this Agreement not later than 12:00 noon (New York City time) on the day when due, in lawful money of the United States of America and in immediately available funds, in the manner set forth in clause (b) below. All payments received after 12:00 noon (New York City time) on any Business Day will be credited on the next succeeding Business Day. All payments shall be made by the Borrower without set-off, counterclaim, deduction or other defense to the Agent and the Lenders. Whenever any payment to be made under any such Loan Document shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. All computations of fees shall be made by the Agent on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for

which such fees are payable. Each determination by the Agent of an interest payment amount or fees hereunder shall be rebuttably presumed to be accurate, in the absence of manifest error.

(b) (i) Other than during the continuance of an Event of Default, the Borrower shall make each payment relating to the payment of principal and interest in respect of the Loan directly to the Lender's Account of each Lender to whom payment is required to be made, in like funds and in accordance with each Lender's Pro Rata Share of such payment. The Borrower shall make all other payments under this Agreement to the Agent's Account for distribution to the Lenders in accordance with clause (iii) below.

(ii) Upon the occurrence and during the continuance of an Event of Default, the Borrower shall make all payments under this Agreement to the Agent's Account for distribution to the Lenders in accordance with clause
(iii) below.

(iii) Upon the receipt of any payment under this Agreement, the Agent will promptly (and in any case, not later than five (5) Business Days) thereafter, cause to be distributed to the Lenders to whom payment is required to be made, (A) in the case of payments relating to principal and interest, in like funds in accordance with their Pro Rata Shares, and (B) in the case of the payment of any other amount payable to any Lender, in like funds; PROVIDED, HOWEVER, that this clause shall not apply to any payment made under this Agreement that is solely for the account of the Agent.

(c) The Agent shall provide the Borrower, promptly after the end of each calendar month, a summary statement (in the form from time to time used by the Agent) of the amounts and dates of all payments on account of the Loan to the Borrower during such month, the amount of interest accrued on the Loan to the Borrower during such month, the amount of PIK Interest added to the principal of the Loan during such month, and the amount and nature of any other fees, commissions, expenses and other Obligations incurred during such month. All entries on any such statement shall be presumed to be correct and, thirty
(30) days after the same is sent, shall be rebuttably presumed to be accurate, absent manifest error. For purposes of such statement, the Agent shall have the right to conclude, absent evidence to the contrary (i) that no payments have been made by the Borrower and no requests for payments have been made to the Borrower by any Lender other than in accordance with this Agreement, and (ii) all payments of principal and interest required to be made directly to any Lender's Account have been made pursuant to the terms of this Agreement.

Section 3.03 SHARING OF PAYMENTS, ETC. Except as provided in Sections 2.02 and 3.02(b) hereof, if any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of any Obligation in excess of its ratable share of payments on account of similar obligations obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in such similar obligations held by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; PROVIDED, HOWEVER, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the

total amount so recovered from the purchasing Lender of any interest or other amount paid by the purchasing Lender in respect of the total amount so recovered). The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 3.03 may, to the fullest extent permitted by law, exercise all of its rights (including the Lender's right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.

Section 3.04 APPORTIONMENT OF PAYMENTS. Subject to Section 2.02 hereof and to any written agreement among the Agent and/or the Lenders:

(a) All payments of principal, interest and PIK Interest in respect of the outstanding portion of the Loan, all payments of fees and all other payments in respect of any other Obligations, shall be allocated by the Agent among such of the Lenders as are entitled thereto, in proportion to their respective Pro Rata Shares or otherwise as provided herein or, in respect of payments not made on account of the Loan, as designated by the Person making payment when the payment is made.

(b) After the occurrence and during the continuance of an Event of Default, the Agent may apply all payments in respect of any Obligations, subject to the provisions of this Agreement, (i) FIRST, ratably to pay the Obligations in respect of any fees, expense reimbursements, indemnities and other amounts then due to the Agent until paid in full; (ii) SECOND, ratably to pay the Obligations in respect of any fees and indemnities then due to the Lenders until paid in full; (iii) THIRD, ratably to pay interest due in respect of the Loan until paid in full; (iv) FOURTH, ratably to pay PIK Interest due in respect of the Loan until paid in full; (v) FIFTH, ratably to pay the principal of the Loan until paid in full; and (viii) SIXTH, to the ratable payment of all other Obligations then due and payable.

(c) In each instance, so long as no Event of Default has occurred and is continuing, Section 3.04(b) shall not be deemed to apply to any payment by the Borrower specified by the Borrower to the Agent to be for the prepayment of all or part of the principal of the Loan in accordance with the terms and conditions of Section 2.04.

(d) For purposes of Section 3.04(b), "paid in full" with respect to interest shall include interest accrued after the commencement of any Insolvency Proceeding irrespective of whether a claim for such interest is allowable in such Insolvency Proceeding.

(e) In the event of a direct conflict between the priority provisions of this Section 3.04 and other provisions contained in any other Loan Document, it is the intention of the parties hereto that both such priority provisions in such documents shall be read together and construed, to the fullest extent possible, to be in concert with each other. In the event of any actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of this Section 3.04 shall control and govern.

Section 3.05 INCREASED COSTS AND REDUCED RETURN. (a) If any Lender or the Agent shall have determined that the adoption or implementation of, or any change in, any law, rule, treaty or regulation, or any policy, guideline or directive of, or any change in, the interpretation or administration thereof by, any court, central bank or other administrative or

Governmental Authority, or compliance by any Lender or the Agent or any Person controlling any such Lender or the Agent with any directive of, or guideline from, any central bank or other Governmental Authority or the introduction of, or change in, any accounting principles applicable to any Lender or the Agent or any Person controlling any such Lender or the Agent (in each case, whether or not having the force of law), shall (i) subject any Lender or the Agent, or any Person controlling any such Lender or the Agent to any tax, duty or other charge with respect to this Agreement or any Loan made by such Lender or the Agent, or change the basis of taxation of payments to any Lender or the Agent or any Person controlling any such Lender or the Agent of any amounts payable hereunder (except for taxes on the overall net income of any Lender or the Agent or any Person controlling any such Lender or the Agent), (ii) impose, modify or deem applicable any reserve, special deposit or similar requirement against any Loan, or against assets of or held by, or deposits with or for the account of, or credit extended by, any Lender or the Agent or any Person controlling any such Lender or the Agent or (iii) impose on any Lender or the Agent or any Person controlling any such Lender or the Agent or any other condition regarding this Agreement or any Loan, and the result of any event referred to in clauses (i),
(ii) or (iii) above shall be to increase the cost to any Lender or the Agent of making any Loan, or agreeing to make any Loan, or to reduce any amount received or receivable by any Lender or the Agent hereunder, then, within ten (10) days after demand and receipt of a detailed calculation and statement of cause by the Agent, on behalf of the affected Lenders, the Borrower shall pay to the Agent, for the benefit of the affected Lenders, such additional amounts as will compensate such Lenders for such increased costs or reductions in amount.

(b) If any Lender or the Agent shall have determined that any Capital Guideline or the adoption or implementation of, or any change in, any Capital Guideline by the Governmental Authority charged with the interpretation or administration thereof, or compliance by any Lender or the Agent or any Person controlling such Lender or the Agent with any Capital Guideline or with any request or directive of any such Governmental Authority with respect to any Capital Guideline, or the implementation of, or any change in, any applicable accounting principles (in each case, whether or not having the force of law), either (i) affects or would affect the amount of capital required or expected to be maintained by any Lender or the Agent or any Person controlling such Lender or the Agent, and any Lender or the Agent determines that the amount of such capital is increased as a direct or indirect consequence of any Loan made or maintained, or any guaranty or participation with respect thereto, any Lender's or the Agent's or any such other controlling Person's other obligations hereunder; or (ii) has or would have the effect of reducing the rate of return on any Lender's or the Agent's any such other controlling Person's capital to a level below that which such Lender or the Agent or such controlling Person could have achieved but for such circumstances as a consequence of any Loan made or maintained, or any guaranty or participation with respect thereto or any agreement to make Loan, or such Lender's or the Agent's or such other controlling Person's other obligations hereunder (in each case, taking into consideration, such Lender's, Agent's or other controlling Person's policies with respect to capital adequacy), then, within ten (10) days after demand and receipt of a detailed calculation and statement of cause by the Agent, on behalf of the affected Lenders, the Borrower shall pay to the Agent, for the benefit of such affected Lenders, from time to time such additional amounts as will compensate such Lenders for such cost of maintaining such increased capital or such reduction in the rate of return on such Lender's or the Agent's or such other controlling Person's capital.

(c) All amounts payable under this Section 3.05 shall bear interest from the date that is ten (10) days after the date of demand by any Lender or the Agent until payment in full to such Lender or the Agent at the Reference Rate. A certificate of the Agent, on behalf of the affected Lenders, claiming compensation under this Section 3.05, specifying the event herein above described and the nature of such event shall be submitted by the Agent, on behalf of the affected Lenders, to the Borrower, setting forth the additional amount due and an explanation of the calculation thereof, and the Agent's reasons for invoking the provisions of this Section 3.05, and shall be rebuttably presumed to be correct, absent manifest error.

(d) If any Lender incurs increased costs and requests compensation under this Section 3.05, then the Borrower may (i) request such Lender use reasonable efforts to designate a different lending office for booking its loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches, or Affiliates, if in the judgment of such Lender, such designation or assignment (A) would eliminate or reduce amounts payable pursuant to Section 3.05 hereof, and (B) would not subject such Lender to any unreimbursed cost or expense, and would not otherwise be disadvantageous to such Lender. The Borrower shall pay all reasonable costs and expenses incurred by such Lender in connection with any such designation of assignment; and (ii) at its sole expense and effort, upon notice to such Lender and the Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 12.07), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that (A) if such assignee is not an existing Lender, the Borrower shall have received the prior written consent of the Agent, which consent shall not unreasonably be withheld, (B) such Lender shall have received payment of an amount equal to the outstanding principal of its Pro Rata Share of the Loan, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts, which shall be paid to the Agent for distribution to such Lender) and (C) such assignment will result in a reduction in such compensation, payments or costs. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

Section 3.06 ADDITIONAL FEES. Notwithstanding anything to the contrary contained herein, in the event that the Requisite Approval is not obtained and all of the Conversion Shares are not approved for listing on the NYSE (i) on or prior to the Listing Deadline Date, the Borrower shall pay a fee at a rate per annum equal to 3% of the principal amount of the Loan outstanding on the Effective Date until the date such Requisite Approval is obtained and such Conversion Shares are listed on the NYSE and (ii) prior to the Final Maturity Date (whether upon demand, by acceleration, by prepayment in full or otherwise), the Borrower shall pay a closing fee in an amount equal to 5% of the principal amount of the Loan outstanding on the Effective Date.

ARTICLE IV

CONDITIONS TO EFFECTIVENESS

Section 4.01 CONDITIONS PRECEDENT TO EFFECTIVENESS. This Agreement shall become effective as of the Business Day (the "EFFECTIVE DATE") when each of the following conditions precedent shall have been satisfied in a manner satisfactory to the Agent:

(a) PAYMENT OF FEES, ETC. The Borrower shall have paid on or before the date of this Agreement all fees, costs, expenses and taxes then payable pursuant to Section 12.04.

(b) REPRESENTATIONS AND WARRANTIES; NO EVENT OF DEFAULT. The following statements shall be true and correct: (i) the representations and warranties contained in Article V and in each other Loan Document, certificate or other writing delivered to the Agent or any Lender pursuant hereto or thereto on or prior to the Effective Date are true and correct on and as of the Effective Date as though made on and as of such date; and (ii) no Default or Event of Default shall have occurred and be continuing on the Effective Date or would result from this Agreement or the other Loan Documents becoming effective in accordance with its or their respective terms.

(c) LEGALITY. Amending and restating this Agreement and maintaining of the Loan shall not contravene any law, rule or regulation applicable to the Agent or any Lender.

(d) DELIVERY OF DOCUMENTS. The Agent shall have received on or before the Effective Date the following, each in form and substance satisfactory to the Agent and, unless indicated otherwise, dated the Effective Date, and all conditions precedent to the effectiveness of such documents (where applicable) shall have been satisfied:

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

(ii) certified copies of request for copies of information on Form UCC-11, listing all effective financing statements which name as debtor any Loan Party and which are filed in the offices referred to in paragraph (x) below, together with copies of such financing statements, none of which, except for Permitted Liens and as otherwise agreed in writing by the Agent, shall cover any of the Loan Parties' properties or assets and the results of searches for any tax Lien and judgment Lien filed against such Person or its property, which

results, except for Permitted Liens and as otherwise agreed to in writing by the Agent, shall not show any such Liens;

(iii) the Registration Rights Agreement;

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

(v) a certificate of the appropriate official(s) of the state of organization and each state of foreign qualification of each Loan Party certifying as to the subsistence in good standing of, and the payment of taxes by, such Loan Party in such states;

(vi) a true and complete copy of the charter, certificate of formation, certificate of limited partnership or other publicly filed organizational document of each Loan Party certified as of a recent date not more than thirty (30) days prior to the Effective Date (except as otherwise agreed by the Agent) by an appropriate official of the state of organization of such Loan Party, which shall set forth the same complete name of such Loan Party as is set forth herein and the organizational number, if an organizational number is issued in such jurisdiction, and Federal employee identification number as of the Effective Date of such Loan Party;

(vii) a copy of the by-laws, limited liability company agreement, operating agreement, agreement of limited partnership or other organizational document of each Loan Party, together with all amendments thereto, certified as of the Effective Date by an Authorized Officer of such Loan Party;

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

(ix) a certificate of an Authorized Officer of each Loan Party, certifying the names and true signatures of the representatives of such Loan Party authorized to sign each Loan Document to which such Loan Party is or will be a party and the other documents to be executed and delivered by such Loan Party in connection herewith and therewith, together with evidence of the incumbency of such authorized officers;

(x) a certificate of an Authorized Officer of the Borrower, certifying the names and true signatures of the persons that are authorized to provide the Notices of Election and all other notices under this Agreement and the other Loan Documents;

(xi) certificate of the chief financial officer of the Borrower, certifying as to the Solvency the Loan Parties taken as a whole, which certificate shall be satisfactory in form and substance to the Agent;

(xii) a certificate of an Authorized Officer of each Loan Party, certifying as to the matters set forth in subsection (b) of this
Section 4.01;

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

(xiv) a copy of the Financial Statements and other such financial information regarding the Loan Parties, as the Agent or the Lenders may request, including, but not limited to interim Financial Statements;

(xv) a copy of the Business Plan, certified as true and correct by an Authorized Officer of the Borrower;

(xvi) copies of the Material Contracts as in effect on the Effective Date, certified as true and correct copies thereof by an Authorized Officer of the Borrower, together with a certificate of an Authorized Officer of the Borrower stating that such agreements remain in full force and effect and that none of the Loan Parties has breached or defaulted on any of its obligations under such agreements in any material respect;

(xvii) such other agreements, instruments, approvals, opinions and other documents, each satisfactory to the Agent in form and substance, as the Agent may reasonably request.

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

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

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

(h) MANAGEMENT. The Lenders shall be satisfied with the ongoing management of each Loan Party and the Agent shall have received satisfactory reference checks for key management of each Loan Party.

(i) DUE DILIGENCE. The Agent shall have completed its business and legal due diligence with respect to each Loan Party and the results thereof shall be acceptable to the Agent, in its sole and absolute discretion.

(j) CONVERSION SHARES. The Borrower shall have reserved out of its authorized and unissued Common Stock, solely for the purpose of effecting the exercise of the Conversion, 1,666,667 shares of Common Stock issuable upon the exercise of the Conversion in accordance with the terms of Article XIII. The Conversion Shares shall have been authorized for listing on the New York Stock Exchange upon the official notice of its issuance.

(k) SENIOR INDEBTEDNESS. The Obligations under this Agreement and the other Loan Documents rank at least pari passu in right of payment to all existing and future senior Indebtedness and senior to all other Indebtedness of each Loan Party.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

Section 5.01 REPRESENTATIONS AND WARRANTIES. Each Loan Party hereby represents and warrants to the Agent and the Lenders as follows:

(a) ORGANIZATION; GOOD STANDING, ETC. Each Loan Party (i) is a corporation, limited liability company or limited partnership duly organized, validly existing and in good standing under the laws of the state or jurisdiction of its organization; (ii) has all requisite power and authority to conduct its business as now conducted and as presently contemplated and, to execute and deliver each Loan Document to which it is a party, and to consummate the transactions contemplated thereby; and (iii) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, except where the failure to so qualify is not reasonably likely to have a Material Adverse Effect.

(b) AUTHORIZATION, ETC. The execution, delivery and performance by each Loan Party of each Loan Document to which it is or will be a party (i) have been duly authorized by all necessary action other than the receipt of the Requisite Approval in connection with the issuance of Conversion Shares in excess of 19.9% of the Borrower's outstanding Common Stock on the Effective Date; (ii) do not and will not contravene in any material respect its charter or by-laws, its limited liability company or operating agreement or its certificate of partnership or partnership agreement, as applicable, or any Applicable Law or any contractual restriction binding on or otherwise affecting it or any of its properties; (iii) do not and will not result in or require the creation of any Lien upon or with respect to any of its properties; and (iv) do not and will not result in any default, noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal of any material permit, license, authorization or approval applicable to its operations or any of its properties.

(c) GOVERNMENTAL APPROVALS. No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority is required in connection with the due execution, delivery and performance by any Loan Party of any Loan Document to which it is or will be a party.

(d) ENFORCEABILITY OF LOAN DOCUMENTS. This Agreement is, and each other Loan Document to which any Loan Party is or will be a party, when delivered hereunder, will be, a legal, valid and binding obligation of such Person, enforceable against such Person in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability.

(e) CAPITALIZATION; SUBSIDIARIES. On the Effective Date, after giving effect to the transactions contemplated hereby to occur on the Effective Date, the authorized Capital Stock of the Borrower and the issued and outstanding Capital Stock of the Borrower are as set forth on Schedule
5.01(e)(i). All of the issued and outstanding shares of Capital Stock of the Borrower have been validly issued and are fully paid and nonassessable, and the holders thereof are not entitled to any preemptive, first refusal or other similar rights. There are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Conversion Shares, except for anti-dilution provisions which have been validly waived on or prior to the date hereof in respect of the issuance of the Conversion Shares. The Conversion Shares have been duly authorized and reserved for issuance upon Conversion of the Loan, and upon such conversion, will be validly issued, fully paid and non-assessable, free from all taxes, liens and charges with respect to the issue thereof, and will not be subject to preemptive rights or other similar rights of stockholders of the Borrower.

(i) Except as described on Schedule 5.01(e)(i), as of the Effective Date, there are no outstanding debt or equity securities of the Borrower or any of its Subsidiaries and no outstanding obligations of the Borrower or any of its Subsidiaries convertible into or exchangeable for, or warrants, options or other rights for the purchase or acquisition from the Borrower or any of its Subsidiaries, or other obligations of the Borrower or any of its Subsidiaries to issue, directly or indirectly, any shares of Capital Stock of the Borrower or any of its Subsidiaries.

(ii) Schedule 5.01(e)(ii) is a complete and correct description of the name, jurisdiction of incorporation and ownership of the outstanding Capital Stock of each of the Subsidiaries of the Borrower in existence on the date hereof. All of the issued and outstanding shares of Capital Stock of such Subsidiaries have been validly issued and are fully paid and nonassessable, and the holders thereof are not entitled to any preemptive, first refusal or other similar rights. Except as indicated on such Schedule, all such Capital Stock is owned by the Borrower or one or more of its wholly-owned Subsidiaries, free and clear of all Liens.

(f) LITIGATION; COMMERCIAL TORT CLAIMS. Except as set forth in Schedule 5.01(f), (i) there is no pending or, to the best knowledge of any Loan Party, threatened action, suit or proceeding affecting any Loan Party before any court or other Governmental Authority or any arbitrator that (A) if adversely determined, could have a Material Adverse Effect or (B) relates to this Agreement or any other Loan Document or any transaction

contemplated hereby or thereby and (ii) as of the Effective Date, none of the Loan Parties holds any commercial tort claims in respect of which a claim has been filed in a court of law or a written notice by an attorney has been given to a potential defendant.

(g) FINANCIAL CONDITION.

(i) All financial statements furnished to the Agent and to each Lender by the Loan Parties on a consolidated basis have been prepared in accordance with GAAP consistently applied (PROVIDED, HOWEVER, that unaudited financial statements are subject to normal year-end adjustments and to the absence of footnotes). All financial statements furnished to the Agent and to each Lender by the Loan Parties present fairly the condition of the Loan Parties at the date(s) thereof and the results of operations and cash flows (to the extent cash flows are required to be prepared) for the period(s) covered (PROVIDED, HOWEVER, that unaudited financial statements are subject to normal year end adjustments and to the absence of footnotes). There has been no change in the consolidated financial condition, results of operations, or cash flows of the Loan Parties since the date(s) of such financial statements, other than changes in the ordinary course of business, which changes have not been materially adverse, either singularly or in the aggregate.

(ii) No Loan Party has any material Contingent Obligations or material obligation under any Lease or Capitalized Lease which is not noted in the Loan Parties' Consolidated financial statements furnished to the Agent and to each Lender prior to the execution of this Agreement.

(h) COMPLIANCE WITH LAW, ETC. No Loan Party is in violation or has received notice of any violation of its organizational documents, any law, rule, regulation, judgment or order of any Governmental Authority applicable to it or any of its property or assets, or any material term of any agreement or instrument (including, without limitation, any Material Contract) binding on or otherwise affecting it or any of its properties, except where such violation is not reasonably likely to have a Material Adverse Effect and no default or event of default has occurred and is continuing.

(i) ERISA. Except to the extent that such action is not reasonably likely to have a Material Adverse Effect, neither any Loan Party nor any ERISA Affiliate has within the past three (3) years:

(i) violated or failed to be in full compliance with any Loan Party's Employee Benefit Plan;

(ii) failed timely to file all reports and filings required by ERISA to be filed by any Loan Party;

(iii) engaged in any nonexempt "prohibited transactions" or "reportable events" (respectively as described in ERISA);

(iv) engaged in, or committed, any act such that a tax or penalty reasonably could be imposed upon any Loan Party on account thereof pursuant to ERISA;

(v) incurred any material accumulated funding deficiency within the meaning of ERISA;

(vi) terminated any Employee Benefit Plan such that a Lien could be asserted against any assets of any Loan Party on account thereof pursuant to ERISA; or

(vii) failed to make any required contribution or payment to, or made a complete or partial withdrawal from, any Employee Benefit Plan which is a multiemployer plan within the meaning of Section 4001(a) of ERISA.

(j) TAXES, ETC.

(i) To the best knowledge of the Borrower, all Federal and all material state and local tax returns and other reports required by Applicable Law to be filed by any Loan Party have been filed, or extensions have been obtained, and all taxes, assessments and other governmental charges imposed upon any Loan Party or any property of any Loan Party and which have become due and payable on or prior to the date hereof have been paid, except to the extent contested in good faith by proper proceedings which stay the imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to which adequate reserves have been set aside for the payment thereof on the Financial Statements in accordance with GAAP.

(ii) Except as described on Schedule 5.01(j):

(A) currently no Loan Party has received from any taxing authority any request to perform any examination of or with respect to any Loan Party nor any other written or verbal notice in any way relating to any claimed failure by any Loan Party to comply with all Applicable Law concerning payment of any taxes or other amounts in the nature of taxes in excess of $500,000 in any one instance;

(B) no agreement exists which waives or extends any statute of limitations applicable to the right of any taxing authority to assert a deficiency or make any other claim for or in respect to Federal income taxes; and

(C) no issue has been raised in any tax examination of any Loan Party which reasonably could be expected to result in the assertion of a deficiency for any fiscal year open for examination, assessment, or claim by any taxing authority in excess of $500,000 in the aggregate for all Loan Parties.

(k) REGULATIONS T, U AND X. No Loan Party is or will be engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation T, U or X), and no proceeds of the Loan have been or will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock.

(l) NATURE OF BUSINESS. No Loan Party is engaged in any business other than a Permitted Business.

(m) ADVERSE AGREEMENTS, ETC. To the best of such Loan Party's knowledge, no Loan Party is a party to any agreement or instrument, or subject to any charter, limited liability company agreement, partnership agreement or other corporate, partnership or limited liability company restriction or any judgment, order, regulation, ruling or other requirement of a court or other Governmental Authority, which is reasonably likely to have a Material Adverse Effect.

(n) PERMITS, ETC. Each Loan Party has, and is in compliance with, all permits, licenses, authorizations, approvals, entitlements and accreditations required for such Person lawfully to own, lease, manage or operate, or to acquire, each business currently owned, leased, managed or operated, or to be acquired, by such Person except where failure to so have or to so comply is not reasonably likely to have a Material Adverse Effect. No condition exists or event has occurred which, in itself or with the giving of notice or lapse of time or both, would result in the suspension, revocation, impairment, forfeiture or non-renewal of any such permit, license, authorization, approval, entitlement or accreditation, and there is no claim that any of the foregoing are not in full force and effect.

(o) PROPERTIES. (i) Each Loan Party has good and marketable title to, valid leasehold interests in, or valid licenses to use, all property and assets material to its business, free and clear of all Liens, except Permitted Liens. All such properties and assets are in good working order and condition, ordinary wear and tear excepted. No Loan Party has possession of any property on consignment to that Loan Party, except as listed on Schedule 5.01(o)(i), and those as to which the Loan Parties notify the Agent in accordance with the provisions of Section 7.03.

(ii) Schedule 5.01(o)(ii) sets forth a complete and accurate list, as of the Effective Date, of the location, by state and street address, of all real property owned or leased by each Loan Party and the name and address of the landlord with respect thereto. As of the Effective Date, each Loan Party has valid leasehold interests in the Leases described on Schedule 5.01(o)(ii) to which it is a party. Except as otherwise indicated on Schedule 5.01(o)(ii), there are no Leases for which any Affiliate of any Loan Party is the lessor. Each such Lease is valid and enforceable in accordance with its terms in all material respects and is in full force and effect. No consent or approval of any landlord or other third party in connection with any such Lease is necessary for any Loan Party to enter into and execute the Loan Documents to which it is a party, except as set forth on Schedule 5.01(o)(ii). No Loan Party and to the best knowledge of any Loan Party, no other party to any such Lease is in material default of its obligations thereunder, and no Loan Party (or any other party to any such Lease) has at any time delivered or received any notice of default which remains uncured under any such Lease and, as of the Effective Date, no event has occurred which, with the giving of notice or the passage of time or both, would constitute a material default under any such Lease.

(p) FULL DISCLOSURE. Each Loan Party has disclosed to the Agent all agreements, instruments and corporate or other restrictions to which it is subject, and all other matters known to it, that, individually or in the aggregate, is reasonably likely to result in a Material Adverse Effect. None of the documents, instruments, agreements, other reports, financial statements, certificates or other information furnished by or on behalf of any Loan Party to the Agent in connection with the negotiation of this Agreement or delivered hereunder (as

modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which it was made, not misleading; PROVIDED, that, with respect to projected financial information, each Loan Party represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. There is no contingent liability or fact that is reasonably likely to have a Material Adverse Effect which has not been set forth in a footnote included in the Financial Statements or a Schedule hereto.

(q) LEASES. Schedule 5.01(q), annexed hereto, sets forth as of the Effective Date a schedule of all presently effective Capitalized Leases. (Schedule 5.01(o)(ii) includes a list of all other presently effective Leases). Each of such Leases and Capitalized Leases is in full force and effect. No Loan Party, to the best of its knowledge, is in default or violation of any such Leases or Capitalized Leases, except where such violation is not reasonably likely to have a Material Adverse Effect. No Loan Party has received any notice or threat of cancellation of any such Lease or Capitalized Lease, which cancellation (together with all other similar cancellations) is reasonably likely to have a Material Adverse Effect.

(r) ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.01(r), (i) the operations of each Loan Party are in material compliance with all Environmental Laws; (ii) to the best of each Loan Party's knowledge, there has been no Release at any of the properties owned or operated by any Loan Party or a predecessor in interest, or at any disposal or treatment facility which received Hazardous Materials generated by any Loan Party or any predecessor in interest which is reasonably likely to have a Material Adverse Effect; (iii) no Environmental Action has been asserted against any Loan Party or any predecessor in interest nor does any Loan Party have knowledge or notice of any threatened or pending Environmental Action against any Loan Party or any predecessor in interest which is reasonably likely to have a Material Adverse Effect; (iv) no Loan Party has knowledge of any Environmental Actions that have been asserted against any facilities that may have received Hazardous Materials generated by any Loan Party or any predecessor in interest which are reasonably likely to have a Material Adverse Effect; (v) to the best of each Loan Party's knowledge, no property now or formerly owned or operated by a Loan Party has been used as a treatment or disposal site for any Hazardous Material; (vi) no Loan Party has failed to report to the proper Governmental Authority any Release which is required to be so reported by any Environmental Laws which is reasonably likely to have a Material Adverse Effect; (vii) each Loan Party holds all licenses, permits and approvals required under any Environmental Laws in connection with the operation of the business carried on by it, except for such licenses, permits and approvals as to which a Loan Party's failure to maintain or comply with is not reasonably likely to have a Material Adverse Effect; and (viii) no Loan Party has received any notification pursuant to any Environmental Laws that (A) any work, repairs, construction or Capital Expenditures are required to be made as a condition of continued compliance with any Environmental Laws, or any license, permit or approval issued pursuant thereto or (B) any license, permit or approval referred to above is about to be reviewed, made, subject to limitations or conditions, revoked, withdrawn or terminated, in each case, except as is not reasonably likely to have a Material Adverse Effect.

(s) INSURANCE. Schedule 5.01(s) sets forth a list of all insurance maintained by each Loan Party or under which any Loan Party is the named insured on the Effective Date. Each of such policies is in full force and effect and meets each of the

requirements set forth in Section 6.01(e). To the best of such Loan Party's knowledge, neither the issuer of any such policy nor any Loan Party is in default or violation of such policy.

(t) [Intentionally Omitted]

(u) SOLVENCY. After giving effect to the transactions contemplated by this Agreement and before and after giving effect to each Loan, each Loan Party is, and the Loan Parties on a consolidated basis are, Solvent.

(v) LOCATION OF BANK ACCOUNTS. Schedule 5.01(v) sets forth a complete and accurate list as of the Effective Date of all deposit, checking and other bank accounts, all securities and other accounts maintained with any broker dealer and all other similar accounts maintained by each Loan Party, together with a description thereof (I.E., the bank or broker dealer at which such deposit or other account is maintained, the account number and a contact person at such bank or broker dealer).

(w) INTELLECTUAL PROPERTY. Except as set forth on Schedule 5.01(w), each Loan Party owns or licenses or otherwise has the right to use all material licenses, permits, patents, patent applications, trademarks, trademark applications, service marks, tradenames, copyrights, copyright applications, franchises, authorizations, non-governmental licenses and permits and other intellectual property rights that are necessary for the operation of its business, without infringement upon or conflict with the rights of any other Person with respect thereto, except for such infringements and conflicts which, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect. Set forth on Schedule 5.01(w) is a complete and accurate list as of the Effective Date of all such material licenses, permits, patents, patent applications, trademarks, trademark applications, service marks, tradenames, copyrights, copyright applications, franchises, authorizations, non-governmental licenses and permits and other intellectual property rights of each Loan Party. To the best knowledge of each Loan Party, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by any Loan Party infringes upon or conflicts with any rights owned by any other Person, and no claim or litigation regarding any of the foregoing is pending or threatened, except for such infringements and conflicts which are not reasonably likely to have a Material Adverse Effect. To the best knowledge of each Loan Party, no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or proposed, which is reasonably likely to have a Material Adverse Effect.

(x) MATERIAL CONTRACTS AND LICENSES. Schedule 5.01(x) sets forth a complete and accurate list as of the Effective Date of all Material Contracts and all material licenses of each Loan Party, showing the parties and subject matter thereof. Each such Material Contract and license (i) is in full force and effect and is binding upon and enforceable against each Loan Party that is a party thereto and, to the best knowledge of such Loan Party, all other parties thereto in accordance with its terms, and (ii) is not in default due to or has not been violated by, the action of any Loan Party or, to the best knowledge of any Loan Party, any other party thereto, except where such default is not reasonably likely to have a Material Adverse Effect. No Loan Party has received any notice or threat of cancellation of any such Material Contract or license which cancellation (together with all similar cancellations) is reasonably likely to have a Material Adverse Effect.

(y) HOLDING COMPANY AND INVESTMENT COMPANY ACTS. None of the Loan Parties is (i) a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935, as amended; or (ii) an "investment company" or an "affiliated person" or "promoter" of, or "principal underwriter" of or for, an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended.

(z) LABOR RELATIONS.

(i) As of the Effective Date, no Loan Party has been, and none is presently a party to any collective bargaining or other labor contract except as listed on Schedule 5.01(z), annexed hereto.

(ii) There is not presently pending and, to any Loan Party's knowledge, there is not threatened any of the following, except to the extent any of the following is not reasonably likely to have a Material Adverse Effect:

(A) any strike, slowdown, picketing, work stoppage, or employee grievance process;

(B) any proceeding against or affecting any Loan Party relating to the alleged violation of any Applicable Law pertaining to labor relations or before the National Labor Relations Board, the Equal Employment Opportunity Commission, or any comparable governmental body, organizational activity, or other labor or employment dispute against or affecting any Loan Party, which, if determined adversely to that Loan Party, is reasonably likely to have a Material Adverse Effect on that Loan Party;

(C) any lockout of any employees by any Loan Party (and no such action is contemplated by any Loan Party); or

(D) any application for the certification of a collective bargaining agent.

(iii) No event has occurred or circumstance exists which could provide the basis for any work stoppage or other labor dispute that would be reasonably likely to have a Material Adverse Effect.

(iv) Each Loan Party:

(A) has complied in all material respects with all Applicable Law relating to employment, equal employment opportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining, the payment of social security and similar taxes, occupational safety and health, and plant closing; and

(B) is not liable for the payment of compensation, damages, taxes, fines, penalties, or other amounts, however designated, for that Loan Party's

failure to comply with any Applicable Law referenced in Section 5.01(z)(iv)(A) which is reasonably likely to have a Material Adverse Effect.

(aa) NO BANKRUPTCY FILING. No Loan Party is contemplating either an Insolvency Proceeding or the liquidation of all or a major portion of such Loan Party's assets or property, and no Loan Party has any knowledge of any Person contemplating an Insolvency Proceeding against it.

(bb) SEPARATE EXISTENCE. Except where the failure to observe, maintain or perform the following is not reasonably likely to have a Material Adverse Effect, all customary formalities regarding the corporate existence of each Loan Party will be observed.

(cc) NAME; JURISDICTION OF ORGANIZATION; ORGANIZATIONAL ID NUMBER; CHIEF PLACE OF BUSINESS; CHIEF EXECUTIVE OFFICE; FEIN. Schedule 5.01(cc) sets forth a complete and accurate list as of the date hereof of (i) the exact legal name of each Loan Party; (ii) the jurisdiction of organization of each Loan Party; (iii) the organizational identification number of each Loan Party as of the Effective Date (or indicates that such Loan Party has no organizational identification number); (iv) each place of business of each Loan Party; (v) the chief executive office of each Loan Party; and (vi) the Federal employer identification number of each Loan Party as of the Effective Date.

(dd) TRADENAMES. Schedule 5.01(dd) hereto sets forth a complete and accurate list as of the Effective Date of (i) all names under which, to the knowledge of the Borrower, any Loan Party has conducted its business in the past five (5) years; and (ii) all Persons with whom any Loan Party has consolidated or merged, or from whom any Loan Party has acquired in a single transaction or in a series of related transactions substantially all of such Person's assets in the past five (5) years.

(ee) [INTENTIONALLY OMITTED].

(ff) [INTENTIONALLY OMITTED].

(gg) [INTENTIONALLY OMITTED].

(hh) SCHEDULES. All of the information which is required to be scheduled to this Agreement is set forth on the Schedules attached hereto, is correct and accurate in all material respects and does not omit to state any information material thereto.

(ii) REPRESENTATIONS AND WARRANTIES IN DOCUMENTS; NO DEFAULT. All representations and warranties set forth in this Agreement and the other Loan Documents are true and correct in all material respects at the time as of which such representations were made and on the Effective Date. No Event of Default has occurred and is continuing and no condition exists which constitutes a Default or an Event of Default.

(jj) INDEBTEDNESS. The Loan Parties do not have any Indebtedness other than (i) Permitted Indebtedness, and (ii) a Loan Party's guaranties of Permitted Indebtedness.

(kk) UNRESTRICTED SUBSIDIARIES. Each Subsidiary of the Borrower that is not a party to this Agreement is set forth on Schedule 5.01(kk) (the "UNRESTRICTED SUBSIDIARY"). Each Unrestricted Subsidiary is inactive or in the process of being liquidated or dissolved and the Unrestricted Subsidiaries do not, in the aggregate, have assets in excess of $500,000.

(ll) PROXY STATEMENT. The proxy statement described in
Section 6.01(n), including any amendments or supplements thereto, shall not, at the time filed with the SEC, as of the date mailed to the Borrower's shareholders or at the time of the shareholders meeting described in Section 6.01(n), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Notwithstanding the foregoing, the Borrower makes no representation or warranty with respect to any information provided by a Lender in writing specifically for use in the proxy statement. The proxy statement will comply as to form in all material respects with the provisions of the Exchange Act.

(mm) VOTING REQUIREMENTS. The Requisite Approval is the only vote of the holders of any class or series of the Borrower's Capital Stock or other securities of the Borrower necessary under Applicable Law or stock exchange (or similar self-regulatory organization) regulations to approve the issuance of the Conversion Shares.

(nn) PROXY. The Borrower has received an irrevocable proxy from SSC (the "PROXY") to vote 17,946,766 shares of Common Stock held by SSC in favor of the approval of the issuance of the Conversion Shares. The shares of Common Stock that are subject to the Proxies constitute all Capital Stock of the Borrower held by SSC.

ARTICLE VI

COVENANTS OF THE LOAN PARTIES

Section 6.01 AFFIRMATIVE COVENANTS. So long as any principal or interest on the Loan or any other Obligation (whether or not due) shall remain unpaid, each Loan Party shall:

(a) ADDITIONAL GUARANTIES. Cause (i) each Subsidiary of any Loan Party not in existence on the Effective Date, or any Unrestricted Subsidiary that at any time fails to meet the requirements for an Unrestricted Subsidiary, to execute and deliver to the Agent promptly and in any event within three (3) Business Days after the formation, acquisition or change in status thereof a Guaranty guaranteeing the Obligations, PROVIDED, HOWEVER, that nothing contained herein shall be deemed a modification of any other provisions of this Agreement restricting the formation or Acquisition of Subsidiaries by the Loan Parties, or the requirements applicable to Unrestricted Subsidiaries.

(b) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its Subsidiaries to comply, and use its assets in compliance with all Applicable Laws, rules, regulations and orders (including, without limitation, all Environmental Laws) except where the failure of such compliance will not have a Material Adverse Effect. Without limiting the foregoing such compliance shall include (i) paying before the same become delinquent all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or

upon any of its properties, and (ii) paying all lawful claims, making all required withholdings, and filing all required reports and returns with Governmental Authorities which if unpaid, not withheld or unfiled might become a Lien or charge upon any of its properties, except (x) to the extent contested in good faith by proper proceedings which stay the imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP, or (y) for the inadvertent failure of a Loan Party to pay such lawful claims, make such withholdings or file such returns or reports so long as (A) the aggregate amount thereof does not exceed $500,000, (B) no Lien has been filed on account thereof and (C) promptly upon the date an Authorized Officer obtains knowledge or should have obtained knowledge thereof, the Loan Parties pay such claims, make such withholdings or file such returns or reports.

(c) PRESERVATION OF EXISTENCE, ETC. Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary except where the failure to so qualify would not have a Material Adverse Effect.

(d) MAINTENANCE OF PROPERTIES AND LEASES, ETC. (i)Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve its properties and assets in good working order and condition (ordinary wear and tear and insured casualty excepted); and

(ii) comply, and cause each of its Subsidiaries to comply, in all material respects, at all times with the provisions of all Leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder.

(e) MAINTENANCE OF INSURANCE. Maintain, and cause each of its Subsidiaries to maintain, insurance (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with responsible and reputable insurance companies or associations (which shall include the companies presently providing such insurance, or such other companies as may be selected by the Borrower with the consent of the Agent, whose consent shall not be unreasonably withheld) with respect to its properties (including all real properties leased or owned by it) and business, in such amounts, in such form, for such periods and covering such risks as is required by any Governmental Authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated and in any event in amount, adequacy and scope reasonably satisfactory to the Agent. The Borrower shall provide the Agent with prompt written notice of any change in the insurance policies owned by the Loan Parties, or under which any Loan Party is the named insured, from those in effect as of the Effective Date.

(f) OBTAINING OF PERMITS, ETC. Obtain, maintain and preserve, and cause each of its Subsidiaries to obtain, maintain and preserve, and take, and cause each of its Subsidiaries to take, all necessary action to timely renew, all permits, licenses, authorizations, approvals, entitlements and accreditations which are necessary or useful in the proper conduct of its business, except where the failure to do so is not reasonably likely to have a Material Adverse Effect.

(g) ENVIRONMENTAL. Except where a violation or failure is not reasonably likely to have a Material Adverse Effect, (i) keep any material property either owned or operated by it or any of its Subsidiaries free of any Environmental Liens; (ii) comply, and cause each of its Subsidiaries to comply, in all material respects with Environmental Laws and provide to the Agent any documentation of such compliance which the Agent may reasonably request; (iii) provide the Agent with written notice within five (5) days of any Release of a Hazardous Material in excess of any reportable quantity from or onto property at any time owned or operated by it or any of its Subsidiaries and take any Remedial Actions required to abate said Release; (iv) provide the Agent with written notice within ten (10) days of the receipt of any of the following: (A) notice that a material Environmental Lien has been filed against any property of any Loan Party or any of its Subsidiaries; (B) commencement of any Environmental Action or notice that an Environmental Action will be filed against any Loan Party or any of its Subsidiaries which is reasonably likely to have a Material Adverse Effect; and (C) notice of a violation, citation or other administrative order to the extent that any of the foregoing are reasonably likely to have a Material Adverse Effect; and (v) defend, indemnify and hold harmless the Agent and the Lenders and their transferees, and their respective employees, agents, officers and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs or expenses (including, without limitation, attorney and consultant fees, investigation and laboratory fees, court costs and litigation expenses) arising out of (A) the generation, presence, disposal, Release or threatened Release of any Hazardous Materials on, under, in, originating or emanating from any property at any time owned or operated by any Loan Party or any of its Subsidiaries (or its predecessors in interest or title), (B) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to the presence or Release of such Hazardous Materials, (C) any request for information, investigation, lawsuit brought or threatened, settlement reached or order by a Governmental Authority relating to the presence or Release of such Hazardous Materials, (D) any violation of any Environmental Law and/or (E) any Environmental Action filed against the Agent or any Lender to the extent that any of the foregoing is reasonably likely to have a Material Adverse Effect.

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

(i) [Intentionally Omitted].

(j) CONDUCT OF BUSINESS. Conduct their business substantially in accordance with the Business Plan, or as otherwise approved by the Agent pursuant to Section 7.10 hereof. The foregoing shall not obligate the Borrower to achieve any specific financial performance and no financial covenants are intended to be imposed thereby.

(k) MAINTENANCE OF LISTING. Maintain and cause to be quoted at all times, shares of the Borrower's Common Stock on a national securities exchange registered under the Exchange Act (a "National Securities Exchange") or the Nasdaq Stock Market;

(l) SEC. Maintain, at all times, the Borrower's status as reporting company under the Exchange Act, and make timely filings thereunder;

(m) CONVERSION. Comply in all respects with the covenants and other requirements of Article XIII;

(n) SHAREHOLDER MEETING. At the next annual meeting of shareholders of the Borrower, which meeting shall occur on or before October 31, 2002, (the "MEETING"), the issuance of the Conversion Shares in excess of 19.9% of the Borrower's issued and outstanding Common Stock shall be submitted to the shareholders for approval; PROVIDED, HOWEVER, that in the event that a unilateral action by SSC or its shareholders results in the delay of the Meeting, then the Meeting shall occur on or before December 31, 2002. The Borrower shall provide each shareholder entitled to vote at the Meeting with a proxy statement, which has been previously reviewed by the Agent and counsel of Agent's choice, soliciting each such shareholder's affirmative vote at the Meeting in favor of the issuance of the Conversion Shares in excess of 19.9% of the Borrower's issued and outstanding Common Stock. The Borrower shall use its reasonable best efforts to solicit and obtain proxies from its shareholders and shall take all other action necessary and advisable to secure the vote of shareholders required by applicable law and the rules and regulations of the NYSE to obtain their approval of the issuance of the Conversion Shares in excess of 19.9% of the Borrower's issued and outstanding Common Stock. The Board of Directors of the Borrower has unanimously approved the issuance of the Conversion Shares in excess of 19.9% of the Borrower's issued and outstanding Common Stock and shall recommend that the shareholders of the Borrower vote in favor of the approval of the issuance of the Conversion Shares in excess of 19.9% of the Borrower's issued and outstanding Common Stock at the Meeting, and the Borrower agrees that it shall include in the proxy statement such recommendation of the Board of Directors of the Borrower that the shareholders of the Borrower approve the issuance of the Conversion Shares in excess of 19.9% of the Borrower's issued and outstanding Common Stock;

(o) PROXY. The Borrower agrees to vote all shares of Common Stock subject to the Proxy in favor of the approval of the issuance of the Conversion Shares in excess of 19.9% of the Borrower's issued and outstanding Common Stock; and

(p) NYSE LISTING. The Borrower shall use its reasonable best efforts to list the Conversion Shares in excess of 19.9% of the Borrower's Common Stock on the Effective Date on the NYSE promptly following its receipt of the Requisite Approval.

Section 6.02 NEGATIVE COVENANTS. So long as any principal of or interest on the

Loan, or any other Obligation (whether or not due) shall remain unpaid, each Loan Party shall not:

(a) LIENS, ETC. (i) Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien upon or with respect to any of its properties, whether now owned or hereafter acquired; file or suffer to exist under the Uniform Commercial Code or any similar law or statute of any jurisdiction, a financing statement (or the equivalent thereof) that names it or any of its Subsidiaries as debtor; sign or suffer to exist any security agreement authorizing any secured party thereunder to file such financing statement (or the equivalent thereof); sell any of its property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable) with recourse to it or any of its Subsidiaries or assign or otherwise transfer, or permit any of its Subsidiaries to assign or otherwise transfer, any account or other right to receive income; other than, as to all of the above, Permitted Liens, or (ii) have possession of any property or consignment to that Loan Party, except as of the Effective Date as set forth on Schedule 5.01(o)(i), and after the Effective Date, those as to which the Loan Parties have notified the Agent, in accordance with Section 7.03.

(b) INDEBTEDNESS. Create, incur, assume, guarantee or suffer to exist, or otherwise become or remain liable with respect to, or permit any of its Subsidiaries to create, incur, assume, guarantee or suffer to exist or otherwise become or remain liable with respect to, any Indebtedness other than
(i) Permitted Indebtedness and (ii) guaranties of Permitted Indebtedness of another Loan Party.

(c) FUNDAMENTAL CHANGES; DISPOSITIONS. (i) Wind-up, liquidate or dissolve, or permit any of its Subsidiaries to wind-up, liquidate or dissolve; (ii) merge, consolidate or amalgamate with any Person, or permit any of its Subsidiaries to merge, consolidate or amalgamate with any Person; (iii) purchase or otherwise acquire, whether in one transaction or a series of related transactions, all or substantially all of the assets of any Person (or any division thereof), or permit any of its Subsidiaries to do any of the foregoing;
(iv) suffer or cause, or permit any of its Subsidiaries to suffer or cause the waste or destruction of any material part of its assets or properties; (v) use or permit any of its Subsidiaries to use, any of its properties or assets in violation of any policy of insurance thereon; (vi) sell, lease, sublease, convey, transfer or otherwise dispose of, or permit any of its Subsidiaries to sell, lease, sublease, convey, transfer or otherwise dispose of any of its assets or properties; and (vii) other than leased departments and similar arrangements with third parties, commit to open or close any location at which any Loan Party maintains, offers for sale, or stores any of its assets or properties, in any fiscal year such that the actual number of stores of all Key Loan Parties in the aggregate (x) exceeds by ten (10) the number of stores reflected on the Business Plan for such fiscal year, or (y) is more than ten
(10) fewer than the number of stores reflected on the Business Plan for such fiscal year (without giving effect to any new stores which the Business Plan projected to be opened or closed, but which have not in fact been opened or closed); PROVIDED, HOWEVER, that if no Default or Event of Default shall have occurred and be continuing or would result therefrom, each of the following shall be permitted:

(A) if no Default or Event of Default shall have occurred and be continuing or would result therefrom, with the prior written consent of the Agent (which

consent shall not be unreasonably withheld) any wholly-owned Subsidiary may merge, consolidate or amalgamate with or into a Key Loan Party or with or into another wholly-owned Subsidiary of a Key Loan Party, so long as in any merger, consolidation or amalgamation involving a Key Loan Party, the Key Loan Party is the surviving, continuing or resulting corporation;

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

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

(D) any Loan Party may engage in (1) the sale of Inventory in compliance with this Agreement; (2) the disposal of Equipment which is obsolete, worn out, or damaged beyond repair, or no longer useful in the Loan Parties' businesses; and (3) Permitted Dispositions.

(d) LINE OF BUSINESS. Engage in any business other than the business in which it is currently engaged or a business reasonably related thereto, or any retail lease department operation.

(e) LOANS; ADVANCES; INVESTMENTS, ETC. (i) Make or commit or agree to make any loan, advance guarantee of obligations, other extension of credit or capital contributions to, or hold or invest in or commit or agree to hold or invest in, or purchase or otherwise acquire any shares of the Capital Stock, bonds, notes, debentures or other securities of, or make or commit or agree to make any other investment in, any other Person; (ii) purchase or own any futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract; (iii) subordinate any debts or obligations owed to that Loan Party by any third party (but not by another Loan Party) to any other debts owed by such third party to any other Person; (iv) enter into leases of property or assets not constituting Permitted Acquisitions, unless such leases are not otherwise in violation of this Agreement; (v) organize or create any Affiliate other than in connection with a Permitted Acquisition; or (vi) acquire any assets other than in the ordinary course and conduct of that Loan Party's business as conducted at the execution of this Agreement, other than in connection with a Permitted Acquisition or as otherwise permitted in this Agreement, or permit any of its Subsidiaries to do any of the foregoing, except for:

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

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

(C) advances to that Loan Party's officers, employees, and salespersons with respect to reasonable expenses to be incurred by such officers, employees, and

salespersons for the benefit of that Loan Party, which expenses are properly substantiated by the Person seeking such advance and properly reimbursable by that Loan Party;

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

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

(F) intercompany loans existing on the date hereof and described on Schedule 6.02(e)(vi)(F) hereof;

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

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

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

(f) CAPITALIZED LEASE OBLIGATIONS. Create, incur or suffer to exist, or permit any of its Subsidiaries to create, incur or suffer to exist, any Capitalized Lease Obligations which would cause the aggregate amount of all obligations under Capitalized Leases entered into after the Effective Date owing by all Loan Parties and their Subsidiaries in any Fiscal Year to exceed the amount set forth in clause (iv) of the definition of Permitted Indebtedness.

(g) RESTRICTED PAYMENTS.

(i) Pay any cash dividend or other distribution, in respect of any class of such Loan Party's or any of its Subsidiaries' Capital Stock, other than dividends payable to another Loan Party or payable solely in the Capital Stock of such paying Loan Party;

(ii) make any repurchase, redemption, retirement, defeasance, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Capital Stock of any Loan Party or any direct or indirect parent of any Loan Party, now or

hereafter outstanding; PROVIDED that the Loan Parties may make cash payments for any such purposes if:

(A) no Default or Event of Default shall have occurred and be continuing at the time of declaration or payment thereof;

(B) after giving effect to the making of any such cash payment, the aggregate amount so expended for such purposes subsequent to the Effective Date does not exceed $1,500,000; and

(C) after giving effect to the making of any such cash payment, the aggregate amount so expended for such purposes in any Fiscal Year of the Key Loan Parties does not exceed $500,000.

(h) FEDERAL RESERVE REGULATIONS. Permit any Loan or the proceeds of any Loan under this Agreement to be used for any purpose that would cause such Loan to be a margin loan under the provisions of Regulation T, U or X of the Board.

(i) TRANSACTIONS WITH AFFILIATES. (i) Except as set forth in that certain confidential side letter from the Borrower to the Agent and for loans which may be made between Loan Parties permitted pursuant to Section 6.02(e) above, make any payment, nor give any value to any Affiliate except for leases, goods and services with such Affiliate for a price and on terms which shall be in the ordinary course of business at prices and on terms and conditions no less favorable to that Loan Party than those which would have been charged and imposed in an arm's-length transaction from unrelated third parties, except (A) sales of goods to an Affiliate for use or distribution outside of the United States of America which complies with the any applicable legal requirements of the Internal Revenue Code of 1986 and the Treasury Regulations, each as amended from time to time, PROVIDED, that such sales shall not exceed $500,000 in the aggregate in any Fiscal Year of the Key Loan Parties, (B) loans, advances and other payments to officers and directors as part of their compensation which are entered into in the ordinary course of business and which are not otherwise prohibited under the Loan Documents, (C) other dividends and distributions to officers, directors and shareholders otherwise permitted under this Agreement, or (D) transactions between or among the Loan Parties not prohibited hereunder and not involving any other Affiliate; (ii) (A) without prior written consent of the Agent, amend, modify or waive any of the provisions of the instruments, documents or agreements described in the confidential side letter referred to in clause (i) above, the effect of which is to increase the payments or value to be furnished by a Loan Party to any Affiliate (other than for ordinary increases under such instruments, documents and agreements in the ordinary course of business, for which the Loan Parties are presently obligated to make payment in such instrument, document or agreement as in effect on the Effective Date) or which would cause such instruments, documents or agreements to be at prices and on terms and conditions no less favorable to that Loan Party than those which would have been charged and imposed in an arm's-length transaction from unrelated third parties, or (B) make any payments under such instruments, documents or agreements in advance of the date when due other than payments made to Affiliates to fund obligations or anticipated claims under medical claims, employee benefit plans or agreements, and other similar plans, all in accordance with current practice; and (iii) fail to use its best efforts to cause its Affiliates to execute and deliver to the

Agent and the Lenders such documentation as the Agent may reasonably require to evidence the Affiliates' agreement with the provisions of this Section 6.02(i).

(j) LIMITATIONS ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES AND RESTRICTIONS ON OBLIGATIONS. Create or otherwise cause, incur, assume, suffer or permit to exist or become effective any consensual encumbrance or restriction of any kind on the ability of (i) any Loan Party to create or grant liens in favor of the Agent or to incur Obligations or
(ii) any Subsidiary of any Loan Party (A) to pay dividends or to make any other distribution on any shares of Capital Stock of such Subsidiary owned by any Loan Party or any of its Subsidiaries, (B) to pay or prepay or to subordinate any Indebtedness owed to any Loan Party or any of its Subsidiaries, (C) to make loans or advances to any Loan Party or any of its Subsidiaries or (D) to transfer any of its property or assets to any Loan Party or any of its Subsidiaries, or permit any of its Subsidiaries to do any of the foregoing; PROVIDED, HOWEVER, that nothing in any of clauses (A) through (D) of this
Section 6.02(j) shall prohibit or restrict compliance with:

(1) this Agreement and the other Loan Documents;

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

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

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

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

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

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

(l) MODIFICATIONS OF INDEBTEDNESS, ORGANIZATIONAL DOCUMENTS AND CERTAIN OTHER AGREEMENTS, ETC. (i) Amend, modify or otherwise change (or permit the amendment, modification or other change) in any manner of any of the provisions of any of its or its Subsidiaries' Indebtedness or of any instrument or agreement (including, without limitation, any purchase agreement, indenture, loan agreement or security agreement) relating to any such Indebtedness if such amendment, modification or change (A) would shorten the final maturity or average life to maturity of, or require any payment to be made earlier than the date originally scheduled on, such Indebtedness, or would increase the interest rate applicable to such Indebtedness, unless (x) Excess Availability, both immediately prior to, immediately after giving effect thereto and projected Excess Availability on a pro forma projected basis for the 12 months immediately following, such amendment, modification or change is at least $100 million, or
(y) the total amount of such Indebtedness so amended, modified or changed since the Effective Date (together with the amounts permitted under clause (ii) hereof), does not exceed $500,000 in the aggregate in any Fiscal Year of the Key Loan Parties, (B) would change the subordination provision, if any, of such Indebtedness, or (C) would otherwise be adverse to the Lenders in any respect;
(ii) except for the Obligations and except as otherwise explicitly permitted herein, make any voluntary or optional payment, prepayment, redemption, defeasance, sinking fund payment or other acquisition for value of any of its or its Subsidiaries' Indebtedness (including, without limitation, by way of depositing money or securities with the trustee therefor before the date required for the purpose of paying any portion of such Indebtedness when due), or refund, refinance, replace or exchange any other Indebtedness for any such Indebtedness (except to the extent such Indebtedness is otherwise expressly permitted by the definition of "Permitted Indebtedness"), or make any payment, prepayment, redemption, defeasance, sinking fund payment or repurchase of any outstanding Indebtedness as a result of any asset sale, change of control, issuance and sale of debt or equity securities or similar event, or give any notice with respect to any of the foregoing, unless (x) Excess Availability, both immediately prior to, immediately after giving effect thereto and projected Excess Availability on a pro forma projected basis for the 12 months immediately following, such payment is at least $100 million, or (y) the total amount of such Indebtedness so paid since the Effective Date (together with the amounts permitted under clause (i)(A) hereof), does not exceed $500,000 in the aggregate in any Fiscal Year of the Key Loan Parties; (iii) except as permitted by Section 6.02(c), amend, modify or otherwise change its name, jurisdiction of organization, organizational identification number or FEIN; (iv) amend, modify or otherwise change its certificate of incorporation or bylaws (or other similar organizational documents), including, without limitation, by the filing or modification of any certificate of designation, or any agreement or arrangement entered into by it, with respect to any of its Capital Stock (including any shareholders' agreement), or enter into any new agreement with respect to any of its Capital Stock, except any such amendments, modifications or changes or any such new agreements or arrangements pursuant to this

clause (iv) that either individually or in the aggregate, could not have a Material Adverse Effect; (v) [Intentionally Omitted]; (vi) agree to any material amendment or other material change to or waiver of any of its rights under any Material Contract without the consent of the Agent (which consent shall not be unreasonably withheld); or (vii) alter, modify or amend any Lease in a manner which is reasonably likely to have a Material Adverse Effect.

(m) INVESTMENT COMPANY ACT OF 1940. Engage in any business, enter into any transaction, use any securities or take any other action or permit any of its Subsidiaries to do any of the foregoing, that would cause it or any of its Subsidiaries to become subject to the registration requirements of the Investment Company Act of 1940, as amended, by virtue of being an "investment company" or a company "controlled" by an "investment company" not entitled to an exemption within the meaning of such Act.

(n) [INTENTIONALLY OMITTED].

(o) ERISA. Do or permit any ERISA Affiliate to do any of the following, if as a result thereof, such Loan Party or ERISA Affiliate will, or could reasonably be expected to, incur liability that is reasonably likely to have a Material Adverse Effect:

(i) violate or fail to be in full compliance with any Loan Party's Employee Benefit Plan;

(ii) fail timely to file all reports and filings required by ERISA to be filed by any Loan Party;

(iii) engage in any nonexempt "prohibited transactions" or "reportable events" (respectively as described in ERISA);

(iv) engage in, or commit any act such that a tax or penalty reasonably could be imposed upon any Loan Party on account thereof pursuant to ERISA;

(v) incur any material accumulated funding deficiency within the meaning of ERISA;

(vi) terminate any Employee Benefit Plan such that a Lien could be asserted against any assets of any Loan Party on account thereof pursuant to ERISA; or

(vii) fail to make any required contribution or payment to, or make a complete or partial withdrawal from, any Employee Benefit Plan which is a multiemployer plan within the meaning of Section 4001(a) of ERISA.

(p) ENVIRONMENTAL. Knowingly or negligently permit the use, handling, generation, storage, treatment, Release or disposal of Hazardous Materials at any property owned or leased by it or any of its Subsidiaries, except in compliance with Environmental Laws and so long as such use, handling, generation, storage, treatment, Release or disposal of Hazardous Materials is not reasonably likely to result in a Material Adverse Effect.

(q) [INTENTIONALLY OMITTED].

(r) [Intentionally Omitted].

(s) UNRESTRICTED SUBSIDIARIES. Permit any Unrestricted Subsidiary at any time to carry on any business activity or have any assets in excess of $500,000 in the aggregate;

(t) INTELLECTUAL PROPERTY. Conduct its business so as to infringe the patents, industrial designs, trademarks, trade names, trade styles, brand names, service marks, logos, copyrights, trade secrets, know-how, confidential information, or other intellectual or proprietary property of any third Person, except where such infringement is not reasonably likely to have a Material Adverse Effect.

ARTICLE VII

REPORTING REQUIREMENTS

Section 7.01 MAINTAIN RECORDS. The Loan Parties shall:

(a) At all times, keep proper books of account, in which full, true, and accurate entries shall be made of all of the Loan Parties' financial transactions, all in accordance with GAAP applied consistently with prior periods to fairly reflect the consolidated financial condition of the Loan Parties at the close of, and its results of operations for, the periods in question.

(b) Timely provide the Agent with those financial reports, statements, and schedules required by this Article VII or otherwise, each of which reports, statements and schedules shall be prepared, to the extent applicable, in accordance with GAAP applied consistently with prior periods to fairly reflect the Consolidated financial condition of the Loan Parties at the close of, and the results of operations for, the period(s) covered therein.

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

(d) At all times, retain (i) Deloitte and Touche, LLP, or such other nationally recognized independent certified public accountants who are reasonably satisfactory to SSC (as long as it remains in Control of the Key Loan Parties) and the Agent, and instruct such accountants, subject to the terms of such accountants' internal policies, and subject to the confidentiality provisions of this Agreement, to fully cooperate with, and be available to, the Agent to discuss the Loan Parties' financial performance, financial condition, operating results, controls, and such other matters, within the scope of the retention of such accountants, as may be raised by the Agent.

(e) Not change any Loan Party's Fiscal Year.

Section 7.02 ACCESS TO RECORDS.

(a) Each Loan Party shall accord the Agent with reasonable access during normal business hours from time to time as the Agent may require to all properties owned by or over which any Loan Party has control. The Agent shall have the right, and each Loan Party will permit the Agent from time to time as the Agent may request, to examine, inspect, copy, and make extracts from any and all of the Loan Parties' books, records, electronically stored data, papers, and files. Each Loan Party shall make that Loan Party's copying facilities available to the Agent.

(b) Each Loan Party hereby authorizes the Agent to inspect, copy, duplicate, review, cause to be reduced to hard copy, run off, draw off, and otherwise use any and all computer or electronically stored information or data which relates to any Loan Party. Each Loan Party shall request full cooperation with the Agent from any service bureau, contractor, accountant, or other Person.

(c) The Agent from time to time may designate one or more representatives to exercise the Agent's rights under this Section 7.02 as fully as if the Agent were doing so; PROVIDED, that the Agent shall not designate a Person which is in a Competitive Business.

Section 7.03 PROMPT NOTICE TO ADMINISTRATIVE AGENT.

(a) The Borrower shall provide the Agent with written notice promptly upon the occurrence of any of the following events, which written notice shall be with reasonable particularity as to the facts and circumstances in respect of which such notice is being given (i) any change in any Loan Party's president, chief executive officer, chief operating officer, and chief financial officer (without regard to the title(s) actually given to the Persons discharging the duties customarily discharged by officers with those titles);
(ii) any ceasing of any Loan Party's payment of the debts of that Loan Party generally as they mature, in the ordinary course, to its creditors (other than its ceasing of making of such payments on account of a dispute which, if adversely determined to the Loan Parties is not reasonably likely to have a Material Adverse Effect); (iii) any failure by any Loan Party to pay rent at any of that Loan Party's locations, which failure continues for more than three (3) days following the last day on which such rent was payable unless such failure is not reasonably likely to have a Material Adverse Effect; (iv) any material adverse change in the business, operations, or financial affairs of any Borrower; (v) the occurrence of any Default; (vi) any intention on the part of any Loan Party to discharge that Loan Party's present independent accountants or any withdrawal or resignation by such independent accountants from their acting in such capacity (as to which, see Section 7.01(d)); (vii) any litigation which, if determined adversely to any Loan Party, is reasonably likely to have a Material Adverse Effect; (viii) any intention of a Key Loan Party to enter into a consignment arrangement or licensing or other similar agreement (whether for intellectual property, leased departments in stores or otherwise) with any other Person; (ix) any additional or amended collective bargaining or other labor contract entered into after the Effective Date; (x)any Material Accounting Changes; (xi) [Intentionally Omitted]; (xii) any event, occurrence or circumstance not specifically described herein that is reasonably likely to have a Material Adverse Effect; (xiii) any Loan Party's entering into a license agreement after the Effective Date; (xiv) any Loan

Party's entering into a Capitalized Lease after the Effective Date; and (xv) any Loan Party's entering into a Lease after the Effective Date.

(b) The Borrower shall (i) provide the Agent, when so distributed, with copies of any materials distributed to the shareholders of the Borrower; (ii) provide the Agent (A) when filed, copies of all filings with the SEC. Such copies may be provided in electronic format; (B) when received, copies of all correspondence from the SEC, other than routine general communications from the SEC; and (C) should any of the information on any of the Schedules hereto become misleading in any material respect, promptly advise the Agent in writing with such revisions or updates as may be necessary or appropriate to update or correct the same; PROVIDED, HOWEVER, that no such Schedule shall be deemed to have been amended, modified or superseded by any such correction or update, nor shall any breach of any representation or warranty resulting from the inaccuracy or incompleteness of such Schedule be deemed to have been cured or waived, unless and until the Agent, in its discretion shall have accepted in writing such revisions; (iii) at the request of Agent, from time to time, provide the Agent with copies of all advertising (including copies of all print advertising and duplicate tapes of all video and radio advertising); and
(iv)provide the Agent, when received by and Loan Party, with a copy of any management letter or similar communications from any independent accountant of any Loan Party.

Section 7.04 [INTENTIONALLY OMITTED].

Section 7.05 [INTENTIONALLY OMITTED].

Section 7.06 QUARTERLY REPORTS. Quarterly, within forty-five (45) days following the end of each of the Loan Parties' fiscal quarters, the Borrower shall provide the Agent with the following:

(a) An original counterpart of a management prepared financial statement (which shall be prepared in the same manner and using the same assumptions as set forth in the forecasts furnished to, and approved by, the Agent pursuant to the provisions of Section 7.10(c) hereof) for (A) the Loan Parties on a consolidated basis, (B) the DSW/Shonac Business, (C) the Filene's Business, and (D) the Value City Business, in each case for the fiscal quarter most recently ended, and for the period from the beginning of the Loan Parties' then current fiscal year through the end of the subject quarter, with comparative information for the same period of the previous fiscal year, which statement shall include a balance sheet, statement of operations and cash flows and comparisons for the corresponding quarter of the then immediately previous year, as well as to the Loan Party's forecast;

(b) A list of all leases entered into or terminated during such quarter; and

(c) The officer's compliance certificate described in
Section 7.08.

Section 7.07 ANNUAL REPORTS.

(a) Annually, within ninety (90) days following the end of the Loan Parties' fiscal year, the Borrower shall furnish the Agent with the following: (i) an original

signed counterpart of the Loan Parties' consolidated annual financial statement, which statement shall have been prepared by, and bear the unqualified opinion of, the Borrower's independent certified public accountants (i.e. said statement shall be "certified" by such accountants) and shall include, at a minimum (with comparative information for the then prior fiscal year) a balance sheet, statement of operations, statement of changes in shareholders' equity, and cash flows; (ii) a consolidating annual financial statement for (x) the DSW/Shonac Business, (y) the Filene's Business, and (z) the Value City Business which shall include (with comparative information for the then prior fiscal year) a balance sheet, statement of changes in shareholders' equity, and cash flows; and (iii) the officer's compliance certificate described in Section 7.08.

(b) No later than fifteen (15) days prior to the end of each of the Loan Parties' fiscal years, the Borrower shall give written notice to such independent certified accountants (with a copy of such notice, when sent, to the Agent) that such annual financial statement will be delivered by the Borrower to the Agent and that the Borrower has been advised that the Agent and each Lender will rely thereon with respect to the administration of, and transactions under, the credit facilities contemplated by this Agreement.

Section 7.08 OFFICER'S CERTIFICATES. The Borrower shall cause either the Borrower's chief executive officer, president, executive vice president, chief financial officer, controller, or treasurer (collectively, an "AUTHORIZED OFFICER"), in each instance, to provide such Person's Certificate with those monthly financial statements to be provided within thirty (30) days of the end of each month and with those to be provided quarterly and annual statements to be furnished pursuant to this Agreement, which Certificate shall:

(a) Indicate that (i) with respect to the Consolidated financial statement, the subject statement was prepared in accordance with GAAP consistently applied, and (ii) with respect to all financial statements, presents fairly the financial condition of the applicable Loan Parties at the close of, and the results of the applicable Loan Parties' operations and cash flows (where such cash flows are required to be provided) for, the period(s) presented, SUBJECT, HOWEVER, to the following: (x) usual year end adjustments (this exception shall note be included in the Certificate which accompanies such annual statement); and (y) Material Accounting Changes, in which event, such Certificate shall include a schedule (in reasonable detail) of the effect of each such Material Accounting Change.

(b) Indicate either that (i) no Default has occurred and is continuing, or (ii) if such an event has occurred, its nature (in reasonable detail) and the steps (if any) being taken or contemplated by the Loan Parties to be taken on account thereof.

Section 7.09 [Intentionally Omitted].

Section 7.10 ADDITIONAL FINANCIAL INFORMATION.

(a) In addition to all other information required to be provided pursuant to this Article VII, the Borrower promptly shall provide the Agent with such other and additional information concerning the Loan Parties, the operation of the Loan Parties' business, and the Loan Parties' financial condition, including original counterparts of financial reports and statements, as the Agent may from time to time reasonably request from the Borrower.

(b) The Borrower shall, upon the Agent's request, provide the Agent, from time to time hereafter, with updated forecasts of the Loan Parties' anticipated performance and operating results for the current fiscal year. Such forecasts shall be in a format consistent with the format previously provided to the Agent.

(c) In all events, the Borrower, no sooner than ninety (90) nor later than sixty (60) days prior to the end of each of the Loan Parties' fiscal years, shall provide the Agent with an updated and extended forecast which shall go out at least through the end of the then next fiscal year and shall include a statement of operations, balance sheet, and statement of cash flow, by month, each consolidated (with consolidating schedules by Division) and each prepared in conformity with GAAP and consistent with the Loan Parties' then current accounting practices.

(d) When available the "Annual Budget", as approved by the Borrower's Board of Directors, shall be provided to the Agent. The Annual Budget shall be subject to the approval of the Agent (whose approval shall not be unreasonably withheld) only if the Annual Budget varies in a material way from the Business Plan for such fiscal year.

(e) Each Loan Party recognizes that all commercial finance examinations, inventories, analysis, financial information, and other materials which the Agent may obtain, develop, or receive with respect to the Loan Parties (other than appraisals and inventories received from third parties) are confidential to the Agent and that, except as otherwise provided herein, no Loan Party is entitled to receipt of any of such commercial finance examinations, inventories, analysis, financial information, and other materials, nor copies or extracts thereof or therefrom.

Section 7.11 FORMAT OF INFORMATION. All information required to be delivered pursuant to this Article VII may be delivered by and in electronic format.

ARTICLE VIII

[INTENTIONALLY OMITTED.]

ARTICLE IX

EVENTS OF DEFAULT

Section 9.01 EVENTS OF DEFAULT. The occurrence of any event described in this Article IX respectively shall constitute an Event of Default herein. The occurrence of any Event of Default shall also constitute, without notice or demand, a default under all other agreements between the Agent or any Lender and any Loan Party and instruments and papers heretofore, now, or hereafter given the Agent or any Lender by any Loan Party in connection with any of the Loan Documents. An Event of Default shall occur upon:

(a) The failure by any Loan Party to pay when due any principal of, interest on, or fees in respect of, the Loan;

(b) The failure by any Loan Party to pay when due (or upon demand, if payable on demand) any payment Obligation other than any payment Obligation on account of the principal of, or interest on, or fees in respect of the Loan;

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

6.02(b)              Indebtedness
6.01(b)              Pay Taxes
6.02(g)              Dividends. Investments. Other
                        Corporate Actions
6.02(e)              Loans and Advances
6.02(i)              Affiliate Transactions
Article VII          Reporting Requirements

(d) [Intentionally Omitted].

(e) the failure by any Loan Party, within twenty (20) days following the earlier of any Authorized Officer's knowledge of a breach of any covenant or Obligation not described in any of clauses (a) through (d) above, or of its receipt of written notice from the Agent of the breach of any of such covenants or Obligations, provided that if such failure cannot be reasonably cured within such twenty (20) day period and the Loan Parties have diligently proceeded, and continue to diligently proceed, to effectuate a cure of such failure, such failure shall not be an Event of Default hereunder unless (i) such failure is not cured within twenty (20) days after the expiration of such initial twenty (20) day period, or (b) such failure, in the reasonable judgment of the Agent, is reasonably likely to have a Material Adverse Effect;

(f) the determination by the Agent that any representation or warranty at any time made by any Loan Party to the Agent or any Lender was not true or complete in all material respects when given;

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

(h) the occurrence of any breach of any covenant or Obligation imposed by, or of any default under, any agreement between the Agent or any Lender and any Loan Party

or instrument given by any Loan Party to any Agent or any Lender relating to Indebtedness of any Loan Party in excess of $1,000,000 in the aggregate and the expiration, without cure, of any applicable grace period (notwithstanding that the Agent or Lender may not have exercised all or any of its rights on account of such breach or default);

(i) the occurrence of any uninsured loss, theft, damage, or destruction of or to any material portion of the property or assets of the Loan Parties;

(j) (i) the entry of any judgment in excess of Two Million Five Hundred Thousand Dollars ($2,500,000.00) against any Loan Party, which judgment (A) is not covered by insurance (as to which the insurer has not notified the applicable Loan Party of the insurer's reservation of rights) or (B) is not satisfied, stayed (if a money judgment) or appealed from (with execution or similar process stayed) within thirty (30) days of its entry;

(ii) the entry of any order or the imposition of any other process having the force of law, the effect of which is to restrain the conduct by any Key Loan Party of its business in the ordinary course and which is reasonably likely to have a Material Adverse Effect;

(k) any act by, against, or relating to any Loan Party, or its property or assets, which act constitutes the determination, by any Loan Party, to initiate a program of substantial or total self-liquidation; application for, consent to, or sufferance of the appointment of a receiver, trustee, or other Person, pursuant to court action or otherwise, over all, or any part of any Loan Party's property; the granting of any trust mortgage or execution of an assignment for the benefit of the creditors of any Loan Party, or the occurrence of any other voluntary or involuntary liquidation or extension of debt agreement for any Loan Party; the offering by or entering into by any Loan Party of any composition, extension, or any other arrangement seeking relief generally from or extension of the debts of any Loan Party; or the initiation of any judicial or non-judicial proceeding or agreement by, against, or including any Loan Party which seeks or intends to accomplish a reorganization or arrangement with creditors; and/or the initiation by or on behalf of any Loan Party of the liquidation or winding up of all or any part of any Loan Party's business or operations except that any of the foregoing actions which are commenced against a Loan Party shall not be deemed an Event of Default hereunder as long as such action is timely contested in good faith by that Loan Party by appropriate proceedings and is dismissed within 60 days of the institution of the foregoing;

(l) the failure by any Loan Party to generally pay the debts of that Loan Party as they mature; adjudication of bankruptcy or insolvency relative to any Loan Party; the entry of an order for relief or similar order with respect to any Loan Party in any proceeding pursuant to the Bankruptcy Code or any other Federal bankruptcy law; the filing of any complaint, application, or petition by any Loan Party initiating any matter in which any Loan Party is or may be granted any relief from the debts of that Loan Party pursuant to the Bankruptcy Code or any other insolvency statute or procedure; the filing of any complaint, application, or petition against any Loan Party initiating any matter in which that Loan Party is or may be granted any relief from the debts of that Loan Party pursuant to the Bankruptcy Code or any other insolvency statute or procedure, which complaint, application, or petition is not

timely contested in good faith by that Loan Party by appropriate proceedings or, if so contested, is not dismissed within 60 days of when filed;

(m) the termination or attempted termination of any Guaranty by any Guarantor;

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

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

(o) any Change in Control;

(p) an event or development occurs which, as determined by the Agent in its discretion, has, or could reasonably be expected to have, a Material Adverse Effect; or

(q) [Intentionally Omitted].

then, and in any such event, the Agent may, with the consent or at the direction of the Required Lenders, by notice to the Borrower, (i) declare all or any portion of the Loan and other Obligations then outstanding to be due and payable, whereupon all or such portion of the aggregate principal of the Loan and other Obligations, all accrued and unpaid interest thereon, all fees and all other amounts payable under this Agreement and the other Loan Documents shall become due and payable immediately, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by each Loan Party and (ii) exercise any and all of its other rights and remedies under Applicable Law, hereunder and under the other Loan Documents; PROVIDED, HOWEVER, that upon the occurrence and during the continuance of any Event of Default described in subsection (k) or (l) of this Section 9.01, without any notice to any Loan Party or any other Person or any act by the Agent or any Lender, and the Loan, together with all accrued and unpaid interest and PIK Interest thereon, all fees and all other amounts due under this Agreement and the other Loan Documents shall become due and payable automatically and immediately, without presentment, demand, protest or notice of any kind, all of which are expressly waived by each Loan Party.

ARTICLE X

AGENT

Section 10.01 APPOINTMENT. Each Lender (and each subsequent maker of any Loan by its making thereof) hereby irrevocably appoints and authorizes the Agent to perform the duties of the Agent as set forth in this Agreement including: (i) to receive on behalf of each Lender any payment of principal of or interest on the Loan outstanding hereunder and all other amounts accrued hereunder for the account of the Lenders and paid to the Agent, and, subject to

Sections 2.02 and 3.02 of this Agreement, to distribute promptly to each Lender its Pro Rata Share of all payments so received; (ii) to distribute to each Lender copies of all material notices and agreements received by the Agent and not required to be delivered to each Lender pursuant to the terms of this Agreement, provided that the Agent shall not have any liability to the Lenders for the Agent's inadvertent failure to distribute any such notices or agreements to the Lenders; (iii) to maintain, in accordance with its customary business practices, ledgers and records reflecting the status of the Obligations, the Loan, and related matters and to maintain, in accordance with its customary business practices, ledgers and records reflecting the status of the properties and assets of the Loan Parties and related matters; (iv) to execute or file any and all financing or similar statements or notices, amendments, renewals, supplements, documents, instruments, proofs of claim, notices and other written agreements with respect to this Agreement or any other Loan Document; (v)
[Intentionally Omitted]; (vi) to perform, exercise, and enforce any and all other rights and remedies of the Lenders with respect to the Loan Parties, the Obligations, or otherwise related to any of same to the extent reasonably incidental to the exercise by the Agent of the rights and remedies specifically authorized to be exercised by the Agent by the terms of this Agreement or any other Loan Document, or as directed by the Required Lenders; (vii) to incur and pay such fees necessary or appropriate for the performance and fulfillment of its functions and powers pursuant to this Agreement or any other Loan Document; and (viii) subject to Section 10.03 of this Agreement, to take such action as the Agent deems appropriate on its behalf to administer the Loan and the Loan Documents and to exercise such other powers delegated to the Agent by the terms hereof or the other Loan Documents (including, without limitation, the power to give or to refuse to give notices, waivers, consents, approvals and instructions and the power to make or to refuse to make determinations and calculations) together with such powers as are reasonably incidental thereto to carry out the purposes hereof and thereof. As to any matters not expressly provided for by this Agreement and the other Loan Documents (including, without limitation, enforcement or collection of the Loan), the Agent shall not be required to exercise any discretion or take any action, which, in the reasonable opinion of the Agent, exposes the Agent to liability or which is contrary to this Agreement or any other Loan Document or Applicable Law. The Lenders hereby agree that the Required Lenders shall make all decisions concerning (A) waivers, (B) amendments, (C) remedial action, including, without limitation, the right to call a default, accelerate and take any enforcement action, and (D) performance by the Lenders or enforcement of the rights of the Lenders hereunder and under the Intercreditor Agreement; PROVIDED, HOWEVER, that the foregoing shall not limit the rights of all Lenders under Section 12.02 hereof.

Section 10.02 NATURE OF DUTIES. The Agent shall have no duties or responsibilities except those expressly set forth in this Agreement or in the other Loan Documents. The duties of the Agent shall be mechanical and administrative in nature. Neither the Agent nor the Lenders shall have by reason of this Agreement or any other Loan Document any fiduciary relationship. Nothing in this Agreement or any other Loan Document, express or implied, is intended to or shall be construed to impose upon the Agent or the Required Lenders any obligations in respect of this Agreement or any other Loan Document except as expressly set forth herein or therein. Each Lender shall make its own independent investigation of the financial condition and affairs of the Loan Parties in connection with the making and the continuance of the Loan hereunder and shall make its own appraisal of the creditworthiness of the Loan Parties and the value of the properties and assets of the Loan Parties, and neither the Agent nor the Required Lenders shall have any duty or responsibility, either initially or on a

continuing basis, to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the initial Loan hereunder or at any time or times thereafter; PROVIDED, that, upon the reasonable request of a Lender, the Agent shall provide to such Lender any documents or reports delivered to the Agent by the Loan Parties pursuant to the terms of this Agreement or any other Loan Document.

Section 10.03 RIGHTS; EXCULPATION, ETC. Neither the Agent nor the Lenders, nor any of their respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by them under or in connection with this Agreement or the other Loan Documents, except for their own gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. Without limiting the generality of the foregoing, the Agent and the Lenders (i) may treat the payee of any Loan as the owner thereof until the Agent receives written notice of the assignment or transfer thereof, pursuant to Section 12.07 hereof, signed by such payee and in form satisfactory to the Agent; (ii) may consult with legal counsel (including, without limitation, counsel to the Agent or counsel to the Loan Parties), independent public accountants, and other experts selected by any of them and shall not be liable for any action taken or omitted to be taken in reasonable good faith by any of them in accordance with the advice of such counsel or experts; (iii) make no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, certificates, warranties or representations made in or in connection with this Agreement or the other Loan Documents; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the other Loan Documents on the part of any Person, the existence or possible existence of any Default or Event of Default, or to inspect the Collateral or other property (including, without limitation, the books and records) of any Person; and (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto. Neither the Agent nor the Required Lenders shall be liable for any apportionment or distribution of payments made in good faith pursuant to Section 3.04. The Agent may at any time (but shall not be required to) request instructions from the Required Lenders with respect to any actions or approvals which by the terms of this Agreement or of any of the other Loan Documents the Agent is permitted or required to take or to grant, and if such instructions are promptly requested, the Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval under any of the Loan Documents until it shall have received such instructions from the Required Lenders. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Agent as a result of the Agent acting or refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of the Required Lenders, or against the Required Lenders on the same basis for which a right of action could be brought against the Agent in connection with such acting or refraining from acting, except to the extent such action, lack of action or instruction is determined by a court of competent jurisdiction, pursuant to a final judgment, to have constituted gross negligence or willful misconduct.

Section 10.04 RELIANCE. The Agent shall be entitled to rely upon any written notices, statements, certificates, orders or other documents or any telephone message believed by it in reasonable good faith to be genuine and correct and to have been signed, sent or made by the

proper Person, and with respect to all matters pertaining to this Agreement or any of the other Loan Documents and its duties hereunder or thereunder, upon advice of counsel selected by it.

Section 10.05 INDEMNIFICATION. To the extent that the Agent is not reimbursed and indemnified by any Loan Party, the Lenders will reimburse and indemnify the Agent from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any of the other Loan Documents (it being understood that the foregoing shall not be deemed to include principal, interest or fees owed by a Loan Party to the Agent) or any action taken or omitted by the Agent under this Agreement or any of the other Loan Documents, in proportion to each Lender's Pro Rata Share, including, without limitation, advances and disbursements made pursuant to Section 10.08; PROVIDED, HOWEVER, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances or disbursements for which there has been a final judicial determination that such liability resulted from the Agent's gross negligence or willful misconduct. The obligations of the Lenders under this Section 10.05 shall survive the payment in full of the Loan and the termination of this Agreement.

Section 10.06 AGENT INDIVIDUALLY. With respect to its Pro Rata Share of the Loan made by it, the Agent shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender or maker of a Loan. The term "Lenders" or "Required Lenders" or any similar terms shall, unless the context clearly otherwise indicates, include the Agent in its individual capacity as a Lender. The Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with any Key Loan Party as if it were not acting as the Agent pursuant hereto without any duty to account to the other Lenders.

Section 10.07 SUCCESSOR AGENT. (a) The Agent may resign from the performance of all its functions and duties hereunder and under the other Loan Documents at any time by giving at least thirty (30) Business Days' prior written notice to the Borrower and each Lender. Such resignation shall take effect upon the acceptance by a successor Agent of appointment pursuant to clauses (b) and (c) below or as otherwise provided below.

(b) Upon any such notice of resignation, the Borrower shall appoint a successor Agent acceptable to SSC. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the Agent, and the Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. After the Agent's resignation hereunder as the Agent, the provisions of this Article X 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 and the other Loan Documents.

(c) If a successor Agent shall not have been so appointed within said thirty (30) Business Day period, the Agent shall then appoint a successor Agent who shall serve as the Agent until such time, if any, as the Borrower (with the consent of SSC) appoints a successor Agent as provided above.

Section 10.08 [Intentionally Omitted].

Section 10.09 [Intentionally Omitted].

ARTICLE XI

GUARANTY

Section 11.01 GUARANTY. Each Guarantor hereby unconditionally and irrevocably guarantees the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all Obligations of the Borrower now or hereafter existing under any Loan Document, whether for principal, interest (including, without limitation, all interest that accrues after the commencement of any Insolvency Proceeding of the Borrower), fees, commissions, indemnifications or otherwise (such obligations, to the extent not paid by the Borrower, being THE "GUARANTEED OBLIGATIONS"), and agrees to pay any and all expenses (including reasonable counsel fees and expenses) incurred by the Agent and the Lenders in enforcing any rights under the Guaranty set forth in this Article XI. Without limiting the generality of the foregoing, each Guarantor's liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by the Borrower to the Agent and the Lenders under any Loan Document but for the fact that they are unenforceable or not allowable due to the existence of an Insolvency Proceeding involving the Borrower.

Section 11.02 GUARANTY ABSOLUTE. Each Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Agent or the Lenders with respect thereto. The Obligations of each Guarantor under this Article XI are independent of the Guaranteed Obligations, and a separate action or actions may be brought and prosecuted against each Guarantor to enforce such Obligations, irrespective of whether any action is brought against any Loan Party or whether any Loan Party is joined in any such action or actions. The liability of each Guarantor under this Article XI shall be irrevocable, absolute and unconditional irrespective of, and each Guarantor hereby irrevocably waives any defenses it may now or hereafter have in any way relating to, any or all of the following:

(a) Any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto;

(b) Any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Loan Party or otherwise;

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

(d) Any change, restructuring or termination of the corporate, limited liability company or partnership structure or existence of any Loan Party; or

(e) Any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Agent or the Lenders that might otherwise constitute a defense available to, or a discharge of, any Loan Party or any other Guarantor or surety.

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

Section 11.03 WAIVER. Each Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Article XI and any requirement that the Agent or the Lenders exhaust any right or take any action against any Loan Party or any other Person. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated herein and that the waiver set forth in this Section 11.03 is knowingly made in contemplation of such benefits. Each Guarantor hereby waives any right to revoke this Article XI, and acknowledges that this Article XI is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.

Section 11.04 CONTINUING GUARANTY; ASSIGNMENTS. This Article XI is a continuing guaranty and shall (a) remain in full force and effect until the later of the cash payment in full of the Guaranteed Obligations (other than indemnification obligations as to which no claim has been made) and all other amounts payable under this Article XI and the Final Maturity Date, (b) be binding upon each Guarantor, its successors and assigns and (c) inure to the benefit of and be enforceable by the Agent and the Lenders and their successors, pledgees, transferees and assigns. Without limiting the generality of the foregoing clause (c), any Lender may pledge, assign or otherwise transfer all or any portion of its rights and obligations under this Agreement (including, without limitation, all or any portion of its Pro Rata Share of the Loan owing to it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted such Lender herein or otherwise, in each case as provided in Section 12.07.

Section 11.05 SUBROGATION. No Guarantor will exercise any rights that it may now or hereafter acquire against any Loan Party or any other Guarantor that arise from the existence, payment, performance or enforcement of such Guarantor's obligations under this Article XI, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Agent and the Lenders against any Loan Party or any other Guarantor, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from any Loan Party or any other Guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security solely on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Article XI shall have been paid in full in cash and the Final Maturity Date shall have occurred. If any amount shall be paid to any Guarantor in violation of the immediately preceding sentence at any time prior to the later of the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this

Article XI and the Final Maturity Date, such amount shall be held in trust for the benefit of the Agent and the Lenders and shall forthwith be paid to the Agent and the Lenders to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Article XI, whether matured or unmatured, in accordance with the terms of this Agreement. If (i) any Guarantor shall make payment to the Agent and the Lenders of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Article XI shall be paid in full in cash and (iii) the Final Maturity Date shall have occurred, the Agent and the Lenders will, at such Guarantor's request and expense, execute and deliver to such Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Guaranteed Obligations resulting from such payment by such Guarantor.

ARTICLE XII

MISCELLANEOUS

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

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

with a copy to:

Porter Wright Morris & Arthur LLP 41 South High Street
Columbus, OH 43215
Attention: Robert J. Tannous, Esq. and Timothy E. Grady, Esq.

Telephone: 614-227-1953

Telecopier: 614-227-2100

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

Schottenstein Stores Corporation 1800 Moler Road
Columbus, OH 43207
Attention: Irwin A. Bain, Esq.

Telephone: 614-449-4332

Telecopier: 614-443-0927

with a copy to:

Cadwalader, Wickersham & Taft 100 Maiden Lane
New York, New York 10038 Attention: Dennis J. Block, Esq.

Telephone: 212-504-6000

Telecopier: 614-504-6666

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

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

Section 12.03 NO WAIVER; REMEDIES, ETC. No failure on the part of the Agent or any Lender to exercise, and no delay in exercising, any right hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right under any Loan Document preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies of the Agent and the Lenders provided herein and in the other Loan Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. The rights of the Agent and the Lenders under any Loan Document against any party thereto are not conditional or contingent on any attempt by the Agent and the Lenders to exercise any of their rights under any other Loan Document against such party or against any other Person.

Section 12.04 EXPENSES; TAXES; ATTORNEYS' FEES. The Borrower will pay within ten (10) days after demand therefor (which demand shall include a statement of the nature thereof), all costs and expenses incurred by or on behalf of the Agent (and, in the case of clauses (b) through (m) below, each Lender), regardless of whether the transactions contemplated hereby are consummated, including, without limitation, reasonable fees, costs, client charges and expenses of counsel for the Agent (and, in the case of clauses (b) through (m) below, each Lender), accounting, due diligence, periodic field audits, physical counts, valuations, investigations, searches and filings, monitoring of assets, title searches and reviewing environmental assessments, miscellaneous disbursements, examination, travel, lodging and meals, arising from or relating to the following: (a) the negotiation, preparation, execution, delivery, performance and administration of this Agreement and the other Loan Documents (including, without limitation, the preparation of any additional Loan Documents pursuant to Section 6.01(b) or the review of any of the agreements, instruments and documents referred to in Section 6.01(f)); (b) any requested amendments, waivers or consents to this Agreement or the other Loan Documents whether or not such documents become effective or are given; (c) the preservation and protection of any of the Lenders' rights under this Agreement or the other Loan Documents; (d) the defense of any claim or action asserted or brought against the Agent or any Lender by any Person that arises from or relates to this Agreement, any other Loan Document, the Agent's or the Lenders' claims against any Loan Party, or any and all matters in connection therewith;
(e) the commencement or defense of, or intervention in, any court proceeding arising from or related to this Agreement or any other Loan Document; (f) the filing of any petition, complaint, answer, motion or other pleading by the Agent or any Lender; (g) [Intentionally Omitted]; (h) [Intentionally Omitted]; (i) any attempt to collect from any Loan Party; (j) all liabilities and costs arising from or in connection with the past, present or future operations of any Loan Party involving any damage to real or personal property or natural resources or harm or injury alleged to have resulted from any Release of Hazardous Materials on, upon or into such property; (k) any Environmental Liabilities and Costs incurred in connection with the investigation, removal, cleanup and/or remediation of any Hazardous Materials present or arising out of the operations of any facility of any Loan Party; (l) any Environmental Liabilities and Costs incurred in connection with any Environmental Lien; or (m) the receipt by the Agent or any Lender of any advice from professionals with respect to any of the foregoing; PROVIDED THAT with respect to clauses (d), (e) and (f) above, such costs and expenses shall not include those costs and expenses that have been determined by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Lender or Agent, as the case may be. Without limitation of the foregoing or any other provision of any Loan Document:
(x) the Borrower agree to pay all stamp, document, transfer, recording or filing taxes or fees and similar impositions now or hereafter determined by the Agent or any Lender to be payable in connection with this Agreement or any other Loan Document, and the Borrower agrees to save the Agent and each Lender harmless from and against any and all present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such taxes, fees or impositions unless such omission is the result of the gross negligence or willful misconduct of any Lender; (y) the Borrower agrees to pay all broker and investment banking fees that may become due in connection with the transactions contemplated by this Agreement and the other Loan Documents (the Agent and the Lenders represent and warrant that no brokers have been engaged or retained by any of them in connection with the transactions evidenced by the Loan Documents); and (z) if the Borrower fails to perform any covenant or

agreement contained herein or in any other Loan Document, the Agent may itself perform or cause performance of such covenant or agreement, and the expenses of the Agent incurred in connection therewith shall be reimbursed on demand by the Borrower.

Section 12.05 RIGHT OF SET-OFF. Upon the occurrence and during the continuance of any Event of Default, the Agent or any Lender may, and is hereby authorized to, at any time and from time to time, without notice to any Loan Party (any such notice being expressly waived by the Loan Parties) and to the fullest extent permitted by law, 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 the Agent or such Lender to or for the credit or the account of any Loan Party against any and all obligations of the Loan Parties either now or hereafter existing under any Loan Document, irrespective of whether or not the Agent or such Lender shall have made any demand hereunder or thereunder and although such obligations may be contingent or unmatured. The Agent and each Lender agree to notify such Loan Party promptly after any such set-off and application made by the Agent or such Lender provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Agent and the Lenders under this Section 12.05 are in addition to the other rights and remedies (including other rights of set-off) which the Agent and the Lenders may have under this Agreement or any other Loan Documents of law or otherwise.

Section 12.06 SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

Section 12.07 ASSIGNMENTS AND PARTICIPATIONS. (a) This Agreement and the other Loan Documents shall be binding upon and inure to the benefit of each Loan Party and the Agent and each Lender and their respective successors and assigns; PROVIDED, HOWEVER, that none of the Loan Parties may assign or transfer any of its rights hereunder without the prior written consent of each Lender and any such assignment without the Lenders' prior written consent shall be null and void.

(b) Each Lender may, with the written consent (which consent shall not be unreasonably withheld) of SSC (so long as SSC is the Agent or a Lender under this Agreement) and the Borrower (so long as no Event of Default has occurred and is continuing), assign to one or more other Lenders or other entities all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of the Loan made by it); PROVIDED, HOWEVER, that (i) such assignment is in an amount which is at least $5,000,000 or a multiple of $1,000,000 in excess thereof (or the remainder of such Lender's Pro Rata Share of the Loan) (except such minimum amount shall not apply to an assignment by a Lender to an Affiliate of such Lender or a fund or account managed by such Lender or an Affiliate of such Lender or, in the case of SSC, a shareholder of such Lender), (ii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance, an Assignment and Acceptance, together with any promissory note subject to such assignment and such parties shall deliver to the Agent a processing and recordation fee of $5,000 (except the payment of such fee shall not be required in connection with an assignment by a Lender to an Affiliate of such Lender or a fund or account managed by such Lender or an Affiliate of such Lender, or, in the case of

SSC, a shareholder of such Lender) and (iii) no written consent of the SSC and the Borrower shall be required in connection with any assignment by a Lender to an Affiliate of such Lender or a fund or account managed by such Lender or an Affiliate of such Lender, or in the case of SSC, a shareholder of such Lender. Upon such execution, delivery and acceptance, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least three (3) Business Days after the delivery thereof to the Agent (or such shorter period as shall be agreed to by the Agent and the parties to such assignment), (A) the assignee thereunder shall become a "Lender" hereunder and, in addition to the rights and obligations hereunder held by it immediately prior to such effective date, have the rights and obligations hereunder that have been assigned to it pursuant to such Assignment and Acceptance and (B) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto).

(i) By executing and delivering an Assignment and Acceptance, the assigning Lender and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (A) other than as provided in such Assignment and Acceptance, the assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any other Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document furnished pursuant hereto provided that such assigning Lender's obligations and responsibilities under the confidentiality provisions of this Agreement shall continue despite any assignment by such assigning Lender; (B) the assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or any of its Subsidiaries or the performance or observance by any Loan Party of any of its obligations under this Agreement or any other Loan Document furnished pursuant hereto; (C) such assignee confirms that it has received a copy of this Agreement and the other Loan Documents, together with such other documents and information it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (D) such assignee will, independently and without reliance upon the assigning Lender, the Agent or any Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents; (E) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof and thereof, together with such powers as are reasonably incidental hereto and thereto; and (F) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement and the other Loan Documents are required to be performed by it as a Lender.

(ii) The Borrower authorizes the Agent, and the Agent agrees, to maintain, or cause to be maintained at the Payment Office, a copy of each Assignment and Acceptance delivered to and accepted by it and a register (THE "REGISTER") for the recordation of the names and addresses of the Lenders, and the principal amount of the Loan (the "REGISTERED LOANS") owing to each Lender from time to time. The entries in the Register shall be conclusive

and binding for all purposes, absent manifest error, and the Borrower, the Agent and the Lenders shall treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice.

(iii) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee, together with any promissory notes subject to such assignment, the Agent shall, if the Agent consents to such assignment and if such Assignment and Acceptance has been completed (A) accept such Assignment and Acceptance and (B) record the information contained therein in the Register.

(iv) In addition to the other requirements contained in this Section 12.07, a Registered Loan (and the registered note, if any, evidencing the same) may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register (and each registered note shall expressly so provide). Any assignment or sale of all or part of such Registered Loan (and the registered note, if any, evidencing the same) may be effected only by registration of such assignment or sale on the Register, together with the surrender of the registered note, if any, evidencing the same duly endorsed by (or accompanied by a written instrument of assignment or sale duly executed by) the holder of such registered note, whereupon, at the request of the designated assignee(s) or transferee(s), one or more new registered notes in the same aggregate principal amount shall be issued to the designated assignee(s) or transferee(s). Prior to the registration of assignment or sale of any Registered Loan (and the registered note, if any, evidencing the same), the Agent shall treat the Person in whose name such Registered Loan (and the registered note, if any, evidencing the same) is registered as the owner thereof for the purpose of receiving all payments thereon and for all other purposes, notwithstanding notice to the contrary.

(v) In the event that any Lender sells participations in a Registered Loan, such Lender shall maintain a register on which it enters the name of all participants in the Registered Loans held by it (the "PARTICIPANT REGISTER"). A Registered Loan (and the registered note, if any, evidencing the same) may be participated in whole or in part only by registration of such participation on the Participant Register (and each registered note shall expressly so provide). Any participation of such Registered Loan (and the registered note, if any, evidencing the same) may be effected only by the registration of such participation on the Participant Register.

(vi) Any foreign Person who purchases or is assigned or participates in any portion of such Registered Loan shall provide the Agent and the assigning or selling Lender with a completed Internal Revenue Service Form W-8BEN (Certificate of Foreign Status) or a substantially similar form for such purchaser, participant or any other affiliate who is a holder of beneficial interests in the Registered Loan.

(c) Each Lender may, with the written consent (which consent shall not be unreasonably withheld) of SSC (so long as SSC is the Agent or a Lender under this Agreement) and the Borrower (so long as no Event of Default has occurred and is continuing), sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation,

all or a portion of its Pro Rata Share of the Loan made by it); PROVIDED, that
(i) such Lender's obligations under this Agreement (including without limitation, its Commitments hereunder) and the other Loan Documents shall remain unchanged; (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, and 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 and the other Loan Documents; (iii) a participant shall not be entitled to require such Lender to take or omit to take any action hereunder except (A) action directly effecting an extension of the maturity dates or decrease in the principal amount of the Loan, (B) action directly effecting an extension of the due dates or a decrease in the rate of interest payable on the Loan or the fees payable under this Agreement, or (C) actions directly effecting a release of any Loan Party (except as provided otherwise by this Agreement or any other Loan Document); and (iv) no consent of SSC or the Borrower will be required for the sale by a Lender to an Affiliate of such Lender or a fund or account managed by such Lender or an Affiliate of such Lender.

Section 12.08 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Agreement by telecopier shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telecopier also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement. The foregoing shall apply to each other Loan Document mutatis mutandis.

SECTION 12.09 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.

SECTION 12.10 CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE. 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 NEW YORK IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH LOAN PARTY HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT AND THE LENDERS TO SERVICE OF PROCESS IN ANY MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY LOAN PARTY IN ANY OTHER JURISDICTION. EACH LOAN PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT

REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY LOAN PARTY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH LOAN PARTY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

Section 12.11 WAIVER OF JURY TRIAL, ETC. EACH LOAN PARTY, THE AGENT AND EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH LOAN PARTY CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR ANY LENDER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS. EACH LOAN PARTY HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT.

Section 12.12 CONSENT BY THE AGENT AND LENDERS. Except as otherwise expressly set forth herein to the contrary, if the consent, approval, satisfaction, determination, judgment, acceptance or similar action (an "ACTION") of the Agent shall be permitted or required pursuant to any provision hereof or any provision of any other agreement to which any Loan Party is a party and to which the Agent or any Lender has succeeded thereto, such Action shall be required to be in writing and may be withheld or denied by the Agent, in its sole good faith discretion.

Section 12.13 NO PARTY DEEMED DRAFTER. Each of the parties hereto agrees that no party hereto shall be deemed to be the drafter of this Agreement.

Section 12.14 REINSTATEMENT; CERTAIN PAYMENTS. If any claim is ever made upon the Agent or any Lender for repayment or recovery of any amount or amounts received by the Agent or such Lender in payment or on account of any of the Obligations, the Agent or such Lender shall give prompt notice of such claim to each other Lender and the Borrower, and if the Agent or such Lender repays all or part of such amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over the Agent or such Lender or any of its property, or (ii) any good faith settlement or compromise of any such claim effected by the Agent or such Lender with any such claimant, then and in such event each Loan Party agrees that (A) any such judgment, decree, order, settlement or compromise shall be binding upon it

notwithstanding the cancellation of any Indebtedness hereunder or under the other Loan Documents or the termination of this Agreement or the other Loan Documents, and (B) it shall be and remain liable to the Agent or such Lender hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by the Agent or such Lender.

Section 12.15 INDEMNIFICATION.

(a) GENERAL INDEMNITY. In addition to each Loan Party's other Obligations under this Agreement, each Loan Party agrees to, jointly and severally, defend, protect, indemnify and hold harmless the Agent and each Lender and all of their respective officers, directors, employees, attorneys, consultants and agents (collectively called the "INDEMNITEES") from and against any and all losses, damages, liabilities, obligations, penalties, reasonable fees, costs and expenses (including, without limitation, reasonable attorneys' fees, costs and expenses) incurred by such Indemnitees, whether prior to or from and after the Effective Date, whether direct, indirect or consequential, as a result of or arising from or relating to or in connection with any of the following: (i) the negotiation, preparation, execution or performance or enforcement of this Agreement, any other Loan Document or of any other document executed in connection with the transactions contemplated by this Agreement;
(ii) the Agent's or any Lender's furnishing of funds to the Borrower under this Agreement or the other Loan Documents, including, without limitation, the management of the Loan; (iii) any matter relating to the financing transactions contemplated by this Agreement or the other Loan Documents or by any document executed in connection with the transactions contemplated by this Agreement or the other Loan Documents; or (iv) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto (collectively, the "INDEMNIFIED MATTERS"); PROVIDED, HOWEVER, that the Loan Parties shall not have any obligation to any Indemnitee under this subsection (a) for any Indemnified Matter caused by the gross negligence or willful misconduct of such Indemnitee, as determined by a final judgment of a court of competent jurisdiction.

(b) ENVIRONMENTAL INDEMNITY. Without limiting Section 12.15(a) hereof, each Loan Party agrees to, jointly and severally, defend, indemnify, and hold harmless the Indemnitees against any and all Environmental Liabilities and Costs and all other claims, demands, penalties, fines, liability (including strict liability), losses, damages, costs and expenses (including without limitation, reasonable legal fees and expenses, consultant fees and laboratory fees), arising out of (i) any Releases or threatened Releases (A) at any property presently or formerly owned or operated by any Loan Party or any Subsidiary of any Loan Party, or any predecessor in interest, or (B) of any Hazardous Materials generated and disposed of by any Loan Party or any Subsidiary of any Loan Party, or any predecessor in interest; (ii) any violations of Environmental Laws; (iii) any Environmental Action relating to any Loan Party or any Subsidiary of any Loan Party, or any predecessor in interest;
(iv) any personal injury (including wrongful death) or property damage (real or personal) arising out of exposure to Hazardous Materials used, handled, generated, transported or disposed by any Loan Party or any Subsidiary of any Loan Party, or any predecessor in interest; and (v) any breach of any warranty or representation regarding environmental matters made by the Loan Parties in
Section 6.01(g) or the breach of any covenant made by the Loan Parties in
Section 5.01(r). Notwithstanding the foregoing, the Loan Parties shall not have any obligation to any Indemnitee under this subsection

(b) regarding any potential environmental matter covered hereunder which is caused by the gross negligence or willful misconduct of such Indemnitee, as determined by a final judgment of a court of competent jurisdiction.

(c) To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section 12.15 may be unenforceable because it is violative of any law or public policy, each Loan Party shall, jointly and severally, contribute the maximum portion which it is permitted to pay and satisfy under Applicable Law, to the payment and satisfaction of all Indemnified Matters incurred by the Indemnitees. The indemnities set forth in this Section 12.15 shall survive the repayment of the Obligations and discharge of any Liens granted under the Loan Documents.

Section 12.16 [Intentionally Omitted.]

Section 12.17 RECORDS. The unpaid principal of and interest on the Loan, the interest rate or rates applicable to such unpaid principal and interest, the duration of such applicability, and the accrued and unpaid fees shall at all times be ascertained from the records of the Agent, which shall be rebuttably presumed to be correct, absent manifest error.

Section 12.18 BINDING EFFECT. This Agreement shall become effective when it shall have been executed by each Loan Party, the Agent and each Lender and when the conditions precedent set forth in Section 4.01 hereof have been satisfied or waived in writing by the Agent, and thereafter shall be binding upon and inure to the benefit of each Loan Party, the Agent and each Lender, and their respective successors and assigns, except that the Loan Parties shall not have the right to assign their rights hereunder or any interest herein without the prior written consent of each Lender, and any assignment by any Lender shall be governed by Section 12.07 hereof.

Section 12.19 MAXIMUM INTEREST. It is the intention of the parties hereto that the Agent and each Lender shall conform strictly to usury laws applicable to it. Accordingly, if the transactions contemplated hereby or by any other Loan Document would be usurious as to the Agent or any Lender under laws applicable to it (including the laws of the United States of America and the State of New York or any other jurisdiction whose laws may be mandatorily applicable to the Agent or such Lender notwithstanding the other provisions of this Agreement), then, in that event, notwithstanding anything to the contrary in this Agreement or any other Loan Document or any agreement entered into in connection with or as security for the Obligations, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest under law applicable to the Agent or any Lender that is contracted for, taken, reserved, charged or received by the Agent or such Lender under this Agreement or any other Loan Document or agreements or otherwise in connection with the Obligations shall under no circumstances exceed the maximum amount allowed by such applicable law, any excess shall be canceled automatically and if theretofore paid shall be credited by the Agent or such Lender on the principal amount of the Obligations (or, to the extent that the principal amount of the Obligations shall have been or would thereby be paid in full, refunded by the Agent or such Lender, as applicable, to the Borrower); and (ii) in the event that the maturity of the Obligations is accelerated by reason of any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to

the Agent or any Lender may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in this Agreement or otherwise shall be canceled automatically by the Agent or such Lender, as applicable, as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by the Agent or such Lender, as applicable, on the principal amount of the Obligations (or, to the extent that the principal amount of the Obligations shall have been or would thereby be paid in full, refunded by the Agent or such Lender to the Borrower). All sums paid or agreed to be paid to the Agent or any Lender for the use, forbearance or detention of sums due hereunder shall, to the extent permitted by law applicable to the Agent or such Lender, be amortized, prorated, allocated and spread throughout the full term of the Loan until payment in full so that the rate or amount of interest on account of the Loan hereunder does not exceed the maximum amount allowed by such applicable law. If at an time and from time to time (x) the amount of interest payable to the Agent or any Lender on any date shall be computed at the Highest Lawful Rate applicable to the Agent or such Lender pursuant to this Section 12.19 and (y) in respect of any subsequent interest computation period the amount of interest otherwise payable to the Agent or such Lender would be less than the amount of interest payable to the Agent or such Lender computed at the Highest Lawful Rate applicable to the Agent or such Lender, then the amount of interest payable to the Agent or such Lender in respect of such subsequent interest computation period shall continue to be computed at the Highest Lawful Rate applicable to the Agent or such Lender until the total amount of interest payable to the Agent or such Lender shall equal the total amount of interest which would have been payable to the Agent or such Lender if the total amount of interest had been computed without giving effect to this Section 12.19.

For purposes of this Section 12.19, the term "applicable law" shall mean that law in effect from time to time and applicable to the loan transaction between the Borrower, on the one hand, and the Agent and the Lenders, on the other, that lawfully permits the charging and collection of the highest permissible, lawful non-usurious rate of interest on such loan transaction and this Agreement, including laws of the State of New York and, to the extent controlling, laws of the United States of America.

The right to accelerate the maturity of the Obligations does not include the right to accelerate any interest that has not accrued as of the date of acceleration.

Section 12.20 CONFIDENTIALITY. The Agent and each Lender agrees (on behalf of itself and each of its affiliates, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of this nature and in accordance with safe and sound practices of comparable commercial finance companies, any non-public information supplied to it by the Loan Parties pursuant to this Agreement or the other Loan Documents which is identified in writing by the Loan Parties as being confidential at the time the same is delivered to such Person (or consists of information (such as business plans and financial information) which is customarily confidential information) (and which at the time is not, and does not thereafter become, publicly available or legally available to such Person from another source (other than the Loan Parties) on a nonconfidential basis), PROVIDED, that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for the Agent or any Lender, (iii) to examiners, auditors, accountants or Securitization Parties, so long as such Person first agrees, in writing, to be bound by

confidentiality provisions similar in substance to this Section 12.20, (iv) in connection with any litigation to which the Agent or any Lender is a party or
(v) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first agrees, in writing, to be bound by confidentiality provisions similar in substance to this Section 12.20. The Agent and each Lender agrees that, upon receipt of a request or identification of the requirement for disclosure pursuant to clause (iv) hereof, it will make reasonable efforts to keep the Loan Parties informed of such request or identification; PROVIDED, that the each Loan Party acknowledges that the Agent and each Lender may make disclosure as required or requested by any Governmental Authority or representative thereof and that the Agent and each Lender may be subject to review by Securitization Parties or other regulatory agencies and may be required to provide to, or otherwise make available for review by, the representatives of such parties or agencies any such non-public information.

Section 12.21 INTEGRATION. This Agreement, together with the other Loan Documents, reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, before the date hereof.

ARTICLE XIII
CONVERSION OF LOAN

Section 13.01 CONVERSION PRIVILEGE AND CONVERSION PRICE.

(a) Subject to and upon compliance with the provisions of this Article, at any time and from time to time, to the extent any portion of the Loan remains outstanding, any Lender may at its option convert all or any portion of its Pro Rata Share of the Loan into fully paid and nonassessable shares of Common Stock ("CONVERSION SHARES") at the Conversion Price, determined as hereinafter provided, in effect at the time of receipt of a Conversion Notice by the Borrower. Such conversion right shall expire at the close of business on the Maturity Date.

(b) Each Lender that elects to convert all or any portion of its Pro Rata Share of the Loan in accordance with the terms of this Article (a "CONVERTING LENDER") shall convert such portion of its Pro Rata Share of the Loan into the number of Conversion Shares obtained by dividing the principal amount of the portion of its Pro Rata Share of the Loan to be converted plus all accrued and unpaid interest thereon by the Conversion Price. The "CONVERSION PRICE" shall initially be equal to $4.50 per share, subject to adjustment and readjustment from time to time as provided in Section 13.03, and, as so adjusted, shall remain in effect until a further readjustment is required by
Section 13.03.

Section 13.02 EXERCISE OF CONVERSION PRIVILEGE.

(a) In order to exercise the Conversion with respect to the Loan or portion thereof, a Converting Lender shall deliver to the Borrower written notice (the "CONVERSION NOTICE") by telecopier, or any other method described in Section 12.01 hereof, not less than two (2) Business Days nor more than ten (10) Business Days prior to the date of such Conversion (the "CONVERSION DATE"). The Conversion Notice shall set forth (i) the Conversion Date, (ii) the amount of the Lender's Pro Rata Share of the Loan and accrued interest to be

converted, (iii) any portion of the Pro Rata Share of the Loan held by such Converting Lender that is not to be Converted, (iv) the current Conversion Price, (v) the number Conversion Shares to be issued and (vi) the amount of cash, if any, to be paid by the Borrower to the Converting Lender in lieu of fractional shares.

(b) Conversion Shares issued on a Conversion Date shall be deemed to have been issued immediately prior to the close of business on such Conversion Date, and a Converting Lender shall be treated for all purposes as the record holder of such Conversion Shares at such time. On the Conversion Date, the Borrower shall issue and deliver to the Converting Lender, (i) a certificate or certificates for the Conversion Shares issuable on such Conversion Date, (ii) payment in lieu of any fraction of a share, as provided in
Section 13.11 hereof.

(c) All Conversion Shares delivered upon such conversion shall bear the following restrictive legend:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS OR UNLESS THE BORROWER RECEIVES AN OPINION OF COUNSEL TO THE EFFECT THAT REGISTRATION UNDER SUCH ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.

If Conversion Shares to be issued upon conversion are to be registered in a name other than that of the Converting Lender, the security registrar shall, prior to such conversion, record in the security register the name of the Person in whose name such Conversion Shares are to be registered.

Section 13.03 ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.

(a) SPECIAL DEFINITION. For purposes of this Section 13.03, "ADDITIONAL SHARES OF COMMON STOCK" shall mean any or all shares of Common Stock issued (or, pursuant to Section 13.03(c), deemed to be issued) by the Borrower after the Effective Date, other than shares of Common Stock issued or issuable:

(i) shares issued upon the conversion of the Loan,

(ii) such number of additional shares as may become issuable upon the conversion of the Loan by reason of adjustments required pursuant to the applicable anti-dilution provisions as in effect on the date hereof,

(iii) up to 5,000,000 shares of Common Stock (and following

the fifth anniversary of the Effective Date, up to an additional 5,000,000 shares of Common Stock) that are issued to Persons other than Affiliates of the Borrower, including (A) shares of Common Stock or options exercisable therefor, issued or to be issued under the Borrower's 2000 Stock Option Plan as in effect on the date hereof or under any other employee stock option or purchase plan or plans, or pursuant to compensatory or incentive agreements, for officers, employees or consultants of the Borrower or any of its Subsidiaries, in each case adopted or assumed after such date by the Borrower's Board of Directors; PROVIDED in each case that the exercise or purchase price for any such share shall not be less than 95% of the fair market value (determined in good faith by the Borrower's Board of Directors) of the Common Stock on the date of the grant, and such additional number of shares as may become issuable pursuant to the terms of any such plans by reason of adjustments required pursuant to antidilution provisions applicable to such securities in order to reflect any subdivision or combination of Common Stock, by reclassification or otherwise, or any dividend on Common Stock payable in Common Stock, (B) shares of restricted stock issued by the Borrower to executive officers of the Borrower, and (C) shares of Common Stock issued by the Borrower as charitable gifts; PROVIDED; HOWEVER, that all options exercisable for shares of Common Stock granted to executive officers of the Borrower or its Subsidiaries during the six months following the date hereof shall have an exercise price of no less than $4.50 per share, and

(iv) [Intentionally Omitted.]

(b) NO ADJUSTMENT OF CONVERSION PRICE. Subject to the provisions of Section 13.03(c)(ii) and Section 13.03(f) below, no adjustment in the number of shares of Common Stock into which the Loan is convertible shall be made, by adjustment in the Conversion Price in respect of the issuance of Additional Shares of Common Stock or otherwise, unless the consideration per share for an Additional Share of Common Stock issued or deemed to be issued by the Borrower is less than the greater of the Current Market Price and the Fair Market Value on the date of, and immediately prior to, the issue of such Additional Share of Common Stock.

(c) ISSUE OF SECURITIES DEEMED AN ISSUE OF ADDITIONAL SHARES OF COMMON STOCk.

(i) OPTIONS AND CONVERTIBLE SECURITIES. In the event the Borrower at any time or from time to time after the Effective Date shall issue any Options or Convertible Securities or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date; PROVIDED, that such Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to Section 13.03(e) hereof) of such Additional Shares of Common Stock would be less than the Conversion Price in effect on the date of and immediately prior to such issue, or such record date, as the case may be, and PROVIDED, FURTHER, that in any such case in

which Additional Shares of Common Stock are deemed to be issued:

(A) no further adjustment in the Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities;

(B) if such Options or Convertible Securities by their terms provide, with the passage of time, pursuant to any provisions designed to protect against dilution, or otherwise, for any increase or decrease in the consideration payable to the Borrower, or increase or decrease in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the applicable Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities;

(C) upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if such Options or Convertible Securities, as the case may be, were never issued;

(D) no readjustment pursuant to clause (B) or
(C) above shall have the effect of increasing the Conversion Price to an amount which exceeds the lower of (i) the Conversion Price on the original date on which an adjustment was made pursuant to this Section 13.03(c)(i), or (ii) the Conversion Price that would have resulted from any issuance of Additional Shares of Common Stock between such original adjustment date and the date on which a readjustment is made pursuant to clause (B) or (C) above; and

(E) if such record date shall have been fixed and such Options or Convertible Securities are not issued on the date fixed therefor, the adjustment previously made in the Conversion Price which became effective on such record date shall be cancelled as of the close of business on such record date, and thereafter the Conversion Price shall be adjusted pursuant to this Section 13.03(c) as of the actual date of their issuance.

(ii) STOCK DIVIDENDS, STOCK DISTRIBUTIONS AND SUBDIVISIONS. In the event the Borrower at any time or from time to time after the Effective Date shall declare or pay any dividend or make any other distribution on the Common Stock payable in Common Stock, or effect a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in Common Stock), then and in any such event, Additional Shares of Common Stock shall be deemed to have been issued:

(A) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of any class of securities entitled to receive such dividend or distribution, or

(B) in the case of any such subdivision, at the close of

business on the date immediately prior to the date upon which such corporate action becomes effective.

If such record date shall have been fixed and such dividend shall not have been fully paid on the date fixed for the payment thereof, the adjustment previously made in the Conversion Price which became effective on such record date shall be cancelled as of the close of business on such record date, and thereafter the Conversion Price shall be adjusted pursuant to this
Section 13.03(c) as of the time of actual payment of such dividend.

(d) Adjustment of Conversion Price.

(i) UPON ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK.
In the event the Borrower shall issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to
Section 13.03(c)(i), but excluding Additional Shares of Common Stock deemed to be issued pursuant to Section 13.03(c)(ii), which event is dealt with in Section 13.03(f) hereof) without consideration or for a consideration per share less than the Conversion Price in effect on the date of and immediately prior to such issue, then such Conversion Price shall be reduced, concurrently with such issue, to the price determined by dividing (i) an amount equal to the sum of (a) the number of shares of Common Stock outstanding immediately prior to such issue or sale and the number of shares of Common Stock issuable upon conversion of the aggregate principal amount of the Loan and any Convertible Securities and upon exercise of any Options multiplied by the then existing Conversion Price and (b) the consideration, if any, received by the Borrower upon such issue or sale, by
(ii) the total number of shares of Common Stock outstanding immediately after such issue or sale and the number of shares of Common Stock issuable upon conversion of the aggregate principal amount of the Loan and any Convertible Securities and upon exercise of any Options.

(ii) CONVERSION PRICE RESET. If the consolidated EBITDA of the Borrower and its subsidiaries for the fiscal year ending February 1, 2003, is less than $90,000,000 or the combined, unconsolidated EBITDA of each of the Borrower (excluding Subsidiaries), Value City Limited Partnership, Value City of Michigan, Inc., GB Retailers, Inc., Gramex Retail Stores, Inc., VCM, Ltd. and any Person acquired after the date hereof that operates Value City department stores is less than $35,000,000 in the aggregate, then effective as of the close of business on February 1, 2003, the Conversion Price shall be reduced to $4.00 per share and the number of Conversion Shares shall be increased to give effect to all other adjustments as provided in this Section 13.03 as if the Conversion Price on the Effective Date had been $4.00 per share.

(e) DETERMINATION OF CONSIDERATION. For purposes of this Article XIII, the consideration received by the Borrower for the issue of any Additional Shares of Common Stock shall be computed as follows:

(i) CASH AND PROPERTY: Such consideration shall:

(A) insofar as it consists of cash, be the aggregate amount of cash received by the Borrower excluding amounts paid or payable for accrued interest

or accrued dividends;

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

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

(ii) OPTIONS AND CONVERTIBLE SECURITIES. The consideration per share received by the Borrower for Additional Shares of Common Stock deemed to have been issued pursuant to Section 13.03(c)(i) shall be determined by dividing:

(x) the total amount, if any, received or receivable by the Borrower as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Borrower upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

(y) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such

Options or the conversion or exchange of such Convertible Securities.

(f) ADJUSTMENT FOR STOCK DIVIDENDS, STOCK DISTRIBUTIONS, SUBDIVISIONS, COMBINATIONS OR CONSOLIDATIONS OF COMMON STOCK.

(i) STOCK DIVIDENDS, STOCK DISTRIBUTIONS OR
SUBDIVISIONS. In the event the Borrower shall issue Additional Shares of Common Stock pursuant to Section 13.03(c)(ii) in a stock dividend, other stock distribution or subdivision, the Conversion Price in effect immediately prior to such stock dividend, stock distribution or subdivision shall, concurrently with the effectiveness of such stock dividend, stock distribution or subdivision, be proportionately decreased to adjust equitably for such dividend, distribution or subdivision.

(ii) COMBINATIONS OR CONSOLIDATIONS. In the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, the Conversion Price in effect immediately prior to such combination or consolidation shall, concurrently with the effectiveness of such combination or consolidation, be proportionately increased to adjust equitably for such combination or consolidation.

(g) ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In case of any consolidation or merger of the Borrower with or into another corporation or the conveyance of all or substantially all of the assets of the Borrower to another corporation, or any proposed reorganization or reclassification of the Borrower (except a transaction for which provision for adjustment is otherwise made in this Article XIII), the Loan shall thereafter be convertible into the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock deliverable upon conversion of such portion of the Loan would have been entitled upon such consolidation, merger, conveyance, reorganization or reclassification; and, in any such case, appropriate adjustment (as determined by the Board of Directors) shall be made in the application of the provisions herein set forth with respect to the rights and interest thereafter of the Lenders, to the end that the provisions set forth herein (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Loan. The Borrower shall not effect any such consolidation, merger or sale unless prior to or simultaneously with the consummation thereof the successor corporation or purchaser, as the case may be, shall assume by written instrument the obligation to deliver to each Lender such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Lender is entitled to receive. Nothing in this Section 13.03 shall be deemed to authorize the Borrower to enter into any transaction not otherwise permitted by this Agreement.

(h) EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS. If the Borrower at any time or from time to time after the date hereof shall declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of other or additional stock or other securities or property or Options by way of dividend or spin-off, reclassification, recapitalization or similar corporate rearrangement) on the Common Stock other than (a) a dividend payable in Additional Shares of Common Stock or (b) a regularly scheduled cash

dividend payable out of consolidated earnings or earned surplus, determined in accordance with generally accepted accounting principles, adequate provision shall be made so that the Lender shall receive, upon conversion of its portion of the Loan, a pro rata share of such dividend based upon the maximum number of shares of Common Stock at the time issuable to the Lender (determined without regard to whether the Loan is convertible at such time).

Section 13.04 NO IMPAIRMENT. The Borrower will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Borrower but will at all times in good faith assist in the carrying out of all the provisions of this Article XIII and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights and other rights of the Lenders against impairment.

Section 13.05 ACCOUNTANTS' REPORT. In each case of any adjustment or readjustment of the Conversion Price pursuant to this Article XIII, the Borrower at its sole expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare a report setting forth such adjustment or readjustment and showing in reasonable detail the method of calculation thereof and the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or to be received by the Borrower for any Additional Shares of Common Stock issued or sold or deemed to have been issued, (b) the number of shares of Common Stock outstanding or deemed to be outstanding, and (c) the Conversion Price in effect immediately prior to such issue or sale and as adjusted and readjusted (if required by Article XIII) on account thereof. The Borrower shall forthwith mail a copy of each such report to each Lender. In the event that a Lender disagrees with such report, the Borrower shall cause independent certified public accountants of recognized national standing (which may be the regular auditors of the Borrower) selected by the Borrower to review and verify or revise such computation (other than any computation of the fair value of property) and report. The Borrower shall also keep copies of all such reports at its principal office and shall cause the same to be available for inspection at such office during normal business hours by any Lender.

Section 13.06 COMMON STOCK RESERVED. The Borrower shall reserve and at all times keep available out of its authorized but unissued Common Stock, free from preemptive or other preferential rights, restrictions, reservations, dedications, allocations, options, other warrants and other rights under any stock option, conversion option or similar agreement, such number of shares of Common Stock as shall from time to time be sufficient to effect conversion of the Loan.

Section 13.07 NO REISSUANCE OF LOAN. Any portion of the principal amount of the Loan which is converted into shares of Common Stock as provided herein shall not be reissued.

Section 13.08 ISSUE TAX. The issuance of certificates for shares of Common Stock upon conversion of the Loan shall be made without charge to each Lender for any issuance tax in respect thereof; PROVIDED, that the Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate

in a name other than that of a Lender.

Section 13.09 CLOSING OF BOOKS. The Borrower will at no time close its transfer books against the transfer of any shares of Common Stock issued or issuable upon the conversion of the Loan in any manner which interferes with the timely conversion of the Loan, except as may otherwise be required to comply with applicable securities laws.

Section 13.10 DEFINITION OF COMMON STOCK. As used in this Article XIII, the term "Common Stock" shall mean and include the Borrower's authorized Common Stock, no par value per share, as constituted on the date hereof, and shall also include any capital stock of any class of the Borrower thereafter authorized which shall neither be limited to a fixed sum or percentage of par value in respect of the rights of the holders thereof to participate in dividends nor entitled to a preference in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Borrower; PROVIDED, that the shares of Common Stock receivable upon conversion of shares of the Loan shall include only shares designated as Common Stock on the Effective Date.

Section 13.11 FRACTIONS OF SHARES OF COMMON STOCK. No fractional shares of Common Stock or scrip certificates in respect thereof shall be issued upon Conversion. The number of full shares which shall be issuable upon conversion thereof shall be computed on the basis of the aggregate principal amount of the Loan to be Converted plus accrued and unpaid interest thereon in accordance with the terms of Section 13.01(b) hereof. Instead of any fractional shares of Common Stock which would otherwise be issuable upon conversion of any portion of the Loan, the Borrower shall pay a cash adjustment in respect of such fraction (calculated to the nearest 1/100 of a share) in an amount in Dollars equal to the such fraction multiplied by the then effective Conversion Price.

Section 13.12 COVENANT AS TO COMMON STOCK. The Borrower covenants that all shares of Common Stock which may be delivered upon Conversion of the Loan will be newly issued shares, upon such delivery will have been duly authorized and validly issued, will be fully paid and nonassessable and the Borrower will pay all taxes, liens and charges with respect to the issue thereof. The Borrower further covenants that all governmental, corporate, shareholder and third-party approvals (including those of any exchange on which such Conversion Securities are, or are proposed to be listed) will have been duly obtained and will be in full force and effect on or before any Conversion Securities are or are required to be issued pursuant to this Article.

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

BORROWER:

VALUE CITY DEPARTMENT STORES, INC.,
an Ohio corporation

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

SUBSIDIARY GUARANTORS:

SHONAC CORPORATION,
an Ohio corporation

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

DSW SHOE WAREHOUSE, INC.,
a Missouri Corporation

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

GRAMEX RETAIL STORES, INC.,
a Delaware corporation

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

FILENE'S BASEMENT, INC.,
a Delaware corporation

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

GB RETAILERS, INC.,
a Delaware corporation

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

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

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

VALUE CITY DEPARTMENT STORES SERVICES, INC.
a Delaware corporation

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

VALUE CITY LIMITED PARTNERSHIP,
an Ohio limited partnership

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

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

VALUE CITY OF MICHIGAN, INC.,
a Michigan corporation

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

VCM, LTD., an Ohio limited liability company

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

WESTERVILLE ROAD GP, INC.,
a Delaware corporation

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

WESTERVILLE ROAD LP, INC.,
a Delaware corporation

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

AGENT AND LENDER:

SCHOTTENSTEIN STORES CORPORATION,
a Delaware corporation

Title:

Exhibit 10.3.1

AMENDMENT NO. 1 TO

AMENDED AND RESTATED SENIOR CONVERTIBLE LOAN AGREEMENT

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

RECITALS

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

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

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

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

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

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

2. DEFINITIONS IN LOAN AGREEMENT.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

"SSC" means Schottenstein Stores Corporation.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

6. COVENANTS.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(r) BOARD OF DIRECTORS RIGHTS.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Section 7.09 INVENTORY, APPRAISALS AND AUDITS.

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

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

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

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

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

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

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

ARTICLE VIII

USE OF COLLATERAL

Section 8.01 USE OF INVENTORY CONTROL.

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

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

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

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

Section 8.04 VALIDITY OF ACCOUNTS.

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

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

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

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

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

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

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

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

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

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

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

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

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

9. EVENTS OF DEFAULT.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

10. AGENT.

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

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

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

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

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

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

Section 10.08 COLLATERAL MATTERS.

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

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

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

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

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

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

11. GUARANTY.

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

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

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

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

12. MISCELLANEOUS.

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

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

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

with a copy to:

Schottenstein Stores Corporation 1800 Moler Road
Columbus, OH 43207
Attention: Irwin A. Bain, Esq.

Telephone: 614-449-4332

Telecopier: 614-443-0927

and

Porter Wright Morris & Arthur LLP 41 South High Street
Columbus, OH 43215
Attention: Robert J. Tannous, Esq. and Timothy E. Grady, Esq.

Telephone: 614-227-1953

Telecopier: 614-227-2100

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

Cerberus Partners, L.P.

450 Park Avenue, 28th Floor
New York, New York 10022

Attention: Lenard Tessler Telephone: (212) 909-1464 Telecopier: (212) 755-3009

with a copy to:

Schulte Roth & Zabel LLP 919 Third Avenue
New York, New York 10022 Attention: Nancy Finkelstein, Esq.

Telephone: 212-756-2419

Telecopier: 212-593-5955

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ARTICLE XIV

TRANSACTIONS WITH AFFILIATES

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

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

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

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

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

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

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

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

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

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

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

(a) FEES AND EXPENSES.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

17. MISCELLANEOUS.

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

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

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

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

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

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

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

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

BORROWER:

VALUE CITY DEPARTMENT STORES, INC.,
an Ohio corporation

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

SUBSIDIARY GUARANTORS:

SHONAC CORPORATION,
an Ohio corporation

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

DSW SHOE WAREHOUSE, INC.,
a Missouri Corporation

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

GRAMEX RETAIL STORES, INC.,
a Delaware corporation

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

FILENE'S BASEMENT, INC.,
a Delaware corporation

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

GB RETAILERS, INC.,
a Delaware corporation

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

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

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

VALUE CITY DEPARTMENT STORES SERVICES, INC.
a Delaware corporation

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

VALUE CITY LIMITED PARTNERSHIP,
an Ohio limited partnership

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

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

VALUE CITY OF MICHIGAN, INC.,
a Michigan corporation

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

VCM, LTD., an Ohio limited liability company

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

WESTERVILLE ROAD GP, INC.
a Delaware corporation

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

WESTERVILLE ROAD LP, INC.
a Delaware corporation

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

RESIGNING AGENT AND LENDER:

SCHOTTENSTEIN STORES CORPORATION

Title:

SUCCESSOR AGENT AND LENDER:

CERBERUS PARTNERS, L.P.

Title:

Exhibit 10.4

AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT

by and among

VALUE CITY DEPARTMENT STORES, INC.,

and

THE INITIAL HOLDERS SPECIFIED ON
THE SIGNATURE PAGES HEREOF

Dated as of June 11, 2002

TABLE OF CONTENTS

                                                                                                           PAGE

1.   DEFINITIONS.............................................................................................2

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

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

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

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

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

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

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

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

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

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

6.17   Nominees for Beneficial Owners.................................................................26

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2. REGISTRATION UNDER THE SECURITIES ACT.

2.1 DEMAND REGISTRATION.

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

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

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

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

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

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

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

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

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

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

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

2.2 INCIDENTAL REGISTRATION.

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

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

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

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

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

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

2.3 SHELF REGISTRATION.

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

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

2.4 UNDERWRITTEN OFFERINGS.

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

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

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

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

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

3. HOLDBACK ARRANGEMENTS

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

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

4. REGISTRATION PROCEDURES.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

5. INDEMNIFICATION; CONTRIBUTION.

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

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

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

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

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

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

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

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

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

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

6. GENERAL.

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

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

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

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

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

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

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

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


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

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


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

                                          Schottenstein Stores Corporation
                                          1800 Moler Road

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

COMPANY:                                INITIAL HOLDERS:


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



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


                                        SCHOTTENSTEIN STORES
                                        CORPORATION


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

Title:

No. [W-]                                                      ___________, 2002


                                                Warrant to Purchase 1,477,396(1)
                                                          Shares of Common Stock

VALUE CITY DEPARTMENT STORES, INC., an Ohio corporation (the "Company"), for value received, hereby certifies that Cerberus Partners, L.P., a Delaware limited partnership, or its registered assigns (the "Holder"), is entitled to purchase from the Company 1,477,396 shares of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock, no par value per share, of the Company (the "Common Stock"), at a purchase price equal to the Purchase Price (this "Warrant"), at any time or from time to time but prior to 5:00 P.M., New York City time, on ________(2) (the "Expiration Date"), all subject to the terms, conditions and adjustments set forth below in this Warrant; PROVIDED, that the purchase price per share of Common Stock hereunder shall not in any event be less than the par value of the Common Stock. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned such terms in the Financing Agreement.

1. DEFINITIONS. As used herein, unless the context otherwise requires, the following terms shall have the meanings indicated:

(2) Expiration Date will be ten years from the date of issuance of the warrant.

"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares (including treasury shares) of Common Stock issued or sold (or, pursuant to Section 3.2(b) or 3.5(b), deemed to be issued) by the Company after the date hereof, whether or not subsequently reacquired or retired by the Company, other than

(a) shares issued upon the exercise of the Financing Warrants,

(b) such number of additional shares as may become issuable upon the exercise of the Financing Warrants by reason of adjustments required pursuant to the anti-dilution provisions applicable to the Financing Warrants as in effect on the date hereof,

(c) up to 5,000,000 shares of Common Stock (and following June 11, 2007, up to an additional 5,000,000 shares of Common Stock) that are issued to Persons other than Affiliates of the Company, including (i) shares of Common Stock or options exercisable therefor, issued or to be issued under the Company's 2000 Stock Option Plan as in effect on the date hereof or under any other employee stock option or purchase plan or plans, or pursuant to compensatory or incentive agreements, for officers, employees or consultants of the Company or any of its Subsidiaries, in each case adopted or assumed after such date by the Company's Board of Directors; PROVIDED in each case that the exercise or purchase price for any such share shall not be less than 95% of the fair market value (determined in good faith by the Company's Board of Directors) of the Common Stock on the date of the grant, and such additional number of shares as may become issuable pursuant to the terms of any such plans by reason of adjustments required pursuant to antidilution provisions applicable to such securities in order to reflect any subdivision or combination of Common Stock, by reclassification or otherwise, or any dividend on Common Stock payable in Common Stock, (ii) shares of restricted stock issued by the Company to executive officers of the Company, and (iii) shares of Common Stock issued by the Company as charitable gifts; PROVIDED; HOWEVER, that all options exercisable for shares of Common Stock granted to executive officers of the Company or its Subsidiaries during the six months following the date hereof shall have an exercise price of no less than $4.50 per share, and

(d) (i) shares of Common Stock issued upon conversion of the Convertible Facility and (ii) such additional number of shares as may become issuable upon the exercise of any such securities by reason of adjustments required pursuant to anti-dilution provisions applicable to such securities as in effect on the date hereof.

"AGGREGATE PURCHASE PRICE" shall have the meaning set forth in Section 2.1(a).

"BUSINESS DAY" shall mean any day other than a Saturday or a Sunday or any day on which national banks are authorized or required by law to close. Any reference to "days" (unless Business Days are specified) shall mean calendar days.

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

"COMMON STOCK" shall have the meaning assigned to it in the introduction to this Warrant, such term to include any stock into which such Common Stock shall have been changed or any stock resulting from any reclassification of such Common Stock, and all other

stock of any class or classes (however designated) of the Company the holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to preference.

"COMPANY" shall have the meaning assigned to it in the introduction to this Warrant, such term to include any corporation or other entity which shall succeed to or assume the obligations of the Company hereunder in compliance with
Section 4.

"CONVERSION" shall have the meaning assigned to it in Section 3.1(b).

"CONVERTIBLE FACILITY" shall mean that certain Amended and Restated Senior Subordinated Convertible Loan Agreement dated as of June 11, 2002, among the Company, Cerberus Partners, L.P. and SSC.

"CONVERTIBLE SECURITIES" shall mean any evidences of indebtedness, shares of stock (other than Common Stock) or other securities directly or indirectly convertible into or exchangeable for Additional Shares of Common Stock.

"CURRENT MARKET PRICE" shall mean, on any date specified herein, the average of the daily Market Price during the 10 consecutive trading days before such date, except that, if on any such date the shares of Common Stock are not listed or admitted for trading on any national securities exchange or quoted in the over-the-counter market, the Current Market Price shall be the Market Price on such date.

"EBITDA" shall mean, with respect to any Person for any period, the consolidated Net Income of such Person and its Subsidiaries for such period, PLUS without duplication, the sum of the following amounts of such Person and its Subsidiaries for such period to the extent deducted in determining consolidated Net Income of such Person and its Subsidiaries for such period: (A) Interest Expense, (B) federal, state, local and foreign income tax expense, (C) depreciation expense, (D) amortization expense and (E) expenses incurred in connection with the Financing Agreement, the Convertible Facility, the Revolving Credit Facility, the refinancing of the Company's existing credit facilities and subsequent refinancing of the Company.

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

"EXPIRATION DATE" shall have the meaning assigned to it in the introduction to this Warrant.

"FAIR VALUE" shall mean, on any date specified herein (i) in the case of cash, the dollar amount thereof, (ii) in the case of a security, the Current Market Price, and (iii) in all other cases, the fair value thereof (as of a date which is within 20 days of the date as of which the determination is to be made) determined in good faith by a committee of the Company's Board of Directors consisting of directors who are not Affiliates of the Company, SSC or Holder; PROVIDED, however, that at the request of the Holder, the Fair Value shall be determined in good

faith by an independent investment banking firm selected jointly by the Company and the Holder or, if that selection cannot be made within 10 days, by an independent investment banking firm selected by the American Arbitration Association in accordance with its rules, and PROVIDED, further, that the Company shall pay all of the fees and expenses of any third parties incurred in connection with determining the Fair Value.

"FINANCING AGREEMENT" shall mean that certain Financing Agreement, dated as of June 11, 2002, among the Company, certain subsidiaries of the Company, Cerberus Partners, L.P. and SSC.

"FINANCING WARRANTS" shall mean all warrants issued pursuant to the Financing Agreement.

"HOLDER" shall have the meaning assigned to it in the introduction to this Warrant.

"INITIAL HOLDERS" shall mean Cerberus Partners, L.P. and SSC.

"INTEREST EXPENSE" shall mean, with respect to any Person for any period, gross interest expense of such Person and its Subsidiaries for such period determined on a consolidated basis and in accordance with GAAP (including, without limitation, interest expense paid to Affiliates of such Person).

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

"NASD" shall mean the National Association of Securities Dealers, Inc.

"NET INCOME" means, with respect to any Person for any period, the net income (loss) of such Person and its Subsidiaries for such period, determined on a consolidated basis and in accordance with GAAP, but excluding from the determination of Net Income (without duplication) (a) any extraordinary or non-recurring gains or losses or gains or losses from Dispositions, (b) restructuring charges, (c) effects of discontinued operations and (d) interest income.

"NEW ISSUANCE PRICE" shall have the meaning set forth in Section 3.2.

"OPTIONS" shall mean any rights, options or warrants to subscribe for, purchase or otherwise acquire either Additional Shares of Common Stock or Convertible Securities.

"OTHER SECURITIES" shall mean any stock (other than Common Stock) and other securities of the Company or any other Person (corporate or otherwise) which the holders of the Financing Warrants at any time shall be entitled to receive, or shall have received, upon the exercise of the Financing Warrants, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise.

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

"PURCHASE PRICE" shall mean initially $4.50 per share, subject to adjustment and readjustment from time to time as provided in Section 3, and, as so adjusted or readjusted, shall remain in effect until a further adjustment or readjustment thereof is required by Section 3.

"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights Agreement, dated as of the date hereof among the Company and the Initial Holders.

"RESTRICTED SECURITIES" shall mean (i) any Financing Warrants bearing the applicable legend set forth in Section 10.1, (ii) any shares of Common Stock (or Other Securities) issued or issuable upon the exercise of Financing Warrants which are (or, upon issuance, will be) evidenced by a certificate or certificates bearing the applicable legend set forth in Section 10.1, and (iii) any shares of Common Stock (or Other Securities) issued subsequent to the exercise of any of the Financing Warrants as a dividend or other distribution with respect to, or resulting from a subdivision of the outstanding shares of Common Stock (or other Securities) into a greater number of shares by reclassification, stock splits or otherwise, or in exchange for or in replacement of the Common Stock (or Other Securities) issued upon such exercise, which are evidenced by a certificate or certificates bearing the applicable legend set forth in Section10.1.

"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from time to time, and the rules and regulations thereunder, or any successor statute.

"SSC" shall mean Schottenstein Stores Corporation.

"WARRANT" shall have the meaning assigned to it in the introduction to this Warrant.

"WARRANT SHARES" means (a) the shares of Common Stock issued or issuable upon exercise of this Warrant in accordance with Section 2, (b) all other securities or other property issued or issuable upon any such exercise or exchange in accordance with this Warrant and (c) any securities of the Company distributed with respect to the securities referred to in the preceding clauses
(a) and (b).

2. EXERCISE OF WARRANT.

2.1. MANNER OF EXERCISE; PAYMENT OF THE PURCHASE PRICE. (a) Except as set forth in Section 2.1(c) below, this Warrant may be exercised by the Holder hereof, in whole or in part, at any time or from time to time prior to the Expiration Date, by surrendering to the Company at its principal office this Warrant, with the form of Election to Purchase Shares attached hereto as Exhibit A (or a reasonable facsimile thereof) duly executed by the Holder and accompanied by payment of the Purchase Price for the number of shares of Common Stock specified in such form (the "Aggregate Purchase Price"). Any partial exercise of this Warrant shall be for a whole number of Warrant Shares only.

(b) Payment of the Aggregate Purchase Price may be made as follows (or by any combination of the following): (i) in United States currency by cash or delivery of a certified check or bank draft payable to the order of the Company or by wire transfer to the Company, (ii) by cancellation of all or any part of the unpaid principal amount of the then-outstanding Obligations (as defined in the Financing Agreement) in an amount equal to the Aggregate Purchase Price,
(iii) by cancellation of such number of the shares of Common Stock otherwise issuable to the Holder upon such exercise as shall be specified for cancellation in such Election to Purchase Shares, such that the excess of the aggregate Current Market Price of such specified number of shares on the date of exercise over the portion of the Aggregate Purchase Price attributable to such shares shall equal the Aggregate Purchase Price attributable to the shares of Common Stock to be issued upon such exercise, in which case such excess amount shall be deemed to have been paid to the Company and the number of shares issuable upon such exercise shall be reduced by such number specified for cancellation, or
(iv) by surrender to the Company for cancellation certificates representing shares of Common Stock of the Company owned by the Holder (properly endorsed for transfer in blank) having a Current Market Price on the date of Warrant exercise equal to the Aggregate Purchase Price.

(c) The portion of the Warrant that constitutes the Allocated Warrants (as defined in the Convertible Facility) shall not be exercisable by the Holder from the date on which the Holder receives the Buyout Exercise Notice (as defined in the Convertible Facility) until the date which is 31 days after the receipt by the Holder of the Buyout Exercise Notice, unless such Buyout Exercise Notice involves a Referred SSC Transaction (as defined in the Convertible Facility) in which case, this Section 2.1(c) shall not apply to such Buyout Exercise Notice, and the Warrant shall continue to be exercisable in full.

2.2. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the Business Day on which

this Warrant shall have been surrendered to, and the Purchase Price shall have been received by, the Company as provided in Section 2.1, and, to the extent permitted by law, at such time the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock (or Other Securities) shall be issuable upon such exercise as provided in Section 2.3 shall be deemed to have become the holder or holders of record thereof for all purposes.

2.3. DELIVERY OF STOCK CERTIFICATES, ETC.; CHARGES, TAXES AND EXPENSES.
(a) As soon as practicable after each exercise of this Warrant, in whole or in part, and in any event within two Business Days thereafter, the Company shall cause to be issued in the name of and delivered to the Holder hereof or, subject to Section 10, as the Holder may direct,

(i) a certificate or certificates for the number of shares of Common Stock (or Other Securities) to which the Holder shall be entitled upon such exercise, and

(ii) in case such exercise is for less than all of the shares of Common Stock purchasable under this Warrant, a new Warrant or Warrants of like tenor, for the balance of the shares of Common Stock purchasable hereunder.

(b) Issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the Holder hereof for any issue or transfer tax or other incidental expense, in respect of the issuance of such certificates, all of which such taxes and expenses shall be paid by the Company; PROVIDED, HOWEVER, that the Company shall not be required to pay any tax that may be payable in respect of any issuance of any Warrant or any certificate for, or any other evidence of ownership of, Warrant Shares in a name other than that of the Holder of this Warrant being exercised or exchanged.

2.4. TAX BASIS. The Company and the Holder shall mutually agree as to the tax basis of this Warrant for purposes of the Internal Revenue Code of 1986, as amended, and the treatment of this Warrant under such Code by each of the Company and the Holder shall be consistent with such agreement.

3. ADJUSTMENT OF PURCHASE PRICE AND COMMON STOCK ISSUABLE UPON EXERCISE.

3.1. ADJUSTMENT OF NUMBER OF SHARES.

(a) Upon each adjustment of the Purchase Price as a result of the calculations made in this Section 3, except to the extent the Purchase Price is adjusted pursuant to Section 3.10 hereof, this Warrant shall thereafter evidence the right to receive, at the adjusted Purchase Price, that number of shares of Common Stock (calculated to the nearest one-hundredth) obtained by dividing (i) the product of the aggregate number of shares covered by this Warrant immediately prior to such adjustment and the Purchase Price in effect immediately prior to such adjustment of the Purchase Price by (ii) the Purchase Price in effect immediately after such adjustment of the Purchase Price.

(b) In the event that, prior to the exercise in full of this Warrant, the Company issues any shares of Common Stock upon the conversion of Convertible Securities outstanding

on the date hereof (including, without limitation, the Convertible Facility) (a "Conversion"), the number of Warrant Shares issuable upon the exercise of this Warrant (whether or not this Warrant has been partially exercised) shall be automatically increased by the number of shares equal to 4.375% of the shares of Common Stock issued upon such Conversion, and the Purchase Price shall not be adjusted in connection with such increase. Any adjustments made to the Purchase Price or the number of Warrant Shares issuable upon exercise of the Warrant prior to such Conversion shall be made as if the Warrant were initially exercisable for such increased number of shares. Upon each such Conversion, the Company shall promptly deliver to the Holder the report required by Section 7 hereof.

3.2. ADJUSTMENT OF PURCHASE PRICE FOR NEW ISSUANCES.

(a) ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In case the Company at any time or from time to time after the date hereof shall issue or sell Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 3.2(b) and excluding shares issued pursuant to Section 3.3) without consideration or for a consideration per share less than the Purchase Price in effect immediately prior to such issue or sale (the "New Issuance Price"), then, and in each such case, subject to Section 3.8, the Purchase Price shall be reduced concurrently with such issue or sale, to the New Issuance Price.

(b) TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. Shares of Additional Shares of Common Stock shall be deemed issued if the Company at any time or from time to time after the date hereof shall issue, sell, grant or assume, or shall fix a record date for the determination of holders of any class of securities of the Company entitled to receive, any Options or Convertible Securities (whether or not the rights thereunder are immediately exercisable) for a consideration per share (determined pursuant to Section 3.6) that is less than the Purchase Price in effect on the date of and immediately prior to such issue, sale, grant or assumption or immediately prior to the close of business on such record date (or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading). Such issuance shall be deemed to occur (i) as of the time of such issue, sale, grant or assumption of the Convertible Securities or Options or (ii) in case such a record date shall have been fixed, as of the close of business on such record date (or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading). No further adjustment of the Purchase Price shall be made upon the subsequent issuance of shares of Common Stock upon the exercise of such Options or the conversion or exchange of such Convertible Securities.

3.3. EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS. If the Company at any time or from time to time after the date hereof shall declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of other or additional stock or other securities or property or Options by way of dividend or spin-off, reclassification, recapitalization or similar corporate rearrangement) on the Common Stock other than (a) a dividend payable in shares of Common Stock subject to Section 3.4, or (b) a regularly scheduled cash dividend payable out of consolidated earnings or earned surplus, determined in accordance with generally accepted accounting principles or (c) a deemed issuance of Additional Shares of Common Stock pursuant to Section 3.2(b), in each such case, subject to Section 3.8, adequate provision shall be made so that the Holder shall receive, upon Warrant exercise, a pro rata share of such dividend

or other distribution based upon the maximum number of shares of Common Stock at the time issuable to the Holder (determined without regard to whether the Warrant is exercisable at such time); PROVIDED, however, that if pursuant to
Section 2.1(c) the Allocated Warrants are assigned to SSC, then that portion of the Holder's pro rata share of such dividend or other distribution attributable to the Allocated Warrants shall be deemed assigned to SSC along with the Allocated Warrants.

3.4. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC. In case the Company at any time or from time to time after the date hereof shall declare or pay any dividend on the Common Stock payable in Common Stock, or shall effect a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by reclassification or otherwise than by payment of a dividend in Common Stock), then, and in each such case, the number of shares of Common Stock obtainable upon exercise of this Warrant shall be proportionately increased and the Purchase Price shall be proportionately decreased. In case the Company at any time or from time to time after the date hereof shall effect any combination or consolidation of the outstanding shares of Common Stock into a lesser number of shares of Common Stock, then, and in each such case, the number of shares of Common Stock obtainable upon exercise of this Warrant shall be proportionately decreased and the Purchase Price shall be proportionately increased. Any adjustment made under this Section shall become effective (a) in the case of any such dividend, immediately after the close of business on the record date for the determination of holders of any class of securities entitled to receive such dividend, or (b) in the case of any such subdivision, at the close of business on the day immediately prior to the day upon which such corporate action becomes effective.

3.5. ADJUSTMENT OF PURCHASE PRICE FOR OTHER ISSUANCES.

(a) ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In case the Company at any time or from time to time after the date hereof shall issue or sell Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 3.5(b)) for a consideration per share less than the Current Market Price but greater than the Purchase Price in effect immediately prior to such issue or sale, then, and in each such case, subject to
Section 3.8, the Purchase Price shall be reduced concurrently with such issue or sale, to a price (calculated to the nearest .01 of a cent) determined by multiplying such Purchase Price by a fraction

(x) The numerator of which shall be the sum of (i) the number of shares of Common Stock outstanding immediately prior to such issue or sale and (ii) the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of such Additional Shares of Common Stock so issued or sold would purchase at such Current Market Price, and

(y) The denominator of which shall be the number of shares of Common Stock outstanding immediately after such issue or sale, PROVIDED that, for the purposes of this Section 3.5, (x) immediately after any Additional Shares of Common Stock are deemed to have been issued pursuant to Section 3.5(b), such Additional Shares shall be deemed to be outstanding, and (y) treasury shares shall not be deemed to be outstanding.

(b) TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. In case the Company at any time or from time to time after the date hereof shall issue, sell, grant or assume, or shall fix a record date for the determination of holders of any class of securities of the Company entitled to receive, any Options or Convertible Securities (whether or not the rights thereunder are immediately exercisable) and the consideration per share (determined pursuant to
Section 3.6) of the shares issuable upon the exercise of such Options or, in the case of Convertible Securities and the Options therefor, the conversion or exchange of such Convertible Securities would be less than the Current Market Price but greater than Purchase Price in effect on the date of and immediately prior to such issue, sale, grant or assumption or immediately prior to the close of business on such record date (or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading), then, and in each such case, the maximum number of Additional Shares of Common Stock (as set forth in the instrument relating thereto, without regard to any provisions contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued for the purposes of Section 3.5 as of the time of such issue, sale, grant or assumption or, in case such a record date shall have been fixed, as of the close of business on such record date (or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading, PROVIDED, that in any such case in which Additional Shares of Common Stock are deemed to be issued:

(i) whether or not the Additional Shares of Common Stock underlying such Options or Convertible Securities are deemed to be issued, no further adjustment of the Purchase Price shall be made upon the subsequent issue or sale of Convertible Securities or shares of Common Stock upon the exercise of such Options or the conversion or exchange of such Convertible Securities, except in the case of any such Options or Convertible Securities which contain provisions requiring an adjustment, subsequent to the date of the issue or sale thereof, of the number of Additional Shares of Common Stock issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities by reason of (x) a change of control of the Company, (y) the acquisition by any Person or group of Persons of any specified number or percentage of the voting securities of the Company or (z) any similar event or occurrence, each such case to be deemed hereunder to involve a separate issuance of Additional Shares of Common Stock, Options or Convertible Securities, as the case may be;

(ii) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase in the consideration payable to the Company, or decrease in the number of Additional Shares of Common Stock issuable, upon the exercise, conversion or exchange thereof (by change of rate or otherwise), the Purchase Price computed upon the original issue, sale, grant or assumption thereof (or upon the occurrence of the record date, or date prior to the commencement of ex-dividend trading, as the case may be, with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options, or the rights of conversion or exchange under such Convertible Securities, which are outstanding at such time;

(iii) upon the expiration (or purchase by the Company and cancellation or retirement) of any such Options which shall not have been exercised or the expiration of any rights of conversion or exchange under any such Convertible Securities which (or purchase by the Company and cancellation or retirement of any such Convertible Securities the rights of conversion or exchange under which) shall not have been exercised, the Purchase Price computed upon the original issue, sale, grant or assumption thereof (or upon the occurrence of the record date, or date prior to the commencement of ex-dividend trading, as the case may be, with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration (or such cancellation or retirement, as the case may be), be recomputed as if:

(x) in the case of Options for Common Stock or Convertible Securities, the only Additional Shares of Common Stock issued or sold were the Additional Shares of Common Stock, if any, actually issued or sold upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Company for the issue, sale, grant or assumption of all such Options, whether or not exercised, plus the consideration actually received by the Company upon such exercise, or for the issue or sale of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Company upon such conversion or exchange, and

(y) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued or sold upon the exercise of such Options were issued at the time of the issue or sale, grant or assumption of such Options, and the consideration received by the Company for the Additional Shares of Common Stock deemed to have then been issued was the consideration actually received by the Company for the issue, sale, grant or assumption of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Company (pursuant to Section 3.6) upon the issue or sale of such Convertible Securities with respect to which such Options were actually exercised; and

(iv) no readjustment pursuant to subdivision (ii) or (iii) above shall have the effect of decreasing the Purchase Price by an amount in excess of the amount of the adjustment thereof originally made in respect of the issue, sale, grant or assumption of such Options or Convertible Securities.

3.6. COMPUTATION OF CONSIDERATION. For the purposes of this Section 3,

(a) the consideration for the issue or sale of any Additional Shares of Common Stock shall, irrespective of the accounting treatment of such consideration,

(i) insofar as it consists of cash, be computed at the gross cash proceeds to the Company, without deducting any expenses paid or incurred by the Company or any

commissions or compensations paid or concessions or discounts allowed to underwriters, dealers or others performing similar services in connection with such issue or sale,

(ii) insofar as it consists of property (including securities) other than cash, be computed at the Fair Value thereof at the time of such issue or sale, and

(iii) in case Additional Shares of Common Stock are issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, be the portion of such consideration so received, computed as provided in clauses (i) and (ii) above, allocable to such Additional Shares of Common Stock, such allocation to be determined in the same manner that the Fair Value of property not consisting of cash or securities is to be determined as provided in the definition of 'Fair Value' herein; and

(b) Additional Shares of Common Stock deemed to have been issued pursuant to Sections 3.2(b) and 3.5(b), relating to Options and Convertible Securities, shall be deemed to have been issued for a consideration per share determined by dividing

(i) the total amount, if any, received and receivable by the Company as consideration for the issue, sale, grant or assumption of the Options or Convertible Securities in question, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration to protect against dilution) payable to the Company upon the exercise in full of such Options or the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, in each case computing such consideration as provided in the foregoing subdivision (a),

by

(ii) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number to protect against dilution) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities.

3.7. DILUTION IN CASE OF OTHER SECURITIES. In case any Other Securities shall be issued or sold or shall become subject to issue or sale upon the conversion or exchange of any stock (or Other Securities) of the Company (or any issuer of Other Securities or any other Person referred to in Section 4) or to subscription, purchase or other acquisition pursuant to any Options issued or granted by the Company (or any such other issuer or Person) for a consideration such as to dilute, on a basis consistent with the standards established in the other provisions of this Section 3, the purchase rights, if any, with respect to such Other Securities, granted by this Warrant, then, and in each such case, the computations, adjustments and readjustments provided for in this Section 3 with respect to the Purchase Price shall be made as nearly as possible in the manner so provided and applied to determine the amount of Other Securities from time to time

receivable upon the exercise of the Warrants, so as to protect the holders of the Warrants against the effect of such dilution.

3.8. DE MINIMIS ADJUSTMENTS. If the amount of any adjustment of the Purchase Price required pursuant to Section 3.5 would be less than one tenth (1/10) of one percent (1%) of the Purchase Price in effect at the time such adjustment is otherwise so required to be made, such amount shall be carried forward and adjustment with respect thereto made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate a change in the Purchase Price of at least one tenth (1/10) of one percent (1%) of such Purchase Price. All calculations under this Warrant shall be made to the nearest one-hundredth of a share.

3.9. ABANDONED DIVIDEND OR DISTRIBUTION. If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution (which results in an adjustment to the Purchase Price under the terms of this Warrant) and shall, thereafter, and before such dividend or distribution is paid or delivered to shareholders entitled thereto, legally abandon its plan to pay or deliver such dividend or distribution, then any adjustment made to the Purchase Price by reason of the taking of such record shall be reversed, and any subsequent adjustments, based thereon, shall be recomputed; PROVIDED, however, that no additional Purchase Price or any other adjustment shall be required with regard to Warrant Shares that have been issued upon exercise of the Warrant prior to such abandonment.

3.10. PURCHASE PRICE RESET. If the consolidated EBITDA of the Company and its subsidiaries for the fiscal year ending February 1, 2003, is less than $90,000,000 or the combined, unconsolidated EBITDA of each of the Company (excluding Subsidiaries), Value City Limited Partnership, Value City of Michigan, Inc. GB Retailers, Inc., Gramex Retail Stores, Inc., VCD, Ltd. and any Person acquired after the date hereof that operates Value City department stores is less than $35,000,000 in the aggregate, then effective as of the close of business on February 1, 2003, the Purchase Price shall be reduced to $4.00 per share and the number of shares issuable upon exercise of this Warrant shall be increased to give effect to all adjustments as provided in this Section 3 which were made prior to February 3, 2003, as if the Purchase Price on the date hereof had been $4.00 per share.

4. CONSOLIDATION, MERGER, ETC.

4.1. ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS, REORGANIZATION, ETC. In case the Company after the date hereof (a) shall consolidate with or merge into any other Person and shall not be the continuing or surviving corporation of such consolidation or merger, or (b) shall permit any other Person to consolidate with or merge into the Company and the Company shall be the continuing or surviving Person but, in connection with such consolidation or merger, the Common Stock or Other Securities shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (c) shall transfer all or substantially all of its properties or assets to any other Person, or (d) shall effect a capital reorganization or reclassification of the Common Stock or Other Securities (other than a capital reorganization or reclassification for which adjustment in the Purchase Price and the number of shares of Common Stock obtainable upon exercise of this Warrant is provided in Section 3.4),

then, and in the case of each such transaction, proper provision shall be made so that, upon the basis and the terms and in the manner provided in this Warrant, the Holder of this Warrant, upon the exercise hereof at any time after the consummation of such transaction, shall be entitled to receive (at the aggregate Purchase Price in effect at the time of such consummation for all Common Stock or Other Securities issuable upon such exercise immediately prior to such consummation), in lieu of the Common Stock or Other Securities issuable upon such exercise prior to such consummation, the highest amount of securities, cash or other property to which such Holder would actually have been entitled as a shareholder upon such consummation if such Holder had exercised this Warrant immediately prior thereto, subject to adjustments (subsequent to such consummation) as nearly equivalent as possible to the adjustments provided for in Sections 3 through 5, PROVIDED that if a purchase, tender or exchange offer shall have been made to and accepted by the holders of more than 50% of the outstanding shares of Common Stock, and if the Holder so designates in a notice given to the Company on or before the date immediately preceding the date of the consummation of such transaction, the Holder of this Warrant shall be entitled to receive the highest amount of securities, cash or other property to which it would actually have been entitled as a shareholder if the Holder of this Warrant had exercised this Warrant, including the payment of the Purchase Price in accordance with Section 2.1(b) hereof, prior to the expiration of such purchase, tender or exchange offer and accepted such offer, subject to adjustments (from and after the consummation of such purchase, tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in Section 3 through 5.

4.2. ASSUMPTION OF OBLIGATIONS. Notwithstanding anything contained in this Warrant or in the Financing Agreement to the contrary, the Company shall not effect any of the transactions described in clauses (a) through (d) of
Section 4.1 unless, prior to the consummation thereof, each Person (other than the Company) which may be required to deliver any stock, securities, cash or property upon the exercise of this Warrant as provided herein shall assume, by written instrument delivered to, and reasonably satisfactory to, the Holder of this Warrant, (a) the obligations of the Company under this Warrant (and if the Company shall survive the consummation of such transaction, such assumption shall be in addition to, and shall not release the Company from, any continuing obligations of the Company under this Warrant), (b) the obligations of the Company under the Registration Rights Agreement and (c) the obligation to deliver to the Holder such shares of stock, securities, cash or property as, in accordance with the foregoing provisions of this Section 4, the Holder may be entitled to receive. Nothing in this Section 4 shall be deemed to authorize the Company to enter into any transaction not otherwise permitted by the Financing Agreement.

5. OTHER DILUTIVE EVENTS. In case any event shall occur as to which the provisions of Section 3 or Section 4 hereof are not strictly applicable or if strictly applicable would not fairly protect the purchase rights of the Holder in accordance with the essential intent and principles of such Sections, then in each such case, the Board of Directors of the Company shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to preserve, without dilution, the purchase rights represented by this Warrant.

6. NO DILUTION OR IMPAIRMENT. The Company shall not, by amendment of its articles of incorporation or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Warrant against dilution or other impairment. Without limiting the generality of the foregoing, the Company (a) shall not permit the par value of any shares of stock receivable upon the exercise of this Warrant to exceed the amount payable therefor upon such exercise, (b) shall take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of stock, free from all liens, security interests, encumbrances (in each of the foregoing cases, other than those imposed by the Holder), taxes, preemptive rights and charges on the exercise of the Warrants from time to time outstanding, and (c) shall not take any action which results in any adjustment of the Purchase Price if the total number of shares of Common Stock (or Other Securities) issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock (or Other Securities) then authorized by the Company's articles of organization and available for the purpose of issue upon such exercise.

7. ACCOUNTANTS' REPORT. In each case of any adjustment or readjustment in the number of shares of Common Stock (or Other Securities) issuable upon the exercise of this Warrant or in the Purchase Price, including, without limitation, pursuant to Section 3.1, 3.2, 3.4, 3.5 or 3.10, the Company at its sole expense shall promptly compute such adjustment or readjustment in accordance with the terms of this Warrant and prepare a report setting forth such adjustment or readjustment and showing in reasonable detail the method of calculation thereof and the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or to be received by the Company for any Additional Shares of Common Stock issued or sold or deemed to have been issued under Section 3, (b) the number of shares of Common Stock outstanding or deemed to be outstanding, and (c) the Purchase Price in effect immediately prior to such issue or sale and as adjusted and readjusted (if required by Section 3) on account thereof. The Company shall forthwith mail a copy of each such report to each holder of a Warrant. In the event that a holder of a Warrant disagrees with such report, the Company shall cause independent certified public accountants of recognized national standing (which may be the regular auditors of the Company) selected by the Company to review and verify or revise such computation (other than any computation of the Fair Value of property) and report. The Company shall also keep copies of all such reports at its principal office and shall cause the same to be available for inspection at such office during normal business hours by any holder of a Warrant or any prospective purchaser of a Warrant designated by the holder thereof.

8. NOTICES OF CORPORATE ACTION. In the event of:

(a) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or

(b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, any consolidation or merger involving the Company and any other Person, any transaction or series of transactions in which more than 50% of the voting securities of the Company are transferred to another Person, or any transfer, sale or other disposition of all or substantially all the assets of the Company to any other Person, or

(c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company,

the Company shall mail to each holder of a Warrant a notice specifying (i) the date or expected date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right, and (ii) the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer, sale, disposition, dissolution, liquidation or winding-up is to take place and the time, if any such time is to be fixed, as of which the holders of record of Common Stock (or Other Securities) shall be entitled to exchange their shares of Common Stock (or Other Securities) for the securities or other property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at least 20 days prior to the date therein specified.

9. REGISTRATION OF COMMON STOCK. If any shares of Common Stock required to be reserved for purposes of exercise of this Warrant require registration with or approval of any governmental authority under any federal or state law (other than the Securities Act) before such shares may be issued upon exercise, the Company shall, at its expense and as expeditiously as possible, use its best efforts to cause such shares to be duly registered or approved, as the case may be. At any such time as Common Stock is listed on any national securities exchange, the Company shall, at its expense, obtain promptly and maintain the approval for listing on each such exchange, upon official notice of issuance, the shares of Common Stock issuable upon exercise of the then outstanding Warrants and maintain the listing of such shares after their issuance; and the Company shall also list on such national securities exchange, shall register under the Exchange Act and shall maintain such listing of, any Other Securities that at any time are issuable upon exercise of the Warrants, if and at the time that any securities of the same class shall be listed on such national securities exchange by the Company.

10. RESTRICTIONS ON TRANSFER.

10.1. RESTRICTIVE LEGENDS. Except as otherwise permitted by this
Section 10, each Warrant (including each Warrant issued upon the transfer of any Warrant) shall be stamped or otherwise imprinted with a legend in substantially the following form:

"THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE

EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS AND CONDITIONS SPECIFIED IN THIS WARRANT.

Except as otherwise permitted by this Section 10, each certificate for Common Stock (or Other Securities) issued upon the exercise of any Warrant, and each certificate issued upon the transfer of any such Common Stock (or Other Securities), shall be stamped or otherwise imprinted with a legend in substantially the following form:

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS."

10.2. TRANSFER TO COMPLY WITH THE SECURITIES ACT. Restricted Securities may not be sold, assigned, pledged, hypothecated, encumbered or in any manner transferred or disposed of (a "Transfer"), in whole or in part, except in compliance with the provisions of the Securities Act and state securities or Blue Sky laws and the terms and conditions hereof.

10.3. NOTICE OF TRANSFER. Each Holder shall, prior to any Transfer of any Warrants, give written notice to the Company of such Holder's intention to Transfer.

10.4. TERMINATION OF RESTRICTIONS. The restrictions imposed by this
Section 10 on the transferability of Restricted Securities shall cease and terminate as to any particular Restricted Securities (a) when a registration statement with respect to the sale of such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (b) when such securities are sold pursuant to Rule 144 (or any similar provision then in force) under the Securities Act, or (c) when, in the reasonable opinion of both counsel for the Holder and counsel for the Company, such restrictions are no longer required or necessary in order to protect the Company against a violation of the Securities Act upon any sale or other disposition of such securities without registration thereunder. Whenever such restrictions shall cease and terminate as to any Restricted Securities, the Holder shall be entitled to receive from the Company, without expense, new securities of like tenor not bearing the applicable legends required by Section 10.1.

10.5. EXEMPT TRANSFERS. The restrictions on the transfer of this Warrant or the Warrant Shares set forth in this Section 10 shall not apply to any transfer to an affiliate of the Holder or to any transfer to any other Person, PROVIDED that such transfer is made in compliance with the provisions of the Securities Act and state securities laws.

11. RESERVATION OF STOCK, ETC. The Company shall at all times reserve and keep available, solely for issuance and delivery upon exercise of this Warrant, the number of shares of Common Stock (or Other Securities) from time to time issuable upon exercise of this Warrant. All shares of Common Stock (or Other Securities) issuable upon exercise of any Warrants shall be duly authorized and, when issued upon such exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable, with no liability on the part of the holders thereof, and, in the case of all securities, shall be free from all liens, security interests, encumbrances (in each of the foregoing cases, other than those imposed by the Holder), taxes, preemptive rights and charges. The transfer agent for the Common Stock, and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of any of the purchase rights represented by this Warrant, are hereby irrevocably authorized and directed at all times until the Expiration Date to reserve such number of authorized and unissued shares as shall be requisite for such purpose. The Company shall keep copies of this Warrant on file with the transfer agent for the Common Stock and with every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by this Warrant. The Company shall supply such transfer agent with duly executed stock certificates for such purpose. All Warrants surrendered upon the exercise of the rights thereby evidenced shall be canceled, and such canceled Warrants shall constitute sufficient evidence of the number of shares of stock which have been issued upon the exercise of such Warrants. Subsequent to the Expiration Date, no shares of stock need be reserved in respect of any unexercised Warrant.

12. REGISTRATION AND TRANSFER OF WARRANTS, ETC.

12.1. WARRANT REGISTER; OWNERSHIP OF WARRANTS. Each Warrant issued by the Company shall be numbered and shall be registered in a warrant register (the "Warrant Register") as it is issued and transferred, which Warrant Register shall be maintained by the Company at its principal office or, at the Company's election and expense, by a Warrant agent or the transfer agent. The Company shall be entitled to treat the registered Holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other Person, and shall not be affected by any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes. Subject to Section 10, a Warrant, if properly assigned, may be exercised by a new holder without a new Warrant first having been issued.

12.2. TRANSFER OF WARRANTS. Subject to compliance with Section 10, if applicable, this Warrant and all rights hereunder are transferable in whole or in part, without charge to the Holder hereof, upon surrender of this Warrant with a properly executed Form of Assignment attached hereto as Exhibit B at the principal office of the Company. Upon any partial transfer, the Company shall at its expense issue and deliver to the Holder a new Warrant of like tenor, in the name of the Holder, which shall be exercisable for such number of shares of Common Stock with respect to which rights under this Warrant were not so transferred.

12.3. REPLACEMENT OF WARRANTS. On receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this

Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender of such Warrant to the Company at its principal office and cancellation thereof, the Company at its expense shall execute and deliver, in lieu thereof, a new Warrant of like tenor.

12.4. ADJUSTMENTS TO PURCHASE PRICE AND NUMBER OF SHARES. Notwithstanding any adjustment in the Purchase Price or in the number or kind of shares of Common Stock purchasable upon exercise of this Warrant, any Warrant theretofore or thereafter issued may continue to express the same number and kind of shares of Common Stock as are stated in this Warrant, as initially issued.

12.5. FRACTIONAL SHARES. Notwithstanding any adjustment pursuant to
Section 3 in the number of shares of Common Stock covered by this Warrant or any other provision of this Warrant, the Company shall not be required to issue fractions of shares upon exercise of this Warrant or to distribute certificates which evidence fractional shares. In lieu of fractional shares, the Company shall make payment to the Holder, at the time of exercise of this Warrant as herein provided, in an amount in cash equal to such fraction multiplied by the Current Market Price of a share of Common Stock on the date of Warrant exercise.

13. REMEDIES; SPECIFIC PERFORMANCE. The Company stipulates that there would be no adequate remedy at law to any Holder in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant and accordingly, the Company agrees that, in addition to any other remedy to which the Holder may be entitled at law or in equity, the Holder shall be entitled to seek to compel specific performance of the obligations of the Company under this Warrant, without the posting of any bond, in accordance with the terms and conditions of this Warrant in any court of the United States or any State thereof having jurisdiction, and if any action should be brought in equity to enforce any of the provisions of this Warrant, the Company shall not raise the defense that there is an adequate remedy at law. Except as otherwise provided by law, a delay or omission by the Holder hereto in exercising any right or remedy accruing upon any such breach shall not impair the right or remedy or constitute a waiver of or acquiescence in any such breach. No remedy shall be exclusive of any other remedy. All available remedies shall be cumulative.

14. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder hereof any rights as a shareholder of the Company or as imposing any obligation on the Holder to purchase any securities or as imposing any liabilities on the Holder as a shareholder of the Company, whether such obligation or liabilities are asserted by the Company or by creditors of the Company.

15. NOTICES. All notices and other communications (and deliveries) provided for or permitted hereunder shall be made in writing by hand delivery, telecopier, any nationally-recognized courier guaranteeing overnight delivery or first class registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

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


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


If to Holder:                              Cerberus Partners, L.P.
                                           450 Park Avenue
                                           New York, New York 10022
                                           Attn:  Lenard Tessler
                                           Fax No. (212) 758-5305

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

All such notices and communications (and deliveries) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; when receipt is acknowledged, if telecopied; on the next Business Day, if timely delivered to a courier guaranteeing overnight delivery; and five days after being deposited in the mail, if sent first class or certified mail, return receipt requested, postage prepaid; PROVIDED, that the exercise of any Warrant shall be effective in the manner provided in Section 2.

16. AMENDMENTS. This Warrant and any term hereof may not be amended, modified, supplemented or terminated, and waivers or consents to departures from the provisions hereof may not be given, except by written instrument duly executed by the Company and the Holder.

17. DESCRIPTIVE HEADINGS, ETC. The headings in this Warrant are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein. Unless the context of this Warrant otherwise requires: (1) words of any gender shall be deemed to include each other gender;
(2) words using the singular or plural number shall also include the plural or singular number, respectively; (3) the words "hereof", "herein" and "hereunder" and words of similar import when used in this Warrant shall refer to this Warrant as a whole and not to any particular provision of this Warrant, and
Section and paragraph references are to the Sections and paragraphs of this Warrant unless otherwise specified; (4) the word "including" and words of similar import when used in this Warrant shall

mean "including, without limitation," unless otherwise specified; (5) "or" is not exclusive; and (6) provisions apply to successive events and transactions.

18. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the law of the State of New York.

19. REGISTRATION RIGHTS AGREEMENT. The shares of Common Stock (and Other Securities) issuable upon exercise of this Warrant (or upon conversion of any shares of Common Stock issued upon such exercise) shall constitute Registrable Securities (as such term is defined in the Registration Rights Agreement). Each Holder shall be entitled to all of the benefits afforded to a holder of any such Registrable Securities under the Registration Rights Agreement and such Holder, by its acceptance of this Warrant, agrees to be bound by and to comply with the terms and conditions of the Registration Rights Agreement applicable to such Holder as a holder of such Registrable Securities.

20. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
p.m., New York City time, on ________________.(3)

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

[Remainder of this page intentionally left blank]

IN WITNESS WHEREOF, the Company has executed and delivered this Warrant as of the date first above written.

VALUE CITY DEPARTMENT STORES, INC.

EXHIBIT A to
COMMON STOCK PURCHASE WARRANT

FORM OF
ELECTION TO PURCHASE SHARES

The undersigned hereby irrevocably elects to exercise the Warrant to purchase ____ shares of Common Stock, no par value per share ("Common Stock"), of VALUE CITY DEPARTMENT STORES, INC. and hereby makes payment of $________ therefor [or] makes payment therefor by application pursuant to Section 2.1(b)(ii) of the Warrant of $_______ aggregate principal amount of the then-outstanding Obligations (as defined in the Financing Agreement) [or] makes payment by reduction pursuant to Section 2.1(b)(iii) of the Warrant of the number of shares of Common Stock otherwise issuable to the Holder upon Warrant exercise by ___ shares [or] makes payment therefor by delivery of the following Common Stock Certificates of the Company (properly endorsed for transfer in blank) for cancellation by the Company pursuant to Section 2.1(b)(iv) of the Warrant, certificates of which are attached hereto for cancellation [list certificates by number and amount]. The undersigned hereby requests that certificates for such shares be issued and delivered as follows:

If the number of shares of Common Stock purchased (and/or reduced) hereby is less than the number of shares of Common Stock covered by the Warrant, the undersigned requests that a new Warrant representing the number of shares of Common Stock not so purchased (or reduced) be issued and delivered as follows:

Dated: ____________, 20__                      NAME OF HOLDER

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

Title:

EXHIBIT B to
COMMON STOCK PURCHASE WARRANT

FORM OF ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the Assignee named below all of the rights of the undersigned to purchase Common Stock, no par value per share ("Common Stock") of VALUE CITY DEPARTMENT STORES, INC. represented by the Warrant, with respect to the number of shares of Common Stock set forth below:

Dated: _______________, 20__                        NAME OF HOLDER

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

Title:

Exhibit 10.6

CORPORATE SERVICES AGREEMENT

This Corporate Services Agreement ("Agreement") is made this 11th day of June 2002, by and between Value City Department Stores, Inc. and its wholly owned subsidiaries (collective referred to as "VCDS") and Schottenstein Stores Corporation ("SSC"). All sections of the previous Agreement dated June 2000, are replaced by this Agreement.

1. RECITALS.

a. Pursuant to an agreement dated June 1991 (the "Exchange Agreement"), SSC agreed to transfer to VCDS substantially all of the business, properties, and assets formerly constituting the Department Store Division of SSC (the "Department Store Division"), and the employees of the Department Store Division became employees of VCDS.

b. Prior to the transfer of the business, properties and assets of the Department Store Division to VCDS, employees of the Department Store Division provided services to other divisions of SSC, and employees of other divisions of SSC provided services to the Department Store Division.

c. VCDS and SSC desire to provide for the continued sharing of services as set forth in this Agreement.

2. EXECUTIVE AND EXECUTIVE SUPPORT STAFF SERVICES. Certain executives work for VCDS and SSC. VCDS's Board of Directors sets the compensation of executives that is reimbursed by VCDS. The executive compensation is paid by SSC and VCDS reimburses its share for payroll tax purposes. VCDS shall pay to SSC a percentage of the payroll and related costs of executive support staff based upon a proportionate share of the compensation reimbursed by VCDS for an executive to that executive's total compensation. Such payments will be billed and reimbursed monthly.

3. LEGAL ADVICE AND LEGAL SERVICES. The in-house legal staff of SSC shall be available to VCDS for consultation and advice and for the performance of legal services. SSC's in-house legal staff will meet annually and determine the percentage of time the in-house legal staff and its support personnel spent on VCDS legal work for the past year. VCDS shall pay to SSC its proportionate share of the payroll and related costs of the in-house legal staff and its support personnel based upon the allocation determined for the past year. VCDS agrees to reimburse SSC for out-of-pocket and other expenses, such as the cost of outside legal counsel and travel, specifically related to VCDS legal work. Such payroll and related costs will be billed and reimbursed monthly.

4. BENEFIT PLAN ADMINISTRATION. VCDS performs certain accounting and auditing functions for the benefit plans of VCDS, SSC, and certain affiliates of SSC. The costs of such accounting and auditing services by VCDS are allocated to the participating companies based on the number of enrolled employees of each company in each benefit plan versus the total number of enrolled employees in each benefit plan. Such payroll and related costs will be billed and reimbursed monthly. VCDS shall review and adjust the allocation annually on a prospective basis. SSC agrees to reimburse VCDS for its share of out-of-pocket and other expenses, such as the cost of travel, specifically related to SSC benefit plan work.

The SSC benefit department provides benefit plan administrative services to SSC and affiliates of SSC including VCDS. The cost of the SSC benefit department is allocated to the participating companies based on the number of participating employees of each company in each benefit plan versus the total number of participating employees in each benefit plan. Such payroll and related costs will be billed and reimbursed monthly. SSC shall review and adjust the allocation annually on a prospective basis based on the number of participating employees at the end of each year. VCDS agrees to reimburse SSC for its share of out-of-pocket and other expenses, such as travel, specifically related to VCDS benefit plan work.

5. INSURANCE AND RISK MANAGEMENT. SSC provides risk management services (collectively RISK MANAGEMENT PROGRAM) to VCDS including:

a. Negotiating and recommending for purchase various property and casualty insurance policies and specialty type policies such as Directors and Officers insurance ("D&O"), crime and theft insurance, and the purchasing of various bonds, etc.

b. Negotiating and recommending the purchase of workers' compensation coverage for all states in which VCDS does business. The states operate both monopolistic and non-monopolistic workers' compensation programs. Under a monopolistic program, a company must participate in the state workers' compensation fund or, if approved by the state, self-insure. Under a non-monopolistic program, a company can self-insure if approved by the state, or purchase workers' compensation coverage from private insurance carriers. VCDS currently operates in two monopolistic states, Ohio and West Virginia.

In Ohio, SSC administers a self-insured workers' compensation program overseen by the Ohio Bureau of Workers Compensation. VCDS has requested and SSC has consented to VCDS'S participation in SSC's Ohio self-insured program.

In West Virginia, VCDS participates directly in the West Virginia State Workers' Compensation Fund and has its own risk number. SSC oversees the management of a third party administrator and litigation relating to claims in

West Virginia for VCDS and charges VCDS an administrative fee for SSC's services.

For all other states, workers' compensation coverage is purchased from private insurance carriers using loss sensitive programs (retrospective premiums and high deductible programs). Effective with workers compensation policies for the period August 1, 2001 through August 1, 2002, a) SSC recommended and Value City Department Stores, Inc. purchased separate coverage for its account from private insurance carriers and b) SSC purchased coverage from private insurance carriers on behalf of Shonac/DSW and Filene's Basement. Effective with workers' compensation policies for periods after August 1, 2002, SSC will recommend to VCDS the purchase for its account coverage from private insurance carriers. Collectively paragraphs 5a and 5b shall be referred to as the INSURANCE PROGRAM.

c. Recommending specifications for insurance products, including the collection of data and assistance in completion of applications needed to properly market the insurance program.

d. Claims coordination services for property losses, commercial and vehicle liability and collision, workers' compensation, D&O, and fidelity.

e. Safety consultation services including assistance in OSHA related issues and various training needs as requested.

f. Assistance in establishing loss reserves and projection of losses including the loss development triangles.

g. Recommending fire protection services and alarm systems to meet the requirements of the insurance carrier and authorities having jurisdiction. These services include oversight of sprinkler flushing and fire protection equipment programs.

h. Various management reports of losses and cost of risk.

i. Environmental review and recommendation for on-going maintenance and monitoring of environmental conditions.

Separate policies will be maintained when possible and appropriate for continued coverage under the Insurance Program.

VCDS shall be responsible for payment of its insurance premiums, insurance audit adjustments, punitive damages, fines, self-insured retentions, deductibles, taxes, surcharges, broker fees or commissions, claims, claims handling fees (including third party administrator fees and charges), self-insurance fees assessed by states or other controlling organizations, reasonable ordinary and necessary travel expenses (not already included as part of an insurance billing), other charges reasonably ordinary and necessary to market the coverage and VCDS's proportionate share of the administrative cost of SSC`s risk management unit based upon the percentage of time spent by the unit on VCDS matters. VCDS shall also be responsible for all risk management and loss control cost not directly related to an insurance policy. The administrative cost includes payroll & benefit expense, travel expenses and other administrative expenses. SSC shall provide a billing of the components of such costs including a computation of the proportionate share allocated to VCDS.

When possible SSC shall have insurance carriers, brokers and agents provide separate invoices for VCDS, which will be approved by SSC's risk management unit and forwarded to VCDS for payment. Such billings will be in the name of VCDS. If SSC pays premiums for VCDS, SSC shall bill VCDS, and VCDS shall reimburse SSC immediately.

SSC's risk management unit will, when possible, include in the billing for insurance premiums the administrative expense for risk management service to allow for an equitable distribution of this expense to location, utilizing, depending upon the type of insurance coverage, VCDS payroll per $100, sales per $1,000, or property values per $100 of value or other basis of premium commonly used by insurance carriers. VCDS additionally is provided risk management services, which may not be part of the Insurance Program, such as environmental, sprinkler installation and repair, or other services which may not be directly related to an insurance coverage ("Professional Services"). Professional Services will be billed separately and independently on a time and expense basis without markup by SSC. The hourly rate will be determined based on the individual's salary or hourly rate plus benefits paid to the individual performing the work, travel expenses, and other related expenses who performed the Professional Services.

VCDS shall pay to SSC, state workers' compensation funds or insurance carriers' premium and/or administrative fee billed as invoices are received or as developed loss reserves are calculated. In the event VCDS is separately billed by SSC for the following insurance policies the following shall apply:

a. For liability, umbrellas and excess coverage of all forms if collectively purchased in whole or in part by SSC, VCDS shall pay to SSC its prorata share of the costs of such coverage, including the estimated cost of claims, claims administration, reserves to cover self-insured retentions, premiums charged by insurance carriers, including primary policies, umbrella and excess

policies, fees, taxes, surcharges, loss control expenses and related administrative fees.

b. For workers compensation coverage in Ohio, VCDS shall pay to SSC its prorata share of the costs of such coverage, including projected claims, medical bills, excess insurance, fees, taxes, surcharges, other related expenses, and estimated compensation and administrative expense for loss control and insurance administration.

For workers' compensation coverage in West Virginia, VCDS shall pay workers' compensation premiums to the West Virginia State Fund. VCDS shall also pay an administrative fee to SSC for its services based on projected payroll and other remuneration.

For workers' compensation coverage in all other states:

1. Prior to August 1, 2001. VCDS participates in SSC's workers' compensation coverage. VCDS pays a premium to SSC based on projected payroll and other reimburseables calculated based on projected claims, medical bills, excess insurance, fees, taxes, surcharges, other related expenses, and estimated compensation and administrative expense for loss control and insurance administration.

2. For the period August 1, 2001 through August 1, 2002.

i. VALUE CITY DEPARTMENT STORES, INC. AND ITS SUBSIDIARIES (EXCLUDING FILENE'S BASEMENT, INC., DSW SHOE WAREHOUSE, INC., AND SHONAC CORPORATION). Premiums shall be paid directly by VCDS to private insurance carriers. Such premiums include cash collateral and loss funds. SSC shall review and recommend to VCDS whether or not the insurance carrier's invoices for workers' compensation premiums and/or losses are to be paid by VCDS. VCDS shall pay an administrative fee to SSC for SSC's claims' coordination and risk management services.

ii. FILENE'S BASEMENT, INC., DSW SHOE WAREHOUSE, INC., AND SHONAC CORPORATION. VCDS shall pay a premium to SSC based on projected payroll and other remuneration calculated based on projected claims, medical bills, excess insurance, fees, taxes, surcharges, other related expenses, and estimated compensation and administrative expense for loss control and insurance administration.

3. For the period beginning after August 1, 2002. Value City Department Stores, Inc. shall continue its direct coverage with an

insurance carrier. Filene's Basement, Inc., DSW Shoe Warehouse, Inc., and Shonac Corporation will be removed from SSC's workers' compensation coverage and added to Value City Department Stores, Inc.'s coverage. Premiums shall be paid directly by VCDS to private insurance carriers. Such premiums include cash collateral and loss funds. SSC shall review and recommend to VCDS whether or not the insurance carrier's invoices for workers compensation premiums and/or losses are to be paid by VCDS. VCDS shall pay an administrative fee to SSC for SSC's claims coordination and risk management services.

c. For property insurance coverage, VCDS shall pay a premium to SSC based on projected insured values and other remuneration, and calculated based on projected expenses, excess insurance, estimated compensation fees, taxes, surcharges, other related expenses and administrative expense for loss control and insurance administration.

d. For auto liability, collision, and comprehensive insurance policies VCDS shall pay all cost for its premiums, fees, taxes, surcharges, and other related expenses. VCDS shall pay direct any deductibles or retained losses as they occur and become due. VCDS shall pay an administrative fee to SSC for SSC's claims coordination and risk management services.

e. For other insurance policies, VCDS shall pay all cost for its premiums, fees, taxes, surcharges, and other expenses related to the policies so SSC is not out-of-pocket for any reasonable VCDS costs relating to the Risk Management Program.

f. In no event shall SSC be responsible for paying VCDS's insurance premiums and absent gross negligence and/or willful misconduct by SSC VCDS agrees to indemnify, defend and hold SSC harmless for all claims, losses and reasonable, ordinary and necessary expenses relating to VCDS's participation in the Insurance Program, including attorney's fees.

Should VCDS elect to leave SSC's loss sensitive programs, the developed loss reserves will be reviewed and VCDS will immediately pay to SSC any unfunded reserves relating to VCDS's participation in SSC's loss sensitive self-insured liability and workers' compensation programs.

The premiums and losses, including associated fees, for participation in SSC's loss sensitive self-insured liability and workers compensation programs in any year shall be subject to adjustment in future fiscal years. VCDS recognizes that the liability and workers' compensation

programs are loss sensitive and the value of claims will change as the claims mature. The parties agree to review the value of the developed loss reserves two times per year. Based upon the semi-annual review, VCDS will pay to SSC additional premiums and claims costs, including associated fees, necessary to assure that SSC has sufficient funds available from VCDS to pay future claims costs and expenses associated with VCDS's participation in SSC's loss sensitive self-insured liability and workers compensation programs. In the event SSC receives a refund of insurance premiums jointly paid by SSC and VCDS, SSC shall promptly refund to VCDS its prorata share of such refund. If SSC holds funds received from VCDS for payment of VCDS's self-insured liability and workers compensation program in excess of the required reserves determined by SSC in its reasonable discretion for such programs, then SSC shall refund to VCDS such excess amounts.

Notwithstanding the duration of this Agreement or any other section of this Agreement pertaining to the duration of VCDS and SSC commitments to each other, the participation of VCDS in the Risk Management Program in a given fiscal year does not obligate VCDS to participate in the Risk Management Program in subsequent fiscal years after the given fiscal year. However, should VCDS not participate in future years, the parties agree that the provisions for adjustments of billing will survive the termination of VCDS's participation in the Insurance Program

6. STORE PLANNING, DESIGN, AND CONSTRUCTION. Periodically, the SSC Store Planning, Design, and Construction departments, upon request from VCDS, will provide services to VCDS. VCDS shall pay to SSC a percentage of the payroll and related costs of such store planning design and construction services equal to the percentage of time the professional staff spends on VCDS store planning design and construction services in proportion to the total hours. Such payroll and related costs will be billed and reimbursed monthly. VCDS agrees to reimburse SSC for reasonable out-of-pocket and other expenses specifically related to VCDS projects.

7. IMPORTATION AGENCY SERVICES. Value City Imports ("VCI"), a division of SSC, shall act as an agent for VCDS for selected purchases of foreign merchandise to be imported into the United States (the "Imported Merchandise.")

VCI's responsibilities shall include:

a. Timely provision of detailed cost estimates for each import transaction that includes first cost, customs duties, taxes and fees, freight, commission, assists, and other miscellaneous charges on a purchase order basis for each individual PO line item;

b. Receipt and processing of orders for Imported Merchandise;

c. Application for international letters of credits, that shall be drawn on VCDS credit lines, relating to Imported Merchandise;

d. Customs compliance services, including classification and valuation verifications and the importation and clearance of Imported Merchandise;

e. Monitoring movement of Imported Merchandise;

f. Arranging for and payment of domestic clearance, customs duties, taxes and fees, commissions, brokerage fees and charges, other miscellaneous clearance charges and domestic freight of the Imported Merchandise;

g. Approval of wire transfers and letter of credit draws in accordance with the terms of the purchase orders or the written instructions of VCDS;

h. Assistance in the return of damaged, rejected or refused merchandise;

i. Assistance in the recovery of any duties, taxes or fees paid;

j. Assistance in making necessary arrangements for inspections or other services at the Manufacturer's premise for quality, quantity, or origin of the Imported Merchandise as specified by VCDS.

k. Assistance in arranging product and/or component testing concerning the material composition, content or any other feature of imported merchandise to ensure and promote compliance with U.S. Customs regulations and other government agencies. VCDS agrees to be responsible for all testing costs as explained under "Payment Of Testing Costs" in the Value City Imports testing program.

l. Negotiation and execution of freight, consolidation and brokerage contracts relating to Imported Merchandise;

m. Coordination with the SSC Insurance Department on the negotiation of marine and ocean insurance coverage and claims, VCDS shall be the primary insured and VCI a secondary insured for Imported Merchandise;

Unless instructed otherwise by SSC, in order to perform its responsibilities, VCDS agrees to nominate VCI as the consignee on bills of lading, invoices, and similar documents for Imported Merchandise. VCI agrees that it shall hold title as consignee of applicable Imported Merchandise and as agent for VCDS.

With the exception of the first cost of the merchandise and unless otherwise agreed, VCI shall bill VCDS for the fixed costs quoted under paragraph 7(a) which shall include any service fees (the "Costs"). In the event of a default or nonpayment by VCDS on a letter of credit or wire transfer for Imported Merchandise, VCI shall have the right to recover from VCDS all costs actually incurred by VCI and a Service Fee of three percent (3%) of the F.O.B. price of the Imported Merchandise (as defined under Incoterms 2000 (ICC Publication No. 560)) (the "Service Fee.").. In addition to Costs, VCDS shall be responsible for all Extraordinary Costs incurred by VCI. "Extraordinary Costs" shall mean any costs or payment incurred by VCI except: (1) the payments set forth above in items a through m under VCI's responsibilities, (2) any other cost normally incurred in the ordinary course of the clearance or movement of Imported Merchandise by VCI for the services listed above in items a through m under VCI's responsibilities, or (3) any cost that is the result of the gross negligence, willful misconduct, or fraud of VCI.

Upon delivery of merchandise to a consolidator or agent of VCI, VCI shall invoice VCDS for all Costs with respect to the Imported Merchandise. At such time, VCI shall issue a separate invoice to VCDS for Extraordinary Costs incurred by VCI, if any.

As the parties may agree, VCI may be asked to sell to VCDS on a fixed price for certain imported merchandise purchased by VCI (hereinafter referred to "Fixed Price Merchandise"). Where the sale of Fixed Price Merchandise is negotiated, all right, title, and interest in the Fixed Price Merchandise shall remain in VCI until payment for said merchandise by VCDS and shall not be subject to any security interest or lien granted by VCDS.

Subject to the terms of the Collateral Agency Agreement dated June 11, 2002 among Value City Department Stores, Inc., Filene's Basement, Inc., Schottenstein Stores Corporation, National City Commercial Finance, Inc. and Fleet Retail Finance, Inc., VCDS agrees that VCI shall have a lien on all Imported Merchandise for all Costs, EXTRAORDINARY COSTS AND the Service Fee with respect to the Imported Merchandise. Such lien shall be superior to all other liens and shall be satisfied prior to sale of the Imported Merchandise.

VCI acknowledges that it does not have any right, power, or authority to make any contract or incur any obligation or liability that shall be binding upon VCDS unless it has been authorized herein or it has been specifically authorized to do so in advance by VCDS. VCI shall not represent to its employees or any third party that VCI is other than an agent for VCDS employed under this Agreement.

Except for VCI's gross negligence, willful misconduct or fraud in the performance of its duties, VCI shall not be liable for any losses or damages, including special, incidental or consequential damages, incurred by VCDS from any claim or dispute

arising out of, related to or in connection with any Purchase Order issued by VCDS. VCDS agrees to hold VCI harmless from such claim or dispute, and to indemnify and defend VCI for all losses and damages including costs, expenses, charges and legal fees, if any, which VCI may incur as a result of any such dispute or claim.

VCI is authorized to appoint its sub-agents to perform some or all of VCI's obligations hereunder, it being understood that the acts of such sub-agents are at VCI's own risk, and must conform to the terms of this Agreement.

8. REAL ESTATE MANAGEMENT FEES. Schottenstein Management Co., ("SMC"), an affiliate of SSC, may from time to time provide real estate services for certain of the properties leased by Value City. The services to be provided involve negotiation and leasing of spaces from unaffiliated third parties where VCDS is a tenant. VCDS shall pay to SMC its proportionate share of the payroll and related costs of such real estate management services equal to the percentage of time the professional staff spends on VCDS real estate management services work in relation to the costs associated with the total professional staff hours, such payments to be BILLED AND REIMBURSED QUARTERLY. VCDS agrees to reimburse SMC for reasonable out-of-pocket and reasonable other expenses, such as travel, specifically related to the services provided to VCDS. SMC may from time to time provide other real estate services to VCDS. The fee for such services shall be mutually agreed upon by SMC and VCDS.

9. TRAVEL. SSC operates a travel department that negotiates rates for travel services used by SSC and its affiliates, including VCDS. Such services include the negotiation of airline, hotel, rental car rates, travel cost tracking, and the formulation of travel policies and procedures. Negotiated rates are accessed through an unrelated travel agent. The cost of the travel department and the fees for the travel agent's services is funded through a surcharge paid on each airline ticket purchased. [VCDS shall exclusively use the SSC travel department for all of its travel] (discuss)

10. AUDIT - VCDS shall have the right to audit during reasonable business hours the books and records of SSC directly relating to the Corporate Services Agreement. Such audits must be finished within 6 months after the end of SSC's fiscal year.

11. Offset - Each of VCDS and SSC shall have the right to offset any amounts owed to it by the other party to this Agreement against any payments owed by it to such party.

12. AIRCRAFT. SSC and its affiliates, including Value City Department Stores, Inc., have jointly purchased fractional interests in aircraft. SSC advanced the funds to purchase the aircraft. VCDS has the right to use such aircraft. VCDS shall pay SSC for its share of all of the costs associated with VCDS's use of the aircraft, which shall include, but not be limited to, fixed and variable costs, economic depreciation, interest, incidentals and any gain or loss on the disposition of aircraft. VCDS SHALL PROMPTLY PAY SSC AFTER RECEIVING A BILL FOR THE COSTS ASSOCIATED WITH VCDS'S USE OF THE AIRCRAFT.

13. ADDITIONAL SERVICES; DISCONTINUATION OF SERVICES. The parties recognize that circumstances may change during the course of their relationship, that the provision of services not contemplated by this Agreement for either party by the other may prove to be desirable and beneficial, and that services contemplated by this Agreement may no longer be required. The parties therefore agree that, should additional services be desired, they will negotiate in good faith with each other the nature of those services and the payment to be made therefor, to the end that the provision of such services by the party providing them shall not be unduly burdensome and the payment to be made for such services shall not be unfair to the party receiving them. Should services provided pursuant to this Agreement be determined to be unnecessary or undesirable, the parties, by mutual agreement, may discontinue them by appropriate amendment to this Agreement. Should additional services be deemed desirable, the parties shall likewise amend this Agreement to specify such services and the payment to be made therefor.

14. ANNUAL REVIEW. The services performed by SSC for VCDS and by VCDS for SSC pursuant to this Agreement and the cost thereof shall be subject to review not later than 90 days following the end of each fiscal year of VCDS by the members of the Audit Committee of the Board of Directors of VCDS. This Agreement may be terminated in whole or in part by VCDS or SSC upon 90 days written notice to the other party. Notwithstanding anything contained herein to the contrary, all indemnity provisions contained in this Agreement and the insurance obligations contained in Paragraph 5 shall survive the termination of this Agreement

15. INDEMNITY. Except for SSC's gross negligence, willful misconduct or fraud in the performance of its duties, SSC shall not be liable for any losses or damages, including special, incidental or consequential damages incurred by VCDS from any claim or dispute arising out of or related to or in connection with any services performed by SSC under this Agreement. VCDS agrees to hold SSC harmless from such claim or dispute and to indemnify and defend SSC for all losses and damages including reasonable costs, expenses, charges and legal fees, if any, which SSC may incur as a result of any such dispute or claim.

EXCEPT for VCDS's gross negligence, willful misconduct or breach of its obligations in the performance of its duties, VCDS shall not be liable for any losses or damages, including special, incidental or consequential damages incurred by SSC from any claim or dispute arising out of or related to or in connection with any services performed by VCDS under this Agreement. SSC agrees to hold VCDS harmless for such claim or dispute and to indemnify and defend VCDS for all losses and damages including reasonable costs, expenses, charges and legal fees, if any, which VCDS may incur as a result of any such dispute or claim.

16. EFFECTIVE DATE. This Agreement is effective as of the beginning of the fiscal year.

17. GOVERNING LAW. The laws of the State of Ohio shall apply to the terms of this Agreement. A court's determination that certain provisions of this Agreement are invalid shall not render the remaining terms of this Agreement unenforceable.

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

SCHOTTENSTEIN STORES CORPORATION

By:      /s/ Jeffry Swanson
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VALUE CITY DEPARTMENT STORES, INC.

By:      /s/ James A. McGrady
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