COUNTY SEAT STORES INC, S-4, 1998-03-16

COUNTY SEAT STORES INC
S-4, 1998-03-16
FAMILY CLOTHING STORES

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 16, 1998
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
--------------------------

COUNTY SEAT STORES, INC.

(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C> <C>
MINNESOTA 5651 41-1272706
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code No.) Identification No.)
</TABLE>

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

CSS TRADE NAMES, INC.

(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C> <C>
MINNESOTA 6794 41-1702797
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code No.) Identification No.)
</TABLE>

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469 SEVENTH AVENUE, 11TH FLOOR
NEW YORK, NEW YORK 10018
(212) 714-4800

(Address, including Zip Code, and Telephone Number, including Area Code,
of Registrants' Principal Executive Offices)

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

BRETT D. FORMAN
EXECUTIVE VICE PRESIDENT
COUNTY SEAT STORES, INC.
469 SEVENTH AVENUE, 11TH FLOOR
NEW YORK, NEW YORK 10018
(212) 714-4800

(Name, Address, including Zip Code, and Telephone Number, including Area Code,
of Agent for Service)
--------------------------

WITH COPIES TO

ROBERT M. MCLAUGHLIN, ESQ.
EATON & VAN WINKLE
600 THIRD AVENUE
NEW YORK, NEW YORK 10016
(212) 867-0606
--------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.

If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
12 3/4 Senior Notes due November 1,
2004................................ $85,000,000 100% $85,000,000 $25,075.00
</TABLE>

(1) Estimated Solely for the purpose of calculating the registration fee
pursuant to Rule 457.
--------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<PAGE>
SUBJECT TO COMPLETION, DATED , 1998

PROSPECTUS
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
OFFER TO EXCHANGE

12 3/4% SENIOR NOTES DUE NOVEMBER 1, 2004
FOR ALL OUTSTANDING 12 3/4% SENIOR NOTES DUE NOVEMBER 1, 2004
OF
COUNTY SEAT STORES, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1998 UNLESS EXTENDED.

County Seat Stores, Inc., a Minnesota corporation (the "Company"), is hereby
offering (the "Exchange Offer"), upon the terms and subject to the conditions
set forth in this Prospectus and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange $1,000 principal amount of its 12 3/4%
Senior Notes due November 1, 2004 (the "Exchange Notes"), which exchange has
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement (which term shall encompass any
amendments thereto) of which this Prospectus is a part, for each $1,000
principal amount of its outstanding 12 3/4% Senior Notes due November 1, 2004
(the "Private Notes"), of which $85,000,000 in aggregate principal amount was
issued on October 29, 1997 and is outstanding as of the date hereof. The form
and terms of the Exchange Notes are identical in all material respects to those
of the Private Notes, except for certain transfer restrictions and registration
rights relating to the Private Notes and except for certain interest provisions
related to such registration rights. The Exchange Notes will evidence the same
indebtedness as the Private Notes (which they replace) and will be entitled to
the benefits of the Indenture dated as of October 29, 1997 governing both the
Private Notes and the Exchange Notes (the "Indenture"). The Private Notes and
the Exchange Notes are sometimes referred to herein collectively as the "Notes."
See "The Exchange Offer" and "Description of the Notes."

Interest on the Notes will be payable in cash semi-annually in arrears on
each November 1 and May 1, commencing May 1, 1998. The Notes will mature on
November 1, 2004.

The Exchange Notes will be redeemable, at the option of the Company, in
whole or in part, at any time on or after November 1, 2001, at the redemption
prices set forth herein, plus accrued and unpaid interest, if any, to the date
of redemption. In addition, prior to November 1, 2001, the Company may, subject
to certain conditions, redeem up to one-third of the principal amount of
outstanding Notes with proceeds of one or more offerings (each, a "Primary
Offering") of Capital Stock (as defined herein) at 112.75% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
redemption; provided, however, that at least two-thirds of the original
principal amount of the Notes is outstanding immediately following such
redemption. Upon a Change of Control (as hereinafter defined), the Company is
required to offer to repurchase all the then outstanding Notes at 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of repurchase.

The Company will accept for exchange any and all Private Notes that are
validly tendered on or prior to 5:00 p.m., New York City time, on the date the
Exchange Offer expires, which will be , 1998 unless the Exchange
Offer is extended (the "Expiration Date"). In the event that the Exchange Offer
is extended, it will remain in effect for a maximum of 90 business days,
including all extensions. Tenders of Private Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange
Offer is not conditioned upon any minimum principal amount of Private Notes
being tendered for exchange. However, the Exchange Offer is subject to certain
conditions which may be waived by the Company and to the terms and provisions of
the Registration Rights Agreement (as defined herein). See "The Exchange Offer."
The Company has agreed to pay the expenses of the Exchange Offer.

The Exchange Notes will be senior unsecured indebtedness of the Company,
except to the extent collateralized by a first priority security interest in a
security account (see "Description of Notes--Security Account"). The Notes will
rank senior in right of payment to all subordinated indebtedness of the Company
and pari-passu in right of payment with all senior indebtedness of the Company.
The Notes will be effectively subordinated to secured indebtedness of the
Company, including any indebtedness outstanding under the Senior Credit Facility
(as defined herein), in each case, to the extent of the assets securing such
indebtedness.

The Company filed a petition for reorganization relief under Chapter 11 of
the Bankruptcy Code on October 17, 1996. The Exchange Offer is being made
pursuant to a Registration Rights Agreement (as hereinafter defined) covering,
inter alia, the Private Notes issued in connection with the Company's Plan of
Reorganization (as defined herein), which was confirmed by the Bankruptcy Court
(as defined herein) on October 1, 1997. As of November 1, 1997, upon
consummation of the Plan of Reorganization, the Company had approximately $99.0
million of indebtedness outstanding (excluding approximately $37.0 million of
letters of credit and bankers' acceptances), including approximately $12.3
million of secured indebtedness under the Senior Credit Facility and
approximately $85.0 million principal amount of indebtedness under the Private
Notes.
SEE "RISK FACTORS", COMMENCING ON PAGE , FOR A DISCUSSION OF CERTAIN
FACTORS THAT INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND
AN INVESTMENT IN THE EXCHANGE NOTES.
---------------------

THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

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

The date of this Prospectus is , 1998
<PAGE>
NOTICE TO INVESTORS

Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Private Notes may be offered for resale, resold
and otherwise transferred by a holder thereof without compliance with the
registration and prospectus delivery provisions of the Securities Act, PROVIDED
that the holder is acquiring the Exchange Notes in the ordinary course of its
business, is not participating and has no arrangement or understanding with any
person to participate in the distribution of the Exchange Notes and is not an
"affiliate" of the Company within the meaning of Rule 405 of the Securities Act.
Holders of Private Notes wishing to accept the Exchange Offer must represent to
the Company that such conditions have been met. Each broker-dealer who holds
Private Notes acquired for its own account as a result of market-making or other
trading activities and who receives Exchange Notes for its own account in
exchange for such Private Notes pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Company believes that none of the registered holders of the Private
Notes is an "affiliate" (as such term is defined in Rule 405 under the
Securities Act) of the Company.

This Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of Exchange Notes received
in exchange for Private Notes acquired by such broker-dealer as a result of
market-making or other trading activities. The Letter of Transmittal states that
by acknowledging that it will deliver a prospectus in connection with any resale
of such Exchange Notes, and by delivering a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. The Company has agreed to make this Prospectus (as it may be
amended or supplemented) available to any such broker-dealer that requests
copies of such Prospectus in the Letter of Transmittal for use in connection
with any such resale for a period of up to 180 days after the Expiration Date
(as defined herein). See "Plan of Distribution."

Prior to the Exchange Offer, there has been no public market for the Private
Notes or the Exchange Notes. There can be no assurance as to the liquidity of
any market that may develop for the Exchange Notes, the ability of holders to
sell the Exchange Notes, or the price at which holders would be able to sell the
Exchange Notes. The Company does not intend to apply for listing of the Exchange
Notes for trading on any securities exchange or for inclusion of the Exchange
Notes in any automated quotation system. The National Association of Securities
Dealers, Inc. ("NASD") has designated the Private Notes as securities eligible
for trading in the Private Offerings, Resales and Trading through Automatic
Linkages ("PORTAL") market of the NASD (see "Price Range of the Private Notes")
and the Company has been advised that Jefferies & Company, Inc. has heretofore
acted as market maker for the Private Notes. The Company has been advised by the
aforesaid market maker that it currently intends to make a market in the
Exchange Notes. Future trading prices of the Exchange Notes will depend on many
factors, including among other things, prevailing interest rates, the Company's
operating results and the market for similar securities. Historically, the
market for securities similar to the Exchange Notes, including non-investment
grade debt, has been subject to disruptions that have caused substantial
volatility in the prices of such securities. There can be no assurance that any
market for the Exchange Notes, if such market develops, will not be subject to
similar disruptions. See "Risk Factors--Lack of Public Market for Securities."

The Company will not receive any proceeds from, and has agreed to bear the
expenses of, the Exchange Offer. Tenders of Private Notes pursuant to the
Exchange Offer may be withdrawn at any time prior to the Expiration Date. No
underwriter is being used in connection with the Exchange Offer.

THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE EXCHANGE ACT.
DISCUSSIONS CONTAINING SUCH FORWARD-LOOKING STATEMENTS MAY BE FOUND IN
"SUMMARY," "RECENT DEVELOPMENTS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS," AS WELL AS WITHIN
THIS PROSPECTUS GENERALLY AND IN DOCUMENTS INCORPORATED HEREIN BY REFERENCE. IN
ADDITION, WHEN USED IN THIS PROSPECTUS THE WORDS "BELIEVES," "ANTICIPATES,"
"EXPECTS," "MAY," "WILL," "SHOULD," AND SIMILAR EXPRESSIONS OR THE NEGATIVE
THEREOF ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE
SUBJECT TO A NUMBER OF KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES.

ACTUAL RESULTS IN THE FUTURE COULD DIFFER MATERIALLY FROM THOSE DESCRIBED IN
OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS, AS A RESULT OF MANY FACTORS
OUTSIDE THE CONTROL OF THE COMPANY, INCLUDING: CONTINUING SUCCESS WITH, AND
MARKET ACCEPTANCE OF, FUNDAMENTAL CHANGES IN THE COMPANY'S MERCHANDISING
STRATEGY DESCRIBED HEREIN; FLUCTUATIONS IN THE COST OF RAW MATERIALS AND
MERCHANDISE USED OR PURCHASED BY THE COMPANY; DEPENDENCE ON THIRD PARTY
SUPPLIERS; CHANGES IN CONSUMER PREFERENCES, IN THE ADVERTISING MARKET FOR THE
COMPANY'S PRODUCTS, IN THE APPAREL INDUSTRY OR MARKET GENERALLY OR THAT SEGMENT
OF WHICH THE COMPANY SPECIFICALLY TARGETS; CHANGES IN THE FINANCIAL CONDITION OF
THE COMPANY'S CUSTOMERS, IN THE GENERAL CONDITION OF THE UNITED STATES ECONOMY,
IN THE AVAILABILITY OF KEY PERSONNEL, IN FOREIGN CURRENCY EXCHANGE RATES, IN
INDUSTRY CAPACITY, AND IN BRAND AWARENESS; AND THE OTHER MATTERS SET FORTH IN
THIS PROSPECTUS AND DESCRIBED FROM TIME TO TIME IN THE COMPANY'S ANNUAL OR
QUARTERLY REPORTS FILED WITH THE COMMISSION.

CONSEQUENTLY, SUCH FORWARD-LOOKING STATEMENTS SHOULD BE VIEWED SOLELY AS THE
COMPANY'S CURRENT PLANS, ESTIMATES AND BELIEFS. READERS ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF
THE DATE HEREOF OR THEREOF. THE COMPANY DOES NOT UNDERTAKE AND SPECIFICALLY
DECLINES ANY OBLIGATION TO PUBLICLY RELEASE ANY REVISIONS TO SUCH
FORWARD-LOOKING STATEMENTS TO REFLECT ANY FUTURE EVENTS OR CIRCUMSTANCES AFTER
THE DATE OF SUCH STATEMENTS OR TO REFLECT THE OCCURRENCE OF ANTICIPATED OR
UNANTICIPATED EVENTS.

AVAILABLE INFORMATION

The Company is filing concurrently a Registration Statement on Form S-4 (of
which this Prospectus forms part) and a Registration Statement on Form S-1
covering its common stock. The Company has also made a filing to register the
Common Stock under the Exchange Act. When the Commission declares effective any
of (i) the Registration Statement on Form S-1, (ii) the Company's Registration
Statement on Form S-4 or (iii) the registration of the Common Stock under the
Exchange Act, the Company will be subject to the informational requirements of
the Exchange Act, and, in accordance therewith, will be required to file
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information can be inspected and copied at
the Public Reference Section of the Commission at Room 1024, 450 Fifth Street,
N. W., Washington, D.C. 20549, and at the Commission's regional offices at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of the
reports, proxy statements and other information can be obtained from the Public
Reference Section of the Commission, Washington, D.C. 20549, at prescribed
rates. In addition, all reports filed by the Company via the Commission's

ii
<PAGE>
Electronic Data Gathering and Retrieval System (EDGAR) can be obtained from the
Commission's Internet Web Site located at http:\\www.sec.gov.

The Company has filed with the Commission a Registration Statement (which
term shall encompass any amendments and exhibits thereto) under the Securities
Act with respect of the Notes offered hereby. This Prospectus, which forms a
part of such Registration Statement, does not contain all the information set
forth in such Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements made in
this Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete; with respect to each such contract,
agreement or other document filed as an exhibit to such Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. Any interested parties may inspect such Registration Statement,
without charge, at the public reference facilities maintained by the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, and may obtain copies of all
or any part of it from the Commission upon payment of the fees prescribed by the
Commission. Neither the delivery of this Prospectus or any Prospectus Supplement
nor any sales made hereunder or thereunder shall under any circumstances create
any implication that the information contained herein or therein is correct as
of any time subsequent to the date hereof or thereof or that there has been no
change in the affairs of the Company since the date hereof or thereof.

The Company was incorporated in Minnesota in 1976. The Company's principal
executive offices are located at 469 Seventh Avenue, 11th Floor, New York, New
York 10018.

iii
<PAGE>
SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, INCLUDED ELSEWHERE IN THIS PROSPECTUS.
UNLESS OTHERWISE INDICATED OR THE CONTEXT CLEARLY IMPLIES OTHERWISE, ALL
REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" REFER TO COUNTY SEAT STORES, INC.
AND ITS SUBSIDIARIES. THE COMPANY'S PLAN OF REORGANIZATION WAS CONSUMMATED ON
OCTOBER 29, 1997 (THE "PLAN" OR "PLAN OF REORGANIZATION"). THE EFFECTS OF THE
PLAN HAVE BEEN ACCOUNTED FOR HEREIN IN THE COMPANY'S BALANCE SHEET DATED AS OF
NOVEMBER 1, 1997 USING THE PRINCIPLES OF "FRESH START" ACCOUNTING AS REQUIRED BY
THE AICPA, STATEMENT OF POSITION 90-7, PURSUANT TO WHICH, IN GENERAL, THE
COMPANY'S ASSETS AND LIABILITIES WERE REVALUED. THE TERM "PREDECESSOR COMPANY"
REFERS TO THE COMPANY PRIOR TO THE CONSUMMATION OF THE PLAN OF REORGANIZATION
AND THE TERM "REORGANIZED COMPANY" REFERS TO THE COMPANY AFTER THE PLAN OF
REORGANIZATION WAS CONSUMMATED. UNLESS OTHERWISE INDICATED OR THE CONTEXT
OTHERWISE REQUIRES, REFERENCES TO 1997, 1996, 1995, 1994, 1993, AND 1992 RELATE
TO THE COMPANY'S FISCAL YEARS ENDED ON JANUARY 31, 1998, FEBRUARY 1, 1997,
FEBRUARY 3, 1996, JANUARY 28, 1995, JANUARY 29, 1994, AND JANUARY 30, 1993,
RESPECTIVELY. EACH OF THESE FISCAL YEARS INCLUDES 52 WEEKS, EXCEPT FOR THE YEAR
ENDED FEBRUARY 3, 1996, WHICH INCLUDES 53 WEEKS. UNLESS OTHERWISE INDICATED OR
THE CONTEXT OTHERWISE REQUIRES, THE INFORMATION CONTAINED IN THIS PROSPECTUS
GIVES EFFECT TO THE OFFERING OF PRIVATE NOTES (THE "PRIVATE NOTE OFFERING") (AND
THE APPLICATION OF THE PROCEEDS THEREFROM) AND THE COMPANY'S PLAN OF
REORGANIZATION, PURSUANT TO WHICH THE COMPANY EMERGED FROM CHAPTER 11
CONCURRENTLY WITH THE CLOSING OF THE PRIVATE NOTE OFFERING (THE DATE OF THE
EFFECTIVENESS OF THE PLAN OF REORGANIZATION AND THE CLOSING OF THE PRIVATE NOTE
OFFERING BEING HEREIN REFERRED TO AS THE "EFFECTIVE DATE"). "PRO FORMA" RESULTS
OF OPERATIONS HAVE BEEN DESCRIBED IN THE COMPANY'S PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS INCLUDED HEREIN, GIVING EFFECT TO (I) CONSUMMATING THE
PRIVATE NOTE OFFERING AND ENTERING INTO THE SENIOR CREDIT FACILITY, (II)
CONSUMMATING THE PLAN OF REORGANIZATION, (III) CLOSING 341 STORES, (IV)
OBTAINING RENT CONCESSIONS ON EXISTING STORES, (V) CONSOLIDATING CERTAIN OF THE
COMPANY'S CORPORATE OFFICES, AND (VI) APPLYING FRESH START ACCOUNTING IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") AS IF EACH HAD
OCCURRED ON FEBRUARY 4, 1996 (WITH RESPECT TO THE PRO FORMA 1996 RESULTS).
REFERENCES TO THE 413 STORES OPERATED BY THE COMPANY GIVE EFFECT TO THE CLOSING
OF 67 STORES BETWEEN THE EFFECTIVE DATE AND THE END OF 1997. 375 OF THE
COMPANY'S STORES ARE COUNTY SEAT STORES, 14 ARE COUNTY SEAT OUTLET STORES, 22
ARE LEVI'S OUTLET STORES, AND 2 ARE OLD FARMER'S ALMANAC GENERAL STORES.

THE COMPANY

The Company is among the nation's largest mall-based specialty retailers of
casual apparel, operating 413 stores in 41 states in the midwestern, southern,
and eastern regions of the United States. Under the direction of a new
management team, the Company's merchandise mix has recently been updated to
consist of casual shirts, sweaters, knit tops, khakis, jeans, dresses and
accessories for men, women, and teens. The Company's products are now primarily
manufactured under private label, which, in the Company's view, offers customers
quality comparable to branded merchandise at significantly lower prices and
generates higher gross margins than the Company has historically achieved. For
the nine months ended November 1, 1997 (the "Pre-Emergence Period"), the Company
generated Pro Forma net sales and EBITDA of approximately $233.7 million and
$7.8 million, respectively. As described below, the Company has made several
fundamental changes in its merchandising strategy.

During the period from 1992 to 1994, the Company expanded from 605 stores,
generating net sales of $458.9 million, EBITDA of $42.9 million, and an EBITDA
margin of 9.3%, to 701 stores, generating net sales of $588.3 million, EBITDA of
$48.2 million, and an EBITDA margin of 8.2%. However, by 1995 the Company's
EBITDA margin declined to 5.6% primarily due, in the Company's view, to the
following: (i) the Company, in an attempt to further its expansion strategy,
opened stores without sufficient regard to the profitability of each location;
(ii) in response to increased price competition on Levi's merchandise, the
Company unsuccessfully expanded its offering of branded apparel in the face of
stiff competition from mall-based department stores; (iii) the Company failed to
competitively source merchandise for its private-label program; and (iv) apparel
retailers generally experienced weak sales. By 1996, in the wake of declining
sales and deteriorating EBITDA margins, the Company was unable to meet scheduled
interest

1
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payment obligations on its then outstanding subordinated indebtedness. As a
result of the foregoing, in October 1996, the Company filed a petition (the
"Chapter 11 Filing") for reorganization relief under Chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code") with the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court").

In December 1996, the Company retained a new management team led by Sam
Forman, the Company's president, chief executive officer, and chairman of the
board of directors. In January and February 1997, the new management team
developed a business plan designed to enhance the Company's profitability and
increase gross margins by reducing costs, implementing a new merchandising
strategy that primarily emphasizes switching from branded to private label
apparel and offering more tops than bottoms, and capitalizing on the Company's
nationally recognized brand name and large store base.

Mr. Forman has over forty years of retailing and manufacturing experience in
the apparel industry and has been an innovator in manufacturing and retailing
value-priced private-label apparel, the cornerstone of the Company's new
merchandising strategy. Mr. Forman has implemented successful business
strategies for apparel retailers by maximizing profitability through direct
sourcing, value-oriented merchandising programs, and internal cost controls.
Most recently, Mr. Forman was president and chief operating officer of American
Eagle Outfitters, Inc. ("American Eagle"), a mall-based specialty retailer.

BUSINESS STRATEGY

The new management team has implemented a business strategy designed to
re-establish the Company as a leading national retailer of high-quality,
value-priced casual apparel and to restore its profitability and EBITDA to
historical levels. The principal elements of this business strategy are similar
to those implemented by Mr. Forman at American Eagle and include: (i) reducing
costs and closing unprofitable stores, (ii) implementing a new merchandising
strategy, and (iii) initiating a controlled expansion program.

PHASE ONE: COST REDUCTIONS

The Company has continued to implement a comprehensive cost control program
during the 39 weeks ended November 1, 1997, that includes five key components:
(i) closing approximately 330 unprofitable stores (137 of which closed in 1997),
which increased Pro Forma EBITDA before special charges for the Pre-Emergence
Period by approximately $16.5 million, (ii) obtaining rent concessions on
existing stores which would have decreased rent expense by approximately $3.6
million for the Pre-Emergence Period, (iii) reducing selling, general and
administrative expenses through personnel reductions associated with closed
stores and corporate consolidations, which would have increased EBITDA before
special charges by approximately $1.8 million for the Pro Forma Pre-Emergence
Period compared to the comparable nine-month period for 1996, (iv) consolidating
its corporate infrastructure by closing its Dallas and deciding to close the
Minneapolis corporate offices, which the Company expects to result in
approximately $0.3 million in annual cost savings, and (v) establishing a new
corporate "culture" focused on cost controls.

PHASE TWO: NEW MERCHANDISING STRATEGY

Prior to December 1996, the Company sourced products primarily from Levi
Strauss and other branded apparel manufacturers. As the Company lowered retail
prices on branded jeans and other branded apparel to meet those offered by its
competitors, its profitability deteriorated. Utilizing its extensive apparel
manufacturing background and significant contacts with domestic and
international vendors, the Company's new management team has initiated a
merchandising strategy focused on (i) competitively sourcing private-label
rather than branded merchandise, (ii) offering high-quality, private-label
merchandise at value prices, and (iii) improving the Company's product mix by
expanding the offering of women's apparel and increasing the ratio of tops to
bottoms.

The new management team has aggressively sought to reduce merchandise unit
costs to increase gross margins and enable the Company to offer lower retail
prices consistent with its value-priced strategy. By reducing merchandise unit
costs, the Company has been able to lower retail prices and reposition itself as
a value-priced, private-label retailer, while improving gross margins. For
example, for the nine months ended November 1, 1997, the average retail price
per unit at the COUNTY SEAT stores was $14.40 compared to

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$19.65 for the nine months ended November 2, 1996. For the nine months ended
November 1, 1997, the average cost per unit at the COUNTY SEAT stores was $7.53
compared to $11.27 for the nine months ended November 2, 1996. For the nine
months ended November 1, 1997, the retail gross margin before special charge at
the COUNTY SEAT stores was 45.2% compared to 40.4% for the nine months ended
November 2, 1996. The Company's new merchandising strategy has improved unit
sales volume. For the nine months ended November 1, 1997, merchandise sales at
the COUNTY SEAT stores totaled 13.7 million units compared to 11.7 million units
for the nine months ended November 2, 1996. In addition to its commitment to
competitive sourcing, the Company has been focusing on emphasizing tops relative
to bottoms and on expanding its women's apparel offering. By placing more
emphasis on women's wear and on tops, the Company expects to continue to improve
unit sales and profitability.

The new management team initiated its sourcing plan and other elements of
its merchandising strategy shortly after its arrival in December 1996. Although
the Company has experienced improved operating results as the new management
team began implementing the business strategy, the effects of the merchandising
strategy are not fully reflected in the operating results for the period ending
November 1, 1997 due to various factors, including (i) the inability to cancel
previously ordered merchandise, (ii) long lead times (between 120 and 150 days)
required for overseas merchandise deliveries, and (iii) the need to take
significant markdowns on prior management's merchandise, particularly in the
first quarter of 1997. Additionally, management recorded in the third quarter of
1997 a special charge in the amount of $12.0 million for excess markdowns
relating to closed stores. The table below shows the actual improvements in the
Company's performance with respect to unit sales and retail gross margin
resulting from the implementation of the new merchandising strategy.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------
<S> <C> <C>
NOVEMBER 1, NOVEMBER 2,
1997(1) 1996(1)
----------- -----------
Units sold (in millions)............................................................... 13.7 11.7
Average selling price per unit......................................................... $ 14.40 $ 19.65
Average cost per unit.................................................................. $ 7.53 $ 11.27
Retail gross profit ($ in millions).................................................... $ 113.4 $ 161.80
Retail gross profit before special charge(2)........................................... 45.2% 40.4%
Retail gross profit after special charge(2)............................................ 40.9% 40.4%
</TABLE>

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

(1) Represents only results of the 375 County Seat Stores open at the end of
1997.

(2) Retail gross margin is presented before and after a special charge to
liquidate excess inventory. The special charge of approximately $12.0
million was recorded within cost of goods sold and relates to the
liquidation of excess inventory from purchase commitments in early 1997 for
Fall 1997 merchandise based upon a chain of over 500 stores, of which 137
were closed by the time the merchandise was received See Note 8 to the
consolidated balance sheet at November 1, 1997, for a discussion of the
special charge.

PHASE THREE: CONTROLLED GROWTH

Upon the successful implementation of the Company's merchandising strategy,
the Company expects to commence a controlled program of opening between 15 to 20
new stores annually as well as to deploy capital expenditures toward the
remodeling of existing stores. Key factors to be considered prior to opening any
new store include store location, mall tenant mix, and mall sales productivity.

PLAN OF REORGANIZATION

On October 29, 1997, the Plan of Reorganization was consummated. As part of
the Plan, the Company issued and sold in a private placement 85,000 Units, each
unit consisting of $1,000 principal amount of Private Notes and one Series A
Warrant to purchase 26.8908 shares of the Company's common stock, par value
$0.01 per share. See "Plan of Reorganization."

3
<PAGE>
THE EXCHANGE OFFER

The Exchange Offer applies to $85,000,000 aggregate principal amount of the
Private Notes. The form and terms of the Exchange Notes are identical in all
material respects to the form and terms of the Private Notes except that the
exchange will have been registered under the Securities Act, and, therefore, the
Exchange Notes will not bear legends restricting the transfer thereof and
holders of the Exchange Notes will not be entitled to any of the registration
rights of holders of the Private Notes under the Registration Rights Agreement,
which rights will terminate upon consummation of the Exchange Offer. The
Exchange Notes will evidence the same indebtedness as the Private Notes (which
they replace) and will be issued under, and be entitled to the benefits of, the
Indenture. For further information and for definitions of certain capitalized
terms used below, see "Description of the Notes."

<TABLE>
<S> <C>
The Exchange Offer.................. The Company is hereby offering to exchange $1,000
principal amount of Exchange Notes for each $1,000
principal amount of Private Notes that are properly
tendered and accepted. The Company will issue
Exchange Notes on or as promptly as practicable after
the Expiration Date. As of the date hereof, there is
$85,000,000 aggregate principal amount of Private
Notes outstanding. The terms of the Exchange Notes
and the Private Notes are identical, except that the
Exchange Notes have been registered under the
Securities Act and, therefore, will not bear legends
restricting their transfer. See "The Exchange Offer."

Resale of the Exchange Notes........ Based on interpretations by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that the Exchange
Notes issued pursuant to the Exchange Offer in
exchange for Private Notes may be offered for resale,
resold and otherwise transferred by a holder thereof
without compliance with the registration and
prospectus delivery provisions of the Securities Act,
PROVIDED that the holder is acquiring Exchange Notes
in the ordinary course of its business, is not
participating and has no arrangement or understanding
with any person to participate in the distribution of
the Exchange Notes and is not an "affiliate" of the
Company within the meaning of Rule 405 under the
Securities Act. Each broker-dealer who holds Private
Notes acquired for its own account as a result of
market-making or other trading activities and who
receives Exchange Notes pursuant to the Exchange
Offer for its own account in exchange therefor must
acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.

4
<PAGE>

<TABLE>
<S> <C>
holder of Private Notes who tenders in the Exchange
Offer with the intention to participate, or for the
purpose of participating, in a distribution of the
Exchange Notes could not rely on the above-referenced
position of the staff of the Commission and, in the
absence of an exemption therefrom, would have to
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with
any resale transaction. Failure to comply with such
requirements in such instance could result in such
holder incurring liability under the Securities Act
for which the holder is not indemnified by the
Company. See "The Exchange Offer--Resale of the
Exchange Notes."

Registration Rights Agreement....... The Private Notes were sold by the Company on October
29, 1997 to Jefferies & Company, Inc. (the "Initial
Purchaser") pursuant to a Purchase Agreement, dated
October 23, 1997, by and among the Company and the
Initial Purchaser (the "Purchase Agreement").
Pursuant to the Purchase Agreement, the Company and
the Initial Purchaser entered into a Registration
Rights Agreement dated as of October 29, 1997 (the
"Registration Rights Agreement"), which grants the
holders of the Private Notes certain exchange and
registration rights. The Exchange Offer is intended
to satisfy such rights, which will terminate upon the
consummation of the Exchange Offer. The holders of
the Exchange Notes will not be entitled to any
exchange or registration rights with respect to the
Exchange Notes. See "The Exchange Offer-- Termination
of Certain Rights." The Company will not receive any
proceeds from, and has agreed to bear the expenses
of, the Exchange Offer.

Expiration Date..................... The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1998, unless the Exchange
Offer is extended by the Company in its sole
discretion, in which case the term "Expiration Date"
shall mean the latest date and time to which the
Exchange Offer is extended. See "The Exchange
Offer--Expiration Date; Extensions; Amendments."

Procedures for Tendering Private
Notes............................. Each holder of Private Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with such
Private Notes and any other required documentation to
First Trust National Association, as exchange agent
(the "Exchange Agent"), at the address set forth
herein. By executing the Letter of Transmittal, the
holder will represent to and agree with the Company
that, among other things, (i) the Exchange Notes to
be acquired by such holder of Private Notes in
connection with the Exchange Offer are being acquired
by such holder in the ordinary course of its
business,
</TABLE>

5
<PAGE>

<TABLE>
<S> <C>
(ii) such holder has no arrangement or understanding
with any person to participate in a distribution of
the Exchange Notes, and (iii) such holder is not an
"affiliate," as defined in Rule 405 under the
Securities Act, of the Company. If the holder is a
broker-dealer that will receive Exchange Notes for
its own account in exchange for Private Notes that
were acquired as a result of market-making or other
trading activities, such holder will be required to
acknowledge in the Letter of Transmittal that such
holder will deliver a prospectus in connection with
any resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus, such
holder will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities
Act. See "The Exchange Offer--Procedures for
Tendering."

Special Procedures for Beneficial
Owners............................ Any beneficial owner whose Private Notes are held
through a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender
such Private Notes in the Exchange Offer should
contact such intermediary promptly and instruct such
intermediary to tender on such beneficial owner's
behalf. See "The Exchange Offer--Procedures for
Tendering."

Guaranteed Delivery Procedures...... Holders of Private Notes who wish to tender their
Private Notes and whose Private Notes are not
immediately available or who cannot deliver their
Private Notes, the Letter of Transmittal or any other
documentation required by the Letter of Transmittal
to the Exchange Agent prior to the Expiration Date
must tender their Private Notes according to the
guaranteed delivery procedures set forth under "The
Exchange Offer--Guaranteed Delivery Procedures."

Acceptance of the Private Notes and
Delivery of the Exchange Notes.... Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Company will
accept for exchange any and all Private Notes that
are properly tendered in the Exchange Offer prior to
the Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be delivered on
the earliest practicable date following the
Expiration Date. See "The Exchange Offer--Terms of
the Exchange Offer."

Withdrawal Rights................... Tenders of Private Notes may be withdrawn at any time
prior to the Expiration Date. See "The Exchange
Offer-- Withdrawal of Tenders."

Certain Federal Income Tax
Considerations.................... For a discussion of certain federal income tax
considerations relating to the exchange of the
Exchange Notes for the Private Notes, see "Certain
United States Federal Income Tax Considerations."

Exchange Agent...................... First Trust National Association is serving as the
Exchange Agent in connection with the Exchange Offer.
First Trust
</TABLE>

6
<PAGE>

<TABLE>
<S> <C>
National Association also serves as Trustee under the
Indenture and as Security Agent under the Security
Agreement.

Consequences of Failure to Private Notes that are not tendered or that are not
Exchange.......................... properly tendered will, following the completion of
the Exchange Offer, continue to be subject to the
existing restrictions upon transfer thereof under the
Securities Act and, upon consummation of the Exchange
Offer, certain registration rights under the
Registration Rights Agreement will terminate. Such
Private Notes will, following consummation of the
Exchange Offer, bear interest at the same rate as the
Exchange Notes. The liquidity of the market for a
Holder's Private Notes could be adversely affected
upon completion of the Exchange Offer if such Holder
does not participate in the Exchange Offer. See "Risk
Factors--Failure to Exchange Private Notes."
</TABLE>

7
<PAGE>
THE EXCHANGE NOTES

<TABLE>
<S> <C>
Notes Offered....................... $85,000,000 aggregate principal amount of 12 3/4%
Senior Notes due 2004, Series B.

Maturity............................ November 1, 2004.

Interest Rate and Payment Dates..... The Exchange Notes will bear interest at a rate of
12 3/4% per annum, payable in cash semi-annually in
arrears on each November 1 and May 1, commencing May
1, 1998.

Security Agreement.................. The Company initially placed $15.5 million of the net
proceeds realized from the sale of the Private Notes
into the Security Account to be held by the Security
Agent for the benefit of the holders of the Notes.
Such funds, together with the proceeds from the
investment thereof, will be utilized to pay interest
on the Notes to May 1, 1999. Upon consummation of the
Exchange Offer, holders of the Exchange Notes shall
be entitled to the benefits of the Security Agreement
and the Security Account. Pending disbursement of
funds from the Security Account, the funds in the
Security Account will be invested in Pledged
Securities (as defined herein). See "Description of
the Notes--Security Account."

Optional Redemption................. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after
November 1, 2001, at 106.3750% of the principal
amount thereof, plus accrued and unpaid interest, if
any, declining ratably to 100% of the principal
amount thereof, plus accrued and unpaid interest, if
any, on or after November 1, 2003. In addition, at
any time prior to November 1, 2001, the Company may
redeem up to one-third of the principal amount of
outstanding Notes with the proceeds of one or more
Primary Offerings at 112.75% of the principal amount
thereof, plus accrued and unpaid interest, if any, to
the redemption date; provided, however, that at least
two-thirds of the original principal amount of the
Notes are outstanding immediately following such
redemption. See "Description of the Notes-- Optional
Redemption."

Mandatory Redemption................ None.

Ranking............................. The Notes will be senior unsecured indebtedness of
the Company, except to the extent collateralized by a
first priority security interest in the Security
Account. The Notes will also rank PARI PASSU in right
of payment with all senior indebtedness of the
Company and will be senior in right of payment to all
subordinated indebtedness of the Company. Except to
the extent collateralized by a first priority
security interest in the Security Account, the Notes
will be effectively subordinated to secured
indebtedness of the Company, including indebtedness
outstanding under the Senior Credit Facility, to the
extent of the assets securing such
</TABLE>

8
<PAGE>

<TABLE>
<S> <C>
indebtedness. As of the Effective Date, the Company
had $99.0 million of indebtedness outstanding
(presentation of this amount differs from that of the
consolidated balance sheet at November 1, 1997 as a
result of the recognition of $7.6 million of Series A
Warrants attached to the debt, which is presented as
a discount to the Senior Notes in accordance with
generally accepted accounting principles), $14.0
million of which was secured indebtedness. See "Risk
Factors-- Substantial Leverage and Ability to Service
Debt."

Change of Control................... Upon a Change of Control (as defined herein), the
Company will be required to make an offer to
repurchase all outstanding Notes at a purchase price
equal to 101% of the aggregate principal amount
thereof, together with accrued and unpaid interest,
if any, to the date of repurchase. See "Description
of the Notes--Repurchase upon Change of Control."

Certain Covenants................... The indenture governing the Notes (the "Indenture")
will, among other things, restrict the ability of the
Company to incur additional indebtedness, create
liens, engage in sale-leaseback transactions, pay
dividends or make distributions in respect of its
capital stock, make investments or certain other
restricted payments, sell assets or stock of
subsidiaries, enter into transactions with
shareholders or affiliates, or effect a consolidation
or merger. These limitations will, however, be
subject to important qualifications and exceptions.
See "Description of the Notes--Certain Covenants."
</TABLE>

RISK FACTORS

AN INVESTMENT IN THE EXCHANGE NOTES INVOLVES CERTAIN RISKS THAT A POTENTIAL
INVESTOR SHOULD CAREFULLY EVALUATE PRIOR TO MAKING AN EXCHANGE OF PRIVATE NOTES
FOR THE EXCHANGE NOTES. SEE "RISK FACTORS," IMMEDIATELY FOLLOWING THIS SUMMARY,
FOR A DISCUSSION OF CERTAIN FACTORS TO BE CONSIDERED IN EVALUATING THE COMPANY,
ITS BUSINESS, AND AN INVESTMENT IN THE NOTES.

9
<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA

The following table presents summary Pro Forma financial data for the
Company. The summary Pro Forma data for the Company include the effects of (i)
consummating the Private Note Offering and entering into the Senior Credit
Facility, (ii) consummating the Plan of Reorganization, (iii) closing 341
stores, (iv) obtaining rent concessions on existing stores, (v) consolidating
certain of the Company's corporate offices, and (vi) applying Fresh Start
Accounting under generally accepted accounting principles ("GAAP") as if each
had occurred on February 4, 1996 (with respect to the Pro Forma 1996 and Pro
Forma results for the 39 weeks ended November 1, 1997). The information set
forth below should be read in conjunction with the discussion under "Pro Forma
Consolidated Statement of Operations." See the Company's Pro Forma Consolidated
Statement of Operations, "Management's Discussion and Analysis of Financial
Condition and Results of Operations-- Changes in Method of Accounting,"
"Selected Historical Financial Data."

COUNTY SEAT STORES, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE 52 WEEKS ENDED FEBRUARY 1, 1997
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA AS
HISTORICAL ADJUSTMENTS ADJUSTED
---------- ----------- ----------
<S> <C> <C> <C>
Net sales................................................................. $ 538,260 $(156,741)(a) $ 381,519
Cost of sales, including buying and occupancy............................. 416,389 (132,651)(a) 283,738
---------- ----------- ----------
Gross profit............................................................ 121,871 (24,090) 97,781
Selling, general and administrative expenses.............................. 126,561 (39,118)(a) 82,143
(400)(b)
(4,900)(c)
Depreciation and amortization............................................. 11,051 (3,444)(d) 12,212
4,605(e)
Reorganization costs...................................................... 43,752 (43,752)(f) --
Interest expense, net..................................................... 15,445 (2,557)(g) 12,888
---------- ----------- ----------
Loss before income taxes and extraordinary item......................... (74,938) (65,476) (9,462)
Income taxes (benefit).................................................... (762) -- (762)
---------- ----------- ----------
Loss before extraordinary item.......................................... $ (74,176) $ (65,476) $ (8,700)
---------- ----------- ----------
---------- ----------- ----------

Other Data:
EBITDA(h)............................................................... $ (4,490) $ 15,638
---------- ----------
---------- ----------
</TABLE>

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

(a) Reflects the elimination of results related to the 341 closed or decided to
be closed stores from the beginning of 1996 through the end of 1997 and the
consolidation of certain regional offices.

(b) Reflects the planned closing of the Dallas and the Minneapolis corporate
offices and the opening of the Company's new corporate headquarters in New
York.

(d) Reflects the reduction in depreciation expense related to property and
equipment of closed stores and the write-off of assets recorded as a
component of reorganization costs associated with closed stores, assuming
closure occurred February 4, 1996.

(e) Reflects the amortization of the Reorganization Value in Excess of Amounts
Allocated to Identified Assets, over a 15 year period, assuming fresh start
accounting was recorded as of February 4, 1996.

10
<PAGE>
(f) Reflects the elimination of the provision for reorganization costs
associated with store closures and professional fees and other expenses
associated with the Chapter 11 case, assuming the Plan of Reorganization was
implemented on February 4, 1996.

(g) Reflects the adjustment to interest expenses, amortization of debt issuance
costs, and amortization of the debt discount to reflect restructured
capitalization of the Company related to the Private Note Offering and the
Senior Credit Facility.

(h) EBITDA represents income (loss) before interest, income taxes, depreciation
and amortization and reorganization costs. EBITDA is presented here to
provide additional information about the Company's operations. EBITDA is not
a measure of financial performance in accordance with GAAP and should not be
considered as an alternative to (i) net income (loss) as a measure of
performance (or any other measure of performance under GAAP) or (ii) cash
flows from operating, investing, or financing activities as an indicator of
cash flow or as a measure of liquidity.

COUNTY SEAT STORES, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE 39 WEEKS ENDED NOVEMBER 1, 1997
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA AS
HISTORICAL ADJUSTMENTS ADJUSTED
---------- ----------- ----------
<S> <C> <C> <C>
Net sales................................................................. $ 277,137 $ (43,427)(a) $ 233,710
Cost of sales, including buying and occupancy............................. 202,824 (35,725)(a) 167,099
Cost of sales, special charge............................................. 11,975 (11,975) --
---------- ----------- ----------
Gross profit.......................................................... 62,338 4,273 66,611
Selling, general and administrative expenses.............................. 71,465 (8,762)(a) 58,803
(300)(b)
(3,600)(c)
Depreciation and amortization............................................. 6,136 (3,150)(d) 6,468
3,482(e)
Reorganization costs...................................................... 38,405 (38,405)(f) --
Interest expense, net..................................................... 4,019 5,647(g) 9,666
---------- ----------- ----------
Loss before income taxes.............................................. (57,687) (49,361) (8,326)
---------- ----------- ----------
Income taxes (benefit).................................................... -- -- --
---------- ----------- ----------
Net loss.............................................................. $ (57,687) $ (49,361) $ (8,326)
---------- ----------- ----------
---------- ----------- ----------
Other Data:
EBITDA (h).............................................................. $ (9,127) $ 7,808
---------- ----------
---------- ----------
</TABLE>

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

(a) Reflects the elimination of results related to the 137 closed or decided to
be closed stores during the 39-week period and the consolidation of certain
regional offices.

(b) Reflects the planned closing of the Dallas and the Minneapolis corporate
offices and the opening of the Company's new corporate headquarters in New
York.

11
<PAGE>
(e) Reflects the amortization of the Reorganization Value in Excess of Amounts
Allocated to Identified Assets, over a 15 year period, assuming fresh start
accounting was recorded as of February 2, 1997.

(f) Reflects the elimination of the provision for reorganization costs
associated with store closures and professional fees and other expenses
associated with the Chapter 11 case, assuming the Plan of Reorganization was
implemented on February 2, 1997.

(g) Reflects the adjustment to interest expense, amortization of debt issuance
costs, and amortization of the debt discount, to reflect restructured
capitalization of the Company related to the Private Note Offering and the
Senior Credit Facility.

12
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA

The following table presents summary historical financial data for the
Company. The historical financial data of the Company for each of the fiscal
years in the three-year period ended February 1, 1997 have been derived from the
historical audited consolidated financial statements of the Company. The
statement of operations data for the nine months ended November 1, 1997 has been
derived from the Unaudited Consolidated Statement of Operations of the Company.
The November 1, 1997 balance sheet has been derived from the Company's audited
consolidated balance sheet. From October 17, 1996 until October 29, 1997 the
Company operated as a debtor-in-possession under Chapter 11 of the Bankruptcy
Code, which caused the Company to incur certain bankruptcy-related expenses. As
a result, the Company does not believe that its historical results of operations
are necessarily indicative of its results of operations as an ongoing entity
after the consummation of the Plan of Reorganization. The information set forth
below should be read in conjunction with the discussion under "Selected
Historical Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Risk Factors--Risks Related to
Projections," the Company's Audited and Unaudited Consolidated Financial
Statements, and the Company's Unaudited Pro Forma Statements of Operations.
<TABLE>
<CAPTION>
NINE NINE
MONTHS MONTHS
ENDED ENDED
NOVEMBER NOVEMBER
1994 1995 1996 2, 1996 1, 1997
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)

<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................................. $ 588.3 $ 619.2 $ 538.3 $ 400.4 $ 277.1
Gross profit before special charge(1).................. 167.8 167.2 121.9 87.7 74.3
Gross profit after special charge(2)................... 167.8 167.2 121.9 87.7 62.3
Income (loss) from operations.......................... 31.5 21.3 (15.7) (18.8) (15.3)
Reorganization expense................................. 43.8 42.4 38.4
Store Data:
Number of stores at end of period...................... 701 745 537 692 413
Increase (decrease) in same store sales(2)............. 7.4% (4.0)% (8.7)% (7.3)% (12.2)%
Other Data:
Gross profit % before special charge(1)................ 28.5% 27.0% 22.6% 21.9% 26.8%
Gross profit % after special charge(1)................. 28.5% 27.0% 22.6% 21.9% 22.5%
Total capital expenditures............................. $ 14.8 $ 13.1 $ 1.8 $ 1.8 $ 1.4
Depreciation and amortization.......................... 16.7 13.2 11.1 8.8 6.1
EBITDA before special charge(1)(3)..................... 48.2 34.5 (4.7) (9.9) 2.9
EBITDA after special charge(1)(3)...................... 48.2 34.5 (4.7) (9.9) (9.1)
BALANCE SHEET DATA:
Cash and cash equivalents (excludes restricted cash in
the Security Account)................................ $ 9.4
Restricted Cash in Security Account.................... 17.0
Inventories............................................ 74.7
Total assets........................................... 220.6
Total long-term debt (including current maturities).... 99.0(4)
Total shareholders' equity (deficit)................... 78.1
</TABLE>

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

13
<PAGE>
Fall merchandise based upon a chain of over 500 stores, of which 137 stores
were closed by the time the merchandise was received See Note 8 to the
consolidated balance sheet at November 1, 1997, for a discussion of the
special charge.

(2) Income (loss) from operations does not give effect to reorganization costs
of $43.8 million, $42.4 million and $38.4 million for 1996 and for the 39
weeks ended November 2, 1996 and November 1, 1997, respectively.

(3) EBITDA represents income (loss) before interest, income taxes, depreciation
and amortization, write-off of certain long-lived assets, and reorganization
costs. EBITDA is presented here to provide additional information about the
Company's operations. EBITDA is not a measure of financial performance under
Generally Accepted Accounting Principles (GAAP) and should not be considered
as an alternative to (i) net income (loss) as a measure of performance (or
any other measure of performance in accordance with GAAP) or (ii) cash flows
from operating, investing, or financing activities as an indicator of cash
flows or as a measure of liquidity. EBITDA is presented before and after
special charge.

(4) Total long-term debt (including current maturities) includes borrowings of
$12.3 million under the Senior Credit Facility, $1.7 million in notes
payable to various taxing authorities as provided for in the Plan of
Reorganization and $85.0 million of Senior Debt. This presentation differs
from that of the Consolidated Balance Sheet at November 1, 1997 as a result
of the recognition of $7.6 million of Series A Warrants attached to the debt
which is presented as a discount to the Senior Notes in accordance with
GAAP.

RECENT DEVELOPMENTS

The Company's preliminary results, which are subject to adjustment, indicate
that net sales for the thirteen weeks of November 1997, December 1997 and
January 1998 are approximately $117.4 million, representing a 3.0% decline in
same store sales relative to the comparable period of the prior year. The
Company believes that the decline in same store sales is primarily due to a
decline in Levi's apparel sales.

14
<PAGE>
RISK FACTORS

THE RISK FACTORS SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION APPEARING
IN THIS PROSPECTUS SHOULD BE CAREFULLY CONSIDERED BEFORE DECIDING TO SURRENDER
THE PRIVATE NOTES IN EXCHANGE FOR EXCHANGE NOTES PURSUANT TO THE EXCHANGE OFFER.
CERTAIN STATEMENTS IN THIS PROSPECTUS, INCLUDING STATEMENTS RELATING TO THE
COMPANY'S EXPECTED OPERATIONS AND FINANCING ACTIVITIES, ARE FORWARD-LOOKING
STATEMENTS THAT INVOLVE CERTAIN RISKS AND UNCERTAINTIES. THESE FORWARD-LOOKING
STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, (I) CONTINUING SUCCESS WITH, AND
MARKET ACCEPTANCE OF, FUNDAMENTAL CHANGES IN THE COMPANY'S MERCHANDISING
STRATEGY DESCRIBED HEREIN; (II) CHANGES IN CONSUMER PREFERENCES, IN THE
ADVERTISING MARKET FOR THE COMPANY'S PRODUCTS, IN THE APPAREL INDUSTRY OR MARKET
GENERALLY OR THAT SEGMENT OF WHICH THE COMPANY SPECIFICALLY TARGETS; (III)
CHANGES IN THE FINANCIAL CONDITION OF THE COMPANY'S CUSTOMERS, IN THE GENERAL
CONDITION OF THE UNITED STATES ECONOMY, IN THE AVAILABILITY OF KEY PERSONNEL, IN
FOREIGN CURRENCY EXCHANGE RATES, IN INDUSTRY CAPACITY, AND IN BRAND AWARENESS;
AND THE OTHER MATTERS SET FORTH IN THIS PROSPECTUS AND DESCRIBED FROM TIME TO
TIME IN THE COMPANY'S ANNUAL OR QUARTERLY REPORTS FILED WITH THE COMMISSION. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS ANTICIPATED IN
THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF NUMEROUS FACTORS, INCLUDING, BUT
NOT LIMITED TO, THOSE REFERRED TO ABOVE AND, AMONG OTHERS, THOSE DISCUSSED IN
"RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS," AND "BUSINESS."

SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT

Since the consummation of the Private Note Offering, the Senior Credit
Facility and the Plan of Reorganization, the Company has remained highly
leveraged and has indebtedness that is substantial in relation to shareholders'
equity. As of November 1, 1997, the Company has an aggregate of $99.0 million of
outstanding indebtedness (excluding approximately $37.0 million of letters of
credit and bankers' acceptances). Presentation of total debt differs from that
of the Consolidated Balance Sheet at November 1, 1997 as a result of the
recognition of $7.6 million of Series A warrants attached to the debt, which is
presented as a discount to the Senior Notes in accordance with generally
accepted accounting principles.

The Company's high leverage could have important consequences to the holders
of the Notes, including the following: (i) the Company's ability to obtain
additional financing for working capital, capital expenditures, acquisitions, or
general corporate or other purposes may be impaired in the future; (ii) a
substantial portion of the Company's cash flow from operations must be dedicated
to the payment of principal and interest on its indebtedness, thereby reducing
the funds available to the Company for other purposes; (iii) the Company may be
substantially more leveraged than certain of its competitors and therefore may
be at a competitive disadvantage; and (iv) the Company's ability to adjust
rapidly to changing market conditions may be hindered and could make the Company
more vulnerable in the event of a downturn in its business or general economic
conditions.

The Company's ability to make scheduled payments of principal and interest
or to refinance its obligations with respect to its indebtedness will depend on
its financial and operating performance, which, in turn, will be subject to
prevailing economic conditions and to certain financial, business, and other
factors beyond its control. For the 39 weeks ended November 2, 1996 and the 39
weeks ended November 1, 1997, the Company had net losses of $77.1 million and
$57.7 million, respectively. If the Company's cash flow and capital resources
are insufficient to fund its debt service obligations, the Company may be forced
to reduce or delay planned expansion and capital expenditures, sell assets,
obtain additional equity capital, or restructure its indebtedness. There can be
no assurance that the Company's operating results, cash flow, and capital
resources will be sufficient for payment of its indebtedness in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

If the Company is unable to generate sufficient cash flow or otherwise
obtain funds necessary to make required payments on its indebtedness or if the
Company otherwise fails to comply with the various covenants in agreements
governing its indebtedness, the Company will be in default under the terms

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thereof, which would permit the holders of such indebtedness to accelerate the
maturity of such indebtedness and could cause defaults under other indebtedness
of the Company or result in the bankruptcy of the Company. Such defaults or any
bankruptcy of the Company resulting therefrom could delay or preclude payment of
principal of, or interest on, the Notes. There can be no assurance that, upon
any such default or bankruptcy, the assets of the Company would be sufficient to
repay the Notes. See "--Subordination of the Notes" and "--Original Issue
Discount Consequences."

SUBORDINATION OF THE NOTES

The Notes will be effectively subordinated to the Senior Credit Facility to
the extent of the assets securing such facility. The Senior Credit Facility will
be secured by substantially all the Company's assets, with the exception of the
funds and Pledged Securities in the Security Account. In the case of an Event of
Default (as defined in the Indenture) or a bankruptcy or insolvency proceeding
involving the Company, the holders of the Notes would be unsecured creditors of
the Company. The Senior Credit Facility will also be cross-defaulted to the
Notes, so that any Default (as defined herein) or Event of Default under the
Indenture will also result in an event of default under the Senior Credit
Facility.

Accordingly, the ability of the Company to repay the Notes following an
Event of Default or a bankruptcy or insolvency proceeding involving the Company
or an event of default under the Senior Credit Facility will, in all likelihood,
be subject to the prior repayment of the Company's indebtedness under the Senior
Credit Facility. There can be no assurance that the assets of the Company would
be sufficient to repay the Notes following any such event, particularly if the
proceeds of such assets are first applied to satisfy the Company's obligations
under the Senior Credit Facility.

SUCCESSFUL EXECUTION OF BUSINESS STRATEGY

The Company is currently implementing a new business strategy, which
consists of a number of cost-cutting and revenue-enhancing initiatives including
a change in merchandising strategy to focus on private-label apparel. There can
be no assurance that the merchandising, operating and other business strategies
implemented by the Company's new management team will continue to be successful
or that the Company will continue to increase revenue, improve its operations,
and remain profitable. Moreover, if the implementation of the new business
strategy is not successful and the Company is unable to generate sufficient
operating funds to pay interest on the Notes and other indebtedness of the
Company, including indebtedness under the Senior Credit Facility, there can be
no assurance that alternative sources of financing will be available to the
Company or, if available, that such financing will be on commercially reasonable
terms. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview" and "Business."

NONCOMPARABILITY OF FINANCIAL INFORMATION

Information reflecting the results of operations and financial condition of
the Company subsequent to the Chapter 11 Filing are not comparable to prior
periods due to (i) store closings undertaken during the Company's
reorganization; (ii) the replacement of the management team and the
restructuring of the Company's store operations and general and administrative
activities; (iii) the Company's Chapter 11 case, including the costs and
expenses relating thereto, and the effect of the settlement of certain related
liabilities; and (iv) the application of Fresh Start Accounting, pursuant to
which the Company's assets are stated at "reorganization value," which is
defined as the value of the entity (before considering liabilities) on a
going-concern basis following the reorganization and represents an estimate of
the amount a willing buyer would pay for the assets of the Company immediately
after the reorganization. In addition, because the Company has been in a
restructuring phase and has continued to incur costs and expenses relating to
its Chapter 11 case, the results of operations since October 1996 may not be
indicative of the Company's future performance. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

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RESTRICTIVE DEBT COVENANTS

The Indenture contains a number of covenants that will impose significant
operating and financial restrictions on the Company and its subsidiary. Such
restrictions affect, and in many respects significantly limit or prohibit, among
other things, the ability of the Company and its subsidiary to incur additional
indebtedness, pay dividends, repay other indebtedness prior to stated
maturities, create liens on assets, make investments or acquisitions, engage in
mergers or consolidations, or engage in certain transactions with affiliates.
These restrictions could limit the ability of the Company in the future to
effect financings, make needed capital expenditures, withstand a downturn in the
Company's business or the economy in general, or otherwise conduct necessary
corporate activities. A failure by the Company or its subsidiary to comply with
these restrictions could lead to a default under the terms of the Indenture and
the Notes, notwithstanding the ability of the Company to meet its debt service
obligations. Upon the occurrence of an Event of Default, the holders of the
Notes could elect to declare all such indebtedness, together with accrued and
unpaid interest thereon, to be immediately due and payable, and there can be no
assurance that the Company would be able to make such payments or borrow
sufficient funds from alternative sources to make any such payments. Even if
additional financing could be obtained, there can be no assurance that it would
be obtainable on commercially reasonable terms. See "Description of Notes."

In addition, the Senior Credit Facility contains covenants that are more
restrictive than those contained in the Indenture. Such covenants include
covenants related to the financial performance of the Company. The Company's
ability to comply with such covenants may be affected by events beyond its
control. There can be no assurance that the Company will be able to comply with
such covenants. A breach of any of the covenants under the Senior Credit
Facility could result in an event of default under the Senior Credit Facility.
Upon the occurrence of an event of default under the Senior Credit Facility, the
lenders under the Senior Credit Facility could elect to declare all obligations
to be immediately due and payable and terminate all commitments under the Senior
Credit Facility. If the lenders under the Senior Credit Facility took such
action, it would result in an Event of Default under the Indenture.

If the Company were unable to pay such amounts, the lenders under the Senior
Credit Facility could foreclose on the collateral securing the Company's
obligations thereunder. Such collateral consists of substantially all assets of
the Company. The Notes are unsecured and are effectively subordinated to the
Senior Credit Facility to the extent of the assets securing such facility. See
"Subordination of Notes" and "Description of Certain Indebtedness--Senior Credit
Facility."

REPURCHASE OF NOTES UPON A CHANGE OF CONTROL

If a Change of Control occurs, the Company must offer to purchase the Notes
at a purchase price equal to 101% of the principal amount thereof plus accrued
and unpaid interest, if any, to the date of repurchase. See "Description of
Notes--Repurchase upon Change of Control" and "--Certain Definitions." In
addition, if the Company merges or consolidates with or into, or sells all or
substantially all of its assets to, a person or entity that does not have
publicly-traded common equity for which the Series A Warrants become
exercisable, and the consideration for such transaction is not all cash, the
Company must offer to repurchase (a "Repurchase Offer") all the Series A
Warrants at the value of the common stock issuable upon exercise thereof less
the exercise price. If the Company must make a Repurchase Offer or an offer to
purchase the Notes upon a Change of Control, there can be no assurance that it
would have sufficient funds available to purchase any Notes or Series A Warrants
tendered. The Company would, then, likely be required to refinance the Notes and
borrow to repurchase the Series A Warrants. There can be no assurance that the
Company would be able to accomplish such refinancing or borrowing or, if such
refinancing or borrowing were to occur, that it would be accomplished on
commercially reasonable terms.

DEPENDENCE ON KEY PERSONNEL

The Company's success will be highly dependent upon the new management team,
including Mr. Sam Forman. The loss of Mr. Forman's services could have a
material adverse effect upon the implementation

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of the Company's business strategy and on the Company in general. Mr. Forman has
the right to terminate his employment agreement with the Company at any time on
sixty days' notice; however, unless such termination results from certain
specified actions or events, any unvested Series C Warrants (as defined herein)
distributed to Mr. Forman will not vest unless they have already vested, and Mr.
Forman will be prevented from being employed by competitors of the Company
(other than Forman Enterprises, Inc.) for a period of one year. See
"Management--Forman Employment Agreement."

The Company's success also depends upon other senior executives. No other
person employed by the Company is subject to an employment agreement. While the
Company believes that no other executive is as important to the success of the
Company as Mr. Forman, the loss of the services of a significant number of
senior executives could have a material adverse effect on the Company.

Certain important merchandising and sourcing activities of the Company are
performed by consultants who are employees and owners of Forman Enterprises,
Inc. ("Forman Enterprises"), which operates factory outlet stores that sell
casual apparel. Seventy percent of the common stock of Forman Enterprises is
owned by Mr. Forman and his family. The loss of the services of such consultants
could have an adverse effect on the Company. See "Certain Relationships."

COMPETITIVE NATURE OF THE COMPANY'S INDUSTRY

The retail apparel industry is highly competitive with price, selection,
quality, service, location, and store environment the principal competitive
factors. While the Company believes it is able to compete favorably as to each
of these factors, the Company believes it competes mainly on the basis of price,
merchandise selection, and customer service. Furthermore, the Company's success
largely depends upon its ability to gauge accurately the tastes of its customers
and provide merchandise that satisfies customer demand. Misjudgment of such
tastes could have a material and adverse effect on the Company's operations,
cash flows, and financial condition, it could also result in overstocked
inventory or lower profits due to markdowns. The Company competes with many
national and local retail stores, specialty apparel chains, department stores,
and mail order merchandisers. The Company also competes in certain locations
with retail and outlet stores operated by one of its suppliers, Levi Strauss &
Co. ("Levi Strauss"). Many of the Company's competitors have greater financial
and marketing resources than the Company. In addition, many of the Company's
competitors offer private-label merchandise that is comparable to the Company's
private-label merchandise.

IDENTIFYING CUSTOMER PREFERENCES

The Company's future success depends, in part, upon its ability to
anticipate and respond to customer preferences in a timely manner. Changes in
customer preferences for style, seasonal adaptation, adverse weather conditions,
or other reasons, if unsuccessfully identified, forecasted, or responded to by
the Company, could, among other things, lead to lower sales, excess inventories,
and higher markdowns. Those in turn could have a material adverse effect on the
Company's results of operations and financial condition.

IMPACT OF ECONOMIC CONDITIONS

Certain economic conditions affect the level of consumer spending on
merchandise offered by the Company, including, among others, business
conditions, interest rates, taxation, and consumer confidence in future economic
conditions. If the demand for apparel and related merchandise were to decline,
the Company's business and results of operations would be materially and
adversely affected. The Company's stores rely principally on mall traffic for
customers. Therefore, the Company depends upon the continued popularity of malls
as a shopping destination and the ability of mall anchor tenants and other
attractions to generate customer traffic for its stores. In addition, a
significant number of the Company's stores are concentrated in the midwest,
southern, and eastern regions of the United States. A decrease in mall traffic

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or a decline in economic conditions in the markets where the Company's stores
are located would materially and adversely affect the Company's growth, net
sales, results of operations, and profitability.

SEASONALITY

The Company, like most retailers, has a seasonal pattern of sales and
earnings. The Company has two major selling seasons: (i) back-to-school in the
third quarter and (ii) Christmas in the fourth quarter. Historically,
substantially all the Company's income from operations has been generated during
the third and fourth quarters. In addition, as is the case with other retailers,
the results of the Company's operations are subject to changes in consumer
demand associated with general economic conditions and to changes in consumer
preferences. The Company's results of operations may also fluctuate from quarter
to quarter in the future as a result of the amount and timing of sales
contributed by new stores and the integration of new stores into the operations
of the Company as well as other factors. An increase in the number of the
Company's stores can significantly affect results of operations on a
quarter-to-quarter basis.

INFORMATION SYSTEMS AND CONTROL PROCEDURES

Since the Chapter 11 Filing, the Company has taken steps to improve and,
where applicable, replace its management information systems to provide enhanced
support to all operating areas and currently anticipates aggregate expenditures
for hardware, software, labor, and compliance with year 2000 requirements of
approximately $6 million between 1997 and 1998. See "Business --Information
Systems." While the Company expects to continue to upgrade its management
information systems, there can be no assurance that the Company can successfully
implement such enhancements or that such enhancements will support the Company's
planned expansion strategy, or, if such upgrades and enhancements are not
successfully implemented, that the Company's current systems will continue to
support adequately its information requirements.

Moreover, while the Company believes its current management information
systems are generally adequate to support the Company's business operations,
certain deficiencies relating to the age and design of the systems, including,
without limitation, difficulties in planning, forecasting, allocating and
measuring performance through an integrated financial system, may adversely
affect the business operations of the Company in the near and long-term. There
can be no assurance that the Company's efforts to improve upon and enhance its
present management information systems will resolve or eliminate any such
existing or potential deficiencies.

As noted above, the Company has implemented a program designed to ensure
that all the Company's software will manage and manipulate data involving the
transition of dates from 1999 to 2000 without functional or data abnormality and
without inaccurate results related to such dates. Any failure on the part of the
Company to ensure that any such software complies with year 2000 requirements
could have a material adverse effect on the business, financial condition, and
results of operations of the Company.

RELIANCE ON KEY VENDORS

The Company's business is dependent upon its ability to purchase current
season apparel at competitive prices. The Company currently purchases inventory
primarily from foreign manufacturers and Levi Strauss. The Company owns no
manufacturing facilities.

Merchandise purchased from Levi Strauss represented approximately 30% of
total sales in 1996 and 26% for the nine months ended November 1, 1997. The
Company operates 22 Levi's Outlet stores pursuant to a license agreement with
Levi Strauss, which license agreement requires the Company to sell only
merchandise manufactured by Levi Strauss in the Levi's Outlet stores. The
Company's license agreement with Levi Strauss is scheduled to expire on July 31,
2000, although individual stores may continue to operate under the license until
the expiration of each such store's lease. There can be no assurance that the
Levi Strauss license for the Levi's Outlets will be renewed. A change in the
Company's relationship with Levi Strauss could have a material adverse effect on
the Company's business.

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The Company has no long-term contracts with suppliers and transacts business
principally on an order-by-order basis. Although the Company's relationship with
its key vendors is satisfactory, there can be no assurance that the Company will
be able to acquire merchandise from such vendors on favorable terms in the
future.

Purchasing merchandise from foreign suppliers subjects the Company to the
general risks of doing business abroad. These risks include cancellations or
delays in shipments, work stoppages, increases in import duties and tariffs,
changes in foreign exchange rates, changes in foreign laws and regulations, and
political instability. The Company believes that the loss of one or more of
these foreign suppliers would not have a long-term material adverse effect on
the Company, because merchandise purchased from foreign suppliers can be
obtained from other sources. However, the loss of certain foreign suppliers
could, in the short term, adversely affect the Company's business until
alternative arrangements can be secured. Trade terms are negotiated with each
vendor and may be modified from time to time. Substantially all the Company's
foreign purchases are currently paid for in U.S. dollars.

NEW STORES AND REMODELING EXISTING STORES

The Company intends to commence a controlled program of opening 15 to 20 new
stores annually as well as to deploy capital expenditures toward the remodeling
of existing stores. Accomplishing the Company's expansion goals will depend upon
a number of factors, including the identification of new markets in which the
Company can successfully compete, the ability to obtain suitably sized locations
for new stores at acceptable costs, the hiring and training of qualified
personnel, particularly at the store management level, the integration of new
stores into existing operations, the expansion of the Company's buying and
inventory capabilities and the availability of capital. There can be no
assurance that the Company will be able to achieve its store expansion goals,
manage growth effectively, successfully integrate planned new stores into the
Company's operations, or operate new stores profitably. Nor can there be any
assurance that remodeled stores will provide a satisfactory return on investment
through increased sales or otherwise.

FRAUDULENT CONVEYANCE

If a court, in a lawsuit brought by an unpaid creditor of the Company or a
representative of creditors, such as a trustee in bankruptcy, or the Company as
a debtor-in-possession, were to find under relevant federal or state fraudulent
conveyance statutes that the Company did not receive fair consideration or
reasonably equivalent value for incurring debt, including the Notes, and that,
at the time of such incurrence, the Company (i) was insolvent; (ii) was rendered
insolvent by reason of such incurrence; (iii) was engaged in a business or
transaction for which the assets remaining with the Company constituted
unreasonably small capital; or (iv) intended to incur, or believed that it would
incur, debts beyond its ability to pay such debts as they matured, such court
could void the Company's obligations under the Notes, subordinate the Notes to
other indebtedness of the Company, or take other action detrimental to the
holders of the Notes.

The measure of insolvency for these purposes would vary depending upon the
law of the jurisdiction being applied. Generally, however, a Company would be
considered insolvent for these purposes if the sum of such Company's liabilities
(including a fair estimate of the likely amount payable in respect of contingent
liabilities) were greater than the fair saleable value of all such Company's
property, or if the present fair saleable value of such Company's assets were
less than the amount that would be required to pay its probable liability on its
existing debts as they became absolute and matured. Moreover, regardless of
solvency or the adequacy of consideration, a court could void the Company's
obligations under the Notes, subordinate the Notes to other indebtedness of the
Company, or take other action detrimental to the holders of the Notes if such
court determined that the incurrence of debt, including the Notes, was made with
the actual intent to hinder, delay, or defraud creditors.

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The Company believes that the indebtedness represented by the Notes is being
incurred for proper purposes and in good faith without any intent to hinder,
delay, or defraud creditors, that the Company is receiving reasonably equivalent
value or fair consideration for incurring such indebtedness, that the Company is
and, after giving effect to the issuance of the Notes and the use of proceeds
therefrom, will continue to be, solvent under the applicable standards, and that
it has and will have sufficient capital for carrying on its businesses and will
be able to pay its debts as they mature.

LIMITATION ON USE OF NET OPERATING LOSSES AND BUILT-IN LOSSES

Under the Internal Revenue Code of 1986, as amended (the "Code"), the
utilization of net operating loss carryforwards ("NOLs") against future taxable
income is subject to limitation if a Company experiences an "ownership change"
as defined in the Code (the "Section 382 limitation"). Moreover, if such Company
experiences an ownership change, the ability to use recognized "built-in losses"
to offset other income may also be subject to the Section 382 limitation. As a
result of its reorganization under Chapter 11, the Company will be treated as
having experienced an ownership change. Thus, after emerging from Chapter 11,
the Company's ability to offset income in each post-reorganization taxable year
by its pre-reorganization NOLs and built-in losses will be limited to an amount
not to exceed the aggregate value of the stock of the Company immediately before
such change in control (taking into account in such calculation, however, the
value of all creditors' claims surrendered in connection with the Plan of
Reorganization) multiplied by the specific interest rate published monthly by
the Internal Revenue Service.

The operation and effect of Section 382 of the Code will be materially
different from that just described if the Company is subject to the special
rules for corporations in bankruptcy provided in Section 382(1)(5) of the Code.
In that case, the Company's ability to utilize its NOLs would not be limited as
described in the preceding paragraph. However, several other limitations would
apply to the Company under Section 382(1)(5) of the Code, including (i) the
Company's NOLs would be calculated without taking into account deductions for
interest paid or accrued in the current tax year and all other tax years ending
during the three-year period prior to the current tax year with respect to
creditors' claims that are exchanged for stock of the Company under the Plan of
Reorganization (resulting in a substantial reduction in the Company's NOLs) and
(ii) if the Company undergoes another ownership change within two years after
the Effective Date, the Company's Section 382 limitation with respect to that
ownership change will be zero. The Company believes that the provisions of
Section 382(1)(5) of the Code will apply to the ownership change occurring
pursuant to the Plan of Reorganization. However, the Company can elect to have
the regular Section 382 rules (described above) apply rather than the special
rules of Section 382(1)(5) of the Code. The Company has not yet determined
whether to elect application of the regular rules under Section 382 of the Code.

ORIGINAL ISSUE DISCOUNT CONSEQUENCES

The allocation of a portion of the issue price of the Private Notes to the
Series A Warrants resulted in the Notes having an issue price less than their
principal amount. The Notes were therefore treated as having been issued at a
discount. When a debt instrument is originally issued at a discount that is
equal to or greater than a DE MINIMIS amount, the debt instrument is treated as
having original issue discount ("OID") for U.S. federal income tax purposes.
Consequently, holders of the Exchange Notes generally will be required to
include amounts in gross income for U.S. federal income tax purposes in advance
of their receipt of the cash payments to which the income is attributable. See
"Certain U.S. Federal Income Tax Considerations--Taxation of the Notes--Original
Issue Discount" for a more detailed discussion of the U.S. federal income tax
consequences for the Company and the beneficial owners of the Notes resulting
from the purchase, ownership, and disposition of the Notes.

Furthermore, since the Notes are subject to the applicable high-yield
discount obligation rules, the Company will not be able to deduct the OID
attributable to the Notes until paid in cash or property or, in certain
circumstances, at all. See "Certain U.S. Federal Income Tax
Considerations--Taxation of the

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Notes--Certain Potential Federal Income Tax Consequences to the Company and to
Corporate Holders." Since the rules applicable to high-yield discount
obligations apply, the Company's after-tax cash flow will be less than if such
OID were deductible when accrued.

If a bankruptcy case is commenced by or against the Company under the
Bankruptcy Code after the issuance of the Notes, the claim of a holder of Notes
may be limited to an amount equal to the sum of (i) the initial offering price
and (ii) that portion of OID that is not deemed to constitute "unmatured
interest" for purposes of the Bankruptcy Code. Any OID that was not amortized as
of the date of any such bankruptcy filing would constitute "unmatured interest."
To the extent that the Bankruptcy Code differs from the Internal Revenue Code in
determining the method of amortization of original issue discount, a holder of
Notes may realize taxable gain or loss upon payment of such holder's claim in
bankruptcy.

EMERGENCE FROM CHAPTER 11

The Company emerged from Chapter 11 on the Effective Date. The Company's
experience in Chapter 11 may affect its ability to negotiate favorable trade
terms with manufacturers and other vendors and to negotiate favorable lease
terms with landlords. The failure to obtain such favorable terms could have a
material adverse effect on the Company and its financial performance. On the
Effective Date, the Company entered into the Senior Credit Facility, which will
provide the Company with a seasonal revolving line of credit in an amount of
$115 million, of which up to $90 million may be used to issue letters of credit
and bankers' acceptances, subject to satisfaction of various conditions. See
"Description of Certain Indebtedness--Senior Credit Facility."

LACK OF PUBLIC MARKET FOR SECURITIES

The Exchange Notes are new securities for which there is currently no
market. The Company does not intend to apply for listing of the Exchange Notes
on any securities exchange or for inclusion of the Exchange Notes in any
automated quotation system. The Company has been advised by the Initial
Purchaser that it currently intends to make a market in the Exchange Notes.
However, there can be no assurance as to the development or liquidity of any
market for the Exchange Notes. If a market for the Exchange Notes were to
develop, the Exchange Notes could trade at prices that may be higher or lower
than their principal amount depending upon many factors, including prevailing
interest rates, the Company's operating results, and the markets for similar
securities. Historically, the market for non-investment grade debt has been
subject to disruptions that have caused substantial volatility in the prices of
securities similar to the Exchange Notes. There can be no assurance that, if a
market for the Exchange Notes were to develop, such a market would not be
subject to similar disruptions.

FAILURE TO EXCHANGE PRIVATE NOTES

The Exchange Notes will be issued in exchange for Private Notes only after
timely receipt by the Exchange Agent of such Private Notes, a properly completed
and duly executed Letter of Transmittal and all other required documentation.
Therefore, holders of Private Notes desiring to tender such Private Notes in
exchange for Exchange Notes should allow sufficient time to ensure timely
delivery. Neither the Exchange Agent nor the Company is under any duty to give
notification of defects or irregularities with respect to tenders of Private
Notes for exchange. Private Notes that are not tendered or are tendered but not
accepted will, following consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof. In addition, any
holder of Private Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer who holds Private
Notes acquired for its own account as a result of market-making or other trading
activities and who receives Exchange Notes for its own account in exchange for
such Private Notes pursuant to the Exchange Offer, must acknowledge that it will
deliver a

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prospectus in connection with any resale of such Exchange Notes. To the extent
that Private Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Private Notes could be
adversely affected due to the limited amount, or "float," of the Private Notes
that are expected to remain outstanding following the Exchange Offer. Generally,
a lower "float" of a security could result in less demand to purchase such
security and could, therefore, result in lower prices for such security. For the
same reason, to the extent that a large amount of Private Notes are not tendered
or are tendered and not accepted in the Exchange Offer, the trading market for
the Exchange Notes could be adversely affected. See "Plan of Distribution" and
"The Exchange Offer."

NO CASH PROCEEDS TO THE COMPANY

This Exchange Offer is intended to satisfy certain obligations of the
Company under the Registration Rights Agreement. The Company will not receive
any proceeds from the issuance of the Exchange Notes offered hereby and has
agreed to pay the expenses of the Exchange Offer. In consideration for issuing
the Exchange Notes as contemplated in this Prospectus, the Company will receive,
in exchange, Private Notes in like principal amount. The form and terms of the
Exchange Notes are identical in all material respects to the form and terms of
the Private Notes, except as otherwise described herein under "The Exchange
Offer--Terms of the Exchange Offer." The Private Notes surrendered in exchange
for the Exchange Notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the Exchange Notes will not result in any increase in
the outstanding debt of the Company.

PRICE RANGE OF THE PRIVATE NOTES

The Private Notes were designated for trading in the PORTAL market of the
NASD effective October 27, 1997. Based on reports of the Initial Purchaser, the
Company believes there is no active market for the Private Notes. As of
, 1998 there were record holders of the Private Notes and
participants in the Global Notes deposited with the Depositary.

23
<PAGE>
CAPITALIZATION

The following table sets forth the actual capitalization of the Company as
of November 1, 1997. The table should be read in conjunction with the historical
consolidated financial statements of the Company and the related notes thereto
included elsewhere in this Prospectus. See "Plan of Reorganization" and
"Selected Historical Financial Data."

<TABLE>
<CAPTION>
NOVEMBER 1, 1997(1)
-------------------
<S> <C>
(DOLLARS IN
MILLIONS)
Cash and cash equivalents (other than restricted cash in the Security Account)............... $ 9.4
Restricted cash in Security Account(2)....................................................... 17.0
Long-term debt (including current maturities):
Current Maturities(3)...................................................................... .3
Notes Payable--Taxes....................................................................... 1.4
Senior Credit Facility(4).................................................................. 12.3
Notes(5)................................................................................... 85.0
------
Total long-term debt (including current maturities)(6)..................................... 99.0

Shareholders' equity......................................................................... 78.1
------
Total capitalization......................................................................... $ 177.1

Long-term debt (including current maturities)/Total capitalization........................... 55.9%
</TABLE>

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

(1) The balance sheet as of November 1, 1997 gives effect to the Private Note
Offering and the application of the proceeds therefrom, the Senior Credit
Facility, the Plan of Reorganization, and the application of Fresh Start
Accounting in accordance with Generally Accepted Accounting Principles
(GAAP) as if each had occurred on November 1, 1997. Fresh Start Accounting
requires a restatement of the Company's balance sheet accounts to reflect an
estimated fair market value upon emergence from Chapter 11. See the
Company's Unaudited Pro Forma Consolidated Statements of Operations, "Plan
of Reorganization," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Changes in Method of Accounting."

(2) Consists of a portion of the net proceeds realized from the Private Note
Offering and placed into the Security Account and represents funds that
together with the proceeds from the investment thereof will be utilized to
pay interest on the Notes to May 1, 1999.

(3) Liabilities subject to compromise are being satisfied pursuant to the Plan
of Reorganization.

(4) As of November 1, 1997, the Company had approximately $27.5 million of
issued letters of credit and approximately $9.6 million of bankers'
acceptances outstanding under the Senior Credit Facility.

(5) In accordance with GAAP, approximately $7.6 million of the proceeds of the
Private Note Offering was allocated to the Series A Warrants, as a discount
to the debt. Therefore, the Note net of the discount is $77.4 million.

(6) Total long-term debt (including current maturities) includes borrowings of
$12.3 million under the Senior Credit Facility, $1.7 million in notes
payable to various taxing authorities as provided for in the Plan of
Reorganization and $85.0 million of Senior Debt. This presentation differs
from that of the Consolidated Balance Sheet at November 1, 1997 as a result
of the recognition of $7.6 million of Series A Warrants attached to the debt
which is presented as a discount to the Senior Notes in accordance with
GAAP.

USE OF PROCEEDS

The Company will not receive any proceeds from the issuance of the Exchange
Notes pursuant to the Exchange Offer. In consideration for issuing the Exchange
Notes as contemplated in this Prospectus, the Company will receive in exchange
Private Notes in like principal amount, the term and form of which are identical
in all material respects to the Exchange Notes. The Private Notes surrendered in
exchange for Exchange Notes will be retired and cancelled and cannot be
reissued. Accordingly, issuance of the Exchange Notes will not increase the
indebtedness of the Company.

The net proceeds from the offering of the Private Notes were $80.6 million
after deducting selling commissions and estimated fees and expenses. Of those
net proceeds, the Company used (i) approximately $15.4 million to purchase a
portfolio of Pledged Securities, which consists of U.S. Treasury Securities that
were pledged as security for the scheduled interest payments on the Notes
through August 1, 1999, and (ii) approximately $65.2 million to repay all
outstanding borrowings under the DIP Facilities. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

24
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA

The following selected historical financial data of the Company for 1992,
1993, 1994, 1995, and 1996 have been taken or derived from the historical
audited consolidated financial statements of the Company. The consolidated
financial data for the 39 week periods ended November 2, 1996 and November 1,
1997 have been derived from unaudited consolidated statements of operations of
the Company and, in the opinion of the Company's management, have been prepared
on a basis consistent with the audited financial statements and include all
adjustments that are considered by management to be necessary for a fair
presentation of such financial information. The balance sheet data at November
1, 1997 has been derived from the audited consolidated balance sheet at November
1, 1997. Historical data and interim results are not necessarily indicative of
future results, and interim data are not necessarily indicative of results for a
full year. The information set forth below should be read in conjunction with
the discussion under "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

<TABLE>
<CAPTION>
39 WEEKS ENDED
FISCAL YEAR ----------------------------
----------------------------------------------------- NOVEMBER 2, NOVEMBER 1,
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS) (UNAUDITED) (UNAUDITED)
STATEMENT OF OPERATIONS DATA
Net sales............................ $ 458.9 $ 502.6 $ 588.3 $ 619.2 $ 538.3 $ 400.4 $ 277.1
Gross profit before special
charge(1).......................... 137.4 142.1 167.8 167.2 121.9 87.7 74.3
Gross profit after special
charge(1).......................... 137.4 142.1 167.8 167.2 121.9 87.7 62.3
Reorganization costs................. -- -- -- -- 43.8 42.4 38.4
Income (loss) from operations(2)..... 26.3 18.0 31.5 21.3 (15.7) (18.8) (15.3)
Net income (loss)(2)................. 2.9 (6.6) 5.2 (97.0) (76.9) (77.1) (57.7)
Ratio of earnings to fixed
charges(3)......................... 1.3 0.9 1.5 N/A N/A N/A N/A

STORE DATA:
Number of stores at end of period.... 605 657 701 745 537 692 413
Increase (decrease) in same store
sales(4)........................... (0.6)% (3.1)% 7.4% (4.0)% (8.7)% (7.3 )% (12.2 )%

Other Data:
Gross profit % before special
charge(1).......................... 29.9% 28.3% 28.5% 27.0% 22.6% 21.9% 26.8%
Gross profit % after special
charge(1).......................... 29.9% 28.3% 28.5% 27.0% 22.6% 21.9% 22.5%
Total capital expenditures........... $ 14.1 $ 8.9 $ 14.8 $ 13.1 $ 1.8 $ 1.8 $ 1.4
Depreciation and amortization........ 16.6 17.4 16.7 13.2 11.1 8.8 6.1
EBITDA before special charge(1)(5)... 42.9 35.3 48.2 34.5 (4.7) (9.9 ) 2.9
EBITDA after special charge(1)(5).... 42.9 35.3 48.2 34.5 (4.7) (9.9 ) (9.1 )
</TABLE>

25
<PAGE>

<TABLE>
<CAPTION>
AS OF AS OF AS OF
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
------------- ----------- -------------
<S> <C> <C> <C>
BALANCE SHEET DATA
Cash and cash equivalents (excludes restricted cash in Security
Account)................................................................ $ 8.2 $ 6.4 $ 9.4
Restricted cash in Security Account....................................... -- -- 17.0
Inventories............................................................... 110.7 72.6 74.7
Total assets.............................................................. 199.0 132.9 220.6
Total debt (including current maturities and liabilities subject to
compromise)............................................................. 201.4 235.6 99.0(6)
Total shareholder's equity (deficit)...................................... (73.2) (157.3) 78.1
</TABLE>

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

(1) Gross profit and EBITDA are presented before and after a special charge to
liquidate excess inventory. The special charge of approximately $12.0
million was recorded within cost of goods sold and relates to the
liquidation of excess inventory from purchase commitments in early 1997 for
1997 Fall merchandise based upon a chain of over 500 stores, of which 137
stores were closed by the time the merchandise was received. See Note 8 to
the consolidated balance sheet at November 1, 1997, for a discussion of the
special charge.

(2) Income (loss) from operations does not give effect to the $80.2 million
write-off of certain long-lived assets in 1995 and reorganization costs
incurred of $43.8 million during 1996, and $38.4 million and $42.4 million
for the 39 weeks ended November 1, 1997 and November 2, 1996, respectively.

(3) The ratio of earnings to fixed charges was 1.3 for 1992, 0.9 for 1993 and
1.5 for 1994. The ratio of earnings to fixed charges for 1995, 1996 and 1997
is not stated because of the net loss incurred in those years. Earnings were
inadequate to cover fixed charges by $1.6 million, $79.4 million and $74.9
million in 1993, 1995 and 1996, respectively. The ratio of earnings to fixed
charges for 1996 and 1997 is not stated due to the suspension of interest
accruals upon the Company's Chapter 11 Filing. The ratio of earnings to
fixed charges is computed by dividing income before income taxes and
extraordinary items and fixed charges by fixed charges. Fixed charges
consist of interest expense, net, amortization of debt issuance costs, and
the portion (approximately one-third) of rent expense that is deemed to
represent interest.

(4) The Company defines same stores to be stores that have reached their
thirteenth full month of operations, excluding closed stores. Same store
sales results present fifty-three weeks of operations measured against
fifty-three weeks in the prior year for 1995 and fifty-two weeks of
operations measured against fifty-two weeks in the prior year for all other
years presented.

(5) EBITDA represents net earnings (losses) before interest, income taxes,
depreciation and amortization, and reorganization costs. EBITDA is presented
here to provide additional information about the Company's operations.
EBITDA is not a measure of financial performance in accordance with
Generally Accepted Accounting Principles (GAAP) and should not be considered
as an alternative to (i) net income (loss) as a measure of performance (or
any other measure of performance in accordance with GAAP) or (ii) cash flows
from operating, investing, or financing activities as an indicator of cash
flows or as a measure of liquidity. EBITDA is presented before and after
non-recurring liquidation charge.

(6) Total debt includes borrowings of $12.3 million under the Senior Credit
Facility, $1.7 million in notes payable to various taxing authorities as
provided for in the Plan of Reorganization, and $85.0 million of senior
debt. This presentation differs from that of the Consolidated Balance Sheet
at November 1, 1997 as a result of the recognition of $7.6 million of Series
A Warrants attached to the debt which is presented as a discount to the
Senior Notes in accordance with GAAP.

26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company recently emerged from bankruptcy under Chapter 11 of the
Bankruptcy Code. See "Plan of Reorganization." The following discussion and
analysis relates to the Company's historical financial results of operations and
financial condition without giving effect to the implementation of the new
business strategy, the Private Note Offering, the Senior Credit Facility, and
the Plan of Reorganization, except to the extent that the implementation of the
new business strategy and the Plan of Reorganization occurred prior to November
1, 1997. The Company's management does not believe that the results of
operations for future periods will be comparable to the results of operations
for prior periods, because of the implementation of the new business strategy
and the Plan of Reorganization, the completion of the Private Note Offering and
the Senior Credit Facility, and the incurrence of expenses in connection with
the Company's Chapter 11 case. The following discussion and analysis should be
read in conjunction with the "Selected Historical Financial Data," the Pro Forma
financial information appearing elsewhere in this Prospectus, and the Company's
consolidated financial statements and the notes thereto.

OVERVIEW

During the period from 1992 to 1994, the Company expanded from 605 stores,
generating net sales of $458.9 million, EBITDA of $42.9 million, and an EBITDA
margin of 9.3%, to 701 stores, generating net sales of $588.3 million, EBITDA of
$48.2 million, and an EBITDA margin of 8.2%. However, by 1995 the Company's
EBITDA margin declined to 5.6% primarily due to the following reasons: (i) the
Company, in an attempt to further its expansion strategy, opened stores without
sufficient regard to the profitability of each location; (ii) in response to
increased price competition on Levi's merchandise, the Company unsuccessfully
expanded its offering of branded apparel in the face of stiff competition from
mall-based department stores; (iii) the Company failed to competitively source
merchandise for its private label program; and (iv) the specialty apparel retail
sector experienced a downturn. By 1996, in the wake of declining sales and
deteriorating margins, the Company was unable to meet its scheduled interest
payment obligations on its then outstanding subordinated indebtedness. As a
result of the foregoing, in October 1996, the Company made the Chapter 11
Filing.

In December 1996, the new management team joined the Company and developed a
new business strategy designed to enhance the Company's profitability and
increase gross margins by capitalizing on the Company's nationally recognized
brand name and large store base and by reducing costs and implementing a new
merchandising strategy. Upon arrival, the new management team immediately began
liquidating merchandise that was inconsistent with its new merchandising
strategy and significantly reduced inventory available in the stores. In
addition, the new management team (i) closed 341 unprofitable stores; (ii)
obtained rent concessions on existing stores; (iii) reduced selling, general and
administrative expenses through personnel reductions associated with closed
stores; (iv) consolidated the Company's corporate infrastructure by closing the
Company's Dallas corporate office; and (v) established a new corporate "culture"
focused on cost control.

The Company began receiving merchandise pursuant to its new business
strategy in May 1997 and began realizing significant benefits of such new
merchandise by August 1997. Accordingly, the Company's retail margins
subsequently increased to 45.2% before the special charge and 40.4% after the
special charge for the 39 weeks ended November 1, 1997. See Note 8 to the
consolidated balance sheet at November 1, 1997, for a discussion of the special
charge.

Net sales consists of sales of apparel, accessories, and other merchandise
through the Company's COUNTY SEAT stores, COUNTY SEAT OUTLET stores, LEVI'S
OUTLET stores, and OLD FARMER'S ALMANAC GENERAL STORES. For the Pre-Emergence
Period, the Company's COUNTY SEAT stores, COUNTY SEAT OUTLET stores, LEVI'S
OUTLET stores, and OLD FARMERS ALMANAC GENERAL STORES comprised 87%, 2%, 10%,
and 1% of net sales, respectively. The COUNTY SEAT OUTLET stores sell special
buy and clearance merchandise, including slow-

27
<PAGE>
moving merchandise from the COUNTY SEAT stores. The LEVI'S OUTLET stores offer
closeouts, seconds, and irregulars under the Levi's and Docker's trademarks.
Merchandise at the COUNTY SEAT stores is generally sold at ticketed retail
prices upon arrival, but markdowns are taken (i) in connection with promotional
activities in the ordinary course of business and (ii) on end-of-season
clearance items and slow moving merchandise. In accordance with the new business
strategy, the Company currently sells its merchandise at lower price points than
it had in prior periods. For example, for the 39 weeks ended November 1, 1997,
the Company decreased its average selling price per unit at its COUNTY SEAT
stores by 27% to $14.40 from $19.65 in the prior period. As a result, the
Company improved unit volume at its COUNTY SEAT stores by 18.0% to 13.7 million
units for the nine months ended November 1, 1997 from 11.6 million units for the
nine months ended November 2, 1996.

Cost of sales includes merchandise costs, transportation costs, storage
costs, handling costs, and other costs related to the sourcing of merchandise.
Cost of sales also includes a substantial portion of fixed occupancy costs.
Selling, general, and administrative costs include store and administrative
wages, administrative costs related to corporate offices and corporate
activities, employee benefits, marketing costs, insurance premiums, cash
management fees, and the cost of supplies, equipment rental and maintenance,
outside services, and travel.

The Company's preliminary results, which are subject to adjustment, indicate
that net sales for the thirteen weeks of November 1997, December 1997 and
January 1998 are approximately $117.4 million, representing a 3.0% decline in
same store sales relative to the comparable period of the prior year. The
Company believes that the decline in comparable store sales is primarily due to
a decline in Levi's and other branded apparel sales.

RESULTS OF OPERATIONS

The following table shows the Company's operating results as a percentage of
net sales for the periods indicated:
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS ENDED
------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 NOVEMBER 2, 1996 NOVEMBER 1, 1997
--------- --------- --------- ------------------- -------------------

<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit before special charge(1).............. 28.5% 27.0% 22.6% 21.9% 26.8%
Gross profit after special charge(1)............... 28.5% 27.0% 22.6% 21.9% 22.5%
Selling, general, and administrative expenses...... 20.3% 21.4% 23.5% 24.4% 25.8%
EBITDA before special charge (1)................... 8.2% 5.6% (0.9)% (2.5 )% 1.0%
EBITDA after special charge(1)..................... 8.2% 5.6% (0.9)% (2.5 )% (3.3 )%
Reorganization costs............................... -- -- 8.1% 10.6% 13.9%
Income (loss) from operations(2)................... 5.4% 3.4% (2.9)% (4.7 )% (5.5 )%
</TABLE>

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

(2) Income (loss) from operations does not give effect to the $80.2 million
write-off of certain long-lived assets in 1995 and reorganization costs of
$43.8 million in 1996, and $42.4 million and $38.4 million for the 39 weeks
ended November 2, 1996 and November 1, 1997, respectively.

28
<PAGE>
COMPARISON OF THE 39 WEEKS ENDED NOVEMBER 1, 1997 WITH THE 39 WEEKS ENDED
NOVEMBER 2, 1996.

Net sales decreased $123.3 million, or 30.8%, to $277.1 million for the 39
weeks ended November 1, 1997 from $400.4 million for the 39 weeks ended November
2, 1996. As contemplated by the Company's new business strategy, the decrease
was primarily due to a $96.5 million decrease in net sales from the closing of
253 stores and a $33.5 million decrease in sales from comparable stores.
Comparable store sales were 12.2% lower for the 39 weeks ended November 1, 1997
than comparable store sales for the 39 weeks ended November 2, 1996 due
primarily to (i) a planned shift toward lower price points in accordance with
the Company's new business strategy and (ii) the Company's difficulty in
obtaining merchandise during 1997 due to the Chapter 11 case. These decreases
were offset by $6.7 million relating to new store sales.

Gross profit decreased $25.4 million, or 28.9%, to $62.3 million for the 39
weeks ended November 1, 1997 from $87.7 million for the 39 weeks ended November
2, 1996. The decrease in gross profit was primarily due to reduced net sales of
$123.3 million, a $10.5 million liquidation sale in the first quarter of 1997,
and a $12.0 million special charge to liquidate excess inventory in the third
quarter of 1997. Gross margin increased by 0.6% to 22.5% for the 39 weeks ended
November 1, 1997 from 21.9% for the 39 weeks ended November 2, 1996 due to (i) a
0.7% reduction in occupancy costs relating primarily to the renegotiation of
certain store leases and (ii) a 4.9% increase in retail margins due to the
successful implementation of the Company's new business strategy, which has
resulted in purchasing merchandise at lower costs per unit and partially offset
by clearing prior management's merchandise which allowed the Company to sell
merchandise at lower price points. These improvements were partially offset by a
4.3% special charge to costs of goods sold and a 0.7% increase in buying and
merchandise handling costs.

Selling, general, and administrative expense decreased $26.2 million, or
26.8%, to $71.5 million for the 39 weeks ended November 1, 1997 from $97.6
million for the 39 weeks ended November 2, 1996. This decrease was due to a
$24.1 million reduction in store expenses from closed stores and a $2.1 million
reduction relating primarily to personnel reductions in 1997 and nonrecurring
severance and outside service charges in 1996. Selling, general and
administrative expense as a percentage of net sales is 25.8% and 24.4% for the
39 weeks ended November 1, 1997 and November 2, 1996, respectively.

Depreciation and amortization expense decreased $2.7 million to $6.1 million
for the 39 weeks ended November 1, 1997 from $8.8 million for the 39 weeks ended
November 2, 1996. The decrease was due to the net closing of 253 stores in 1996
and the first half of 1997.

Loss from operations decreased to $(57.7) million for the 39 weeks ended
November 1, 1997 from $(77.1) million for the 39 weeks ended November 2, 1996.

For the 39 weeks ended November 1, 1997 and November 2, 1996, reorganization
costs of $38.4 million and $42.4 million, respectively, were recorded. The
reorganization costs primarily relate to stores closed during 1997 and 1996 and
stores that the new management team had decided to close. Reorganization costs
recorded in 1997 include estimated lease rejection claims, write-offs to fixed
assets associated with closed stores, other going out of business store
expenses, costs associated with the closure of the distribution center and
administrative offices and professional fees and other reorganization costs.

COMPARISON OF YEARS 1996 AND 1995

Results of operations for 1996 included 52 weeks, while 1995 included 53
weeks.

Net sales decreased $80.9 million, or 13.1% to $538.3 million in 1996 from
$619.2 million in 1995. Comparable store sales were 8.7% lower, on a 52 week
basis, in 1996 as compared to 1995. The decline in net sales was due to (i) the
closing of 217 store locations during 1996, which accounted for $50.0 million in
net sales, 52 weeks versus 53 weeks, (ii) a $41.6 million decrease in sales from
comparable stores on a 52 week basis, and (iii) the $6.9 million in net sales
for the fifty-third week in 1995. Comparable store sales were negatively
affected by the Company's difficulty in obtaining merchandise during the fourth
quarter of 1996 following the Chapter 11 Filing and by the liquidation in 1997
of certain branded merchandise that

29
<PAGE>
was inconsistent with the Company's new business strategy. These decreases were
offset in part by $15.1 million from new store sales.

Gross profit decreased $45.3 million, or 27.1%, to $121.9 million in 1996,
from $167.2 million in 1995. The decrease in gross profit was primarily due to a
$24.2 million decrease due to store closures and a $25.0 million decrease due to
a decline in net sales at comparable stores. The decrease in gross profit was
offset by a $3.9 million reduction in buying, occupancy and merchandise handling
costs. Gross margin decreased to 22.6% in 1996 from 27.0% in 1995 due to the
Company's attempt to improve liquidity prior to the Chapter 11 Filing by
liquidating merchandise irrespective of gross margins achieved.

Selling, general and administrative expense decreased $6.1 million, or 4.6%,
in 1996 compared to 1995. The decrease was primarily due to reduced operating
expenses associated with stores closed in 1996. Selling, general and
administrative expense as a percentage of net sales increased to 23.5% in 1996
compared to 21.4% in 1995. The increase in selling, general and administrative
expense as a percentage of net sales was primarily due to comparable stores
reporting lower sales combined with relatively constant operating costs.

Depreciation and amortization expense decreased $2.1 million to $11.1
million in 1996 from $13.2 million in 1995. The decrease was due to the
elimination of goodwill amortization due to the $80.2 million write-off of
long-lived assets in 1995 and fixed assets becoming fully depreciated.

Income (loss) from operations decreased to $(15.7) million for 1996 from
$21.3 million for 1995. As a percentage of net sales, income (loss) from
operations was (2.9)% for 1996 compared to 3.4% for 1995.

In the third quarter of 1995, the Company recorded an $80.2 million non-cash
write-off of certain long-lived assets. Approximately $74.7 million of remaining
goodwill was written off to reflect a change in the Company's estimate of its
fair value. Certain fixed assets with a net book value of $5.5 million were
included in the write-off based on management's estimate of the recoverability
of their net book value.

Reorganization costs of $43.8 million were recorded in 1996. The
reorganization costs primarily relate to stores closed during 1996 and stores
that the new management team had decided to close. Reorganization costs recorded
in 1996 include estimated lease rejection claims of $25.6 million, write-offs of
fixed assets associated with closed stores of $7.2 million, operating and other
costs associated with closed stores of $7.2 million, and professional fees and
other reorganization costs of $3.7 million.

The Company recorded income tax benefits of $0.7 million in 1996 on a loss
before income taxes of $74.9 million. The Company's income tax provision
includes a $28.4 million valuation allowance for deferred tax assets. The
effective income tax rate differs from the statutory federal rate primarily due
to the non-deductible write-off of the valuation allowance for deferred tax
assets.

In the third quarter of 1996, the Company recorded an extraordinary charge
of $2.7 million with no tax benefit. The extraordinary charge represented the
write-off of debt issuance costs related to the pre-existing credit agreement,
which was replaced with the Existing Credit Facility in October 1996.

COMPARISON OF YEARS 1995 AND 1994

Results of operations for 1995 included 53 weeks, while 1994 included 52
weeks.

Net sales increased $30.9 million, or 5.3%, to $619.2 million in 1995 from
$588.3 million in 1994. The increase was primarily due to a $52.0 million
increase in net sales from new store locations, partially offset by a $16.4
million decrease in sales from comparable stores and a $4.7 million reduction in
sales due to store closings. Comparable store sales were 4.0% lower in 1995 than
comparable store performance in 1994 due to a weak retail environment. Sales
were also affected by unseasonable and adverse weather conditions, which
affected the mix of goods sold in both the spring and fall seasons.

30
<PAGE>
Gross profit decreased $0.6 million, or 0.4%, to $167.2 million in 1995
compared to $167.8 million in 1994. The decrease was primarily due to lower
comparable store sales, additional buying and occupancy costs from new store
locations, and a lower retail margin rate, partially offset by sales from stores
opened in 1995 and 1994. Gross Margin decreased to 27.0% in 1995 from 28.5% in
1994 due to promotional pricing and adverse weather conditions. The change in
the mix of goods sold reflected an increase in sales of competitively priced
Levi's jeans and outlet merchandise and lower sales of higher margin tops.

Selling, general, and administrative expense increased $13.1 million, or
10.9%, to $132.7 million in 1995 compared to $119.6 million in 1994. The
increase was primarily due to store operating expenses associated with new
stores opened in 1995 and 1994, as well as a $1.0 million non-recurring
consulting fee related to the evaluation of the Company's financial structure
recorded in the first half of 1995. Selling, general, and administrative expense
as a percentage of net sales increased to 21.4% in 1995 compared to 20.3% in
1994. This increase was primarily due to comparable stores reporting lower sales
combined with relatively constant operating expenses and the non-recurring
consulting fee referred to above.

Depreciation and amortization expense decreased $3.5 million to $13.2
million in 1995 from $16.7 million in 1994. The decrease was due to the
reduction in amortization expense related to the Company's noncompete agreement
and goodwill, partially offset by depreciation on new store and remodeled store
assets. The Company's noncompete agreement was fully amortized in 1994, and the
remaining balance of goodwill was written off in the third quarter of 1995.
Depreciation and amortization decreased as a percentage of net sales to 2.1%
from 2.8%, substantially as a result of the elimination of noncompete agreement
amortization.

Income from operations decreased to $21.3 million for 1995 from $31.5
million for 1994. As a percentage of net sales, income from operations was 3.4%
in 1995 compared to 5.4% for 1994.

In the third quarter of 1995, the Company recorded an $80.2 million non-cash
write-off of certain long-lived assets. The $74.7 million of remaining goodwill
was written off to reflect a change in the Company's estimate of its fair value.
Certain fixed assets with a net book value of $5.5 million were included in the
write-off based on management's estimate of the recoverability of their net book
value.

The Company recorded income tax expense of $7.6 million in 1995 on a loss
before income taxes of $79.4 million, reflecting the impact of non-deductible
charges for the $74.7 million goodwill write-off, $1.6 million goodwill
amortization, and $0.3 million of debt discount amortization. The Company's
income tax provision includes an $8.6 million valuation allowance for the
deferred tax assets, partially offset by a $1.0 million income tax benefit. The
effective income tax rate differs from the statutory federal rate primarily due
to the non-deductible write-off of goodwill and the valuation allowance for the
deferred tax assets.

Extraordinary charges totaling $10.0 million, net of related income taxes,
were recorded in 1995. In May 1995, an extraordinary charge of $2.4 million
relating to the redemption of the Company's senior notes was recorded,
consisting of prepayment premiums of $1.6 million and the write-off of debt
issuance costs related to the retirement of debt of $0.8 million. In July 1995,
an extraordinary charge of $7.6 million relating to the exchange of $104.9
million principal amount of 12% Senior Subordinated Notes maturing October 1,
2002 for $104.9 million principal amount of 12% Senior Subordinated Notes
maturing October 1, 2001 in the second quarter of 1995 was recorded, consisting
of the write-off of debt discount of $5.1 million, the write-off of debt
issuance costs related to the retirement of debt of $2.0 million, and the
payment of repurchase premiums of $0.5 million.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities for the 39 weeks ended November 1,
1997 was $32.8 million due primarily to a $57.7 million net loss which was
offset in part by $6.1 million of depreciation and amortization, $1.2 million of
rent expense in excess of cash outlays, $4.9 million loss on disposal of
property and equipment and $20.2 million of reorganization costs. Net cash used
in operations for the 39

31
<PAGE>
weeks ended November 2, 1996 was $5.8 million due primarily to a $77.1 million
net loss which was offset in part by $8.8 million of depreciation and
amortization, $38.1 million of reorganization costs and a $2.7 million
extraordinary item.

Because of the seasonal nature of the Company's business, working capital
requirements increase as inventory levels peak in anticipation of the
back-to-school and holiday shopping seasons. Working capital as of November 1,
1997 and at the end of 1996 were $41.7 million and $3.4 million, respectively.

Net cash used to make capital expenditures was $1.4 million during the 39
weeks ended November 1, 1997 and $1.8 million in 1996.

The Company's Plan of Reorganization was confirmed by the Bankruptcy Court
on, and in an order (the "Confirmation Order") dated, October 1, 1997. The
planned proceeds of the Private Note Offering together with borrowings under the
new Senior Credit Facility are being used to repay the Existing Credit Facility,
pay claims pursuant to the Plan of Reorganization, and pay other transaction
fees and expenses.

The Senior Credit Facility provides for a three-year revolving line of
credit in an amount of $115 million. Up to $90 million of such amount may be
utilized for letters of credit and bankers' acceptances. Amounts available under
the Senior Credit Facility are subject to the value of the Company's eligible
inventory (as defined in the Senior Credit Facility) and to the satisfaction of
certain conditions. The borrowing base provides for seasonal fluctuations in
inventory. Peak borrowing periods generally occur between June and November. The
Company's peak borrowing periods commence with the sourcing of its merchandise
through the utilization of letters of credit facilities with approximately three
months lead-time prior to delivery of such merchandise. The Company has entered
into the Senior Credit Facility to repay its obligations under the Existing
Credit Facility upon the closing of the Private Note Offering. See "Description
of Certain Indebtedness--Senior Credit Facility."

As of November 1, 1997, the Company had approximately $27.5 million of
letters of credit and $9.6 million of bankers' acceptances outstanding in
addition to approximately $24.0 million of remaining availability under the
Senior Credit Facility. The Company believes that cash generated from
operations, together with borrowings under the Senior Credit Facility, will be
adequate to finance 1998 operations.

INFLATION, ECONOMIC TRENDS, AND POTENTIAL DEVELOPMENTS

The Company's operations are affected by general economic trends, including
inflation. Management believes that the Company and other specialty retailers
have suffered from price competition, which has had a negative effect on sales
and gross margin. The Company believes that poor economic conditions have
adversely affected its sales and profitability in prior years and may affect
results in future periods.

32
<PAGE>
SEASONALITY

The Company, like most retailers, has a seasonal pattern of sales and
earnings. The Company has two major selling seasons: back-to-school (third
quarter) and Christmas (fourth quarter). The table below sets forth by quarter,
1997 (through the third quarter), 1996 and 1995 net sales, gross profit, and
EBITDA.

<TABLE>
<CAPTION>
FIRST TOTAL
YEAR QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER YEAR
- --------- ------------ -------------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
1997 Net sales............................. $ 93,158 $ 86,897 $ 97,081 N/A N/A
Gross profit before special
charge(1)........................... 15,820 25,289 33,221 N/A N/A
Gross profit after special charge..... 15,820 25,289 21,246 N/A N/A
EBITDA before special charge(1)(2).... (7,861) 247 10,462 N/A N/A
EBITDA after special charge(1)(2)..... (7,861) 247 (1,513) N/A N/A
Income (loss) from operations(3)...... (10,061) (1,832) (3,371)
1996 Net sales............................. $ 121,604 $ 121,727 $ 157,060 $ 137,869 $ 538,260
Gross profit.......................... 26,075 31,444 33,559 30,793 121,871
EBITDA(2)............................. (5,227) (2,203) (2,511) 5,251 (4,690)
Income (loss) from operations(3)...... (8,186) (5,159) (5,430) 3,034 (15,741)
1995 Net sales............................. $ 124,189 $ 130,110 $ 159,476 $ 205,450 $ 619,225
Gross profit.......................... 29,251 34,987 41,073 61,900 167,211
EBITDA(2)............................. (622) 2,818 8,447 23,869 34,512
Income (loss) from operations(3)...... (3,878) (713) 4,998 20,868 21,275
</TABLE>

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

(1) Gross profit and EBITDA are presented before and after a special charge to
liquidate excess inventory. The special charge of approximately $12.0
million was recorded within cost of goods sold and relates to the
liquidation of excess inventory from purchase commitments in early 1997 for
1997 Fall merchandise, based upon a chain of over 500 stores, of which 137
stores were closed by the time the merchandise was received. See Note 8 to
the consolidated balance sheet at November 1, 1997 for a discussion of the
special charge.

(2) EBITDA represents net earnings (losses) before interest, income taxes,
depreciation and amortization, and reorganization costs. EBITDA is presented
here to provide additional information about the Company's operations.
EBITDA is not a measure of financial performance in accordance with
Generally Accepted Accounting Principles (GAAP) and should not be considered
as an alternative to (i) net income (loss) as a measure of performance (or
any other measure of performance in accordance with GAAP) or (ii) cash flows
from operating, investing, or financing activities as an indicator of cash
flows or as a measure of liquidity. EBITDA is presented before and after
special charge to liquidate inventory.

(3) Income (loss) from operations does not give effect to the write-off of
certain long-lived assets in 1995 and reorganization costs incurred during
1996 and the 39 weeks ended November 1, 1997.

INCOME TAXES

The Company had been included in the consolidated federal income tax return
of County Seat, Inc. Prior to the Effective Date, County Seat, Inc. owned all
the Company's capital stock. The tax year-end for the Company and County Seat,
Inc. is the Saturday closest to July 31. As of November 1, 1997, the Company had
NOLs of approximately $100.0 million. The Company's Plan of Reorganization or
significant changes in ownership of the Company could substantially limit the
use of NOLs. The Company and

33
<PAGE>
County Seat, Inc. account for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
standard requires, among other things, recognition of future tax benefits,
measured by enacted tax rates, attributable to deductible temporary differences
between financial statement and income tax bases of assets and liabilities and
to tax NOLs to the extent that realization of such benefits is more likely than
not. Based on the Company's history of earnings and in consideration of the
Company's Chapter 11 Filing, the Company's entire balance of deferred tax assets
has been reduced by a valuation allowance of $14.7 million, as realization of
these long-term tax benefits is dependent upon future earnings. Management
cannot predict sufficient operating income to utilize fully its deferred income
tax assets.

CHANGES IN METHOD OF ACCOUNTING

The effects of the Company's reorganization under Chapter 11 have been
accounted for in the Company's financial statements using the principles
required by the American Institute of Certified Public Accountants' Statement of
Position 90-7, FINANCIAL REPORTING BY ENTITIES IN REORGANIZATION UNDER THE
BANKRUPTCY CODE ("Fresh Start Accounting"). Pursuant to such principles, the
Company's assets, upon emergence from Chapter 11, were stated at "REORGANIZATION
VALUE," which is defined as the value of the entity before considering
liabilities on a going-concern basis following the reorganization and represents
the estimated amount a willing buyer would pay for the assets of the Company
immediately after the reorganization. The reorganization value for the Company
is determined by reference to the remaining liabilities plus the estimated value
of total shareholders' equity of the outstanding shares of the Common Stock. The
reorganization value of the Company is allocated to the assets of the Company in
conformity with the procedures specified by Accounting Principles Board Opinion
No. 16, BUSINESS COMBINATIONS, for transactions reported on the basis of the
purchase method of accounting. In this allocation, identifiable assets are
valued at estimated fair values, and any excess reorganization value has been
recorded as "reorganization value in excess of amounts allocated to identified
assets" (a long-term intangible asset similar to "goodwill").

YEAR 2000 COMPLIANCE

The Company has recently commenced a two year project to update and, where
applicable, replace all mainframe systems with third party software to support
the operations of the Company. The Company anticipates expenditures for
hardware, software and labor to be approximately $6.0 million through 1998 (the
anticipated completion), at which point operating systems will be year 2000
compliant. The Company will also begin a process to review with its vendors the
impact of year 2000 on transactions between both parties.

34
<PAGE>
BUSINESS

OVERVIEW

The Company is among the nation's largest mall-based specialty retailers of
casual apparel, operating 413 stores in 41 states in the midwestern, southern,
and eastern regions of the United States. Under the direction of a new
management team, the Company's merchandise mix has recently been updated to
include more tops than bottoms and consist of casual shirts, sweaters, knit
tops, khakis, jeans, dresses, and accessories for men, women, and teens. The
Company's products are now primarily manufactured under private label, which, in
the Company's view, offers customers quality comparable to branded merchandise
at significantly lower prices and generates higher gross margins than the
Company has historically achieved.

In December 1996, a new management team led by Sam Forman developed a new
business plan designed to enhance the Company's profitability and increase gross
margins by reducing costs, implementing a new merchandising strategy, and
capitalizing on the Company's nationally recognized brand name and large store
base.

Mr. Forman has over forty years of retailing and manufacturing experience in
the apparel industry and has been an innovator in manufacturing and retailing
value-priced private label apparel, the cornerstone of the Company's new
merchandising strategy. Mr Forman has implemented successful business strategies
for apparel companies by maximizing profitability through direct sourcing,
value-oriented merchandising strategies, and internal cost controls. Most
recently, Mr. Forman was president and chief operating officer of American
Eagle, a mall-based specialty retailer.

The new management team has implemented a business strategy designed to
re-establish the Company as a leading national retailer of high-quality,
value-priced casual apparel and to restore its profitability and EBITDA to
historical levels. The principal elements of this business strategy are similar
to those implemented by Mr. Forman at American Eagle and include (i) reducing
costs, including, unlike at American Eagle, closing unprofitable stores, (ii)
implementing a new merchandising strategy, and (iii) initiating a controlled
expansion program.

STORES

The Company owns and operates approximately 375 COUNTY SEAT stores, 14
COUNTY SEAT OUTLET stores, 22 LEVI'S OUTLET stores, and 2 OLD FARMER'S ALMANAC
GENERAL STORES. COUNTY SEAT stores are typically located in regional shopping
malls that are typically at least 500,000 square feet in size and that are
anchored by two or more major department stores. COUNTY SEAT stores range in
size from 2,700 to 7,300 square feet and average 4,000 square feet. The Company
seeks to position its COUNTY SEAT stores in prime mall locations with sufficient
store frontage in areas occupied by comparable specialty stores. The Company
believes that, based on its business strategy and recent results of operations
since the arrival of the new management team, it will compete effectively with
comparable apparel stores due to the relative quality and value of its
merchandise selection. The Company believes that its stores are generally in
good physical condition and anticipates making approximately $4.2 million in
capital expenditures in 1998 to remodel its stores.

The Company projects a casual lifestyle image in its stores. In each COUNTY
SEAT store, there are usually large tables near the entrance filled with key
items like polo shirts, flannel shirts, or t-shirts to attract customers into
the store. Coordinated groupings and outfits are displayed throughout the store
to enable the customer to visualize the product offering and to promote multiple
unit transactions. The merchandise selection in the COUNTY SEAT stores is
limited by design to key colors and styles with a focus on offering basics. The
general layout of merchandise in the stores is planned by the Company's
corporate management but may be varied and adapted by individual store
management to properly reflect specific store characteristics and customer
preferences.

35
<PAGE>
The Company's store employees generally wear the Company's merchandise. The
Company seeks to hire sales associates who have prior retail sales experience
and an entrepreneurial spirit. Sales personnel are knowledgeable about the
merchandise and encouraged through incentives to increase the number of units
sold per transaction. The Company considers customer service an important
element of its success and believes it has an established reputation for
personal attention to the customer's needs and requirements for casual,
value-priced apparel. The Company's sales personnel, store managers, and
co-managers are trained by experienced store managers and district managers to
offer the customer courteous and knowledgeable service. Store managers and
co-managers receive bonuses based on sales and shrinkage. Other store employees
are not paid a commission but receive incentive pay based on sales.

MERCHANDISE

The Company has transitioned itself from a retailer of denim jeans and
primarily branded apparel to a private label casual apparel retailer. The new
strategy places less dependence on bottoms and branded apparel and more emphasis
on tops and women's wear and is intended to enhance gross margins. The
assortment of tops consists of classics such as polo shirts, woven and flannel
shirts, knit shirts and t-shirts in a broad range of colors with updated
features.

Since it began implementing its new merchandise strategy, the Company has
offered basic bottoms such as khakis and jeans at $19.99. The Company is
utilizing such marketing strategies and taking advantage of its reputation as a
bottoms retailer to position itself as the value leader in the mall, offering a
merchandise mix designed to appeal to a broad customer base.

SHIFT OF PRODUCT MIX. Part of the Company's merchandise strategy is to
increase the percentage of its sales derived from tops. Tops generally provide
higher margins and more unit volume than bottoms since tops usually have a lower
relative unit cost and customers typically purchase more units of tops than
bottoms. The Company's goal is to increase the ratio of tops to bottoms sold to
3:1 by the end of 1998. The Company has significantly improved the ratio of tops
to bottoms at its COUNTY SEAT stores from 1:1 for the 39 weeks ended November 2,
1996 to 1.7:1 for the nine months ended November 1, 1997.

Another feature of the new management team's strategy is to focus on women's
apparel with a view toward broadening the customer base. The increased mix of
women's wear includes fashionable basics such as sweaters, knit tops, and casual
dresses. Based on this change in product mix, management expects women's wear to
grow from 43% of sales to 50% of sales.

PRIVATE LABEL. The Company believes that the sale of high quality
private-label merchandise builds customer loyalty and differentiates the Company
from its competitors. In addition, private-label merchandise typically has
higher gross margins than branded merchandise and allows the Company to avoid
direct price competition on national branded merchandise. Private-label
merchandise has grown from approximately 65.0% of sales at the Company's COUNTY
SEAT stores during the nine months ended November 2, 1996 to 82.0% during the
nine months ended November 1, 1997.

QUALITY. Management believes that the quality of the Company's
private-label merchandise is comparable to the quality of select branded
merchandise and private-label merchandise sold by the Company's competitors. The
Company's goods are generally made with high quality cotton or other natural
fibers. For example, typically the weight of the Company's private-label jeans
is 14 3/4 ounces, the weight of its private-label t-shirts is 185 grams, and the
weight of its pique polo shirt is 220 grams, which, in management's view, are
the industry standards for high quality denim, cotton t-shirts and pique polo
shirts, respectively. The Company regularly inspects samples of its manufactured
goods prior to delivery for quality based on materials, color, sizing
specifications, and shrinkage. The Company's management team also routinely
inspects the factories of the Company's suppliers to ensure that the Company's
goods are of high quality.

36
<PAGE>
SOURCING AND SUPPLIERS

All the Company's inventory is purchased from third-party suppliers or
manufacturers. The Company owns no manufacturing facilities. Approximately 80%
of the Company's private-label products are manufactured abroad, with the
remainder being made in the United States.

A key element of the Company's strategy is to significantly reduce its cost
of goods sold while maintaining or increasing gross margins through disciplined,
direct sourcing of its merchandise. Pursuant to this strategy, the Company has
established relationships with vendors in certain developing countries. The
Company generally negotiates directly with its vendors without using agents or
middlemen. As a result, the Company has greater control over its manufacturing
costs, the manufacturing process, and the quality of its merchandise. The
Company also takes advantage of special buy situations that complement its
private-label merchandise and provide gross margin enhancement.

As a result of the Company's improved sourcing, the cost of acquiring
merchandise has declined significantly. The table below shows the decline in
average cost per unit on a percentage basis for select items at the COUNTY SEAT
stores between November 1996 and November 1997. For the 39 weeks ended November
1, 1997, the average cost per unit for merchandise at the COUNTY SEAT stores was
$7.53, which is 33% lower than the average cost per unit for the nine months
ended November 2, 1996.

<TABLE>
<CAPTION>
PERCENT SAVINGS
IN COST PER UNIT
---------------------
<S> <C>
Menswear
Denim jeans.................................................................. 34%
Short sleeve solid tee....................................................... 43%
Short sleeve solid polo...................................................... 40%
Socks........................................................................ 40%

Womenswear
Denim jeans.................................................................. 33%
Short sleeve solid tee....................................................... 44%
Socks........................................................................ 25%
</TABLE>

The Company believes it has established relationships with an adequate
number of suppliers to meet its ongoing inventory needs. The Company has no
long-term contracts with suppliers and transacts business principally on an
order-by-order basis. During the nine months ended November 1, 1997, merchandise
purchased from Levi Strauss represented approximately 26% of net sales. No other
vendor or group of vendors account for more than 15% of the Company's
merchandise purchases. No more than 20% of the Company's purchases are currently
manufactured in any particular country other than the United States.

DISTRIBUTION

All merchandise is currently shipped to the Company's stores through the
distribution center in Brooklyn Park, Minnesota, except replenishment of
inventory to the LEVI'S OUTLET stores. In February, 1998 the Company signed a
ten-year lease for a new 276,000 square foot distribution center located near
Baltimore, Maryland. The Company plans to relocate to this new facility from its
current Brooklyn Park distribution center sometime in the early summer of 1998.
The new facility in Baltimore will be able to service a substantially greater
number of stores than the distribution center which the Company currently
operates or could service out of its existing facility. The transit time for
merchandise being delivered to the distribution center generally varies from
three to five days for domestic goods and a few days to several weeks for
imported goods. Freight consolidators are used in the shipment process to reduce
costs. Advanced shipping notices are utilized when possible to anticipate
delivery of goods and schedule on-call

37
<PAGE>
employees for merchandise handling. The time period from receipt of goods at the
distribution center to display in the Company's stores is generally five days.

During the nine months ended November 1, 1997, approximately 85% of
merchandise coming into the distribution center was vendor pre-ticketed and
approximately 66% was vendor pre-packed, with 8% of the merchandise prepacked in
a manner which permits cross-docking. Pre-ticketing, pre-packing, and cross-
docking save time, reduce labor costs, and enhance inventory management. The
Company is seeking to increase the amount of goods that are cross-docked. In
accordance with the new business strategy of reducing operating costs, the
Company is evaluating additional ways to reduce distribution costs, including
evaluating alternative distribution facility options to take advantage of
regional differences in labor costs.

Shipments to stores for basic items are generated by a planning and
distribution personnel team that compares individual store stock levels to the
store's model stock level. Shipments to all stores are made once or twice per
week depending on the season. The delivery schedule allows the Company to adjust
on-hand inventory at the store level, thus minimizing the total inventory needs
and maximizing inventory turns.

STORE OPENINGS AND CLOSINGS

The Company has utilized the legal protections available to it under the
Bankruptcy Code to reduce operating costs and improve profitability through its
store closing program. Under this program, immediately following the Chapter 11
Filing the Company began identifying underperforming stores and stores located
in regions where the associated administrative costs did not warrant continuing
such operations and implementing streamlined procedures for closing such stores.

Phase one of the Company's new business strategy contemplated the closing of
approximately 330 stores. Approximately 260 of such stores had been closed prior
to the Effective Date. Approximately 70 such stores were closed in January 1998,
after the Christmas season.

The Company opened two new stores in 1997, and it reopened prior to the
Effective Date 13 COUNTY SEAT OUTLET stores that had previously been closed. In
the future, the Company expects to consider expansion through the opening of
additional stores on a selective basis. The Company expects to open 15 to 20
additional stores per year.

In deciding whether to open or close a store, the Company considers a number
of factors, including (i) the extent of competition from other mall tenants,
(ii) the location of the store in the mall, (iii) the rental rate for the
property on which the store is or will be located, (iv) the performance of other
specialty stores in the mall, (v) whether the mall's environment is suitable for
the store, (vi) the anticipated return on investment, and (vii) whether there
are at least two department store anchors in the mall in which the store is or
will be located.

PROPERTIES

As of the end of 1997, the Company owns and operates 413 go-forward stores
in 41 states. Of the 413 stores, approximately 375 are COUNTY SEAT stores, 14
are COUNTY SEAT OUTLET stores, 22 are LEVI'S OUTLET

38
<PAGE>
stores, and 2 are OLD FARMER'S ALMANAC GENERAL STORES. The following table
details the geographical distribution of the Company's stores.

<TABLE>
<CAPTION>
STATE STORES STATE STORES
- ------------------------------ ----------- ------------------------------ -----------
<S> <C> <C> <C>
Alabama 5 Nebraska 3
Arkansas 5 Nevada 2
Colorado 7 New Hampshire 2
Delaware 1 New Jersey 3
Florida 20 New Mexico 1
Georgia 11 New York 8
Idaho 3 North Carolina 13
Illinois 32 North Dakota 3
Indiana 19 Ohio 24
Iowa 13 Oklahoma 8
Kansas 8 Pennsylvania 11
Kentucky 6 South Carolina 7
Louisiana 10 South Dakota 2
Maine 2 Tennessee 11
Maryland 11 Texas 58
Massachusetts 2 Utah 11
Michigan 26 Virginia 9
Minnesota 19 West Virginia 6
Mississippi 3 Wisconsin 14
Missouri 11 Wyoming 1
---
Montana 2
Total Stores 413
---
---
</TABLE>

All the Company's stores are operated under leases that typically provide
for monthly rental payments plus a percentage of gross receipts in excess of
certain sales levels. Leases typically have an initial term of approximately
seven to ten years, except for certain outlet locations, and do not contain a
renewal option. In each case, the particular terms of the proposed lease are a
major factor in determining whether to open a store at that site. After a site
has been approved, the Company normally completes lease negotiations and
constructs the store within five to twelve months. As of November 1, 1997 the
average remaining lease term of the Company's stores was 3.7 years.

Approximately 8% to 19% of store leases expire each year. The Company has
not experienced problems renewing its leases but no assurance can be given that
the Company can renew existing leases on favorable terms.

In addition to its retail stores, the Company currently leases office space
in New York, New York, and Eden Prairie, Minnesota. In January 1998, the Company
closed its leased offices in Dallas, Texas, which formerly housed the Company's
executive office, merchandising, merchandising planning, and real estate
functions. To complete the Company's office consolidation, the Company plans to
close the Eden Prairie office by the end of June 1998 and transfer functions
formerly performed there to the New York office. Once the Eden Prairie office is
closed, the New York office will house all functions in approximately 34,000
leased square feet. The Eden Prairie office currently houses the accounting,
finance, human resources, and MIS functions in approximately 28,000 leased
square feet, of which 2,400 square feet is sub-leased to a third party. The
Company also currently owns a distribution center in Brooklyn Park, Minnesota,
which provides product distribution to all stores except for Levi's Outlet
stores, which are direct-shipped by Levi Strauss. The Brooklyn Park distribution
center occupies 159,000 square feet. In February 1998, the Company signed a
lease for a new 276,000 square foot facility in the Baltimore, Maryland area.
The

39
<PAGE>
Company's chief executive office is located at 469 Seventh Avenue, 11th Floor,
New York, New York 10018 and its telephone number is (212) 714-4800.

COMPETITION

The retail apparel industry is highly competitive, with merchandise
selection, price, quality, fashion, customer service, location and store
environment being the principal competitive factors. While the Company believes
that it is able to compete favorably with respect to each of these factors, the
Company believes it competes primarily on the basis of price, merchandise
selection, and customer service. In recent years, the Company has experienced
increased competition, particularly with respect to branded apparel.

The Company competes in the highly competitive casual apparel industry. The
Company's specialty store competitors include The Gap, The Limited, Abercrombie
& Fitch, Express, Structure, Gadzooks, The Buckle, American Eagle, Miller's
Outpost, Designs, Inc., Wet Seal, and Contempo Casuals. Among the Company's
largest specialty store competitors, the Company is one of the few companies
offering a full selection of Levi's jeans, the biggest selling brand of jeans in
the United States. The Company also competes with department and discount stores
that sell casual apparel. Many of the Company's competitors are larger and have
greater financial resources than the Company.

MARKETING

The Company relies on mall traffic, the Company's reputation, in-store
promotions, and in-store visual merchandising to attract customers. In-store
visual merchandising is dynamic and coordinated so that all stores feature a
consistent marketing strategy. One of the Company's current marketing strategies
is the in-store promotion of the sale of jeans and khakis for $19.99. This
strategy is designed to make the Company's stores a destination for high quality
merchandise at value prices and take advantage of the Company's reputation as a
bottoms retailer.

The Company utilizes co-op advertising from Levi Strauss, in mass media and
merchandise tabloids. In 1996, Levi Strauss paid for approximately 54% of this
expense. Marketing expenses net of co-op payments have averaged approximately
0.7% of sales for the last five years. The Company has incurred marketing
expenses in the amount of $2.5 million during 1997 for, among other things,
direct marketing, in-store displays, and limited mass media advertising.

CREDIT SALES

In 1996, approximately 37% of the Company's total sales were paid for with
credit cards. The Company accepts MasterCard, VISA, Discover, and American
Express. Under its agreements with MasterCard, VISA, Discover, and American
Express, the Company receives daily payments on amounts charged on those cards.
The payments are not subject to recovery by MasterCard, VISA, Discover or
American Express unless the charge in question involved invalid use of a credit
card.

OTHER OPERATIONS

In addition to 375 COUNTY SEAT stores, the Company owns and operates 14
COUNTY SEAT OUTLET stores, 22 LEVI'S OUTLET stores, and 2 OLD FARMER'S ALMANAC
GENERAL STORES. During 1996, 89% of the Company's sales were derived from the
COUNTY SEAT stores.

The COUNTY SEAT OUTLET stores range in size from 5,000 to 8,400 square feet,
with the average size being 5,700 square feet. The COUNTY SEAT OUTLET stores are
located primarily in factory outlet shopping centers. The COUNTY SEAT OUTLET
stores sell special buy and clearance merchandise. The Company uses the COUNTY
SEAT OUTLET stores to facilitate the sale of slow-moving merchandise at the
COUNTY SEAT stores, thus enabling the COUNTY SEAT stores to remain stocked with
fresh, higher margin merchandise.

40
<PAGE>
Located primarily in outlet shopping malls in nine midwestern states, the
Company's LEVI'S OUTLET stores carry a large and comprehensive assortment of
Levi's and Docker's products for men, women, and children. The LEVI'S OUTLET
stores target value conscious consumers by offering Levi's closeouts, seconds,
and irregulars. The LEVI'S OUTLET stores range in size from 8,900 square feet to
13,700 square feet and average about 11,100 square feet. The Company operates
the LEVI'S OUTLET stores on a royalty-free basis pursuant to a license
agreement, which expires on July 31, 2000. Under the terms of this license
agreement, the Company is the only party other than Levi Strauss or any
subsidiary of Levi Strauss that is permitted to use the Levi's trademark in
connection with the sale of closeouts, seconds, and irregulars in nine
midwestern states. The Company is also permitted to use the Levi's trademark in
connection with the sale of closeouts, seconds, and irregulars in two other
states, but two outlet stores operated by Designs, Inc. are also permitted to
use the Levi's trademarks in those states.

The Company's two OLD FARMER'S ALMANAC GENERAL STORES are located in malls
in Indianapolis, Indiana and Bloomington, Minnesota and offer housewares, food
products, decorative home products, clothing, and stationery in a
turn-of-the-century setting that includes potbellied-stoves, and rocking chairs.
The Company's OLD FARMER'S ALMANAC GENERAL STORES are operated pursuant to a
license agreement with Yankee Publishing, Inc. The license agreement grants the
Company the right to use the Old Farmer's Almanac trademark, which is also
licensed to certain other parties, in connection with the marketing,
distribution, and sale of certain products in the United States, Canada, and
Mexico. The Company is required to pay to Yankee Publishing, Inc., on a
quarterly basis, a royalty of 2% of total net sales. If the Company's Old
Farmer's Almanac General Stores do not achieve certain annual royalty targets,
then it must pay Yankee Publishing, Inc. the shortfall in the royalty target for
the applicable year or permit Yankee Publishing, Inc. to license the use of the
Old Farmer's Almanac trademark to additional parties. Pursuant to the license
agreement, Yankee Publishing, Inc. has the right to terminate the license if the
Company has not continually operated at least three OLD FARMER'S ALMANAC GENERAL
STORES for a period of one fiscal year at any time. The Company and Yankee
Publishing, Inc. have agreed in principle that the Company will operate at least
five OLD FARMER'S ALMANAC GENERAL STORES from October 1, 1998 throughout the
remainder of the term of the license. The license agreement expires in 2005 but
is subject to renewal if certain sales targets are met or specified amounts are
paid by the Company to Yankee Publishing, Inc.

INFORMATION SYSTEMS

In 1995, the Company completed installation of a new point of sale (POS)
system. The Company's POS system provides daily merchandising data to the
merchandise information systems on a store-by-store basis by individual stock
keeping unit ("SKU"). The new POS system added bar coded universal product code
("UPC") scanning with integrated price-lookup and credit authorization, enhanced
promotional pricing support and improved processing of store transfers. The POS
system generates reports showing merchandise data organized by store,
department, class, category, style, and size. This provides merchandise planners
with detailed information enabling them to adjust stock levels and balance
merchandise and size distribution profiles. The Company's buyers are provided
with velocity sales reports, which rank selling within categories and classes.
Timely sales reporting allows the Company to react quickly to developing sales
trends. The Company believes timely and accurate data capture is critical to the
success of its business.

The Company's systems assist merchandise management in all aspects of
inventory control by tracking purchases and receipts, controlling inter-store
movement, and determining the on-hand inventory for all locations. Stock status
is monitored at the distribution center, at individual stores and in transit, by
capturing SKU level data (style, color, and size). A stock ledger application
developed by the Company provides financial dollar inventory control and gross
margin results for all physical locations and merchandise departments. The
Company's information systems help to shorten the time from product ordering to
receipt at the store. This reduced lead time helps the Company maintain lower
inventory levels and take advantage of sales opportunities.

41
<PAGE>
The Company's systems allow the Company to plan unit sales and inventory for
all merchandise categories according to season. Merchandise categories are
planned by store and adjusted for seasonality, demographics, and sales trends.
The planning system is integrated with a comprehensive distribution and
replenishment system facilitating delivery of merchandise to the correct
location in a timely manner.

Merchandise pricing decisions are controlled centrally and communicated to
stores on a next-day basis through the use of the Company's data transmission
system. Timely and centralized control allows the Company to test sales volume
sensitivity to price changes.

The Company's non-POS systems are primarily mainframe systems. The Company
has recently commenced a two-year project to update and, where applicable,
replace these systems with third-party packaged solutions which will provide
enhanced support to all operating areas, particularly merchandising. The Company
is working with IBM on the selection and implementation process. The Company
currently anticipates aggregate expenditures for hardware, software, labor, and
compliance with year 2000 requirements of approximately $6.0 million between
1997 and 1998 to complete this project, including $4.2 million in 1998.

TRADEMARKS AND SERVICE MARKS

The Company uses numerous trademarks, service marks and trade names in its
business, including COUNTY SEAT-Registered Trademark-, COUNTY SEAT THE
JEANSTORE-Registered Trademark-, NUOVO-Registered Trademark-, NUOVO COUNTY
SEAT-Registered Trademark-, and TEN STAR-Registered Trademark-. While the
Company believes that the products and services underlying such trade names and
trademarks are of great importance to the Company and that such trade names and
trademarks as a whole are of material importance to the Company's business in
which they are used, besides COUNTY SEAT-Registered Trademark- and COUNTY SEAT
THE JEANSTORE-Registered Trademark-, none individually is material to the
Company's business. Certain of the Company's service marks are owned by CSS
Trade Names, Inc. ("CSS"), the Company's subsidiary, and licensed to the
Company. CSS has no other assets other than such service marks.

LITIGATION

The Company has been named as a defendant in certain legal proceedings.
Although the outcome of these matters cannot be determined, the Company believes
that the disposition of these proceedings will not materially affect the
financial position or results of operations of the Company.

On or about September 29, 1997, RAI Credit Corporation ("RAI") filed an
adversary proceeding against the Company in the Bankruptcy Court. The Company
and RAI had entered into an Account Purchase and Service Agreement dated July
11, 1997 (the "RAI Agreement") pursuant to which RAI had agreed to establish and
service a private-label credit card program for the Company. In September 1997,
the Company notified RAI that it was terminating the RAI Agreement on the ground
that RAI had materially breached and failed to perform under the RAI Agreement.
RAI's complaint alleges that the Company wrongfully terminated the RAI Agreement
and seeks compensatory damages of not less than $10,741,960 and an injunction
prohibiting the Company from entering into a private-label credit card program
with any person other than RAI prior to the beginning of 1999, as well as
attorneys' fees and costs.

The Company believes that it has meritorious defenses to RAI's complaint and
counterclaims against RAI, which it intends to pursue vigorously. Although the
ultimate outcome of the litigation cannot be predicted at this time, management
believes that any resolution of this matter will not have a material adverse
effect on the Company's financial position or future results of operations.

Simultaneous with the Company's Chapter 11 Filing, CSS, the Company's
wholly-owned subsidiary, also filed a petition for reorganization relief under
Chapter 11 of the Bankruptcy Code with the Bankruptcy Court. A motion will be
filed with the Bankruptcy Court before the Effective Date to dismiss the Chapter
11 case of CSS.

42
<PAGE>
As contemplated by the Plan of Reorganization and the Confirmation Order,
the Company is litigating various Disputed Claims (as defined in the Plan). As
of November 1, 1997, the aggregate amount of all Disputed Claims was $0.5
million. Cash in the amount of $0.5 million has been established to cover the
estimated aggregate amount of (x) the disputed amount of all Disputed Claims
that are unliquidated or, if liquidated, as to which the Company shall have
requested estimation, and (y) the Face Amount (as defined in the Plan) of all
other liquidated Disputed Claims. Payments and distributions from the
Distribution Reserve to each holder of a Disputed Claim, to the extent that
claim ultimately becomes an Allowed Claim (as defined in the Plan), will be made
in accordance with the provisions of the Plan that govern the class of claims to
which that Allowed Claim belongs under the Plan.

EMPLOYEES

At March 3, 1998, the Company had a total of 5,880 employees, of which 5,524
worked in the Company's stores, 169 worked in the Company's offices, and 187
worked in the Company's distribution center. All the Company's employees are
non-union, and the Company enjoys good labor relations.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information concerning the current
directors and executive officers of the Company and the positions they hold.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Sam Forman........................................... 70 Chairman, President, Chief Executive Officer
Brett D. Forman...................................... 28 Executive Vice President and Director
Paul Roth............................................ 53 Executive Vice President
Paul J. Kittner...................................... 48 Senior Vice President, Chief Financial Officer and
Treasurer
Bernadette R. Duponchel.............................. 44 Senior Vice President
Ronda A. Hisiger..................................... 46 Senior Vice President
John R. Meinert...................................... 70 Director
Marshall E. Felenstein............................... 65 Director
M. Brent Stevens..................................... 36 Director
John S. Belisle...................................... 50 Director
Faith Larsen......................................... 42 Director
</TABLE>

The Company's board of directors consists of seven members, five of whom
were previously selected and began serving as directors on the Effective Date.
The remaining two members were selected at the first meeting of the Company's
board of directors by the non-management directors. As provided in, and for the
term of, the Forman Employment Agreement (as defined below), Mr. Forman has the
right to serve as a director of the Company and to name one other person to act
as his designee (the "Executive Designee") to serve as an additional director of
the Company. See "--Forman Employment Agreement." All of the Company's directors
shall hold office until the first annual meeting of shareholders and until their
successors are duly elected and qualified. Thereafter, directors who are elected
at an annual meeting of shareholders shall hold office until the next annual
meeting of shareholders and until their successors are elected and qualified.

43
<PAGE>
BACKGROUND OF DIRECTORS AND EXECUTIVE OFFICERS

Set forth below is a brief description of the business experience of the
executive officers and directors of the Company.

SAM FORMAN has served as president and chief executive officer of the
Company since December 1996. Since the Effective Date he has also served as the
chairman of the Company's board of directors. Prior to joining the Company, Mr.
Forman formed Forman Enterprises in 1995 to purchase the outlet stores then
operated by American Eagle. Mr. Forman was president and chief operating officer
of American Eagle from 1992 to 1995 and chairman of Kuppenheimer from 1982 to
1992. Mr. Forman is the chairman of the board of directors of Forman
Enterprises. His service as a director of the Company commenced on the Effective
Date. Sam Forman is the father of Brett D. Forman, a director and executive vice
president of the Company.

BRETT D. FORMAN has served as an executive vice president of the Company
since the Effective Date and served from December 1996 until the Effective Date
as the senior vice president of real estate and corporate development of the
Company. In 1995, he joined his father, Sam Forman, in creating Forman
Enterprises. He was an analyst at Bear, Stearns & Co. Inc from 1994 to 1995 and
was employed by Blue Cross of Western Pennsylvania from 1992 to 1994. His
service as a director of the Company commenced on the Effective Date. He is the
Executive Designee.

PAUL ROTH has served as executive vice president of the Company, with
responsibility for merchandising since December 1996. Before joining the
Company, Mr. Roth served as merchandise manager at American Eagle, which he
joined in 1992. Mr. Roth has nearly thirty years of retail merchandising
experience and was a senior vice president and the general merchandise manager
at R. H. Macy from 1980 to 1991.

PAUL J. KITTNER has served as a senior vice president, treasurer and chief
financial officer of the Company since September 1997. Before joining the
Company, Mr. Kittner was part of the co-sourcing practice at Deloitte & Touche
from November 1996 to September 1997. Before joining Deloitte & Touche, Mr.
Kittner was a vice president and controller for the Leslie Fay Companies, Inc.
from March 1993 to November 1996 and a senior vice president, chief financial
officer, and treasurer for The He-Ro Group Ltd. from November 1989 to November
1992. Prior to joining The He-Ro Group, Ltd., Mr. Kittner was a senior vice
president and the chief financial officer for Loehmann's, Inc. and a vice
president at Associated Dry Goods Corporation.

BERNADETTE R. DUPONCHEL has served as a senior vice president of the Company
with responsibility for planning and distribution since 1997. Ms. Duponchel
served as a vice president of planning and distribution of J. Crew Retail from
July 1996 to November 1997 and as a vice president of planning and distribution
of Britches from 1994 to 1996. From 1993 to 1994 she served as a vice president
of planning and distribution of American Eagle. Ms Duponchel has nearly twenty
years of experience in merchandise planning and allocation.

RONDA A. HISIGER has served as a senior vice president of the Company with
responsibility for store operations since August 1997. Ms. Hisiger served as the
senior vice-president of store operations at Paul Harris Stores, Inc. from
September 1995 to July 1997 and the regional director of stores for certain
divisions of Petrie Stores Corporation from March 1991 to August 1995. Ms.
Hisiger has over twenty-five years of experience in retail store operations.

JOHN R. MEINERT has served as a director of the Company since January 1998
and is a member of both the Compensation Committee and the Audit Committee of
the Company's board of directors. Since January 1990 Mr. Meinert has been a
principal, and since January 1996 the chairman of the board of directors, of the
investment banking firm J.H. Chapman Group, L.L.C. From 1975 through December
1986, Mr. Meinert served as chief financial and administrative officer of
Hartmarx Corporation/Hart Shaffner & Marx. From 1973 to April 1990 he was a
member of the board of directors of Hartmarx

44
<PAGE>
Corporation and the chairman of that board from December 1986 until 1990, and
thereafter has been designated as chairman emeritus. He is a member of the board
of Northwestern University's Kellogg Graduate School of Management and John
Evans Club, the Chicagoland Chamber of Commerce and Better Business Bureau and
has been vice president of the American Institute of CPAs and president of the
Illinois CPA Society.

MARSHALL E. FELENSTEIN has served as a director of the Company since January
1998 and is a member of the Compensation Committee of the Company's board of
directors. Since December 1990 he has been a principal of Felenstein Koniver &
Associates, retail consultants. From 1986 to present Mr. Felenstein has been a
director of Dorchester Public Relations, Inc., a private public relations firm.
Mr. Felenstein has over forty years of experience in the retail industry.

M. BRENT STEVENS has served as a director of the Company since the Effective
Date and is a member of the Audit Committee of the Company's board of directors.
He is a managing director of Jefferies & Company, Inc., which he joined in 1990.

JOHN S. BELISLE has served as a director of the Company since the Effective
Date and is a member of the Compensation Committee of the Company's board of
directors. Mr. Belisle served as a managing director and the chief workout
officer of Chemical Banking Corporation from 1989 to 1996. He has been an
independent consultant since 1996 and formed Alco & Belisle, LLC, a
reorganization consulting firm, in 1998.

FAITH LARSEN has served as a director of the Company since the Effective
Date and is a member of the Audit Committee of the Company's board of directors.
After joining BankAmerica Corporation in 1977, Ms. Larsen served as a senior
vice president and chief workout officer in New York from 1992 to September
1996. Since October 1996, she has been an independent consultant.

EXECUTIVE COMPENSATION

The following table sets forth information with respect to the accrued
compensation of the Company's Chief Executive Officer and each of the four other
most highly compensated executive officers of the Company (collectively, the
"Named Executive Officers") received from the Company in 1997, 1996 and 1995.

45
<PAGE>
SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
-----------------------------
ANNUAL COMPENSATION SECURITIES
NAME AND --------------------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY $ BONUS $ OPTIONS # COMPENSATION $
- ------------------------------------------------------- --------- --------- ----------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Sam Forman 1997 669,231 -- 3,529,410(1) 9,537
Chairman, CEO and President 1996 140,769 -- -- --
1995 -- -- -- --

Brett D. Forman 1997 154,693 50,000 -- --
Executive Vice President 1996 23,462 -- -- --
1995 -- -- -- --

Paul Roth 1997 177,665 -- -- --
Executive Vice President 1996 37,019 -- -- --
1995 -- -- -- --

Steven Anderson 1997 131,250 30,000 -- --
Senior Vice President/CIO 1996 -- -- -- --
1995 -- -- -- --

David Mitchell 1997 129,696 25,000 -- --
Vice President 1996 115,449 -- -- --
1995 124,478 13,357 -- --
</TABLE>

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

(1) Represents Series C Warrants issued to Sam Forman pursuant to his employment
agreement with the Company. The warrants have a term of five years.
Currently, warrants exercisable for 1,176,470 shares of Common stock are
vested; an additional 1,176,470 warrants will vest on October 29, 1998 and
an additional 1,176,470 warrants will vest on October 29, 2000. The exercise
price of the warrants is determined on the basis of the total recovery to
the holders of general unsecured claims under the Plan. See "Forman
Employment Agreement."

DIRECTORS' COMPENSATION

Directors each receive $25,000 in annual directors' fees, and $1,500 per
each meeting attended. The Company is also contemplating establishing a plan to
compensate directors with equity compensation in the form of stock options. In
addition, all directors are reimbursed for their expenses, if any, incurred for
attendance at each Board meeting.

46
<PAGE>
The following table sets forth information with respect to option grants to
the Company's Chief Executive Officer during the last fiscal year:

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------- POTENTIAL
PERCENT OF REALIZABLE VALUE
TOTAL AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF
SECURITIES /SAR STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR
OPTION EMPLOYEES OF BASE OPTION TERM
/SARS IN FISCAL PRICE EXPIRATION --------------------
NAME GRANT (3) YEAR (S/SB) DATE 5% ($) 10% ($)
- ------------------------------------------------ ---------- ------------- ------------- --------------- --------- ---------

<S> <C> <C> <C> <C> <C> <C>
Sam Forman...................................... 3,529,410 100 (1) (1)
</TABLE>

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

COMMITTEES OF BOARD OF DIRECTORS

An Audit Committee has been established by the Company's board of directors
consisting exclusively of independent directors. The current members of the
Audit Committee are Messrs. Meinert and Stevens and Ms. Larsen. The Audit
Committee makes recommendations to the board of directors regarding the
independent accountants to be nominated for election by the stockholders and
reviews the independence of such accountants, approves the scope of the annual
audit activities of the independent accountants, approves the audit fee payable
to the independent accountants and reviews such audit results. Arthur Andersen
LLP presently serves as the independent accountants of the Company.

The board of directors has also established a Compensation Committee which
consists of Messrs. Belisle, Meinert and Felenstein. The duties of the
Compensation Committee are to provide a general review of the Company's
compensation and benefit plans to ensure that they meet corporate objectives.
The Compensation Committee also reviews compensation policies and practices with
respect to senior executive officers and directors of the Company and makes its
recommendations to the board. The board of directors may also establish other
committees to assist in the discharge of its responsibilities.

FORMAN EMPLOYMENT AGREEMENT

Mr. Sam Forman is employed pursuant to an employment agreement (the "Forman
Employment Agreement") with the Company. Under the terms of the Forman
Employment Agreement, which expires in August 2002, Mr. Forman is entitled to
receive as compensation a base salary of $600,000 per year, which shall be
adjusted annually in accordance with the federal cost of living index. Mr.
Forman received, in connection with the Forman Employment Agreement, Series C
Warrants, which entitle him to purchase 15% of the Common Stock, subject to
dilution only by the Series A Warrants and by certain options to

47
<PAGE>
purchase Common Stock that may be granted to certain employees and directors of
the Company. The Series C Warrants have the following exercise prices: (1) the
Series C-1 Warrants have an exercise price which represents a recovery to the
holders of general unsecured claims under the Plan (a "Recovery") of 40%; (ii)
the Series C-2 Warrants have an exercise price which represents a Recovery of
70%; and (iii) the Series C-3 Warrants have an exercise price which represents a
Recovery of 90%; PROVIDED FURTHER that, notwithstanding the foregoing, if, for
any consecutive ten trading days during the five-year term of the Series C
Warrants, the product of the average value per share of the Company's Common
Stock times the number of outstanding shares of such Common Stock (including
shares reserved for Warrants other than the Series C Warrants) exceeds $200
million, then the exercise price of the Series C-1 Warrants shall be zero. Mr.
Forman is also entitled to receive certain severance benefits if, among other
things, (i) any person or entity acquires beneficial ownership of 51% or more of
the Common Stock (including Common Stock subject to options and warrants)
following the Effective Date, (ii) Mr. Forman's designee (the "Forman Designee")
to serve on the Company's Board of Directors is removed from or not elected to
the Company's Board of Directors, or (iii) Mr. Forman resigns from the Company
following certain specified events. Mr. Forman may terminate the Forman
Employment Agreement at any time upon sixty days' written notice to the
Company's Board of Directors.

LIMITATIONS ON LIABILITY; INDEMNIFICATION

The Company's articles of incorporation, which have been amended and
restated pursuant to the Plan of Reorganization, provide that no director of the
Company shall be personally liable to the Company or its shareholders for
monetary damages for breach of any fiduciary duty. The Articles of
Incorporation, however, do not eliminate or limit the liability of a director
for, among other things, (i) a breach of the director's duty of loyalty, (ii)
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) failing to vote against or consenting to an
unlawful distribution, or (iv) any transaction from which the director derived
an improper personal benefit.

CERTAIN RELATIONSHIPS

Mr. Sam Forman is chairman of the board of directors and owns, together with
his family, 70% of the voting securities of Forman Enterprises. Forman
Enterprises owns and operates 73 factory outlet stores that sell casual apparel
similar to that sold by the Company. The Forman Employment Agreement provides
that Mr. Forman must devote substantially all of his working time to the
performance of his responsibilities as chief executive officer of the Company.
Mr. Forman's sons, Brett Forman and Richard Forman, have relationships with both
the Company and Forman Enterprises. Brett Forman is a member of the board of
directors, a shareholder, and a nonemployee president of Forman Enterprises but
devotes substantially all of his time to the performance of his responsibilities
as executive vice president and a director of the Company. Richard Forman is an
employee but not an officer of the Company. Richard Forman also owns voting
securities of Forman Enterprises.

To take advantage of operating synergies and reduce the Company's corporate
overhead, the Company has engaged Forman Enterprises to perform certain
consulting services for the Company. In August 1997, with the approval of the
Bankruptcy Court, the Company entered into a Consulting Agreement with Forman
Enterprises (the "Consulting Agreement"), pursuant to which Forman Enterprises
provides the Company with sourcing, merchandising, budgeting, store management,
and related services. Howard Katcher, the chief operating officer of Forman
Enterprises, Amaz Zivony, the vice president of sourcing of Forman Enterprises,
and Wendy Forman, the vice president of merchandising and a shareholder of
Forman Enterprises, will each provide services to the Company primarily related
to the sourcing of merchandise, spending, respectively, 50%, 75%, and 75% of
their working time to perform such services on behalf of the Company. Wendy
Forman is the daughter of Sam Forman. The Company will reimburse Forman
Enterprises for 50%, 75%, and 75%, respectively, of Messrs. Katcher and Zivony's
and Ms. Forman's salary and benefits payable by Forman Enterprises. In 1997, the
Company purchased

48
<PAGE>
$1,666,827 of merchandise and paid consulting fees and related expenses of
$321,739 to Forman Enterprises; in 1998, such payments are expected to result in
an aggregate payment of approximately $750,000. The Consulting Agreement
provides for an additional payment of $40,000 per month by the Company to
reimburse Forman Enterprises for the consulting services referenced above other
than those being performed by Messrs. Katcher and Zivony and Ms. Forman, from
which will be deducted a $5,000 payment from Forman Enterprises to the Company
to pay Forman Enterprises's share of rent expense for the Company's New York
office.

Thirty percent of the equity of Forman Enterprises is owned by Mr. Larry
Ashinoff. Coronet an entity controlled by Mr. Ashinoff, sells merchandise to
both the Company and Forman Enterprises. In addition, Forman Enterprises and the
Company utilize many of the same suppliers. During 1997, payments for
merchandise to Coronet totaled approximately $762,000.

These relationships pose a potential conflict of interest. The Company
believes that the potential for a conflict of interest is minimized because (i)
Forman Enterprises is not, for the most part, a mall-based retailer, (ii) the
overlap in suppliers could strengthen the Company's ability to acquire goods at
a low cost in furtherance of its business strategy, and (iii) the Consulting
Agreement is at least as advantageous to the Company as would an arrangement for
similar consulting services entered into with an unaffiliated third party.

In 1997, the Company engaged Felenstein Koniver & Associates ("FKA"), to act
as a real estate consultant to the Company at (i) a consulting fee of $3,000 per
month plus (ii) a success fee of $3,000 for each lease completed by the Company
and arranged by FKA. In fiscal year 1997, the Company entered into 27 leases
that were arranged by FKA and total payments to FKA totaled $117,219. As noted
above, Mr. Felenstein, a member of the Company's board of directors, is a
principal of FKA.

During 1997, prior to their retention after the Effective Date by the
Company, Eaton & Van Winkle represented Sam Forman and Forman Enterprises on
certain matters. Eaton & Van Winkle has continued since the Effective Date to
represent Sam Forman and Forman Enterprises on certain matters.

The Audit Committee of the Board of Directors is monitoring and will
continue to monitor these relationships.

49
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information concerning the beneficial
ownership of shares of Common Stock on , 1998, by: (i) each
stockholder known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock (ii) each director of the Company, (iii) each
Named Executive Officer, (iv) and all directors and current executive officers
as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
----------------------------
<S> <C> <C>
AMOUNT AND
NAME AND ADDRESS OF NATURE OF PERCENTAGE OF
BENEFICIAL OWNER OWNERSHIP(1) CLASS(2)
- ------------------------------------------------------------------------------------- ------------- -------------
Dean Witter High Yield Securities, Inc.(3)...........................................
Dean Witter Diversified Income Trust(3)..............................................
[To be completed by
Dean Witter Variable Investment Series--High Yield Portfolio(3)...................... amendment.]
High Income Advantage Trust(3).......................................................
High Income Advantage Trust II(3)....................................................
High Income Advantage Trust III(3)...................................................
Dean Witter Select Dimensions Investment--The Diversified Income Portfolio(3)........
Sam Forman........................................................................... 1,176,470(4)
Brett D. Forman...................................................................... -- --
John S. Belisle...................................................................... -- --
Marshall E. Felenstein............................................................... -- --
Faith Larsen......................................................................... -- --
John R. Meinert...................................................................... -- --
M. Brent Stevens.....................................................................
Directors and Named Executive Officers as a group.................................... 1,176,470(4)
</TABLE>

(1) In computing the number of shares beneficially owned by a person and the
percentage of ownership of that person, shares of Common Stock subject to
options or warrants held by that person that are currently exercisable or
exercisable within 60 days of the date hereof are deemed outstanding.

(2) Beneficial ownership is determined in accordance with the rules and
regulations of the Securities and Exchange Commission. In computing the
number of shares beneficially owned by a person and the percentage of
ownership of that person, shares of Common Stock subject to options or
warrants held by that person that are currently exercisable or exercisable
within 60 days of the date hereof are deemed outstanding. Such shares,
however, are not deemed outstanding for the purpose of computing the
percentage ownership of any other person.

(3) The Company has been advised that none of the holders listed above
beneficially owns individually more than 5% of the outstanding shares of
Common Stock. Nevertheless, of the shares of Common Stock held
by each of the listed holders are held pursuant to [shared voting and
investment power with [Dean Witter ,] an affiliate[, and such
shares are held pursuant to shared voting and investment power with ,
a wholly-owned subsidiary].

(4) Represents the vested portion of Series C Warrants issued to Mr. Sam Forman.
See Note 1 to Summary Compensation Table and "Forman Employment Agreement."

THE EXCHANGE OFFER

PURPOSE OF THE EXCHANGE OFFER

The Private Notes were sold by the Company on October 29, 1997 (the "Issue
Date") to the Initial Purchaser pursuant to the Purchase Agreement. The Initial
Purchaser subsequently sold the Private Notes to "qualified institutional
buyers" ("QIBs"), as defined in Rule 144A under the Securities Act

50
<PAGE>
("Rule 144A"), in reliance on Rule 144A. As a condition to the initial sale of
the Private Notes, the Company and the Initial Purchaser entered into the
Registration Rights Agreement dated as of October 29, 1997. Pursuant to the
Registration Rights Agreement, the Company agreed that it would use its best
efforts to (i) file with the Commission within 120 days after the Issue Date a
registration statement under the Securities Act with respect to the Exchange
Offer and (ii) cause such Registration Statement to become effective under the
Securities Act within 180 days after the Issue Date. The Company agreed to issue
and exchange Exchange Notes for all Private Notes validly tendered and not
withdrawn before the expiration of the Exchange Offer. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The Registration Statement is
intended to satisfy certain of the Company's obligations under the Registration
Rights Agreement and the Purchase Agreement.

TERMS OF THE EXCHANGE OFFER

Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Private
Notes validly tendered and not withdrawn prior to the Expiration Date.

The Company will issue $1,000 principal amount of Exchange Notes in exchange
for each $1,000 principal amount of outstanding Private Notes validly tendered
pursuant to the Exchange Offer and not withdrawn prior to the Expiration Date.
Private Notes may be tendered only in integral multiples of $1,000.

The form and terms of the Exchange Notes are the same as the form and terms
of the Private Notes except that (i) the exchange will be registered under the
Securities Act and, therefore, the Exchange Notes will not bear legends
restricting the transfer thereof and (ii) holders of the Exchange Notes will not
be entitled to any of the registration rights of holders of Private Notes under
the Registration Rights Agreement, which rights will terminate upon the
consummation of the Exchange Offer. The Exchange Notes will evidence the same
indebtedness as the Private Notes (which they replace) and will be issued under,
and be entitled to the benefits of, the Indenture, which also authorized the
issuance of the Private Notes, such that both series of Notes will be treated as
a single class of debt securities under the Indenture.

As of the date of this Prospectus, $85,000,000 in aggregate principal amount
of the Private Notes is outstanding, all of which is registered in the name of
Cede & Co., as nominee for The Depository Trust Company (the "Depositary").
Solely for reasons of administration, the Company has fixed the close of
business on March 1, 1998 as the record date for the Exchange Offer for purposes
of determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially. There will be no fixed record date for determining
holders of the Private Notes entitled to participate in the Exchange Offer.

Holders of the Private Notes do not have any appraisal or dissenters' rights
under the Minnesota Business Corporation Law or the Indenture in connection with
the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the provisions of the Registration Rights Agreement and the
applicable requirements of the Securities Act and the rules and regulations of
the Commission thereunder.

The Company shall be deemed to have accepted validly tendered Private Notes
when, and if, the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Private Notes for the purposes of receiving the Exchange Notes from the
Company.

Holders who tender Private Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Private
Notes pursuant to the Exchange Offer. The Company will pay all charges and

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<PAGE>
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "--Fees and Expenses."

EXPIRATION DATE; EXTENSIONS; AMENDMENTS

The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the terms "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.

In order to extend the Exchange Offer, the Company will (i) notify the
Exchange Agent of any extension by oral or written notice and (ii) issue a press
release or other public announcement which shall include disclosure of the
approximate number of Private Notes deposited to date, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date.

The Company reserves the right, in its sole discretion, (i) to delay
accepting any Private Notes, (ii) to extend the Exchange Offer or (iii) if, in
the opinion of counsel for the Company, the consummation of the Exchange Offer
would violate any applicable law, rule or regulation or any applicable
interpretation of the staff of the Commission, to terminate or amend the
Exchange Offer by giving oral or written notice of such delay, extension,
termination or amendment to the Exchange Agent. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by a press release or other public announcement thereof. If the Exchange Offer
is amended in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the holders, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the amendment and the manner of disclosure to
the holders, if the Exchange Offer would otherwise expire during such five to
ten business day period.

Without limiting the manner in which the Company may choose to make a public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, the Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.

RESALE OF THE EXCHANGE NOTES

With respect to the Exchange Notes, based upon interpretations by the staff
of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder who exchanges Private Notes for
Exchange Notes in the ordinary course of business, who is not participating,
does not intend to participate, and has no arrangement with any person to
participate in a distribution of the Exchange Notes, and who is not an
"affiliate" of the Company within the meaning of Rule 405 of the Securities Act,
will be allowed to resell Exchange Notes to the public without further
registration under the Securities Act and without delivering to the purchasers
of the Exchange Notes a prospectus that satisfies the requirements of Section 10
of the Securities Act. However, if any holder acquires Exchange Notes in the
Exchange Offer for the purpose of distributing or participating in the
distribution of the Exchange Notes, such holder cannot rely on the position of
the staff of the Commission enumerated in such no-action letters issued to third
parties and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction,
unless an exemption from registration is otherwise available. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Private Notes
acquired by such broker-dealer as a result of market-making or other trading
activities must acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of any Exchange Notes
received in exchange for Private Notes acquired by such broker-dealer as a
result of market-making or other trading activities. Pursuant to the
Registration Rights

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<PAGE>
Agreement, the Company has agreed to make this Prospectus, as it may be amended
or supplemented from time to time, available to any such broker-dealer that
requests copies of such Prospectus in the Letter of Transmittal for use in
connection with any such resale for a period of up to 180 days after the
Registration Statement is declared effective. See "Plan of Distribution."

Each Holder participating in the Exchange Offer shall be required to
represent to the Company that at the time of the consummation of the Exchange
Offer (i) any Exchange Notes received by such Holder will be acquired in the
ordinary course of its business, (ii) such Holder will have no arrangements or
understanding with any person to participate in the distribution of the Private
Notes or Exchange Notes within the meaning of the Securities Act, (iii) such
Holder is not an "affiliate" (as defined in Rule 405 of the Securities Act) of
the Company, or if it is an affiliate, such Holder will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable, (iv) if such Holder is not a broker-dealer, that it is not
engaged in, and does not intend to engage in, the distribution of the Exchange
Notes and (v) if such Holder is a broker-dealer, that it will receive Exchange
Notes for its own account in exchange for Private Notes that were acquired as a
result of market-making activities or other trading activities and that it will
be required to acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Notes.

PROCEDURES FOR TENDERING

To tender in the Exchange Offer, a holder of Private Notes must complete,
sign and date the Letter of Transmittal, or facsimile thereof, have the
signatures thereon guaranteed if required by the Letter of Transmittal, and mail
or otherwise deliver such Letter of Transmittal or such facsimile to the
Exchange Agent at the address set forth below under "--Exchange Agent" for
receipt prior to the Expiration Date. In addition, either (i) certificates for
such Private Notes must be received by the Exchange Agent along with the Letter
of Transmittal, (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Private Notes into the Exchange Agent's
account at the Depositary pursuant to the procedure for book-entry transfer
described below, must be received by the Exchange Agent prior to the Expiration
Date or (iii) the holder must comply with the guaranteed delivery procedures
described below.

The tender by a holder that is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.

THE METHOD OF DELIVERY OF PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. DO NOT SEND THE LETTER OF TRANSMITTAL OR ANY PRIVATE
NOTES TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.

Any beneficial owner(s) of the Private Notes whose Private Notes are held
through a broker, dealer, commercial bank, trust Company or other nominee and
who wishes to tender should contact such intermediary promptly and instruct such
intermediary to tender on such beneficial owner's behalf.

Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed by
an Eligible Institution (as defined below) unless the Private Notes tendered
pursuant thereto are tendered (i) by a registered holder who has not completed
the box titled "Special Delivery Instruction" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be made by a member firm of a
registered

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<PAGE>
national securities exchange or of the NASD, a commercial bank or trust Company
having an office or correspondent in the United States or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act which is
a member of one of the recognized signature guarantee programs identified in the
Letter of Transmittal (an "Eligible Institution").

If the Letter of Transmittal is signed by a person other than the registered
holder of any Private Notes listed therein, such Private Notes must be endorsed
or accompanied by a properly completed bond power, signed by such registered
holder exactly as such registered holder's name appears on such Private Notes.

In connection with any tender of Private Notes in definitive certified form,
if the Letter of Transmittal or any Private Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.

The Exchange Agent and the Depositary have confirmed that any financial
institution that is a participant in the Depositary's system may utilize the
Depositary's Automated Tender Offer Program to tender Private Notes.

All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Private Notes will be determined
by the Company in his sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Private
Notes not properly tendered or any Private Notes the Company's acceptance of
which would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the right to waive any defects, irregularities or conditions of
tender as to particular Private Notes. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the instructions in the Letter
of Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Private Notes must be
cured within such time as the Company shall determine. Although the Company
intends to notify holders of defects or irregularities in connection with
tenders of Private Notes, neither the Company, the Exchange Agent nor any other
person shall incur any liability for failure to give such notification. Tenders
of Private Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived.

While the Company has no present plan to acquire any Private Notes that are
not tendered in the Exchange Offer or to file a registration statement to permit
resales of any Private Notes that are not tendered pursuant to the Exchange
Offer, the Company reserves the right in its sole discretion to purchase or make
offers for any Private Notes that remain outstanding subsequent to the
Expiration Date and, to the extent permitted by applicable law, purchase Private
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers could differ from the terms of the
Exchange Offer.

By tendering Private Notes pursuant to the Exchange Offer, each holder of
Private Notes will represent to the Company that, among other things, (i) the
Exchange Notes to be acquired by such holder of Private Notes in connection with
the Exchange Offer are being acquired by such holder in the ordinary course of
business of such holder, (ii) such holder has no arrangement or understanding
with any person to participate in the distribution of the Exchange Notes, (iii)
such holder acknowledges and agrees that any person who is a broker-dealer
registered under the Exchange Act or is participating in the Exchange Offer for
the purposes of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale of the Exchange Notes acquired by such person
and cannot rely on the position of the staff of the Commission set forth in
certain no-action letters, (iv) such holder understands that a secondary resale
transaction described in clause (iii) above and any resales of Exchange Notes
obtained by such holder in exchange for Private Notes acquired by such holder
directly from the Company should be covered by an effective registration
statement containing the selling security holder information required by Item
507 or Item 508, as

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<PAGE>
applicable, of Regulation S-K of the Commission and (v) such holder is not an
"affiliate", as defined in Rule 405 under the Securities Act, of the Company. If
the holder is a broker-dealer that will receive Exchange Notes for such holder's
own account in exchange for Private Notes that were acquired as a result of
market-making activities or other trading activities, such holder will be
required to acknowledge in the Letter of Transmittal that such holder will
deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, such holder will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.

RETURN OF PRIVATE NOTES

If any tendered Private Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Private Notes are withdrawn
or are submitted for a greater principal amount than the holders desire to
exchange, such unaccepted, withdrawn or nonexchanged Private Notes will be
returned without expense to the tendering holder thereof (or, in the case of
Private Notes tendered by book-entry transfer in to the Exchange Agent's account
at the Depositary pursuant to the book-entry transfer procedures described
below, such Private Notes will be credited to an account maintained with the
Depositary) as promptly as practicable.

BOOK-ENTRY TRANSFER

The Exchange Agent will make a request to establish an account with respect
to the Private Notes at the Depositary for purposes of the Exchange Offer within
two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depositary's systems may make book-
entry delivery of Private Notes by causing the Depositary to transfer such
Private Notes into the Exchange Agent's account at the Depositary in accordance
with the Depositary's procedures for transfer. However, although delivery of
Private Notes may be effected through book-entry transfer at the Depositary, the
Letter of Transmittal or facsimile thereof, with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the Exchange Agent at the address set forth below under
"--Exchange Agent" on or prior to the Expiration Date or pursuant to the
guaranteed delivery procedures described below.

GUARANTEED DELIVERY PROCEDURES

Holders who wish to tender their Private Notes and (i) whose Private Notes
are not immediately available or (ii) who cannot deliver their Private Notes,
the Letter of Transmittal or any other required documents to the Exchange Agent
prior to the Expiration Date, may effect a tender if:

(a) The tender is made through an Eligible Institution;

(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the holder, the certificate number(s) of such Private Notes (if
applicable) and the principal amount of Private Notes tendered, stating that
the tender is being made thereby and guaranteeing that, within five New York
Stock Exchange trading days after the Expiration Date, the Letter of
Transmittal (or a facsimile thereof), together with the certificate(s)
representing the Private Notes in proper form for transfer or a Book-Entry
Confirmation, as the case may be, and any other documents required by the
Letter of Transmittal, will be deposited by the Eligible Institution with
the Exchange Agent; and

(c) Such properly executed Letter of Transmittal (or facsimile thereof),
as well as the certificate(s) representing all tendered Private Notes in
proper form for transfer or a Book-Entry Confirmation, as the case may be,
and all other documents required by the Letter of Transmittal are received
by the Exchange Agent within five New York Stock Exchange trading days after
the Expiration Date.

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<PAGE>
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Private Notes according to the
guaranteed delivery procedures set forth above.

WITHDRAWAL OF TENDERS

Except as otherwise provided herein, tenders of Private Notes may be
withdrawn at any time prior to the Expiration Date.

To withdraw a tender of Private Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private
Notes to be withdrawn (including the certificate number or numbers, if
applicable, and principal amount of such Private Notes) and (iii) be signed by
the holder in the same manner as the original signature on the Letter of
Transmittal by which such Private Notes were tendered (including any required
signature guarantees). All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
in its sole discretion, whose determination shall be final and binding on all
parties. Any Private Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer, and no Exchange Notes will be
issued with respect thereto unless the Private Notes so withdrawn are validly
retendered. Properly withdrawn Private Notes may be retendered by following one
of the procedures described above under "The Exchange Offer--Procedures for
Tendering" at any time prior to the Expiration Date.

TERMINATION OF CERTAIN RIGHTS

All registration rights under the Registration Rights Agreement accorded to
holders of the Private Notes (and all rights to receive additional interest in
the event of a Registration Default as defined therein) will terminate upon
consummation of the Exchange Offer except with respect to the Company's
continuing obligation for a period of up to 180 days after the Registration
Statement is declared effective to keep the Registration Statement effective and
to provide copies of the latest version of the Prospectus to any broker-dealer
that requests copies of such Prospectus in the Letter of Transmittal for use in
connection with any resale by such broker-dealer of Exchange Notes received for
its own account pursuant to the Exchange Offer in exchange for Private Notes
acquired for its own account as a result of market-making or other trading
activities.

EXCHANGE AGENT

First Trust National Association has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:

<TABLE>
<CAPTION>
By Facsimile:
(For Eligible Institutions
By Mail: Only) By Hand or Overnight Courier
<S> <C> <C>
First Trust National (612) 244-1537 First Trust National
Association Association
180 East Fifth Street Confirm by Telephone: 180 East Fifth Street
St. Paul, Minnesota 55101 (612) 244-1215 St. Paul, Minnesota 55101
Attention: Specialized Attention: Specialized
Finance, Finance,
4th Floor 4th Floor
</TABLE>

First Trust National Association also serves as Trustee under the Indenture.

56
<PAGE>
FEES AND EXPENSES

The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, facsimile transmission, telephone or in person by
officers and regular employees of the Company and its affiliates.

The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable, out-of-pocket expenses in connection therewith.

The expenses to be incurred in connection with the Exchange Offer, including
registration fees, fees and expenses of the Exchange Agent and the Trustee,
accounting and legal fees, and printing costs, will be paid by the Company.

The Company will pay all transfer taxes, if any, applicable to the exchange
of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of the Private Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.

CONSEQUENCE OF FAILURE TO EXCHANGE

Participation in the Exchange Offer is voluntary. Holders of the Private
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.

Private Notes that are not exchanged for the Exchange Notes pursuant to the
Exchange Offer will remain "restricted securities" within the meaning of Rule
144(a)(3)(iv) of the Securities Act. Accordingly, such Private Notes may not be
offered, sold, pledged or otherwise transferred except (i) to a person whom the
seller reasonably believes is a "qualified institutional buyer" within the
meaning of Rule 144A under the Securities Act purchasing for its own account or
for the account of a qualified institutional buyer in a transaction meeting the
requirements of Rule 144A, (ii) in an offshore transaction complying with Rule
903 or Rule 904 of Regulation S under the Securities Act, (iii) pursuant to an
exemption from registration under the Securities Act provided by Rule 144
thereunder (if available), (iv) pursuant to an effective registration statement
under the Securities Act or (v) pursuant to another available exemption from the
registration requirements of the Securities Act, and, in each case, in
accordance with all other applicable securities laws.

ACCOUNTING TREATMENT

For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the remaining term of the Notes.

DESCRIPTION OF THE NOTES

GENERAL

The Notes will be issued pursuant to an Indenture (the "Indenture") among
the Company, the Subsidiary Guarantors (as defined), and First Trust National
Association, as trustee (the "Trustee"). The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (the "Trust Indenture Act"). The Notes and the
Registration Rights Agreement are subject to all such terms, and holders of the
Notes are referred to the Indenture, the Registration Rights Agreement and the
Trust Indenture Act for a statement thereof. The following summary of certain
provisions of the Indenture and the Registration Rights Agreement does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Indenture and the

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<PAGE>
Registration Rights Agreement, including the definitions contained therein.
Copies of the proposed forms of Indenture and Registration Rights Agreement have
been filed as part of the registration statement covering the Notes. Copies are
also available from the Company and the Initial Purchaser upon request. The
definitions of certain terms used in the following summary are set forth below
under "Certain Definitions."

The Notes will be senior unsecured obligations of the Company. The Notes
will rank senior in right of payment to all present and future subordinated
indebtedness of the Company and PARI PASSU in right of payment with all present
and future unsubordinated indebtedness. The Notes will be effectively
subordinated to all existing and future secured indebtedness of the Company,
including indebtedness under the Senior Credit Facility, to the extent of the
value of the assets securing such indebtedness. As of the Effective Date, the
Company had an aggregate of $99.0 million of outstanding indebtedness (excluding
approximately $35.6 million of letters of credit and bankers' acceptances), of
which approximately $12.3 million was indebtedness under the Senior Credit
Facility.

PRINCIPAL, MATURITY, AND INTEREST

The Notes are limited in aggregate principal amount to $85 million and will
mature on November 1, 2004. Interest will be payable on the Notes in cash at the
rate per annum of 12 3/4%, semi-annually in arrears, on each November 1 and May
1, to holders of record on the immediately preceding October 15 and April 15,
respectively, commencing on May 1, 1998. Cash interest will be computed on the
basis of a 360-day year, consisting of twelve 30-day months. Interest on the
Notes will increase from time to time if the Company fails to fulfill its
obligations under the Registration Rights Agreement. In that regard, the Company
informed the Trustee on February 26, 1998 that the Company had not filed by the
Filing Date (this and the other capitalized terms used in this sentence without
definition are defined in the Registration Rights Agreement) either the Exchange
Registration Statement or the Initial Shelf Registration Statement; accordingly,
Additional Interest will accrue on the Notes until either such registration
statement has been filed and all other applicable Registration Defaults, if any,
have been cured.

The Notes will be payable both as to principal and interest at the office or
agency of the Company, or, at the option of the Company, payment of interest may
be made by check mailed to the holders of the Notes at their respective
addresses set forth in the register of holders of Notes. Until otherwise
designated by the Company, the Company's office or agency will be the office of
the Trustee maintained for such purpose. The Notes will be issued in registered
form only, without coupons, in denominations of $1,000 principal amount and
integral multiples thereof.

SECURITY ACCOUNT

In order to secure the Company's obligations with respect to the first three
scheduled interest payments under the Notes, the Company has deposited in the
Security Account to be held by the Trustee, as security agent (the "Security
Agent"), pursuant to the terms and conditions of the Indenture and the Security
Agreement (as defined herein), certain Pledged Securities acquired by the
Company upon consummation of the Private Note Offering with a portion of the net
proceeds from the sale of the Notes in an amount equal to approximately $15.5
million. The funds in the Security Account have been invested by the Security
Agent in Pledged Securities. The amount of Pledged Securities purchased depended
on the interest rates on government securities prevailing at the time of
purchase.

Interest earned on the Pledged Securities will be added to the Security
Account. The Pledged Securities and Security Account will also secure the
repayment of the principal amount and premium, if any, on the Notes to May 1,
1999.

The funds in the Security Account will be applied to satisfy the Company's
obligations to pay interest on the Notes to May 1, 1999. Under the terms of the
Security Agreement, after all scheduled interest

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<PAGE>
payments on the Notes to May 1, 1999 have been made, any remaining Pledged
Securities and proceeds thereof, if any, will be released from the Security
Account to the Company.

GUARANTEES

CSS, whose only assets consist of certain service marks of the Company, has
entered into a supplemental indenture pursuant to which it guarantees the
repayment of the Notes (the "CSS Guarantee"). The repayment of the Notes will
also be unconditionally and irrevocably guaranteed, jointly and severally, by
all Restricted Subsidiaries of the Company formed after the Closing Date
(together with CSS, the "Subsidiary Guarantors"). The Indenture provides that,
as long as any Notes remain outstanding, any Subsidiary Guarantor shall enter
into a supplemental indenture and guarantee repayment of the Notes (each,
including the CSS Guarantee, a "Subsidiary Guarantee"). The Subsidiary Guarantee
of each Subsidiary Guarantor will rank pari passu in right of payment to all
existing and future unsubordinated indebtedness of such Subsidiary Guarantor.
The Subsidiary Guarantee will be effectively subordinated to secured
indebtedness of the Subsidiary Guarantor, including indebtedness outstanding
under the Senior Credit Facility, in each case, to the extent of the assets
securing such indebtedness.

The obligations of each Subsidiary Guarantor will be limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Subsidiary Guarantee, result in the obligations of such Subsidiary Guarantor
under the Subsidiary Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. The net worth of any Subsidiary
Guarantor for such purpose shall include any claim of such Subsidiary Guarantor
against the Company for reimbursement and any claim against any other Subsidiary
Guarantor for contribution. Each Subsidiary Guarantor may consolidate with or
merge into or sell its assets to the Company or another Subsidiary Guarantor, or
with other Persons upon the terms and conditions set forth in the Indenture. See
"--Certain Covenants-- Mergers, Consolidations or Sale of Assets" and "--Certain
Covenants --Asset Sales." If all the capital stock of a Subsidiary Guarantor is
sold (including by way of merger or consolidation) by the Company and the sale
complies with the provisions set forth in "--Certain Covenants --Asset Sales,"
the Subsidiary Guarantee with respect to such Subsidiary Guarantor will be
released. Any Subsidiary Guarantor may cease to be a Subsidiary Guarantor, and
the Subsidiary Guarantee of such Subsidiary Guarantor will terminate at any time
that the Board of Directors designates such Subsidiary Guarantor as an
"Unrestricted Subsidiary," as provided below.

OPTIONAL REDEMPTION

The Notes are not subject to any mandatory redemption provisions or sinking
fund payments. Except as described below, the Notes are not redeemable at the
Company's option prior to November 1, 2001. Thereafter, the Notes will be
subject to redemption at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on November 1 of the years indicated below:

<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2001.............................................................................. 106.3750%
2002.............................................................................. 103.1875%
2003 and thereafter............................................................... 100%
</TABLE>

Notwithstanding the foregoing, prior to November 1, 2001, the Company may
redeem, at its option, up to one-third of the principal amount of outstanding
Notes at a redemption price equal to 112.75% of their principal amount on the
redemption date, plus accrued and unpaid interest thereon to the redemption
date, with all or a portion of the net proceeds of an offering of Capital Stock
(other than Disqualified

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Stock) of the Company; provided, that (i) at least two-thirds of the original
principal amount of the Notes are outstanding immediately following such
redemption and (ii) such redemption shall occur within 60 days of the date of
the closing of such offering of Capital Stock of the Company. The restrictions
on optional redemptions set forth in the Indenture do not limit the Company's
right to make open market or privately negotiated purchases of the Notes from
time to time.

If less than all the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the national securities exchange, if any, on which the Notes are
listed, or, if the Notes are not so listed, on a pro rata basis, by lot or by
such method as the Trustee deems to be fair and appropriate, provided that Notes
with a principal amount of $1,000 or less may not be redeemed in part. Notice of
redemption will be mailed by first class mail at least 15 days but not more than
60 days before the redemption date to each holder of Notes to be redeemed at
such holder's registered address. If any Note is to be redeemed in part only,
the notice of redemption that relates to such Note will state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal to
the unredeemed portion thereof will be issued in the name of the holder thereof
upon cancellation of the original Note. On and after the date of redemption,
interest will cease to accrue on the Notes or portions of Notes called for
redemption.

REPURCHASE UPON CHANGE OF CONTROL

Upon the occurrence of a Change of Control, the Company will be required to
notify the Trustee in writing thereof and to offer to repurchase all or any part
(equal to $1,000 of principal or an integral multiple thereof) of each holder's
Notes pursuant to the offer described below (the "Change of Control Offer") at a
purchase price equal to 101% of the principal amount thereof on the date of
purchase, plus accrued and unpaid interest thereon, if any, through the date of
purchase (the "Change of Control Payment"). Within 30 days following any Change
of Control, the Company shall mail a notice to each holder stating: (1) that the
Change of Control Offer is being made pursuant to the covenant entitled "Change
of Control" and that all Notes tendered will be accepted for payment; (2) the
purchase price and the purchase date, which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed (the "Change of Control
Payment Date"); (3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in the payment of the Change of Control
Payment, on and after the Change of Control Payment Date, all Notes accepted for
payment pursuant to the Change of Control Offer shall cease to accrue interest;
(5) that holders electing to have any Notes purchased pursuant to a Change of
Control Offer will be required to surrender the Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control Payment Date;
(6) that holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission, or letter setting forth the name of the holder, the principal
amount of Notes delivered for purchase, and a statement that such holder is
withdrawing his election to have such Notes purchased; and (7) that holders
whose Notes are being purchased only in part will be issued new Notes equal in
principal amount to the unpurchased amount of the Notes surrendered; provided
that each Note purchased and each new Note issued shall be in a principal amount
equal to $1,000 or an integral multiple thereof. The Company will comply with
the requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes in connection with a
Change of Control. To the extent that the provisions of any securities laws or
regulations conflict with the "Repurchase upon Change of Control" provisions of
the Indenture, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
"Repurchase upon Change of Control" provisions of the Indenture by virtue
thereof.

On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (2) deposit with the

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Paying Agent an amount equal to the Change of Control Payment in respect of all
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Notes so accepted together with an Officers' Certificate
stating the amount of the Notes or portions thereof tendered to the Company. The
Paying Agent shall promptly mail to each holder of Notes so accepted payment in
an amount equal to the purchase price for such Notes, and the Trustee shall
promptly authenticate and mail to each holder a new Note equal in principal
amount to the unpurchased portion of the Notes surrendered, if any; provided,
that each such new Note shall be in a principal amount of $1,000 or an integral
multiple thereof. The Company will publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.

There can be no assurance that sufficient funds will be available at the
time of any Change of Control Offer to make required repurchases. The Company's
failure to comply with the covenant described above, including failure to pay
the repurchase price, will be an Event of Default under the Indenture.

CERTAIN COVENANTS

RESTRICTED PAYMENTS. The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly (i) declare or pay any
dividend or make any distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of the Company or
dividends or distributions payable to the Company or any Wholly-Owned Restricted
Subsidiary of the Company); (ii) purchase, redeem or otherwise acquire or retire
for value any Equity Interests of the Company or any Restricted Subsidiary or
other Affiliate of the Company (other than any such Equity Interests owned by
the Company or any Wholly-Owned Restricted Subsidiary of the Company); (iii)
voluntarily purchase, redeem, decease or otherwise acquire or retire for value
any other Indebtedness (other than Indebtedness under the Senior Credit Facility
or Indebtedness evidenced by the Notes or the New Notes) that is PARI PASSU with
or subordinated to the Notes; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments") unless, at the time of such
Restricted Payment:

(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;

(b) immediately after giving effect to such transaction, on a pro forma
basis as if such transaction had occurred at the beginning of the applicable
four-quarter period, the Company would be permitted to incur at least $1.00
of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
set forth in the first paragraph under "-- Incurrence of Indebtedness and
Issuance of Preferred Stock";

(c) the amount of such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the date of the Indenture, is less than the
sum of (x) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first quarter
commencing immediately after the date of the Indenture to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, 100% of such deficit),
plus (y) 100% of the net cash proceeds received by the Company from the
issuance or sale of Equity Interests of the Company (other than Equity
Interests sold to a Restricted Subsidiary or Affiliate of the Company and
other than Disqualified Stock) after the date of the Indenture and on or
prior to the time of such Restricted Payment, plus (z) 100% of the net cash
proceeds received by the Company from the issuance or sale, other than to a
Restricted Subsidiary or Affiliate of the Company, of any debt security of
the Company that has been converted into Equity Interests of the Company
(other than Disqualified Stock) pursuant to the terms thereof after the date
of the Indenture and on or prior to the time of such Restricted Payment. For
purposes of this clause (c) the amount of any Restricted

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Payment paid in property other than cash shall be the fair market value of
such property as determined reasonably and in good faith by the Board of
Directors of the Company (and evidenced by a resolution set forth in an
Officers' Certificate delivered to the Trustee); and

(d) at least two fiscal quarters shall have elapsed since the Effective
Date.

The foregoing provisions will not prohibit, so long as no Default or Event
of Default shall have occurred and be continuing or would occur as a consequence
of any of the following: (i) the payment of any dividend within 60 days after
the date of declaration thereof, if at said date of declaration such payment
would have complied with the provisions of the Indenture; (ii) the redemption,
repurchase, retirement or other acquisition of any Indebtedness or Equity
Interests of the Company in exchange for, or solely out of the proceeds of, the
substantially concurrent sale (other than to a Restricted Subsidiary or other
Affiliate of the Company) of other Equity Interests of the Company (other than
any Disqualified Stock); (iii) the redemption, repurchase or payoff of Purchase
Money Obligations required to be repaid with the proceeds of the sale of the
asset financed by such indebtedness; (iv) the redemption, repurchase, defeasance
or payoff of any Indebtedness with proceeds of any Refinancing Indebtedness
permitted to be incurred under "-- Incurrence of Indebtedness and Issuance of
Preferred Stock"; (v) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any Subsidiary of
the Company held by any officer or employee of the Company or its Subsidiaries;
PROVIDED, HOWEVER, that the aggregate amount of all such repurchases,
redemptions and other acquisitions and retirements under this clause (v) on or
after the date of the Indenture shall not exceed $2.5 million, except for any
such repurchases, redemptions and other acquisitions and retirements funded with
insurance proceeds or proceeds received in connection with the issuance of
Equity Interests of the Company and its Restricted Subsidiaries, which shall not
be subject to such limitation; (vi) the purchase, redemption, defeasance or
other acquisition or retirement of Series A Warrants, Series B Warrants or
Series C Warrants, in each case to the extent required by the terms of the
agreement or agreements relating thereto or governing the terms thereof as in
effect on the Closing Date; (vii) distributions required under the Plan of
Reorganization or (viii) payments or distributions to dissenting stockholders
required by applicable law pursuant to and in connection with transactions
permitted under the terms of the Indenture.

Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the "Restricted Payments" covenant were computed, which calculations
may be based upon the Company's latest available financial statements.

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<PAGE>
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. The Company
will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guarantee or otherwise become directly
or indirectly liable with respect to (collectively, "incur") any Indebtedness
(other than Permitted Indebtedness), and the Company will not issue any
Disqualified Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of Preferred Stock; PROVIDED, HOWEVER, that the Company may
incur Indebtedness or issue shares of Disqualified Stock, if (i) no Default or
Event of Default shall have occurred and be continuing or would occur after
giving effect on a pro forma basis to such incurrence or issuance and (ii) the
Fixed Charge Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least equal to 2.5:1,
determined on a pro forma basis as if the additional Indebtedness had been
incurred, or the Disqualified Stock had been issued, as the case may be, at the
beginning of such four-quarter period.

ASSET SALES. The Company will not, and will not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or
the applicable Restricted Subsidiary, as the case may be, receives consideration
at the time of such Asset Sale in an amount at least equal to the fair market
value of the assets sold or otherwise disposed of (A), as determined in good
faith by the Company's Board of Directors (as set forth in a resolution of such
Board of Directors and set forth in an Officers' Certificate delivered to the
Trustee) with respect to any Asset Sale pursuant to which at least 85% of the
consideration received by the Company or the Restricted Subsidiary, as the case
may be, from such Asset Sale shall be in the form of cash or Cash Equivalents
and is received at the time of such disposition or (B) with respect to any other
Asset Sale, as determined by an Independent Financial Advisor (as evidenced by a
favorable opinion delivered by such Independent Financial Advisor to the Trustee
as to (x) the adequacy of the consideration received by the Company or the
Restricted Subsidiary, as the case may be, from such Asset Sale and (y) the
fairness, from a financial point of view, of such Asset Sale); and (ii) upon the
consummation of an Asset Sale, the Company shall (I) apply, or cause such
Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset
Sale within 180 days of such Asset Sale either (A) to repay any Indebtedness
secured by the assets involved in such Asset Sale or outstanding Indebtedness
under the Senior Credit Facility, in each case, together with a concomitant
permanent reduction in the amount of such Indebtedness (including a permanent
reduction in the committed amounts therefor in the case of any revolving credit
facility so repaid), (B) to make an investment in properties and assets that
replace the properties and assets that were the subject of such Asset Sale or in
properties and assets that will be used in the business of the Company and its
Restricted Subsidiaries ("Replacement Assets"), or (C) to effect a combination
of repayment and investment permitted by the foregoing clauses (ii)(I)(A) and
(B) or (II) (A) enter into a definitive written agreement, within 150 days of
such Asset Sale, committing it, subject to conditions customary in such
agreements, to apply, or cause such Restricted Subsidiary to apply, the Net Cash
Proceeds relating to such Asset Sale within 270 days of such Asset Sale to an
investment in Replacement Assets or (B) effect a combination of repayment and
investment permitted by the foregoing clauses (ii)(I)(A) and (B) and
(ii)(II)(A). On (i) the 181st day after an Asset Sale, (ii) if a definitive
written agreement relating to an investment in Replacement Assets was entered
into within 150 days of such Asset Sale, on the 271st day after such Asset Sale
or such earlier date on which such definitive agreement is for any reason
terminated or (iii) such earlier date as the Board of Directors of the Company
or of such Restricted Subsidiary determines to apply the Net Cash Proceeds
relating to such Asset Sale as set forth in clauses (ii)(I) and (ii)(II) of the
immediately preceding sentence, in each case as applicable (each, a "Net
Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which
has not been applied on or before such Net Proceeds Offer Trigger Date as
permitted in clauses (ii)(I) or (ii)(II) of the immediately preceding sentence
(each a "Net Proceeds Offer Amount") shall be applied by the Company or such
Restricted Subsidiary to make an offer to purchase (the "Net Proceeds Offer"),
on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor more than
60 days following the applicable Net Proceeds Offer Trigger Date, from all
holders of Notes on a pro rata basis that amount of Notes equal to

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the Net Proceeds Offer Amount at a price equal to 100% of the principal amount
of the Notes to be purchased, plus accrued and unpaid interest thereon, if any,
to the date of purchase; PROVIDED, HOWEVER, that if at any time any non-cash
consideration received by the Company or any Restricted Subsidiary of the
Company, as the case may be, in connection with any Asset Sale is converted into
or sold or otherwise disposed of for cash (other than interest received with
respect to any such non-cash consideration), then such conversion or disposition
shall be deemed to constitute an Asset Sale hereunder, and the Net Cash Proceeds
thereof shall be applied in accordance with this covenant. The Company may defer
the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer
Amount equal to or in excess of $10 million resulting from one or more Asset
Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not
just the amount in excess of $10 million, shall be applied as required pursuant
to this paragraph).

In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "--Merger, Consolidation
or Sale of Assets" below, the successor corporation shall be deemed to have sold
the properties and assets of the Company and its Restricted Subsidiaries not so
transferred for purposes of this covenant, and shall comply with the provisions
of this covenant with respect to such deemed sale as if it were an Asset Sale.
In addition, the fair market value of such properties and assets of the Company
or its Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash
Proceeds for purposes of this covenant.

Each Net Proceeds Offer will be mailed to the record holders of Notes as
shown on the register of holders within 25 days following the Net Proceeds Offer
Trigger Date, with a copy to the Trustee, and shall comply with the procedures
set forth in the Indenture. Upon receiving notice of the Net Proceeds Offer,
holders may elect to tender their Notes in whole or in part (in integral
multiples of $1,000 principal amount) in exchange for cash. To the extent
holders properly tender Notes in an amount exceeding the Net Proceeds Offer
Amount, Notes of tendering holders will be purchased on a pro rata basis (based
on amounts tendered). A Net Proceeds Offer shall remain open for a period of 20
business days or such longer period as may be required by law.

The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Limitation on Asset Sales" provisions of the Indenture by
virtue thereof.

There can be no assurance that sufficient funds will be available at the
time of any Net Proceeds Offer to make required repurchases.

LIMITATIONS ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Company will not cause or permit any of its Restricted
Subsidiaries to issue or sell any Capital Stock (other than to the Company or to
a Wholly-Owned Restricted Subsidiary of the Company) or permit any Person (other
than the Company or a Wholly-Owned Restricted Subsidiary of the Company) to own
or hold any Capital Stock of any Restricted Subsidiary of the Company or any
Lien or security interest therein (other than Permitted Liens); PROVIDED,
HOWEVER, such covenant shall not prohibit the disposition (by sale, merger or
otherwise) of all the Capital Stock of a Restricted Subsidiary; provided any Net
Cash Proceeds therefrom are applied in accordance with the covenants described
under "-- Asset Sales."

LIENS. The Indenture will provide that neither the Company nor any of its
Restricted Subsidiaries may, directly or indirectly, incur, any Lien, except
Permitted Liens, on any asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom.

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LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrances or restrictions on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (A) on such Restricted
Subsidiary's Capital Stock or (B) with respect to any other interest or
participation in, or measured by, its profits, or pay any Indebtedness owed to
the Company or any of its Restricted Subsidiaries, (b) make loans or advances to
the Company or any of its Restricted Subsidiaries or (c) transfer any of its
properties or assets to the Company or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reasons of (1)
applicable law; (2) the Indenture, Notes or Senior Credit Facility; (3)
customary non-assignment provisions of any contract or any lease entered into in
the ordinary course of business; (4) agreements existing on the Closing Date to
the extent and in the manner such agreements are in effect on the Closing Date;
or (5) an agreement governing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement referred to in
clause (2) or (4) above; provided, however, that the provisions relating to such
encumbrance or restriction contained in any such Indebtedness are no less
favorable to the Company in any material respect as determined by the Board of
Directors of the Company in their reasonable and good faith judgment than the
provisions relating to such encumbrance or restriction contained in agreements
referred to in such clause (2) or (4).

MERGER, CONSOLIDATION OR SALE OF ASSETS. The Company will not, in a single
transaction or series of related transactions, consolidate or merge with or into
(whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets to, another corporation, Person or entity unless (i) the
Company is the surviving corporation, or the entity or the person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
entity or person formed by or surviving any such consolidation or merger (if
other than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made assumes all the obligations
of the Company under the Registration Rights Agreement and, pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee, under
the Notes and the Indenture; (iii) immediately after such transaction (including
giving effect to any Indebtedness and Acquired Debt incurred or expected to be
incurred in connection with or in respect of such transaction and to any
assumption required by clause (ii) above) no Default or Event of Default exists;
(iv) the Company or any corporation formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer, lease
conveyance or other disposition will have been made (A) will have Consolidated
Net Worth (immediately after the transaction but prior to any purchase
accounting adjustments resulting from the transaction) equal to or greater than
the Consolidated Net Worth of the Company immediately preceding the transaction
and (B) will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Indenture and will have a Fixed Charge Coverage
Ratio, determined on a pro forma basis, greater than or equal to the Fixed
Charge Coverage Ratio of the Company immediately prior to the transaction and
(v) the Company or the entity or Person formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made shall have delivered to the
Trustee an Officers' Certificate and an opinion of counsel (with respect to
which opinion such counsel may rely solely as to matters of fact on an Officers'
Certificate), each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and any supplemental indenture
required in connection with such transaction comply with the applicable
provisions of the Indenture and that all conditions precedent in the Indenture
relating to such transaction have been satisfied.

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For purposes of the foregoing, the transfer (by lease, assignment, sale, or
otherwise in a single transaction or series of transactions) of all or
substantially all the properties or assets of one or more Subsidiaries of the
Company the Capital Stock of which constitutes all or substantially all the
properties and assets of the Company, shall be deemed to be the transfer of all
or substantially all the properties and assets of the Company.

The Indenture will provide that upon any consolidation, combination or
merger or any transfer of all or substantially all the assets of the Company in
accordance with the foregoing, in which the Company is not the continuing
corporation, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, lease or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture and the Notes with the same effect as if such
surviving entity had been named as such.

Each Restricted Subsidiary (other than any Restricted Subsidiary whose
Subsidiary Guarantee is to be released in accordance with the terms of the
Subsidiary Guarantee and the Indenture in connection with any transaction made
in compliance with the provisions of "-- Asset Sales") will not, and the Company
will not cause or permit any Restricted Subsidiary to, consolidate with or merge
with or into any Person (other than the Company or any Restricted Subsidiary of
the Company), or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its assets, other than to the Company or any other
Restricted Subsidiaries unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Restricted Subsidiary), or to which
such disposition shall have been made, is a corporation organized and existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) such entity assumes by supplemental indenture all the obligations
of the Restricted Subsidiary on the Subsidiary Guarantee; (iii) immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing; and (iv) immediately after giving effect to
such transaction and the use of any net proceeds therefrom on a pro forma basis,
the Company could satisfy the provisions of clause (iv) of the first paragraph
of this covenant. Any merger or consolidation of a Restricted Subsidiary with
and into the Company (with the Company being the surviving entity) or another
Restricted Subsidiary need only comply with clause (iv) of the first paragraph
of this covenant.

LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into or permit to exist any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any services or the entering into any contract,
agreement, understanding, loan, or guarantee) with, or for the benefit of, any
of its Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under the next succeeding paragraph and (y) Affiliate
Transactions and each series of related Affiliate Transactions that are similar
or part of a common plan, having an aggregate value of less than $2 million;
provided that such transactions are on terms that are no less favorable than
those that might reasonably have been obtained in a comparable transaction at
such time on an arm's-length basis from a Person that is not an Affiliate of the
Company or such Restricted Subsidiary. All Affiliate Transactions (and each
series of related Affiliate Transactions that are similar or part of a common
plan) involving aggregate payments or other property with a fair market value in
excess of $2 million shall be approved by a majority of the disinterested
members of the Board of Directors of the Company, such approval to be evidenced
by a Board Resolution stating that such Board of Directors has determined that
such transaction complies with the foregoing provisions. If the Company or any
Restricted Subsidiary of the Company enters into an Affiliate Transaction (or a
series of related Affiliate Transactions which are similar or part of a common
plan) that involves an aggregate fair market value of more than $5 million, the
Company shall, prior to the consummation thereof, obtain a favorable opinion as
to the fairness of such transaction or series of related transactions to the
Company from a financial point of view from an Independent Financial Advisor and
deliver such opinion to the Trustee.

The restrictions set forth in the preceding paragraph shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or consultants of

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the Company or any Subsidiary as determined in good faith by the Company's Board
of Directors or senior management; (ii) transactions exclusively between or
among the Company and any of its Wholly-Owned Restricted Subsidiaries or
exclusively between or among such Wholly-Owned Restricted Subsidiaries, PROVIDED
such transactions are not otherwise prohibited by the Indenture; and (iii)
Restricted Payments not prohibited by the Indenture.

SUBSIDIARY GUARANTEES. The Indenture will provide that as long as any Notes
remain outstanding, any Restricted Subsidiary shall (a) execute and deliver to
the Trustee a supplemental indenture in form reasonably satisfactory to the
Trustee pursuant to which such Restricted Subsidiary shall unconditionally
guarantee all the Company's obligations under the Notes and the Indenture on the
terms set forth in the Indenture and (b) deliver to the Trustee an opinion of
counsel, subject to customary exceptions, that such supplemental indenture has
been duly authorized, executed and delivered by such Restricted Subsidiary and
constitutes a legal, valid, binding and enforceable obligation of such
Restricted Subsidiary. Thereafter, such Restricted Subsidiary shall be a
Subsidiary Guarantor for all purposes of the Indenture.

Any Restricted Subsidiary may cease to be a Subsidiary Guarantor and the
Subsidiary Guarantee of such Restricted Subsidiary will terminate at any time
that the Board of Directors of the Company designates such Restricted Subsidiary
as an "Unrestricted Subsidiary," as provided below. As of the Closing Date, the
Company has one Subsidiary, CSS, whose only assets are certain service marks of
the Company. See "Business --Trademarks and Service Marks." After the Chapter 11
case of CSS has been dismissed by the Bankruptcy Court, CSS shall agree to
guarantee payment of the Company's obligations under the Notes and the
Indenture. While the Company believes that its service marks as a whole are of
material importance to its business, such service marks have minimal value as a
source of funds or assets underlying any Subsidiary Guarantee executed by CSS.

If all the Capital Stock of any Restricted Subsidiary is sold to a Person
(other than the Company or any of its Restricted Subsidiaries) and the Net
Proceeds from such Asset Sale are used in accordance with the terms of the
covenant described under "-- Asset Sales," then such Restricted Subsidiary will
be released and discharged from all of its obligations under its Subsidiary
Guarantee of the Notes and the Indenture.

CONDUCT OF BUSINESS. Neither the Company nor any of its Restricted
Subsidiaries will engage in any businesses other than (a) the business conducted
or proposed to be conducted by the Company and its Restricted Subsidiaries on
the Closing Date or (b) any business reasonably related and complimentary to any
business described in clause (a) above.

REPORTS. So long as any Notes are outstanding, the Company will furnish to
the holders of Notes all quarterly and annual financial information and other
reports filed with the Commission pursuant to the Exchange Act and, whether or
not the Company is required to file any financial information with the
Commission, will furnish to the holders of the Notes and to prospective
purchasers of the Notes, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act for so long as is
required for an offer or sale of the Notes under Rule 144A. From and after the
date of effectiveness of any registration statement filed with the Commission
with respect to the Notes, the Company will furnish to the holders of Notes such
quarterly, annual or other reports or information that is required to be filed
with the Commission.

KEY MAN LIFE INSURANCE. The Company shall use commercially reasonable
efforts to obtain, not later than 30 days after the Closing Date, and to
maintain, for so long as the Notes are outstanding, key man life insurance upon
the life of Sam Forman, the Company's chief executive officer, and any successor
chief executive officer of the Company, or other senior executive officer of the
Company performing similar functions, with the death benefit thereunder payable
to the Company in an amount not less than $10,000,000. The Company shall at all
times retain all the incidents of ownership of such insurance and

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shall not borrow upon or otherwise impair its right to receive the proceeds of
such insurance, except that the Company may incur Permitted Liens on such
insurance and proceeds.

PAYMENTS FOR CONSENT

Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Notes for, or as inducement to,
any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to be paid or agreed
to be paid to all holders of the Notes then outstanding that consent, waive or
agree to amend any of such terms or provisions in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.

EVENTS OF DEFAULT AND REMEDIES

The Indenture will provide that each of the following constitutes an Event
of Default: (i) default for 10 days by the Company in the payment when due of
interest on the Notes; (ii) default by the Company in payment of principal (or
premium, if any) on the Notes when due, redemption, by acceleration or
otherwise, including any default in the performance or breach of the provisions
described under "-- Repurchase Upon Change of Control," "-- Asset Sales" and "--
Merger, Consolidation or Sale of Assets"; (iii) failure by the Company or any of
its Restricted Subsidiaries to comply with any of its other agreements or
covenants in, or provisions of, the Indenture or the Notes and the default
continues for a period of 30 days following receipt by the Company of a written
notice specifying the nature of such failure; (iv) default under (after giving
effect to any applicable grace periods or any extension of any maturity date)
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness by the Company or any
of its Restricted Subsidiaries whether such Indebtedness now exists, or is
created after the date of the Indenture, if (a) either (A) such default results
from the failure to pay principal of or interest on such Indebtedness and the
default continues for a period of 30 days or (B) as a result of such default the
maturity of such Indebtedness has been accelerated, and (b) the principal amount
of such Indebtedness, together with the principal amount of any other such
Indebtedness with respect to which a payment default (after the expiration of
any applicable grace period or any extension of the maturity date) has occurred,
or the maturity of which has been so accelerated, exceeds $2 million in the
aggregate, and the default continues for a period of 10 days after the Company
has received written notice specifying the default from the Trustee or the
Holders of at least 25% of the aggregate principal amount of the then
outstanding Notes; (v) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments (other than any judgment as to which a
reputable insurance Company has accepted full liability in writing) aggregating
in excess of $2 million which judgments are not stayed or discharged within 60
days after their entry; (vii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Restricted Subsidiaries; and (viii) except
as permitted under the Indenture, any Subsidiary Guarantee for any reason ceases
to be in full force and effect or becomes or is declared to be null and void,
unenforceable or invalid or any Restricted Subsidiary denies its obligations
under its Subsidiary Guarantee.

If any Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in aggregate principal amount of the then outstanding Notes may
by written notice declare all the Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
immediately due and payable without further action or notice. Holders of the
Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, holders of a majority in aggregate
principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trustee power. The Trustee may withhold from holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.

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The holders of a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Trustee, may on behalf of the holders of
all the Notes (a) waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the Notes, or a Default or
Event of Default with respect to any covenant or provision which cannot be
modified or amended without the consent of the holder of each outstanding Note
affected or (b) rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree if all existing Events of Default
(except nonpayment of principal or interest that has become due solely because
of the acceleration) have been cured or waived.

The Company is required, upon becoming aware of any Default or Event of
Default, to deliver to the Trustee a statement specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.

NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS

No past, present or future director, officer, employee, incorporator or
stockholder of the Company or any Subsidiary Guarantor, as such, shall have any
liability for any obligations of the Company or any Subsidiary Guarantor under
the Notes, the Indenture, the Warrant Agreement or the Registration Rights
Agreement or for any claim based on, in respect of, or by reason of, such
obligation. Each holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive certain liabilities under
the federal securities laws, and it is the view of the Commission that such a
waiver is against public policy.

DEFEASANCE AND DISCHARGE OF THE INDENTURE AND THE NOTES

If the Company irrevocably deposits, or causes to be deposited, in trust
with the Trustee or the Paying Agent, at any time prior to the stated maturity
of the Notes or the date of redemption of all the outstanding Notes, as trust
funds in trust, money or direct non-callable obligations of or guaranteed by the
United States of America in an amount sufficient (as to principal, premium (if
any) and interest, but without reinvestment thereof) to pay timely and discharge
the principal amount of and premium, if any, and accrued cash interest on the
Notes to redemption or maturity, as the case may be, and comply with certain
other conditions required by the Indenture, the Indenture shall cease to be of
further effect as to all outstanding Notes (except, among other things, as to
(i) remaining rights of registration of transfer and substitution and exchange
of the Notes, (ii) rights of holders to receive payment of principal of and
interest on the Notes and (iii) the rights, obligations and immunities of the
Trustee) and the Subsidiary Guarantees will be discharged. Such trust may only
be established if (i) the Company has delivered to the Trustee an opinion of
independent counsel to the effect that the holders of the Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and defeasance and will be subject to federal income tax on the
same amount, in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred, (ii) the Company shall
have delivered to the Trustee an opinion of counsel to the effect that, after
the passage of 90 days following the deposit, the trust funds will not be
subject to section 547 of the Bankruptcy Code or any similar federal or state
law for the relief of debtors, (iii) no Default or Event of Default shall have
occurred or be continuing, and (iv) certain other customary conditions precedent
are satisfied.

TRANSFER AND EXCHANGE

A holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents, and the Company may
require a holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a date

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fixed for redemption of Notes. The registered holder of a Note will be treated
as the owner of such Note for all purposes.

AMENDMENT, SUPPLEMENT AND WAIVER

Except as provided in the next succeeding paragraph, the Indenture or the
Notes may be amended or supplemented with the consent of the holders of at least
a majority in aggregate principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for Notes) and any existing Default or Event of Default or compliance with any
provision of the Indenture or the Notes may be waived with the consent of the
holders of a majority in aggregate principal amount of the then outstanding
Notes (including consents obtained in connection with a tender offer or exchange
offer for Notes).

Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting holder of Notes)(i) reduce
the principal amount of Notes whose holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of, or the premium on, or change
the fixed maturity of any Note or alter the provisions with respect to the
redemption of the Notes or alter the provisions with respect to repurchases or
redemptions of the Notes with net proceeds from Asset Sales or upon a Change of
Control, (iii) reduce the rate of or change the time for payment of interest,
including default interest, on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on any
Note (other than a Default in the payment of an amount due as a result of an
acceleration, where such acceleration is rescinded pursuant to the Indenture),
(v) make any Note payable in money other than that stated in the Notes, (vi)
make any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of holders of Notes to receive payments of principal of
or interest on the Notes, (vii) waive a redemption payment with respect to any
Note, or (viii) modify or change any provision of the Indenture affecting the
ranking of the Notes or the Subsidiary Guarantees in a manner which adversely
affects the holders of Notes.

Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company may amend or supplement the Indenture or the Notes to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's obligations to holders of the Notes or any Restricted Subsidiary's
obligation under its Subsidiary Guarantee of the Notes in the case of a merger
or consolidation, to make any change that would provide any additional rights or
benefits to the holders of the Notes or that does not adversely affect the legal
right under the Indenture of any such holder, or to comply with the requirements
of the Commission in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act.

CONCERNING THE TRUSTEE

The Trustee under the Indenture will be First Trust National Association.
The Indenture contains certain limitations on the rights of the Trustee, should
it become a creditor of the Company, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.

The holders of a majority in aggregate principal amount of the then
outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent person in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the

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request of any holder of Notes, unless such holder shall have offered to the
Trustee an indemnity satisfactory to it against any loss, liability or expense.

ADDITIONAL INFORMATION

Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to the Company at 469 Seventh Avenue, 11th Floor, New
York, New York 10018, Attention: Chris R. Decker.

CERTAIN DEFINITIONS

Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definitions are provided.

"ACQUIRED DEBT" means, with respect to any specified person, Indebtedness of
any other person existing at the time such other person merged with or into or
became a Subsidiary of such specified person, excluding Indebtedness incurred in
connection with, or in contemplation of, such other person merging with or into
or becoming a Subsidiary of such specified person.

"AFFILIATE" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management of policies of such person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that in the case of a corporation, beneficial ownership of 10% or more of the
aggregate voting power of the Voting Stock of a person shall be deemed to be
control. In the case of an individual, (A) members of such Person's immediate
family (as defined in Instruction 2 of Item 404(a) of Regulation S-K under the
Securities Act) and (B) trusts, any trustee or beneficiaries of which are such
Person or members of such Person's immediate family, shall be under common
control with such individual. Notwithstanding the foregoing, neither the Initial
Purchaser nor any of its Affiliates will be deemed to be Affiliates of the
Company.

"ASSET SALE" means, with respect to any transaction or series of
transactions, any direct or indirect sale, issuance, conveyance, transfer, lease
(other than operating leases entered into in the ordinary course of business),
assignment or other transfer for value by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or a Wholly-Owned Restricted
Subsidiary of the Company of (a) any Capital Stock of any Restricted Subsidiary
of the Company; or (b) any other property or assets of the Company or any
Restricted Subsidiary of the Company other than in the ordinary course of
business; provided, however, that Asset Sales shall not include (i) the sale,
lease, conveyance, disposition or other transfer of all or substantially all the
assets of the Company as permitted under "-- Merger, Consolidation and Sale of
Assets," (ii) the sale, conveyance, transfer or other disposition by the Company
or any of its Restricted Subsidiaries of (x) obsolete or unusable inventory or
other assets or (y) receivables generated by customer purchases in the ordinary
course of business or (iii) Sale and Leaseback Transactions.

"BOARD RESOLUTION" means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have been
duly adopted by the Board of Directors of such Person and to be in full force
and effect on the date of such certification, and delivered to the Trustee.

"CAPITAL LEASE OBLIGATION" means, as to any Person, the obligations of such
Person under a lease that are required to be classified and accounted for as
capital lease obligations under GAAP and, for purposes of this definition, the
amount of such obligations at any date shall be the capitalized amount of such
obligations at such date, determined in accordance with GAAP.

"CAPITAL STOCK" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations, rights or other equivalents
(however designated) of corporate stock, including, without

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limitation, partnership interests and other indicia of ownership and (ii) with
respect to any other Person, any and all partnership or other equity interests
of such Person.

"CASH EQUIVALENTS" means (i) obligations issued or unconditionally
guaranteed by the United States of America or any agency thereof, or obligations
issued by any agency or instrumentality thereof and backed by the full faith and
credit of the United States of America; (ii) commercial paper rated the highest
grade by Moody's Investors Service, Inc. and Standard & Poor's Corporation and
maturing not more than one year from the date of creation thereof; (iii) time
deposits with, and certificates of deposit and banker's acceptances issued by,
any bank having capital surplus and undivided profits aggregating at least $500
million and maturing not more than one year from the date of creation thereof;
(iv) repurchase agreements that are secured by a perfected security interest in
an obligation described in clause (i) and are with any bank described in clause
(iii); (v) money market accounts with any bank having capital surplus and
undivided profits aggregating at least $500 million; (vi) readily marketable
direct obligations issued by any state of the United States of America or any
political subdivision thereof having one of the two highest rating categories
obtainable from either Moody's Investors Service, Inc. or Standard & Poor's
Corporation; and (vii) money market funds investing only in U.S. Government
Obligations.

"CHANGE OF CONTROL" means the occurrence of any of the following (in one
transaction or a series of transactions): (i) the sale, lease, transfer,
conveyance or other disposition of all or substantially all of the Company's
assets to any "person" or "group" (as such terms are used in Section 13(d) and
14(d) of the Exchange Act) other than to one or more Existing Holders; (ii) the
liquidation or dissolution of the Company or the adoption of a plan by the
stockholders of the Company relating to the dissolution or liquidation of the
Company; (iii) at any time following the first anniversary of the Effective
Date, any "person" or "group" (as such terms are used in Section 13(d) and 14(d)
of the Exchange Act), except for one or more Existing Holders, is or becomes the
"beneficial owner" (as such term is defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the aggregate ordinary voting power
of the total outstanding Voting Stock of the Company; or (iv) at any time
following the first anniversary of the Effective Date, with respect to the
Company's Board of Directors as such board is constituted on and after the
Effective Date, during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the Company
(together with any new directors who are approved by a vote of at least 66 2/3%
of the directors then still in office who were either directors at the beginning
of such 3 period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then still in office.

The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the Company's assets. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of Notes to require the Company to repurchase such Notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all of the
assets of the Company and its Subsidiaries to another person may be uncertain.

"CLOSING DATE" means the date of original issuance of the Notes.

"COMMISSION" means the Securities and Exchange Commission.

"CONSOLIDATED CASH FLOW" means, with respect to any person for any period,
the Consolidated Net Income of such person for such period plus (to the extent
such amounts are deducted in calculating such income (loss) from operations of
such Person for such period and without duplication) (a) provision for taxes
based on income or profits to the extent such provision for taxes was included
in computing Consolidated Net Income, (b) consolidated interest expense of such
person for such period, whether paid or accrued (including deferred financing
costs, non-cash interest payments and the interest component of

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capital lease obligations), to the extent such expense was deducted in computing
Consolidated Net Income, and (c) depreciation and amortization (including
amortization of goodwill and other intangibles) for such period to the extent
such depreciation or amortization were deducted in computing Consolidated Net
Income, in each case, on a consolidated basis and determined in accordance with
GAAP.

"CONSOLIDATED NET INCOME" means, with respect to any person for any period,
the aggregate of the Net Income of such person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP,
plus extraordinary charges deducted in computing Net Income to the extent
related to and incurred in respect of the Chapter 11 Filing, the Private Note
Offering and the issuance of the New Notes; provided, that (i) the Net Income of
any person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid to the referent person or a Wholly-Owned
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary will not be
included to the extent that declarations of dividends or similar distributions
by that Restricted Subsidiary are not at the time permitted, directly or
indirectly, by operation of the terms of its organization document or any
agreement, instrument, judgment or state or government regulation, (iii) the Net
Income of any person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded and (iv) the
cumulative effect of a change in accounting principles shall be excluded.

"CONSOLIDATED NET WORTH" means, with respect to any person, the sum of (i)
the consolidated equity of the common stockholders of such person and its
consolidated Restricted Subsidiaries plus (ii) the respective amounts reported
on such person's most recent balance sheet with respect to any series of
preferred stock (other than Disqualified Stock) that by its terms is not
entitled to the payment of dividends unless such dividends may be declared and
paid only out of net earnings in respect of the year of such declaration and
payment, but only to the extent of (a) any cash received by such person upon
issuance of such preferred stock and (b) the fair market value of any non-cash
consideration received by such person upon issuance of such preferred stock;
provided that such value has been determined in good faith by a nationally
recognized investment bank, less (x) all write-ups, subsequent to the date of
the Indenture, in the book value of assets owned by such person or a
consolidated Restricted Subsidiary of such person, other than (a) write-ups
resulting from foreign currency translations and (B) write-ups upon the
acquisition of assets acquired in a transaction to be accounted for by purchase
accounting under GAAP, (y) all investments in persons that are not consolidated
Restricted Subsidiaries (except, in each case, a Permitted Investment), and (z)
all unamortized debt discount and expense and unamortized deferred financing
charges (except such amounts arising from the issuance of the Notes), all of the
foregoing determined in accordance with GAAP.

"DEFAULT" means any event known to the Company or which should have been
known to the Company after due inquiry that is, or with the passage of time or
the giving of notice or both would be, an Event of Default.

"DISQUALIFIED STOCK" means any Capital Stock which, (i) either by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the
Maturity Date or (ii) is convertible or exchangeable at the option of the issuer
thereof or any other Person for debt securities.

"EQUITY INTERESTS" means Capital Stock or warrants, options or other rights
to acquire Capital Stock (but excluding any debt security that is convertible
into, or exchangeable for, Capital Stock).

"EXCHANGE OFFER" means the offer that may be made by the Company pursuant to
the Registration Rights Agreement to exchange New Notes for the Notes.

"EXISTING HOLDERS" shall mean, collectively, the record and beneficial
holders of Common Stock that receive such Common Stock in connection with the
Plan of Reorganization.

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"FIXED CHARGE COVERAGE RATIO" means, with respect to any person for any
period, the ratio of the Consolidated Cash Flow of such person for such period
to the Fixed Charges of such person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, guarantees, repays,
repurchases or redeems any Indebtedness (other than revolving credit borrowings)
or issues or redeems Preferred Stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated but prior
to the event for which the calculation of the Fixed Charge Coverage Ratio is
made, then the Fixed Charge Coverage Ratio (both the numerator and the
denominator therein) shall be calculated giving pro forma effect to such
incurrence, assumption, guarantee, repayment, repurchase or redemption of
Indebtedness, or such issuance or redemption of Preferred Stock, as if the same
had occurred at the beginning of the applicable period; PROVIDED that pro forma
effect shall be given to repayments, repurchases or redemptions of Indebtedness
or Preferred Stock only to the extent such Indebtedness or Preferred Stock is
permanently retired (and, in the case of the Notes, surrendered to the Trustee
for cancellation). In addition, in the event of any Asset Sale, Consolidated
Cash Flow for such period shall be reduced by an amount equal to the
Consolidated Cash Flow (if positive) directly attributable to the assets sold
and Consolidated Interest Expense shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness assumed
by third parties or repaid with the proceeds of such Asset Sale, in each case as
if the same had occurred at the beginning of the applicable period. In the event
that acquisitions, divestitures, mergers or consolidations have been made by the
Company or any of its Subsidiaries subsequent to the commencement of the
four-quarter period over which the Fixed Charge Coverage Ratio is being
calculated, but prior to the event for which the calculation of the Fixed Charge
Coverage Ratio is being made, then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such acquisitions, divestitures, mergers
and consolidations as if such transactions had occurred at the beginning of the
applicable period.

"FIXED CHARGES" means, with respect to any person for any period, the sum of
(a) consolidated interest expense of such person for such period, whether paid
or accrued, to the extent such expense was deducted in computing Consolidated
Net Income (including amortization of non-cash interest payments and the
interest component of capital leases but excluding amortization of deferred
financing fees) and (b) the product of (i) all dividend payments, whether paid
in cash, assets, securities or otherwise, in the case of a person that is a
Subsidiary of the Company, on any series of preferred stock of such person, and
all dividend payments in respect of any series of preferred stock of the
Company, whether paid in cash, assets, securities or otherwise (other than
dividends payable in additional shares of the preferred stock on which such
dividends are paid), times (ii) a fraction, the numerator of which is one and
the denominator of which is one minus the then current combined federal, state
and local statutory tax rate of such person, expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP.

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

"INDEBTEDNESS" means, with respect to any person, any indebtedness of such
person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or bankers' acceptances or
letters of credit (or reimbursement agreements in respect thereof) or
representing the balance deferred and unpaid of the purchase price of any
property (including pursuant to capital leases) or representing any Interest
Rate Swap Obligations, except any such balance that constitutes an accrued
expense or trade payable, if and to the extent any of the foregoing Indebtedness
(other than Interest Rate Swap Obligations) would appear as a liability upon a
balance sheet of such person prepared in accordance with GAAP, and also
includes, to the extent not otherwise included, the guarantee (other than by
endorsement of negotiable instruments for collection in the ordinary course of
business), direct or indirect, by such person in any manner (including, without
limitation, letters of credit and reimbursement

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agreements in respect thereof), of all or any part of any of the items which
would be included within this definition.

"INDEPENDENT FINANCIAL ADVISOR" means a nationally recognized independent
public accounting firm or investment banking firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.

"INTEREST RATE SWAP OBLIGATIONS" means the obligations of any Person
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.

"INVESTMENTS" means, with respect to any person, all investments by such
person in other persons (including Affiliates) in the form of loans (including
direct or indirect guarantees), advances or capital contributions (excluding
commissions, travel and similar advances to officers and employees made in the
ordinary course of business), purchases or other acquisitions for consideration
of Indebtedness, Equity Interests or other securities and all other items that
are or would be classified as investments on a balance sheet prepared in
accordance with GAAP.

"LIEN" means, with respect to any asset, mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction, excluding true
lease and consignment filings).

"NET CASH PROCEEDS" means, with the respect to any Asset Sale, the proceeds
in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions), (b) taxes paid or payable after taking into
account any reduction in consolidated tax liability due to available tax credits
or deductions and any tax sharing arrangements, (c) repayment of Indebtedness
that is required to be repaid in connection with such Asset Sale and (d)
appropriate amounts to be provided by the Company or any Subsidiary, as the case
may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any Subsidiary,
as the case may be, after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale.

"NET INCOME" means, with respect to any person, the net income (loss) of
such person, determined in accordance with GAAP, excluding, however, any gain
(but not loss), together with any related provision for taxes on such gain (but
not loss), realized in connection with any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions), and
excluding any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).

"NEW NOTES" means the Company's 12 3/4% Senior Notes due 2004, Series B, as
described and 4 authenticated and issued under the Indenture.

"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.

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"PAYING AGENT" shall initially be the Trustee until a successor paying agent
for the Notes is selected in accordance with the Indenture.

"PERMITTED INDEBTEDNESS" means each of the following:

(a) Indebtedness incurred by the Company and its Subsidiaries under the
Senior Credit Facility in an aggregate principal amount not to exceed $130
million;

(b) Indebtedness incurred by the Company or its Restricted Subsidiaries
in connection with or arising out of Sale and Leaseback Transactions,
Capital Lease Obligations or Purchase Money Obligations, PROVIDED, that the
aggregate principal amount at any one time outstanding of all such Sale and
Leaseback Transactions, Capital Lease Obligations and Purchase Money
Obligations does not exceed $10 million;

(c) Indebtedness of the Company represented by the Notes or the New
Notes and Indebtedness of the Restricted Subsidiaries of the Company
represented by the Subsidiary Guarantees (whether incurred on the Closing
Date, or in connection with the Exchange Offer or any shelf registration
contemplated by the Registration Rights Agreement);

(d) Indebtedness owed by the Company to any of its Wholly-Owned
Subsidiaries for so long as such Indebtedness is held by a Wholly-Owned
Subsidiary of the Company, subject to no Lien except a Lien in favor of or
for the benefit of lenders party to the Senior Credit Facility; PROVIDED
that (i) any such Indebtedness of the Company is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations under the
Indenture and the Notes and (ii) if as of any date any Person other than a
Wholly-Owned Subsidiary of the Company owns or holds any such Indebtedness
or any Person holds a Lien in respect of such Indebtedness, such date shall
be deemed the date of incurrence of Indebtedness not constituting Permitted
Indebtedness of the Company;

(e) Indebtedness of a Wholly-Owned Subsidiary of the Company to the
Company or to a Wholly-Owned Subsidiary of the Company for so long as such
Indebtedness is held by the Company or a Wholly-Owned Subsidiary of the
Company, in each case subject to no Lien held by a Person other than (x) the
Company or a Wholly-Owned Subsidiary of the Company or (y) the lenders party
to the Senior Credit Facility or a Person acting as their agent; PROVIDED
that if as of any date any Person other than the Company or a Wholly-Owned
Subsidiary of the Company owns or holds such Indebtedness or holds a Lien in
respect of such Indebtedness, such date shall be deemed the date of
incurrence of Indebtedness not constituting Permitted Indebtedness by the
issuer of such Indebtedness;

(f) the incurrence by the Company and its Restricted Subsidiaries of
Indebtedness issued in exchange for, or the proceeds of which are
contemporaneously used to extend, refinance, renew, replace, or refund
(collectively, "Refinance") Permitted Indebtedness referred to in clauses
(a), (b) and (c) above and outstanding Indebtedness incurred in accordance
with the "Incurrence of Indebtedness and Issuance of Preferred Stock"
covenant (other than pursuant to this definition of Permitted Indebtedness
except to the extent provided in clauses (a), (b) and (c) thereof) (the
"Refinancing Indebtedness"); PROVIDED, HOWEVER, that (1) the principal
amount of such Refinancing Indebtedness shall not exceed the principal
amount of Indebtedness so Refinanced (plus the amount of reasonable fees
required to be paid and reasonable expenses incurred in connection
therewith); (2) the Refinancing Indebtedness shall rank in right of payment
no more senior (and at least as subordinated) to the Notes than did the
Indebtedness being Refinanced; (3) if the Indebtedness being Refinanced is
Indebtedness of the Company or any Subsidiary, then such Refinancing
Indebtedness shall be Indebtedness solely of the Company or such Subsidiary;
(4) such Refinancing Indebtedness shall have a Weighted Average Life equal
or longer than, and a stated maturity which is the same or later than, that
of the Indebtedness being Refinanced; and (5) the Indebtedness so Refinanced
is permanently retired (and, in case of the Notes, surrendered to the
Trustee for cancellation); and

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(g) Interest Rate Swap Obligations of the Company covering Indebtedness
of the Company or any of its Restricted Subsidiaries and Interest Rate Swap
Obligations of any Restricted Subsidiary covering Indebtedness of such
Restricted Subsidiary; PROVIDED, HOWEVER, that such Interest Rate Swap
Obligations are entered into to protect the Company and its Restricted
Subsidiaries from fluctuations in interest rates on Indebtedness incurred in
accordance with the Indenture to the extent the notional principal amount of
such Interest Rate Swap Obligation does not exceed the principal amount of
the Indebtedness to which such Interest Rate Swap Obligation relates.

"PERMITTED INVESTMENTS" means (i) Investments by the Company or any
Wholly-Owned Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly-Owned Subsidiary of the Company or
that will merge or consolidate into the Company or a Wholly-Owned Subsidiary of
the Company, (ii) Investments in the Company by any Restricted Subsidiary of the
Company; PROVIDED that any Indebtedness evidencing such Investment is unsecured
and subordinated, pursuant to a written agreement, to the Company's obligations
under the Notes and the Indenture; (iii) investments in cash and Cash
Equivalents; (iv) Interest Rate Swap Obligations entered into in the ordinary
course of the Company's or its Subsidiaries' businesses and otherwise in
compliance with the Indenture; (v) Investments in securities of trade creditors
or customers received pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of such trade creditors or
customers; (vi) Investments in the Notes; (vii) Investments made by the Company
or its Subsidiaries as a result of an Asset Sale made in compliance with the
"Asset Sales" covenant; (viii) Investments existing on the Closing Date; and
(ix) Investments in joint ventures or other similar arrangements in an aggregate
amount not to exceed $5 million.

"PERMITTED LIENS" means the following types of Liens:

(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries shall
have set aside on its books such reserves as may be required pursuant to
GAAP;

(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;

(iii) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business, or to secure the performance and
return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);

(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;

(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company or
any of its Restricted Subsidiaries;

(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or assets
which is not leased property subject to such Capitalized Lease Obligation;

(vii) Purchase Money Liens of the Company or any Restricted Subsidiary
of the Company acquired in the ordinary course of business; PROVIDED,
HOWEVER, that (A) the related Purchase Money

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Obligation shall not exceed the cost of such property or assets and shall
not be secured by any property or assets of the Company or any Restricted
Subsidiary of the Company other than the property and assets so acquired and
(B) the Lien securing such Indebtedness shall be created within 90 days of
such acquisition;

(viii) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumbered documents and other property
relating to such letters of credit and products and proceeds thereof;

(ix) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Subsidiaries, including rights of offset and set-off;

(x) Liens incurred in the ordinary course of business securing Interest
Rate Swap Obligations, which Interest Rate Swap Obligations relate to
Indebtedness that is otherwise permitted under the Indenture;

(xi) Liens securing Acquired Debt incurred in accordance with the
covenant described under "--Incurrence of Indebtedness and Issuance of
Preferred Stock"; PROVIDED that (A) such Liens secured such Acquired Debt at
the time of and prior to the incurrence of such Acquired Debt by the Company
or a Restricted Subsidiary of the Company and were not granted in connection
with, or in anticipation of, the incurrence of such Indebtedness by the
Company or a Restricted Subsidiary of the Company and (B) such Liens do not
extend to or cover any property or assets of the Company or of any of its
Subsidiaries other than the property or assets that secured the Acquired
Debt prior to the time such Indebtedness became Acquired Debt of the Company
or a Restricted Subsidiary of the Company and are no more favorable to the
lienholders than those securing the Acquired Debt prior to the incurrence of
such Acquired Debt by the Company or a Restricted Subsidiary of the Company;

(xii) Liens existing on the Closing Date to the extent and in the manner
such Liens are in effect on the Closing Date;

(xiii) Liens securing Indebtedness under the Senior Credit Facility;

(xiv) Liens of the Company or a Wholly-Owned Subsidiary of the Company
on assets of any Subsidiary of the Company;

(xv) Liens securing Refinancing Indebtedness which is incurred to
Refinance any Indebtedness which has been secured by a Lien permitted under
the Indenture and which has been incurred in accordance with the provisions
of the Indenture; PROVIDED, HOWEVER, that such Liens (a) are no less
favorable to the holders of Notes and are not more favorable to the
lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being Refinanced and (b) other than Liens securing Indebtedness
under the Senior Credit Facility, do not extend to or cover any property or
assets of the Company or any of its Restricted Subsidiaries not securing the
Indebtedness so Refinanced; and

(xvi) Liens on the Security Account.

"PERSON" or "PERSON" means any individual, corporation, partnership, joint
venture, association, joint stock Company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

"PLEDGED SECURITIES" means the U.S. Government Obligations to be purchased
by the Company and held in the Security Account in accordance with the Security
Agreement.

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otherwise before any payment may be made with respect to any other Capital Stock
of such Person or its Restricted Subsidiaries.

"PURCHASE AGREEMENT" means the Purchase Agreement, dated October 23, 1997,
between the Company and the Initial Purchaser.

"PURCHASE MONEY LIENS" means (i) Liens to secure or securing Purchase Money
Obligations permitted to be incurred under the Indenture and (ii) Liens to
secure Refinancing Indebtedness incurred solely to Refinance Purchase Money
Obligations permitted to be incurred under the Indenture, provided that such
Refinancing Indebtedness is incurred no later than six (6) months after the
satisfaction of such Purchase Money Obligations and such Lien extends to or
covers only the asset or property securing the Purchase Money Obligations being
Refinanced.

"PURCHASE MONEY OBLIGATIONS" means Indebtedness representing, or incurred to
finance, the cost of acquiring any assets (including Purchase Money Obligations
of any other person at the time such other person is merged with or into or is
otherwise acquired by the Company or its Wholly Owned Subsidiaries), provided
that (i) the principal amount of such Indebtedness does not exceed 100% of such
cost (including the amount of reasonable expenses incurred and reasonable fees
and interest required to be paid), (ii) any Lien securing such Indebtedness does
not extend to or cover any other asset or property other than the asset or
property being so acquired and (iii) such Indebtedness is incurred, and any
Liens with respect thereto are granted, within 90 days of the acquisition of
such property or asset.

"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.

"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.

"SALE AND LEASEBACK TRANSACTION" means any direct or indirect arrangement
with any Person or to which any such Person is a party providing for the leasing
to the Company or a Restricted Subsidiary of any property whether owned by the
Company or any Restricted Subsidiary at the Closing Date or later acquired,
which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.

"SECURITY ACCOUNT" means one or more accounts established with the Trustee
pursuant to the terms of the Security Agreement for the deposit of a portion of
the proceeds from the Private Note Offering and the Pledged Securities in the
Security Account.

"SECURITY AGENT" shall mean the Trustee as security agent under the Security
Agreement.

"SECURITY AGREEMENT" means the Security and Disbursement Agreement, dated as
of the Closing Date, between the Trustee, as security agent, and the Company
relating to the Security Account.

"SENIOR CREDIT FACILITY" means (i) the credit facility evidenced by the Loan
and Security Agreement, dated as of the Closing Date, among the Company,
BankBoston Retail Finance Inc., and the lenders party thereto, and (ii) any
additional or replacement credit facility entered into by the Company subsequent
to the Closing Date which is permitted to be incurred under clause (a) of the
definition of "Permitted Indebtedness" pursuant to which the Company and its
Subsidiaries may incur Indebtedness thereunder at any time outstanding in an
aggregate principal amount not to exceed $130 million, together with all other
agreements, instruments and documents executed or delivered pursuant thereto or
in connection therewith, in each case, as such agreements, instruments or
documents may be amended, supplemented, extended, renewed, replaced or otherwise
modified from time to time.

"SIGNIFICANT SUBSIDIARY" means any Subsidiary which would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.

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"SUBSIDIARY" means, with respect to any person, any corporation, association
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by such person or
one or more of the other Subsidiaries of that person or a combination thereof.

"SUBSIDIARY GUARANTOR" means CSS Trade Names, Inc. (after its Chapter 11
case is dismissed by the Bankruptcy Court) and all Restricted Subsidiaries of
the Company formed after the Closing Date.

"UNRESTRICTED SUBSIDIARY" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The
Board of Directors may designate any Subsidiary (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary
owns any Capital Stock of, or owns or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; PROVIDED that (v) immediately after giving
effect to such designation, the Company is able to incur at least $1.00 of
additional Indebtedness in compliance with the "Incurrence of Indebtedness and
Issuance of Preferred Stock" covenant, (w) immediately before and immediately
after giving effect to such designation, no Default or Event of Default shall
have occurred and be continuing, (x) the Company certifies to the Trustee that
such designation complies with the "Restricted Payments" covenant and (y) each
Subsidiary to be so designated and each of its Subsidiaries has not at the time
of designation, and does not thereafter, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to any
Indebtedness pursuant to which the lender has recourse to any of the assets of
the Company or any of its Restricted Subsidiaries. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if (x)
immediately after giving effect to such designation, the Company is able to
incur at least $1.00 of additional Indebtedness in compliance with the
"Incurrence of Indebtedness and Issuance of Preferred Stock" covenant and (y)
immediately before and immediately after giving effect to such designation, no
Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.

"U.S. GOVERNMENT OBLIGATIONS" means non-callable direct obligations of, and
non-callable obligations guaranteed by, the United States of America for the
payment of which the full faith and credit of the United States of America is
pledged.

"VOTING STOCK" means, with respect to any Person, (i) one or more classes of
the Capital Stock of such Person having general voting power under ordinary
circumstances to elect at least a majority of the Board of Directors, managers
or trustees of such Person (irrespective of whether or not at the time Capital
Stock of any other class or classes shall have or might have voting power by
reason of the happening of any contingency); and (ii) any Capital Stock of such
Person convertible or exchangeable without restriction at the option of the
holder thereof into Capital Stock of such Person described in clause (i) above.

"WEIGHTED AVERAGE LIFE" means, as of the date of determination, with respect
to any Indebtedness, the quotient obtained by dividing (i) the sum of the
products of the numbers of years from the date of determination to the date of
each successive scheduled principal payment of such Indebtedness multiplied by
the amount of such principal payment by (ii) the sum of all such principal
payments.

"WHOLLY-OWNED RESTRICTED SUBSIDIARY" means, with respect to any person, a
Restricted Subsidiary all the Capital Stock of which (other than directors'
qualifying shares) is owned by such person or another Wholly-Owned Restricted
Subsidiary of such person.

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SAME-DAY SETTLEMENT AND PAYMENT

Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the Notes
are expected to be eligible to trade in the PORTAL market and to trade in the
Depository's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in the Notes will therefore be required by the
Depository to be settled in immediately available funds. No assurance can be
given as to the effect, if any, of such settlement arrangements on trading
activity in the Notes.

BOOK-ENTRY, DELIVERY AND FORM

Except as set forth in the next paragraph, the Securities to be sold as set
forth herein will initially be issued in the form of one or more registered
Global Notes (the "Global Notes") each of which will be deposited on the Closing
Date with the Trustee as custodian for, and registered in the name of, a nominee
of DTC (such nominee being referred to herein as the "Global Holder"). The
following are summaries of certain rules and operating procedures of DTC which
affect the Global Notes.

Securities that are (A) originally issued to or transferred to (i)
"institutional accredited investors" (as such terms are defined under "Notice to
Investors" elsewhere herein) who are not "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act) ("QIBs") or to any other persons
who are not QIBs (the "Non-Global Purchasers") or (ii) except as described
below, persons outside the United States pursuant to sales in accordance with
Regulation S under the Securities Act or (B) issued as described below under
"Certificated Securities, will be issued in registered form (the "Certificated
Securities"). Upon the transfer to a QIB of Certificated Securities initially
issued to a Non-Global Purchaser, such Certificated Securities will, unless the
applicable Global Security has previously been exchanged for Certificated
Securities, be exchanged for an interest in the Global Security representing the
principal amount of Notes or number of Series A Warrants being transferred. For
a description of the restrictions on the transfer of Certificated Securities,
see "Notice to Investors."

Securities originally purchased by persons outside the United States
pursuant to sales in accordance with Regulation S under the Securities Act will
be represented upon issuance by a temporary Global Note certificate and a
temporary Global Warrant certificate (each a "Temporary Certificate") that will
not be exchangeable for Certificated Securities until the expiration of the
"40-day restricted period," within the meaning of Rule 903(c)(3) of Regulation S
under the Securities Act. The Temporary Certificate will be registered in the
name of, and held by, a temporary certificate holder (the "Temporary Certificate
Holder") until the expiration of the applicable restricted period, at which time
the Temporary Certificate will be delivered to the Trustee or Warrant Agent, as
the case may be, in exchange for Certificated Securities registered in the names
requested by the Temporary Certificate Holder. In addition, until the expiration
of the applicable restricted period, transfers of interests in the Temporary
Certificate can only be effected through the Temporary Certificate Holder in
accordance with the requirements set forth in "Notice to Investors."

DTC has advised the Company that it is a limited-purpose trust Company that
was created to hold securities for its participating organizations
(collectively, the "Participants" or the "DTC's Participants") and to facilitate
the clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. DTC's Participants include securities brokers and dealers, banks
and trust companies, clearing corporations and certain other organizations.
Access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect Participants"
or "DTC's Indirect Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who are
not Participants may beneficially own securities held by or on behalf of DTC
only through DTC Participants or DTC's Indirect Participants.

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The Company expects that pursuant to procedures established by DTC (i) upon
deposit of the Global Notes, DTC will credit the accounts of Participants with
portions of the Global Notes and (ii) ownership of the Securities will be shown
on, and the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the interests of the DTC's Participants),
DTC's Participants and DTC's Indirect Participants. The laws of some states
require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer Securities will
be limited to such extent. For certain other restrictions on the transferability
of the Securities, see "Notice to Investors."

So long as the Global Holder is the registered owner of any Notes, the
Global Holder will be considered the sole owner of such Securities outstanding
under the Indenture. Except as provided below, owners of beneficial interests in
a Global Note will not be entitled to have Securities registered in their names,
will not receive or be entitled to receive physical delivery of Certificated
Securities, and will not be considered the owners or Holders thereof under the
Indenture for any purpose. As a result, the ability of a person having a
beneficial interest in Securities represented by a Global Note to pledge such
interest to persons or entities that do not participate in DTC's system or to
otherwise take actions in respect of such interest, may be affected by the lack
of a physical certificate evidencing such interest. Accordingly, each QIB owning
a beneficial interest in a Global Note must rely on the procedures of DTC and,
if such QIB is not a Participant or an Indirect Participant, on the procedures
of the Participant through which such QIB owns its interest, to exercise any
rights of a holder under such Global Note or the Indenture.

Neither the Company nor the Trustee nor the Warrant Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of Securities by DTC, or for maintaining, supervising
or reviewing any records of DTC relating to such Securities.

Payments in respect of the principal of, premium, if any, and interest on
any Notes registered in the name of a Global Holder on the applicable record
date will be payable by the Trustee to or at the direction of such Global Holder
in its capacity as the registered holder under the Indenture. Under the terms of
the Indenture, the Company and the Trustee may treat the persons in whose names
the Notes, including the Global Notes, are registered as the owners thereof for
the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to be beneficial
owners of Notes (including principal, premium, if any and interest), or to
immediately credit the accounts of the relevant Participants with such payment,
in amounts proportionate to their respective interests in the Global Notes in
principal amount of beneficial interests in the relevant security as shown on
the records of DTC. Payments by DTC's Participants and DTC's Indirect
Participants to the beneficial owners of Notes will be governed by standing
instructions and customary practice and will be the responsibility of DTC's
Participants or DTC's Indirect Participants.

CERTIFICATED SECURITIES

If (i) the Company notifies the Trustee in writing that DTC is no longer
willing or able to act as a depository and the Company does not appoint a
qualified successor within 90 days or (ii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture, then, upon surrender by the relevant Global
Holder of its Global Note, Certificated Securities in such form will be issued
to each person that such Global Holder and DTC identify as the beneficial owner
of the related Notes. In addition, subject to certain conditions, any person
having a beneficial interest in the Global Note may, upon request to the
Trustee, exchange such beneficial interest for Notes in the form of Certificated
Securities. Upon any such issuance, the Trustee is required to register such
Certificated Securities in the name of, and cause the same to be delivered to,
such person or persons (or the nominee of any thereof) in fully registered form.

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Neither the Company nor the Trustee shall be liable for any delay by the
related Global Holder or DTC in identifying the beneficial owners of the related
Securities and each such person may conclusively rely on, and shall be protected
in relying on, instructions from such Global Holder or of DTC for all purposes
(including with respect to the registration and delivery, and the respective
principal amounts of the Notes to be issued).

CERTAIN PROVISIONS OF THE ARTICLES OF
INCORPORATION AND BYLAWS

ELECTION OF DIRECTORS

Pursuant to the Bylaws, the directors of the Company appointed pursuant to
the Plan of Reorganization will hold office until the first annual meeting of
the Company's shareholders and until their successors are elected and qualified.
Thereafter, directors who are elected at an annual meeting of the Company's
shareholders shall hold office until the next annual meeting of shareholders and
until their successors are elected and qualified.

INDEMNIFICATION

The Articles of Incorporation provide that the Company shall indemnify each
director and officer of the Company to the fullest extent permitted by law.

LIMITATIONS ON DIRECTORS' LIABILITY

The Articles of Incorporation provide that no director of the Company shall
be personally liable to the Company or its shareholders for monetary damages for
any breach of fiduciary duty as a director, except to the extent such exemption
from liability or limitation thereof is not permitted under the Business
Corporation Act of the State of Minnesota (the "MBCA"). These provisions will
not limit the liability of directors under federal securities laws and will not
affect the availability of equitable remedies such as an injunction or
rescission based upon a director's breach of his duty of care or duty of
loyalty.

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CERTAIN PROVISIONS OF THE
MINNESOTA BUSINESS CORPORATION ACT

Certain provisions of the MBCA could thwart an unsolicited takeover of the
Company. These provisions are intended to provide management flexibility, to
enhance the likelihood of continuity and stability in the composition of the
Board of Directors and in the policies formulated by the Board of Directors, and
to discourage an unsolicited takeover of the Company if the Board of Directors
determines that such a takeover is not in the best interests of the Company and
its shareholders. However, these provisions could have the effect of
discouraging certain attempts to acquire the Company, thus depriving the
Company's shareholders of opportunities to sell their shares of Common Stock at
prices higher than prevailing market prices.

Section 302A.671 of the MBCA applies, with certain exceptions, to any
acquisition of voting stock of the Company (from a person other than the
Company, and other than in connection with certain mergers and exchanges to
which the Company is a party) resulting in any person acquiring beneficial
ownership of 20% or more of the Company's voting stock then outstanding. Section
302A.671 requires approval of any such acquisitions by a majority vote of the
shareholders of the Company prior to its consummation. In general, shares
acquired in the absence of such approval are denied voting rights and are
redeemable at their then fair market value by the Company within 30 days after
the acquiring person has failed to give a timely information statement to the
Company or the date the shareholders voted not to grant voting rights to the
acquiring person's shares. A corporation, pursuant to a provision in its
articles of incorporation or bylaws, may elect not to be governed by Section
302A.671 of the MBCA. The Company will not make such an election, and as a
result, the Company will be subject to the provisions of Section 302A.671 of the
MBCA following completion of the Private Note Offering.

Section 302A.673 of the MBCA prohibits certain transactions between a
Minnesota corporation and an "interested shareholder," which is defined as a
person who, together with any affiliates or associates of such person,
beneficially owns, directly or indirectly, 10% or more of the outstanding voting
shares of a Minnesota corporation. Section 302A.673 prohibits certain business
combinations (defined broadly to include mergers, consolidations, sales or other
dispositions of assets having an aggregate value of 10% or more of the
consolidated assets of the corporation, and certain transactions that would
increase the interested shareholder's proportionate share ownership in the
corporation) between an interested shareholder and a corporation for a period of
four years after the date the interested shareholder acquired its stock unless
the business combination or the acquisition of the shares is approved by an
affirmative vote of a majority of a committee of all the disinterested members
of the Board of Directors. A corporation, pursuant to a provision in its
articles of incorporation or bylaws, may elect not to be governed by Section
302A.673 of the MBCA. The Company will not make such an election, and, as a
result, the Company will be subject to the provisions of Section 302A.673 of the
MBCA following completion of the Private Note Offering.

PLAN OF REORGANIZATION

The Private Note Offering and the Plan of Reorganization were consummated on
October 29, 1997. The Plan of Reorganization was confirmed by the Bankruptcy
Court on October 1, 1997. The Plan of Reorganization is designed to reorganize
the Company's capital structure so that the Company can continue as a going
concern with adequate capitalization. The Plan of Reorganization organizes the
claims against and interests in the Company into seven classes. Under the terms
of the Plan of Reorganization, the class consisting of general unsecured claims
will receive 20,000,000 shares of Common Stock and the class consisting of
preferred stock interests will receive 3,000,000 Series B Warrants, which, when
exercised, will entitle the holder thereof to receive 3,000,000 shares of Common
Stock. All other classes, with the exception of the class consisting of common
stock interests and the class consisting of fines, penalties, and punitive
damage claims, will either be reinstated or paid in full under the Plan of
Reorganization using the proceeds from the Private Note Offering and amounts
borrowed under the Senior Credit Facility. See

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"Use of Proceeds." The class consisting of common stock interests and the class
consisting of fines, penalties, and punitive damage claims will not receive a
distribution of either cash or property under the Plan of Reorganization.

The disclosure statement (the "Disclosure Statement") that relates to the
Plan of Reorganization was approved by the Bankruptcy Court on August 22, 1997
and distributed to pre-petition creditors and other parties-in-interest shortly
thereafter. The Disclosure Statement contains, among other things, a description
of the Plan of Reorganization and information relating to the Company, its
operating history, and future prospects. The Disclosure Statement also contains
projections as to the future operating and financial results of the Company. The
inclusion of such projections in the Disclosure Statement is required by the
Bankruptcy Court. Such projections, which are subject to numerous assumptions
and qualifications as set forth in the Disclosure Statement, were prepared in
connection with the Disclosure Statement and not for the purpose of evaluating
an investment in the Notes. The Initial Purchaser did not participate in the
preparation of such projections and disclaims any responsibility therefor.
Copies of the Disclosure Statement are available from Donlin, Recano & Company,
Inc., 419 Park Avenue South, Suite 1206, New York, NY 10016; telephone number
(212) 481-1411.

DESCRIPTION OF CERTAIN INDEBTEDNESS

The following is a description of certain indebtedness of the Company
outstanding as of November 1, 1997.

SENIOR CREDIT FACILITY

As of the Effective Date, the Company entered into a revolving credit
facility (the "Senior Credit Facility") with BankBoston Retail Finance Inc. and
the lenders named therein. The Senior Credit Facility provides the Company with
a three-year revolving line of credit in the amount of $115 million. $90 million
of the availability under the Senior Credit Facility may be utilized for
issuance of letters of credit and bankers' acceptances primarily to secure
obligations to merchandise suppliers; provided that only $20 million of such
availability may be utilized in connection with the issuance of standby letters
of credit. The ability of the Company to borrow under the Senior Credit Facility
or to issue letters of credit or bankers' acceptance thereunder is subject to
various conditions precedent including, without limitation, accuracy of
representations, compliance with covenants and absence of defaults thereunder.
The amounts available to be borrowed thereunder or utilized in connection with
the issuance of letters of credit or bankers' acceptances are limited to
specified percentages of the value of the Company's eligible inventory, as
determined under the Senior Credit Facility, ranging from 65% to 75% based upon
the Company's projected seasonal working capital requirements. Availability at
any time will be reduced by any amounts then borrowed under the Senior Credit
Facility, as well as then outstanding amounts of letters of credit and bankers'
acceptances issued thereunder.

Interest on amounts advanced under the Senior Credit Facility will accrue,
at the option of the Company, at (a) the applicable London interbank offered
rate (as determined under the Senior Credit Facility) plus a margin ranging from
1.50% to 1.75% or (b) the prime rate plus a margin not to exceed 0.75%. The
Senior Credit Facility contains a number of covenants and events of default
customary for credit facilities of this nature, including covenants related to
the financial performance of the Company and restrictions on payment of
dividends by the Company. A breach of such covenants or any other default by the
Company under the Senior Credit Facility could prevent the Company from making
borrowings or issuing letters of credit or bankers' acceptances thereunder and
result in the acceleration of the Company's obligations thereunder. The Company
will be subjected to a prepayment penalty if it terminates the Senior Credit
Facility prior to maturity.

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The Company's obligations under the Senior Credit Facility are secured by a
lien on substantially all of the Company's assets except real property and
property in the Security Account. The Senior Credit Facility will be
cross-defaulted to the Notes and any other material indebtedness of the Company.

On the Effective Date, the Company borrowed approximately $6.8 million under
the Senior Credit Facility and utilized such amount, together with the net
proceeds of the Private Note Offering, to repay all amounts outstanding under
the Existing Credit Facility, to satisfy certain claims under the Plan of
Reorganization and to pay fees and expenses related to the Plan of
Reorganization and the Offering.

PRE-PETITION TAX CLAIMS

Certain of the Company's tax liabilities incurred prior to the Chapter 11
Filing have been restructured pursuant to the Plan of Reorganization as
"Priority Tax Claims." Such Priority Tax Claims have an aggregate value of
approximately $1.68 million. Under the Plan of Reorganization, Priority Tax
Claims are payable (i) in equal installments every three months over a period of
six years with interest accruing at the rate available on 90-day United States
Treasuries on the date the Plan of Reorganization is consummated or (ii) with
Bankruptcy Court approval, (a) on other terms that are less favorable than those
set forth in clause (i), or (b) in full on the date the Plan of Reorganization
is consummated. The Company paid in full approximately $235,000 of Priority Tax
Claims on the date the Plan of Reorganization was consummated and the remainder
will be paid over six years in accordance with clause (i) above.

DESCRIPTION OF CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

The Company's authorized capital stock consists of 40,000,000 shares of
Common Stock, par value $0.01 per share and 1,000,000 shares of Preferred Stock,
par value $.01 per share. Marine Midland Bank is the transfer agent and
registrar for the Common Stock. As of March 16, 1998, the 20,000,000 shares of
Common Stock issued pursuant to the Plan of Reorganization constituted all of
the shares of Common Stock outstanding. Under the terms of the Plan of
Reorganization, the shares were issued to a Disbursing Agent to be disbursed to
creditors upon final settlement of their respective claims. As of ,
1998, shares have been disbursed to creditors who have settled their
claims.

Under the Plan of Reorganization, the Company also issued (i) Series A
Warrants to purchase up to 2,285,718 shares of Common Stock, (ii) Series B
Warrants to purchase up to an aggregate of 15% of Common Stock (subject to
dilution by the Series A Warrants, the Series C Warrants described below, and
options to purchase Common Stock granted to certain employees (the "Employee
Options")), and (iii) Series C Warrants to Mr. Sam Forman to purchase an
aggregate of 15% of Common Stock (subject to dilution by the Series A Warrants
and certain Employee Options). As of the date hereof, none of the holders of the
foregoing warrants or options have exercised their rights to acquire shares of
Common Stock.

PREFERRED STOCK

The Board of Directors has the authority, without further action by the
stockholders, to issue up to 1,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares constituting any
series or the designation of such series. The issuance of Preferred Stock could
adversely affect the voting power of holders of Common Stock and could have the
effect of delaying, deferring or preventing a change in control of the Company.
The Company has no present plan to issue any shares of preferred stock. In
addition, the Indenture and the Senior Credit Facility contain restrictions on
the Company's ability to issue certain types of redeemable or convertible
capital stock.

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COMMON STOCK

The holders of the Common Stock are entitled to one vote for each share held
of record and shall vote as a single class on all matters as to which
stockholders are entitled to vote. There are no cumulative voting rights in the
election of directors. The quorum required at any stockholders' meeting for
consideration of any matter is a majority of all outstanding shares entitled to
vote, represented in person or by proxy. All matters will be decided by a
majority of the votes cast at stockholder meetings by holders of shares present
in person or by proxy who are entitled to vote.

Holders of the Common Stock are entitled to receive dividends when, as and
if declared by the Board of Directors out of funds legally available for
dividends. In the event of any liquidation, dissolution or winding up of the
Company, the holders of the Common Stock are entitled to receive pro rata any
assets distributable to stockholders in respect of shares held by them, after
payment of all obligations of the Company. The holders of Common Stock are not
entitled to pre-emptive rights to any securities issued by the Company.

The Company is authorized to issue additional shares of capital stock from
time to time. There are no specific restrictions upon such issuances, except
that the Company's Certificate prohibits the issuance of non-voting equity
securities if, and only to the extent that and so long as, Section 1123 of the
Bankruptcy Code is applicable and would prohibit such issuance.

PLAN OF DISTRIBUTION

This Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of any Exchange Notes
received in exchange for Private Notes acquired by such broker-dealer as a
result of market-making or other trading activities. Each such broker-dealer
that receives Exchange Notes for its own account in exchange for such Private
Notes pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Company has
agreed that for a period of up to 180 days after the Registration Statement is
declared effective, it will make this Prospectus, as amended or supplemented,
available to any such broker-dealer that requests copies of this Prospectus in
the Letter of Transmittal for use in connection with any such resale.

The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers or any other persons. Exchange Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions or through the writing of options on the Exchange Notes, or a
combination of such methods of resale, at market prices prevailing at the time
of resale or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange
Notes that were received by it for its own account pursuant to the Exchange
Offer in exchange for Private Notes acquired by such broker-dealer as a result
of market-making or other trading activities and any broker-dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.

The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders of Private Notes (including any broker-dealers), and
certain parties related to such holders, against certain liabilities, including
liabilities under the Securities Act.

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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following summary describes certain United States federal income tax
consequences of an investment in the Exchange Notes and Series A Warrants as of
the date hereof. Except where noted, it deals only with Exchange Notes and
Series A Warrants held as capital assets by United States holders and does not
deal with special situations, such as those of foreign persons, dealers in
securities, financial institutions, life insurance companies, holders whose
"functional currency" is not the U.S. dollar, or special rules with respect to
integrated transactions of which the ownership of common stock is a part (such
as certain hedging transactions), or certain "straddle" transactions.
Furthermore, the discussion below is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and
judicial decisions thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified (possibly with retroactive effect) so as to result
in federal income tax consequences different from those discussed below.

This discussion assumes that the Exchange Notes will be treated as debt and
not equity for U.S. federal income tax purposes. The holders of the Exchange
Notes and the Company must report the Exchange Notes as debt for such purposes.

THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION ONLY. PERSONS
CONSIDERING THE EXCHANGE OF THE PRIVATE NOTES FOR EXCHANGE NOTES ARE URGED TO
CONSULT THEIR TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSIDERATIONS
THAT MAY BE SPECIFIC TO THEM AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE
LAWS OF ANY OTHER TAXING JURISDICTION.

REGISTRATION OF THE NOTES

The exchange of Private Notes for Exchange Notes should not be treated as a
taxable transaction for United States Federal income tax purposes because the
Exchange Notes will not be considered to differ materially in kind or in extent
from the Private Notes. Rather, the Exchange Notes received by a holder of
Private Notes should be treated as a continuation of such holder's investment in
the Private Notes. As a result, there should be no material United States
Federal income tax consequences to holders exchanging Private Notes for Exchange
Notes.

ISSUE PRICE OF THE ORIGINAL UNITS

The issue price of the units consisting of the Private Notes and the Series
A Warrants was the initial price at which a substantial portion of the units
were sold to the public (not including sales to bond houses, brokers or similar
persons or organizations acting in the capacity of underwriters or wholesalers).
The Company allocated a portion of the issue price of the units to the Private
Notes for purposes of calculating the yield-to-maturity of the Private Notes.
The issue price of the Private Notes was determined by allocating the issue
price of the units between the Private Notes and the Series A Warrants based on
their relative fair market values. This allocation reflected the Company's
judgment as to the relative values of those instruments at the time of issuance.
The allocation is binding on a holder unless such holder explicitly discloses on
its tax return for the taxable year that includes the acquisition date of the
unit that its allocation is different from that of the Company. The allocation
was not, however, binding on the Internal Revenue Service (the "IRS"). If the
Company's allocation were successfully challenged by the IRS, the issue price,
original issue discount accrual on a Note, and gain or loss on the sale or
disposition of a Note or Series A Warrant would be different from that resulting
under the allocation determined by the Company.

TAXATION OF THE NOTES

TAXATION OF INTEREST. Stated interest payments on the Exchange Notes will
be taxable to a holder when received or accrued in accordance with such holder's
method of accounting.

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ORIGINAL ISSUE DISCOUNT. The allocation of a portion of the issue price of
the original units consisting of the Private Notes and Series A Warrants to such
Series A Warrants resulted in the Notes having an issue price less than their
principal amount. The Private Notes were therefore treated as having been issued
at a discount. If a debt instrument is originally issued at a discount that is
equal to or greater than a DE MINIMIS amount, the debt instrument will be
treated as having OID for U.S. federal income tax purposes. The DE MINIMIS
amount is an amount equal to 0.25% multiplied by the product of the debt
instrument's "stated redemption price at maturity" (as defined below) and the
number of complete years to maturity from the issue date. If notes are issued
with OID, then each holder of notes generally will be required to include OID in
income as it accrues on a yield-to-maturity basis over the term of the notes in
advance of cash payments attributable to such income (regardless of whether the
holder is a cash or accrual basis taxpayer). The amount of OID with respect to a
note will be the excess of the stated redemption price at maturity of such note
over its issue price. The stated redemption price at maturity will include all
payments required to be made on the notes, whether denominated as principal or
interest (other than qualified stated interest (defined generally as stated
interest that is unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually at a single fixed rate that
appropriately takes into account the length of intervals between payments) and
other than payments subject to remote or incidental contingencies). The Company
intends to treat the payment of additional interest payable if the Company fails
to comply with its obligations under the Registration Rights Agreement as
subject to contingencies, which treatment is binding on holders unless a holder
explicitly discloses on its tax return for the taxable year that includes the
acquisition date of the Private Notes that its treatment is different. The
Company's treatment is not, however, binding on the IRS. The issue price of the
Private Notes was determined as described above under "Issue Price of the
Original Units." Such issue price carries over to the Exchange Notes upon the
exchange under the Exchange Offer.

A holder of a debt instrument that bears OID is required to include in gross
income an amount equal to the sum of the daily portions of OID for each day
during the taxable year in which the debt instrument is held. The daily portions
of OID are determined by allocating to each day in an accrual period the pro
rata portion of the OID that is allocable to the accrual period. The amount of
OID that is allocable to a future accrual period is generally equal to the
excess of (i) the product of the adjusted issue price of the Exchange Notes at
the beginning of the accrual period (the issue price of the Exchange Notes
determined as described above, generally increased by all prior accruals of OID
and decreased by the amount of any cash payment (other than qualified stated
interest) previously made on the Private or Exchange Notes) and the Exchange
Notes' yield-to-maturity (the discount rate, which, when applied to all payments
under the Private or Exchange Notes, results in a present value equal to the
issue price of the Exchange Notes) over (ii) the qualified stated interest
allocable to the accrual period. In the case of the final accrual period, the
allocable OID generally is the difference between the amount payable at maturity
and the adjusted issue price at the beginning of the accrual period.

The Company will furnish annually to the IRS and to holders (other than with
respect to certain exempt holders, including, in particular, corporations)
information with respect to the OID accruing while the Exchange Notes were held
by holders.

PREMIUM. If a holder purchased a Private Note for an amount that is greater
than the Private Note's stated redemption price at maturity, such holder will be
considered to have purchased such Private Note with "amortizable bond premium"
equal in amount to such excess, and generally will not be required to include
OID in income. A holder who has exchanged a Private Note for an Exchange Note
may elect to amortize such premium, using a constant yield method, over the
remaining term of the Exchange Note with reference to either the amount payable
on maturity or, if it results in a smaller premium attributable to the period
through the earlier call date, with reference to the amount payable on the
earlier call date. An election to amortize bond premium applies to all taxable
debt obligations then owed and thereafter acquired by the holder and may be
revoked only with the consent of the IRS.

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If a holder of an Exchange Note purchased the Private Note for an amount
greater than the Private Note's adjusted issue price but less than the Private
Note's stated redemption price at maturity, the holder will be required to
include annual accruals of OID in gross income in accordance with the rules
described above; however, the amount of OID includable in income will be reduced
to reflect such acquisition premium. The includable OID (as otherwise
determined) will be reduced by an amount equal to the OID multiplied by a
fraction, the numerator of which is such excess and the denominator of which is
the OID for the period from the date of acquisition until the maturity date.

MARKET DISCOUNT. If a holder of an Exchange Note purchased the Private Note
for an amount that is less than the "revised issue price" of the Private Note at
the time of acquisition, the amount of such difference will be treated as
"market discount" for federal income tax purposes, unless such difference is
less than a specified DE MINIMIS amount. The "revised issue price" of a debt
obligation generally equals the sum of its issue price and the total amount of
OID includable in the gross income of all holders for periods before the
acquisition of the debt obligation by the current holder (without regard to any
reduction in such income resulting from acquisition premium) and less any cash
payments in respect of such debt obligation (other than qualified stated
interest). Under the market discount rules, a holder of an Exchange Note will be
required to treat any principal payment on, or any gain on the sale, exchange,
retirement or other disposition of, an Exchange Note as ordinary income to the
extent of the market discount that has not previously been included in income
and is treated as having accrued on such Exchange Note at the time of such
payment or disposition. If a holder makes a gift of an Exchange Note, accrued
market discount, if any, will be recognized as if such holder had sold such Note
for a price equal to its fair market value. In addition, the holder may be
required to defer, until the maturity of the Note or, in certain circumstances,
the earlier disposition of the Note in a taxable transaction, the deduction of a
portion of the interest expense on any indebtedness incurred or continued to
purchase or carry such Note.

Any market discount will be considered to accrue on a straight-line basis
during the period from the date of acquisition to the maturity date of the
Exchange Note, unless the holder elects to accrue market discount on a constant
interest method. A holder of a Note may elect to include market discount in
income currently as it accrues (on either a straight-line basis or constant
interest method), in which case the rules described above regarding the deferral
of interest deductions will not apply. This election to include market discount
in income currently, once made, is irrevocable and applies to all market
discount obligations acquired on or after the first day of the first taxable
year to which the election applies and may not be revoked without consent of the
IRS.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND TO CORPORATE
HOLDERS. The Exchange Notes will constitute applicable high yield discount
obligations ("AHYDOs") since the yield-to-maturity of the Private Notes was
equal to or greater than the sum of the relevant applicable federal rate (the
"AFR") plus five percentage points and the Private Notes were issued with
significant OID. The Company, therefore, will not be entitled to deduct OID that
accrues with respect to the Notes until amounts attributable to such OID are
paid. In addition, if, as may occur, the yield-to-maturity of the Notes exceeds
the sum of the relevant AFR plus six percentage points (such excess portion
being the "Excess Yield"), the Company's deduction for the "disqualified
portion" of the OID accruing on the Notes will be disallowed. In general, the
"disqualified portion" of the OID for any year will be equal to the lesser of
(i) the total yield for the year times a fraction, the numerator of which is the
Excess Yield and the denominator of which is the yield-to-maturity on the Notes,
and (ii) the OID for the year. Subject to otherwise applicable limitations,
holders that are U.S. corporations will be entitled to a dividends-received
deduction (generally at a current rate of 70%) with respect to any disqualified
portion of the accrued OID to the extent that the Company has sufficient current
or accumulated earnings and profits. If the disqualified portion exceeds the
Company's current and accumulated earnings and profits, the excess will continue
to be taxed as ordinary OID income in accordance with the rules described above
in "Original Issue Discount."

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DISPOSITION OF NOTES. A holder will generally recognize gain or loss upon
the sale, exchange, retirement or other disposition of Exchange Notes equal to
the difference between the amount realized on the disposition and the holder's
adjusted tax basis in the Notes. A holder's adjusted tax basis in an Exchange
Note will generally be the cost of such Note, increased by any OID previously
included in income by such holder and decreased by the amount of any amortizable
bond premium used to reduce interest on the Note. Such gain or loss generally
would be capital gain or loss and would be mid-term capital gain or loss if the
Note was held more than one year but not more than eighteen months at the time
of disposition, and long-term capital gain or loss if the Note was held for more
than eighteen months at the time of disposition.

BACKUP WITHHOLDING. Under certain circumstances, a holder may be subject to
backup withholding at a 31% rate on payments received with respect to the
Exchange Notes. This withholding generally applies only if the holder (i) fails
to furnish his or her social security or other taxpayer identification number
("TIN"), (ii) furnishes an incorrect TIN, (iii) is notified by the IRS that he
or she has failed to report payment of interest and dividends properly and the
IRS has notified the Company that he or she is subject to backup withholding or
(iv) fails, under certain circumstances, to provide a certified statement,
signed under penalty of perjury, that the TIN provided is his or her correct
number and that he or she is not subject to backup withholding. Any amount
withheld from a payment to a holder under the backup withholding rules is
allowable as a credit against such holder's federal income tax liability,
provided that the required information is furnished to the IRS. Certain holders
(including, among others, corporations and foreign individuals who comply with
certain certification requirements) are not subject to backup withholding.
Holders should consult their tax advisors as to their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption.

LEGAL MATTERS

The validity of the Exchange Notes will be passed upon for the Company by
Eaton & Van Winkle, 600 Third Avenue, New York, New York 10016.

EXPERTS

The consolidated financial statements of the Company as of February 1, 1997,
February 3, 1996 and January 28, 1995, and for the years then ended, included in
this prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.

The consolidated balance sheet of the Company as of November 1, 1997
included in this prospectus and elsewhere in the registration statement has been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and is included herein in reliance upon the
authority of said firm as experts in giving said report.

91
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS
39-WEEKS ENDED NOVEMBER 1, 1997 AND NOVEMBER 2, 1996
Report of Independent Public Accountants............................................ F-1
Audited Consolidated Balance Sheet.................................................. F-2
Unaudited Statements of Operations.................................................. F-3
Unaudited Statements of Shareholders' Equity........................................ F-4
Unaudited Statements of Cash Flows.................................................. F-5
Notes to Audited Consolidated Balance Sheet......................................... F-7

52-WEEKS ENDED FEBRUARY 1, 1997, 53-WEEKS ENDED FEBRUARY 3, 1996, AND 52-WEEKS ENDED
JANUARY 28, 1995
Report of Independent Public Accountants............................................ F-21
Consolidated Balance Sheets......................................................... F-22
Consolidated Statements of Operations............................................... F-23
Consolidated Statements of Shareholder's Equity (Deficit)........................... F-24
Consolidated Statements of Cash Flows............................................... F-25
Notes to Consolidated Financial Statements.......................................... F-26

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited Pro Forma Consolidated Statement of Operations for the 52-Weeks Ended
February 1, 1997.................................................................. PF-1
Unaudited Pro Forma Consolidated Statement of Operations for the 39-Weeks Ended
November 1, 1997.................................................................. PF-2
</TABLE>

I-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of
County Seat Stores, Inc.:

We have audited the accompanying consolidated balance sheet of County Seat
Stores, Inc. (a Minnesota corporation) and subsidiary, as of November 1, 1997.
This balance sheet is the responsibility of the Company's management. Our
responsibility is to express an opinion on this balance sheet based on our
audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

As more fully described in Notes 1 and 2 to the consolidated balance sheet,
effective October 29, 1997, the Company emerged from protection under Chapter 11
of the U.S. Bankruptcy Code pursuant to a Reorganization Plan which was
confirmed by the Bankruptcy Court on October 1, 1997. In accordance with AICPA
Statement of Position 90-7, the Company adopted "Fresh Start Accounting" whereby
its assets, liabilities and new capital structure were adjusted to reflect
estimated fair values as of November 1, 1997.

In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of County Seat Stores, Inc. and
subsidiary, as of November 1, 1997, in conformity with generally accepted
accounting principles.

New York, New York

March 11, 1998

ARTHUR ANDERSEN LLP

F-1
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
NOVEMBER 1,
1997
-----------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................................................................... $ 9,370
Restricted cash in security account................................................................ 11,687
Receivables........................................................................................ 2,736
Merchandise inventories............................................................................ 74,701
Prepaid expenses................................................................................... 7,017
-----------
Total current assets............................................................................. 105,511
-----------
Property and equipment, net.......................................................................... 32,360
-----------
Other Assets:
Debt issuance costs................................................................................ 7,384
Restricted cash in security account................................................................ 5,317
Reorganization value in excess of amounts allocated to identified assets........................... 69,643
Other.............................................................................................. 420
-----------
Total other assets............................................................................... 82,764
-----------
$ 220,635
-----------
-----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Borrowings under credit agreement.................................................................. $ 12,276
Current maturities of long-term debt............................................................... 292
Accounts payable................................................................................... 24,581
Accrued expenses................................................................................... 13,532
Accrued reorganization costs....................................................................... 13,136
-----------
Total current liabilities........................................................................ 63,817
-----------
Long-Term Liabilities:
Long-term debt..................................................................................... 77,353
Other long-term liabilities........................................................................ 1,400
Shareholders' Equity:
Common stock: par value $.01 per share; 40,000,000 shares authorized, 20,000,000 issued and
outstanding...................................................................................... 200
Paid-in capital in excess of par value............................................................. 77,865
-----------
Total shareholders' equity....................................................................... 78,065
-----------
$ 220,635
-----------
-----------
</TABLE>

The accompanying notes are an integral part of this consolidated balance sheet.

F-2
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(AMOUNTS IN THOUSANDS)

UNAUDITED

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
--------------------------
NINE MONTHS NINE MONTHS
ENDED ENDED
NOVEMBER 1, NOVEMBER 2,
1997 1996
------------ ------------
<S> <C> <C>
Net sales............................................................................. $ 277,137 $ 400,391
Cost of sales, includes buying and occupancy costs, and
a special charge of $11,975......................................................... 214,799 312,693
------------ ------------
Gross profit...................................................................... 62,338 87,698
Selling, general and administrative expenses.......................................... 71,465 97,639
Depreciation and amortization......................................................... 6,136 8,834
Reorganization costs.................................................................. 38,405 42,352
Interest expense, net................................................................. 4,019 14,069
------------ ------------
Loss before income tax (benefit) and extraordinary item........................... (57,687) (75,196)
Income tax (benefit).................................................................. -- (762)
------------ ------------
Loss before extraordinary item.................................................... (57,687) (74,434)
Extraordinary item, net of tax benefit................................................ -- 2,692
------------ ------------
Net loss.......................................................................... $ (57,687) $ (77,126)
------------ ------------
------------ ------------
</TABLE>

F-3
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

UNAUDITED

<TABLE>
<CAPTION>
ACCUMULATED TOTAL
PAID-IN EARNINGS SHAREHOLDERS'
SHARES PAR VALUE CAPITAL (DEFICIT) EQUITY
------------ ----------- ---------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Balance, January 28, 1995................. 1,000 $ 1 $ 49,789 $ (13,912) $ 35,878
Net loss................................ -- -- -- (97,030) (97,030)
Redeemable preferred stock dividends and
accretion............................. -- -- -- (8,645) (8,645)
Dividend to parent...................... -- -- -- (2,102) (2,102)
Receivable from parent.................. -- -- -- (1,300) (1,300)
------------ ----- ---------- ------------ ----------
Balance, February 3, 1996................. 1,000 1 49,789 (122,989) (73,199)
Net loss................................ -- -- -- (76,868) (76,868)
Redeemable preferred stock dividends and
accretion............................. -- -- -- (6,029) (6,029)
Dividend to parent...................... -- -- -- (1,051) (1,051)
Receivable from parent.................. -- -- -- (144) (144)
------------ ----- ---------- ------------ ----------
Balance, February 1, 1997................. 1,000 1 49,789 (207,081) (157,291)
Net loss................................ -- -- -- (57,687) (57,687)
Redeemable preferred stock dividends and
accretion............................. -- -- -- -- --
Dividend to parent...................... -- -- -- -- --
Receivable from parent.................. -- -- -- -- --
------------ ----- ---------- ------------ ----------
Balance, November 1, 1997 (Predecessor
Company)................................ 1,000 $ 1 $ 49,789 ($ 264,768) ($ 214,978)
------------ ----- ---------- ------------ ----------
------------ ----- ---------- ------------ ----------
Retirement of old common stock and
paid-in capital and write-off of
accumulated deficit................... (1,000) $ (1) ($ 49,789) $ 264,768 $ 214,978
Issuance of new common stock at par
value................................. 20,000,000 0.01 200
Paid-in capital in excess of par
value................................. 66,711 -- 66,711
Series A warrants..................... 7,647 -- 7,647
Series B warrants..................... 1,595 -- 1,595
Additional warrant.................... 1,912 -- 1,912
------------ ----- ---------- ------------ ----------
Balance, November 1, 1997 (Reorganized
Company).............................. 20,000,000 $ 0.01 $ 77,865 -- $ 78,065
------------ ----- ---------- ------------ ----------
------------ ----- ---------- ------------ ----------
</TABLE>

F-4
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS IN THOUSANDS)

UNAUDITED

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
NOVEMBER 1, NOVEMBER 2,
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................................................ $ (57,687) $ (77,126)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Reorganization costs.............................................................. 20,156 38,786
Extraordinary item................................................................ -- 2,692
Depreciation and amortization..................................................... 6,136 8,834
Amortization of debt issuance costs............................................... 538 715
Loss on disposal of property and equipment........................................ 4,915 --
Rent expense in excess of cash outlays............................................ 1,215 12
Deferred tax benefit.............................................................. -- (762)
Changes in operating assets and liabilities:
Receivables..................................................................... (960) 635
Merchandise inventories......................................................... (2,073) (269)
Prepaid expenses................................................................ 1,268 600
Accounts payable................................................................ (5,373) 10,076
Accrued expenses................................................................ (1,190) (5,907)
Current maturities of long-term debt............................................ 292 --
Other non-current assets and liabilities........................................ -- (79)
Operating liabilities subject to compromise..................................... -- 15,968
------------ ------------
Net cash used in operating activities......................................... (32,763) (5,825)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Repayments) borrowings under credit agreement...................................... (26,324) 9,600
Issuance of long-term debt.......................................................... 85,000 --
Notes payable, taxes................................................................ 1,400 --
Debt and equity issuance costs...................................................... (5,872) (1,649)
Dividend to parent.................................................................. -- (1,051)
Receivable from parent.............................................................. -- (237)
Advance to parent and capital leases................................................ -- (16)
Restricted cash in security account................................................. (17,004) --
------------ ------------
Net cash provided by financing activities..................................... 37,200 6,647
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................................................ (1,423) (1,790)
Proceeds from disposal of property and equipment.................................... -- 4
------------ ------------
Net cash used in investing activities......................................... (1,423) (1,786)
------------ ------------
Net increase (decrease) in cash and cash equivalents.................................. 3,014 (964)
Cash and cash equivalents:
Beginning of period................................................................. 6,356 8,166
------------ ------------
End of period....................................................................... $ 9,370 $ 7,202
------------ ------------
------------ ------------
</TABLE>

F-5
<PAGE>

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SUPPLEMENTAL SCHEDULE OF NONCASH OPERATING, INVESTING AND NOVEMBER 1,
FINANCING ACTIVITIES 1997
-------------
<S> <C>
NONCASH OPERATING ACTIVITIES:
Elimination of current assets upon emergence from bankruptcy............... $ 269
Elimination of debt issuance costs upon emergence from bankruptcy.......... (1,021)
Elimination of liabilities subject to compromise upon emergence from
bankruptcy............................................................... (197,043)
Other current liabilities upon emergence from bankruptcy................... (15,088)
Other long-term liabilities upon emergence from bankruptcy................. (9,118)

NONCASH INVESTING ACTIVITIES:
Elimination of property and equipment in connection with the
reorganization........................................................... $ 8,160
Establishment of reorganization value in excess of amounts allocated to
identified assets........................................................ (69,643)
Elimination of accumulated deficit upon emergence from bankruptcy.......... 214,978

NONCASH FINANCING ACTIVITIES:
Issuance of common stock to unsecured creditors upon emergence from
bankruptcy............................................................... $ 66,911
Issuance of Series B warrants to preferred shareholders.................... 1,595
</TABLE>

F-6
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED BALANCE SHEET

NOTE 1. REORGANIZATION AND NATURE OF BUSINESS

The accompanying consolidated balance sheet represents those of County Seat
Stores, Inc. (County Seat) and its wholly-owned subsidiary, CSS Trade Names,
Inc. (Trade Names) (together, the Company). The Company is a specialty apparel
retailer selling both brand name and private-label jeans and jeanswear. The
Company currently operates 413 stores in 41 states. The Company's 375 County
Seat stores, located almost exclusively in regional shopping malls, offer
one-stop shopping for daily casual wear featuring a contemporary jeanswear look.
The Company's selection of popular brands includes Levi's, and its proprietary
brands, County Seat, Nuovo and Ten Star. The Company also operates 14 County
Seat Outlet stores offering discount pricing on special purchase and clearance
merchandise and 22 Levi's Outlet stores under license from Levi Strauss & Co.
(Levi Strauss) offering a full range of Levi's and Docker's off-price
merchandise for both adults and children. The Company operates two Old Farmer's
Almanac General Stores, a new retail concept selling products associated with
American country living, under license from Yankee Publishing, Inc., the
publisher of The Old Farmer's Almanac.

The activities of Trade Names consist principally of licensing the rights to
the County Seat service marks to these stores.

On October 17, 1996, County Seat and Trade Names filed voluntary petitions
for relief under Chapter 11 (Chapter 11) of Title 11 of the United States Code
(the Bankruptcy Code) in the United States Bankruptcy Court for the District of
Delaware (the Court). The Company operated as debtors-in-possession under the
jurisdiction of the Court.

Following approval by the Court on October 17, 1996, the Company entered
into a debtor-in-possession credit agreement (the DIP Credit Agreement) with a
syndicate of commercial banks to provide working capital and longer-term
financing through the Chapter 11 process.

On August 22, 1997 the Company filed the "First Amended Disclosure Statement
with Respect to Plan of Reorganization of County Seat Stores, Inc." (The Plan)
with the Court, which was confirmed on October 1, 1997 and consummated on
October 29, 1997 (Effective Date). The Plan segregated creditors into three
classes--unclassified claims, unimpaired claims and impaired claims.
Unclassified and unimpaired claims were satisfied by cash payments totaling
$4,234,286. Additionally, a $1,520,664 security account was established to pay
lease cures, disputed claims and holdback professional fees. In exchange for
impaired claims of approximately $151.0 million, creditors received 20,000,000
shares of new common stock (100% of the Company's Stock) valued at $66,911,000
representing 44% recovery of their claims. Previous preferred stockholders
received warrants valued at $1.595 million in exchange for their claims of
$50.347 million.

As provided for in the Plan, the Company sold $85,000,000 of 12 3/4% Senior
Notes due November 1, 2004 with Series A warrants to purchase common stock
(Notes). Each unit consisting of a principal amount of $1,000 contains one
Series A Warrant to purchase 26.8908 shares of the Company's common stock, par
value $.01 per share, at an exercise price of $.01 per share. Proceeds from the
Notes after the initial discount to the underwriters of $4,250,000 and less
$15,482,100 deposited into a security account to satisfy interest on the Notes
to May 1, 1999, and a $125,000 fee paid to the underwriters is $65,142,900.
Additionally, the Company secured a New Credit Facility (Credit Facility) with a
syndicate of banks led by Bank Boston (Banks). The Company used the proceeds
from the Notes and initial borrowings under the Credit Facility to pay
$65,515,531 to satisfy the obligations from the DIP Credit Agreement and pay
claims as described above. Also, under the Plan, the old stockholders of the
Company did not receive assets of the reorganized company. Due to the Company's
reorganization and the implementation of fresh start

F-7
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED BALANCE SHEET (CONTINUED)

NOTE 1. REORGANIZATION AND NATURE OF BUSINESS (CONTINUED)
reporting, (see Note 2), the consolidated balance sheet as of November 1, 1997,
is not comparable to that of the predecessor company.

NOTE 2. FRESH START ACCOUNTING

The effects of the Company's reorganization under Chapter 11 have been
accounted for in the Company's balance sheet using principals required by the
American Institute of Certified Public Accountants' Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
(Fresh Start Accounting). Fresh Start Accounting results in a revaluation of the
Company's assets and liabilities as of the Effective Date to reflect the
estimated fair market values of those assets and liabilities in conformity with
the procedures specified by Accounting Principles Board (APB) No. 16, "Business
Combinations". The valuation differences are charged to the Reorganization Value
in Excess of Amounts Allocated to Identified Assets account (Excess
Reorganization Value). This balance is being amortized on a straight-line basis
over 15 years. After Fresh Start Accounting is applied, the Company, is in
effect a new entity (Reorganized Company).

The estimated reorganization value has been based upon an equity valuation
and represents a hypothetical value that reflects the estimated intrinsic value
assigned by the public markets for debt and equity securities. The estimated
equity value of the company as of the Effective Date was derived from an entity
equity valuation of the Company, through various valuation methodologies,
prepared by an independent appraiser, including (i) an analysis of comparable
publicly-traded specialty apparel retailers and (ii) a discounted cash flow
analysis. The discounted cash flow analysis utilizes projected future cash flows
of the Company through 2002, which were provided by the Company, and a remaining
terminal value. The cash flow projections were based on estimates and
assumptions about circumstances and events that have not yet occurred. As such,
these estimates and assumptions are inherently subject to significant economic
uncertainties beyond the control of the Company, which prevent the Company from
making assurances in achieving these projections.

The consolidated balance sheet presented herein is as of November 1, 1997,
which differs from the Effective Date of the Company's emergence from
bankruptcy. Management believes that the three days between October 29, 1997 and
November 1, 1997 did not materially impact the presentation of Fresh Start
Accounting, and as a matter of expedience and practicality reported Fresh Start
Accounting as if it occurred on November 1, 1997. Since the fresh start balance
sheet, presented herein, is in effect, that of the Reorganized Company, the
comparable balance as of November 2, 1996 is not presented. Furthermore, the
fresh start balance sheet as of November 1, 1997 is not comparable to prior
periods.

F-8
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED BALANCE SHEET (CONTINUED)

NOTE 2. FRESH START ACCOUNTING (CONTINUED)
The effect of the Plan on the Company's balance sheet using Fresh Start
Accounting to the Company's consolidated balance sheet for the period ended
November 1, 1997, is presented by the following:

COUNTY SEAT STORES, INC. AND SUBSIDIARY
REORGANIZING BALANCE SHEET
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
REORGANIZATION FRESH
PREDECESSOR START REORGANIZED
COMPANY ADJUSTMENTS COMPANY
NOVEMBER 1, ------------------------- NOVEMBER 1,
1997 DEBIT CREDIT 1997
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Total current assets.................................... $ 94,094 $ 11,687(a) $ 270(b) $ 105,511
Property and equipment, net............................. 32,439 79(c) 32,360
Other assets............................................ 1,821 12,321(d) 1,021(e) 13,121
Reorganization value in excess of amounts allocated to
identified assets..................................... 69,643(f) 69,643
----------- ----------- ------------ -----------
TOTAL ASSETS............................................ $ 128,354 $ 93,651 $ 1,370 $ 220,635
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Borrowings under credit agreement....................... $ 70,561 $ 58,285(g) $ 12,276
Current liabilities..................................... 59,382 10,749(h) 2,908(i) 51,541
----------- ----------- ------------ -----------
Total current liabilities............................... 129,943 69,034 2,908 63,817
Long-term liabilities................................... 10,190 17,837(j) 86,400(k) 78,753
Liabilities subject to compromise....................... 201,390 201,390(l) --
----------- ----------- ------------ -----------
341,523 288,261 89,308 142,570
Shareholders' equity.................................... (213,169) 291,234(m) 78,065
----------- ----------- ------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............. $ 128,354 $ 288,261 $ 380,542 $ 220,635
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
</TABLE>

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

(a) Cash resulting from the Offering restricted for payment of current interest
related to the debt, lease cures, disputed claims and holdback professional
fees.

(b) To reflect the fair market value of current assets, pursuant to Fresh Start
Accounting.

(d) Reflects debt issuance costs related to the Offering, as well as cash
resulting from the Offering restricted for long-term interest payments.

(e) Reflects the write-off of deferred financing fees associated with
retired/extinguished debt.

(f) Reflects the reorganization value of the Company not allocable to specific,
identified assets that is recorded as an intangible asset in accordance with
guidance provided by the American Institute of Certified Public Accountants
in Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code". The Company has estimated a
useful life of 15 years for amortization purposes.

F-9
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED BALANCE SHEET (CONTINUED)

NOTE 2. FRESH START ACCOUNTING (CONTINUED)
(g) Reflects the repayment of the Company's Debtor in Possession Credit
Agreement with funds obtained through the Offering.

(h) Reflects the repayment of undisputed administrative claims and expenses
pursuant to the Plan of Reorganization and the write-off of the straight
line rent liability.

(i) To record additional liabilities and reclassify certain liabilities not
subject to compromise.

(j) Reflects the debt discount attributable to the value of the Series A
warrants, which are attached to the debt, of approximately $7.6 million and
the write down of long-term liabilities to their fair value pursuant to
Fresh Start Accounting.

(k) Recording of $85 million of seven year Senior Notes that bear interest at
12 3/4% per annum with interest payable semiannually in November and May,
and long-term taxes payable.

(l) Pursuant to Fresh Start Accounting, the Company eliminated its liabilities
subject to compromise, including claims of preferred stockholders.

(m) Reflects the issuance of new common stock and warrants in accordance with
the Plan of Reorganization, as well as the elimination of the Old Common
Stock and accumulated deficit pursuant to Fresh Start Accounting.

SECURED DEBT--The Company's secured obligation of $65,515,531 under the DIP
Credit Agreement was paid in full from the proceeds of the bond sale and initial
borrowings under the New Credit Facility.

UNCLASSIFIED AND UNIMPAIRED CLAIMS--The holders of unclassified and
unimpaired claims were paid $4,234,286. An escrow of $1,520,664 was established
for lease cures, disputed claims and professional fee holdback, which will be
paid by order of the Court through a distribution agent of the Company.

IMPAIRED CLAIMS--Holders of $151,043,087 in impaired claims, which include
$105,000,000 from old senior debt holders, $35,997,407 in lease cure claims from
Lessors and $10,045,680 from other general creditors, received in exchange for
their claims 20,000,000 shares of new common stock. The 20,000,000 shares
represent 100% of the Company's outstanding stock. The new common stock is
valued at $66,911,000 and represents a 44% recovery of their claims.

NEW SENIOR DEBT--The Company secured Notes on the Effective Date with
interest payable each May 1 and November 1, through November 1, 2004 when the
principal amount, $85,000,000 is due. After the discount to the initial
purchaser of $4,250,000, and associated expenses of $125,000, and $15,482,100
placed in escrow to pay the first 18 months of interest, the net proceeds from
the offering are $65,142,900. Each unit has a face value of $1,000 with a stated
interest rate of 12 3/4%. Additionally, Series A Warrants issued as attachments
to the Notes are valued at $7.6 million and reflected as a debt discount to the
Notes in the accompanying balance sheet. The discount will be amortized as
additional interest expense over the life of the debt, utilizing the effective
interest rate method of accounting.

PREFERRED STOCK--The old preferred stock of the Company was retired in
exchange for Series B Warrants, providing for an aggregate of 15% of the new
common stock in three equal tranches exercisable over a seven-year period after
the Effective Date. The first tranche price will be equal to the price per share
of the stock granted to the holders of impaired claims plus an amount equal to
12% per annum from the Effective Date. The second and third tranche prices will
represent a 120% and 140% recovery to the holders of impaired claims. In the
event of a sale, merger or other business combination of the

F-10
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED BALANCE SHEET (CONTINUED)

NOTE 2. FRESH START ACCOUNTING (CONTINUED)
Reorganized Company for cash within two years following the Effective Date, the
Series B warrants will convert into the right to receive cash. The Series B
Warrants are valued at $1.6 million and in the accompanying schedule of
Shareholders' Equity.

NOTE 3: SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

All significant intercompany accounts and transactions have been eliminated.
Certain prior year amounts have been reclassified to conform to the current year
presentation.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

YEAR-END

The Company's fiscal year ends on the Saturday closest to January 31 of each
year. References to 1996, 1995 and 1994 relate to the fiscal years ended on
February 1, 1997, February 3, 1996 and January 28, 1995 which include 52, 53 and
52 weeks, respectively. The Company's tax year-end is the Saturday closest to
July 31.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards (SFAS) No. 107 requires
disclosure about the fair value of certain financial instruments. Cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities are
presented at fair value.

CASH AND CASH EQUIVALENTS

Short-term investments having original maturities of three months or less
are considered cash equivalents.

MERCHANDISE INVENTORIES

Merchandise inventories are stated at the lower of first-in, first-out
(FIFO) cost or market, using the retail inventory method.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
assets. The useful lives are generally 25 years for buildings and improvements,
3 to 10 years for furniture, fixtures and equipment, and the remaining lease
term for leasehold improvements. The cost of assets sold or retired and the
related accumulated depreciation are removed from the accounts with any
resulting gain or loss included in income.

F-11
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED BALANCE SHEET (CONTINUED)

NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Effective October 28, 1995, the Company adopted SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". SFAS No. 121 establishes accounting standards for recognizing and recording
the impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets. The Company evaluates the recoverability of
the net book value of property and equipment based on an analysis of expected
cash flows. In fiscal 1997, the Company closed 137 stores as part of the
Company's reorganization. Reorganization costs of $8.2 million were recorded in
fiscal 1997 for the write-off of the net book value of assets disposed of,
including $6.8 million related to store closings.

Fresh Start Accounting results in a revaluation of the Company's assets and
liabilities as of the Effective Date to reflect the estimated fair market values
of those assets and liabilities in conformity with the procedures specified by
APB Opinion 16, "Business Combinations". When fresh start accounting was applied
to the property and equipment of the Company, the net book value fairly
represented the fair value.

OTHER ASSETS

Other assets consist principally of Excess Reorganization Value, debt
issuance costs, restricted cash, deferred income taxes and other deferred
charges. Excess Reorganization Value will be amortized on a straight-line basis
over 15 years. Debt issuance and credit acquisition costs are amortized into
interest expense utilizing the effective interest rate method.

STORE OPENING AND CLOSING COSTS

Store opening costs are expensed as incurred. Costs of store closings,
principally lease commitment costs, estimated future store fixed expenses and
estimated losses on store asset dispositions, are provided for in the period
when the decision is made to close the store.

PROVISION FOR INCOME TAXES

The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes". SFAS No. 109 utilizes an asset and liability
approach to deferred taxes which are determined based on the estimated future
tax effects of differences between the financial statement and tax bases of
assets and liabilities given the provisions of the enacted tax laws.

EQUITY BASED COMPENSATION

The Financial Accounting Standards Board (FASB) issued SFAS No. 123
(effective for fiscal years beginning after December 15, 1996), "Accounting for
Stock-Based Compensation", which gave companies the choice to use either the
fair market valuation method for accounting for stock-based compensation or the
alternative method as provided by APB No. 25. Instead of assigning a fair value
to the stock-based compensation, APB No. 25 records compensation expense when
the first date that both the number of shares that may be issued upon exercise
of the options and the exercise price are known. SFAS No. 123 disclosure
requirements, however, supersede APB No. 25.

The Company has elected to account for stock-based compensation under the
provisions of APB No. 25, and provide disclosures as required by SFAS No. 123.

F-12
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED BALANCE SHEET (CONTINUED)

NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS

In 1997, the FASB issued SFAS No. 128, "Earnings Per Share," which revises
the manner in which earnings per share is calculated. This statement is
effective for both interim and annual periods after December 15, 1997. The
Company intends to comply with the provisions of SFAS No. 128 after the
effective date.

Additionally, in 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income." This statement, which is effective for periods beginning
after December 15, 1997, expands and modifies disclosure and will have no impact
on the Company's reported financial position, results of operations, or cash
flows.

NOTE 4: COUNTY SEAT, INC.

On December 4, 1989, County Seat, Inc. (CSI), formed by Donaldson, Lufkin &
Jenrette Securities Corporation (DLJ) and certain members of the Company's
management, acquired all of County Seat's outstanding capital stock from Carson
Pirie Scott & Company. The activities of CSI consisted principally of its
investment in the Company.

Since the old common stock of the Company was canceled under the Plan and no
distributions were made to CSI with respect to such interests, the Company, in
effect, is no longer a subsidiary of CSI. CSI, as of the Effective Date owed the
Company $4.6 million. CSI filed for Chapter 11 bankruptcy protection on the same
day as the Company. The case is currently being converted to a Chapter 7 filing,
and it is unlikely that there will be assets to distribute to creditors to
satisfy claims after the liquidation, including the Company's claim.
Accordingly, this amount has been eliminated from the Company's assets in Fresh
Start Accounting.

NOTE 5: MERCHANDISE INVENTORIES

Merchandise inventories, net of reserves, at November 1, 1997 consist of
finished goods.

NOTE 6: PROPERTY AND EQUIPMENT

Property and equipment, at November 1, 1997, consisted of the following (in
thousands):

<TABLE>
<S> <C>
Land............................................................................... $ 766
Buildings and improvements......................................................... 2,897
Leasehold improvements............................................................. 13,301
Furniture, fixtures and equipment.................................................. 14,342
Construction in progress........................................................... 1,054
---------
32,360
Less -- Accumulated deprecation and amortization................................... --
---------
Net................................................................................ $ 32,360
---------
---------
</TABLE>

F-13
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED BALANCE SHEET (CONTINUED)

NOTE 7: RESERVE FOR REORGANIZATION COSTS

Reorganization costs of $38.4 million recognized for the nine months ended
November 1, 1997 consist of store closing costs ($22.8 million), corporate
office and distribution center facility exit costs, ($6.1 million), and
professional fees ($9.5 million), as described below. Of this amount,
approximately $13.1 million is reflected as a liability for reorganization costs
to be incurred as a result of the Company's reorganization plan in connection
with and upon the Company's emergence from bankruptcy.

Store closing costs - Store closing costs include 137 stores operating
in a going out of business mode (GOB) in conjunction with the Company's plan
of reorganization. Management records store closings in the period in which
the decision to close is made. Store closing costs of $22.8 million
consisted of lease rejection claims, write-off of fixed assets and other GOB
store expenses. An accrual of approximately $1.9 million is included in
accrued restructuring expenses at November 1, 1997 for costs attributable to
stores closing after November 1, 1997.

Facility exit costs - These costs represent the Company's decision to
relocate its Minneapolis distribution center to Baltimore, Maryland and its
Dallas and Minneapolis administrative operations to New York. Facility exit
costs include severance to terminated employees ($2.7 million), incremental/
duplicative operating costs and wages ($1.7 million), operating lease
cancellations and fixed asset write-offs ($1.7 million). The relocation of
these facilities is expected to be complete during fiscal 1998. An accrual
of approximately $9.5 million is included in accrued reorganization costs at
November 1, 1997 for facility exit costs.

Professional fees - These costs include legal, accounting and consulting
fees incurred in connection with the Company's reorganization. Accrued
professional fees of approximately $1.7 million are included in accrued
reorganization costs at November 1, 1997.

NOTE 8: SPECIAL CHARGE

A special charge of approximately $12.0 million recorded within cost of
goods sold for the nine months ended November 1, 1997 relate to the liquidation
of excess inventory. Non-cancelable purchase commitments made by management for
1997 Fall merchandise were based on a chain of over 500 County Seat stores. As a
result of management's reorganization plan in which it closed a substantial
number of unprofitable stores, the Company owned and operated only 375 County
Seat stores by the Fall season of 1997. This resulted in significantly more
merchandise on-hand than was needed to sell through remaining store channels. In
order to liquidate this excess merchandise, the Company will recognize lower
than anticipated recovery rates on this merchandise. The additional markdowns
anticipated to liquidate this excess inventory represent an incremental
provision in excess of the original provision normally included in cost of goods
sold. The Company utilizes various methods to dispose of excess inventory,
including clearance sales in existing and going out of business stores,
warehouse sales and sales through jobbers. Management anticipates substantially
completing this liquidation process during fiscal 1998. A markdown reserve of
approximately $11.8 million was established at November 1, 1997 to be used to
liquidate this excess inventory in subsequent periods.

F-14
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED BALANCE SHEET

NOTE 9: DEBT

A.) CREDIT AGREEMENT

On October 29, 1997, the Company entered into the Credit Agreement with a
syndicate of banks, led by Bank of Boston (Banks). The Credit Agreement is
funded through the Banks to provide working capital and longer-term financing.
The Credit Agreement matures October 29, 2000.

The commitment under the Credit Agreement provides for a revolving credit
facility up to $115,000,000, including a $90,000,000 letter of credit facility.
Availability under the Credit Agreement is limited to certain percentages of
eligible inventory. Availability is reduced by any amounts drawn under the
facility as well as outstanding letters of credit and bank acceptances.
Borrowings under the facility are secured by the Company's assets and guaranteed
by Trade Names. Trade Names was formed to hold trade names and service marks of
the Company.

Borrowing capacity under the Credit Agreement is subject to inventory levels
which change during periods of the year as defined below:

<TABLE>
<CAPTION>
FROM TO RATE
- ------------------------------ ---------------------- -----
<S> <C> <C>
October 29, 1997 December 15, 1997 75%
December 16, 1997 January 31, 1998 65%
Each February 1 Each June 30 70%
Each July 1 Each December 15 73%
Each December 16 Each January 31 65%
</TABLE>

At the option of the Company, interest is payable on borrowings under the
Credit Agreement at a prime rate plus .75% or the London Interbank Offer Rate
(LIBOR) plus 1.75%.

The Credit Agreement contains a financial covenant which requires a fixed
charge coverage ratio of 1.25:1.00 (defined as earnings before interest, taxes,
depreciation and amortization (EBITDA) divided by the sum of interest paid, cash
dividend payments, principal payments on capitalized leases, cash payment of
taxes and capital expenditures). The fixed charge coverage ratio is be measured
quarterly, commencing with the fiscal quarter ended January 31, 1998, using the
preceding twelve month rolling average, provided that, for the first three such
fiscal quarters ending after November 2, 1997, the calculation period for the
ratio shall be the period commencing on November 3, 1997 and ending as of the
end of each of such first three fiscal quarters. Other non-financial covenants
limit the amount of debt of the Company and limit acquisitions.

F-15
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED BALANCE SHEET (CONTINUED)

NOTE 9: DEBT (CONTINUED)
Loans, borrowing base and letter of credit commitments under the Credit
Agreement as of November 1, 1997 are as follows (dollars in thousands):

<TABLE>
<S> <C>
AT PERIOD-END
Loans outstanding.................................................................. $ 12,276
Borrowing base..................................................................... 83,906
Available borrowing base........................................................... 23,968
Letter of credit commitments outstanding........................................... 27,468
Bank Acceptances outstanding....................................................... 9,568

DURING THE 39 WEEK PERIOD
Days loans were outstanding........................................................ 272
Maximum loan borrowing............................................................. $ 66,400
Average loan borrowing............................................................. 48,688
Weighted average interest rate..................................................... 8.72%
</TABLE>

In connection with securing the credit line, the Company incurred costs of
$1.1 million, which will be amortized on a straight-line basis over the life of
the Credit Agreement.

B.) LONG-TERM DEBT

GENERAL--As provided for in the Plan, the Company sold 85,000 units of
"12 3/4% Senior Notes due 2004 with Series A warrants to purchase shares of
common stock" on the Effective Date. Each unit has a face value of $1,000 with
interest payable each May 1 and November 1, through November 1, 2004 when the
principal amount, $85,000,000 is due. The Company deposited $15,482,100 of the
net proceeds of the Offering into an escrow account, which, together with the
proceeds from the investment thereof will pay the interest on the Notes to May
1, 1999. The net proceeds from the offering after the initial purchaser discount
of $4,250,000, fees of $125,000 and the payment to the escrow account is
$65,142,900.

The value assigned to the Series A warrants represents a discount to the
Notes of $7,647,000. In addition, the Company incurred debt issuance costs of
$6.3 million. Both the discount to the Notes and debt issuance costs will be
amortized as interest expense utilizing the effective interest rate method over
the life of the Notes.

The Notes are senior unsecured obligations of the Company, that rank senior
in right of payment to all present and future subordinated indebtedness, except
to the extent collateralized by a first priority security interest in the
security account. The Notes were issued as a private offering, and as such
cannot be traded publicly. The Company has agreed, for the benefit of all
holders of the Notes, to register the Notes under the Securities Act of 1933
within 180 days of their issuance on the necessary form to effect an exchange of
the private notes for public notes (Exchange Offer).

If the Exchange Offer registration statement is not filed within 120 days
following the Effective Date of the Plan, an additional interest of 0.50 % per
annum over and above the stated interest of 12.75% will accrue on the Notes for
the first 90 days commencing on the 120th day after the Effective Date.
Additional interest of 0.50% per annum for each subsequent 90-day period will
accrue. Further, if the Exchange Offer does not become effective 180 days after
the Effective Date, additional interest of 0.50% per annum over

F-16
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED BALANCE SHEET (CONTINUED)

NOTE 9: DEBT (CONTINUED)
and above the stated interest of 12.75% will accrue on the Notes for the first
90 days commencing on the 180th day after the Effective Date.

The additional interest penalty for failing to file within 120 days and
failing to become effective within 180 days may not exceed 1.50% per annum in
the aggregate; and provided further, that as soon as all registration defaults
have been cured additional interest on the Notes shall cease to accrue. The
penalty began accruing February 25, 1998 and will be cured with the filing of
the S-4.

REDEEMABLE OPTION--The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after November 1, 2001 at
redemption prices set below, plus accrued and unpaid interest, if any, to the
date of redemption. In addition, prior to November 1, 2001, the Company may,
subject to certain conditions, redeem up to one-third of the principal amount of
outstanding Notes with proceeds of one or more offerings of capital stock at
112.75% of the principal amount, plus accrued and unpaid interest, if any, to
the date of redemption. Upon a change of control, the Company is required to
offer to repurchase all the then outstanding Notes at 101% of the principal
amount, plus accrued and unpaid interest, if any, to the date of repurchase.

Optional Redemption:

<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------------------------------------------ -----------
<S> <C>
2001.......................................................................... 106.3750%
2002.......................................................................... 103.1875%
2003 and thereafter........................................................... 100%
</TABLE>

CERTAIN COVENANTS--The Company has agreed to certain covenants upon the sale
of the Notes, including the inability to declare or pay a dividend, or purchase
equity of the Company. The Company will not acquire additional indebtedness or
issue preferred stock. The Company is also restricted in its ability to sell the
assets of the Company, and not permitted to sell any capital stock.

The Company's wholly-owned subsidiary, Trade Names, has guaranteed the
payment of the Notes.

NOTE 10: INCOME TAXES

The Company's tax year-end is the Saturday closest to July 31. A
consolidated federal income tax return is filed. For the purpose of these
financial statements, the Company calculates income taxes as if it files federal
and state income tax returns for its fiscal years.

As of November 1, 1997, the Company had a net operating loss carryforward of
approximately $100,000,000. The Company's reorganization or significant changes
in ownership of the Company could substantially limit the use of the net
operating loss carryforward.

Under SFAS No. 109, deferred taxes are determined based on the estimated
future tax effects of differences between the financial reporting and tax bases
of assets and liabilities given the provisions of the enacted tax laws. The
Company evaluates the recoverability of its deferred tax assets based on
estimates of future operating income. Based on these estimates and in
consideration of the Company's recent emergence from Chapter 11, the Company
fully reserved the current deferred tax asset of $10.2 million and the
non-current deferred tax asset of $4.5 million representing a total valuation
reserve of $14.7 million.

F-17
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED BALANCE SHEET (CONTINUED)

NOTE 11: SHAREHOLDERS' EQUITY

Pursuant to the Plan the Company has amended and restated the articles of
incorporation and bylaws of the Company. As such, the Company's authorized
capital stock consists of 40,000,000 shares of common stock and 1,000,000 shares
of preferred stock, par value $.01 per share.

COMMON STOCK--20,000,000 shares of common stock were granted to creditors
holding impaired claims (see Note 2 for a further explanation). In addition, (i)
shares of common stock constituting 10% of the common stock on a fully-diluted
basis are reserved for issuance upon the exercise of the Series A warrants, (ii)
shares of common stock constituting 15% of the common stock are reserved for
issuance upon the exercise of the Series B warrants, subject to dilution by the
Series A warrants, the additional warrant, the Series C warrants, and options to
purchase common stock to be granted to certain employees and directors of the
Company, (iii) shares of common stock constituting 15% of the common stock are
reserved for issuance upon exercise of the Series C warrants (as defined
herein), subject to dilution by the Series A warrants, the additional warrant,
and options to purchase common stock to be granted to certain employees and
directors of the Company, and (iv) share of common stock constituting 2.5% of
the common stock on a fully-diluted basis are reserved for issuance upon the
exercise of the additional warrant. The holders of the common stock are entitled
to one vote for each share of common stock.

PREFERRED STOCK--Preferred stock may be issued from time to time by the
board of directors as shares of one or more series, subject to the provisions of
the articles of incorporation. Currently, the Company has no plans to issue any
shares of preferred stock.

WARRANTS

A) SERIES A WARRANTS--Each unit of the Notes have attached a Series A
warrant to purchase 26.8908 shares of the Company's common stock at an exercise
price of $.01 (See Note 8: Debt, b) Long-Term Debt--for further discussion).

B) SERIES B WARRANTS--As provided for in the Plan, old preferred
stockholders received warrants to purchase 15% of the Company's common stock,
exercisable over a seven-year period in three equal tranches (See Note 2 for
further discussion).

C) SERIES C WARRANTS--Pursuant to a warrant agreement between the Company
and Mr. Sam Forman (Mr. Forman), Mr. Forman received on the Effective Date,
warrants to purchase 15% of the common stock, subject to dilution only by the
Series A Warrants and by certain options to purchase common stock that may be
granted to certain directors of the Company. The warrants vest in three equal
tranches. The first vested on the Effective Date, the second on the first
anniversary of the Effective Date and the third on the third anniversary date.

The exercise price of the Series C warrants for the three tranches will
represent a recovery to the holders of general unsecured claims under the Plan
of 40%, 70% and 90%, respectively. However, if for any consecutive ten trading
days during the term of the Series C warrant the product of (i) the average
value per share of the common stock and (ii) the number of shares of common
stock outstanding (including shares reserved for warrants other than the Series
C warrants) exceeds $200 million, the exercise price for the first tranche of
Series C warrants shall be $0.

D) ADDITIONAL WARRANT--In connection with the offering, the Company issued
to the initial purchaser of the senior debt an additional Series A warrant to
purchase 2.5% of the common stock on a fully-diluted basis.

F-18
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED BALANCE SHEET (CONTINUED)

NOTE 12: COMMITMENTS AND CONTINGENCIES

A) LEASES--The Company's leases are principally for the use of retail store
facilities and equipment and certain non-store equipment and are generally for a
period of up to ten years. Most store leases are net leases which require the
Company to pay real estate taxes, maintenance costs, insurance and other
operating costs. Rent payments are based upon a combination of fixed rentals
(subject to escalation) and rentals contingent upon sales levels.

The Company can reject executory contracts, including leases, under the
relevant provisions of the Bankruptcy Code. Prior to the Effective Date, the
Company rejected certain leases on stores, which they intend to close subsequent
to January 1998. The minimum annual rental commitments, giving effect to
rejected leases, at November 1, 1997 are summarized as follows (in thousands):

<TABLE>
<CAPTION>
YEAR PAYMENTS
- ------------------------------------------------------------------------------- -----------
<S> <C>
1997 (13-Weeks ending January 31, 1998)........................................ $ 8,625
1998........................................................................... 31,330
1999........................................................................... 27,140
2000........................................................................... 23,677
2001........................................................................... 18,646
Thereafter..................................................................... 31,683
</TABLE>

LITIGATION--The Company has been named as a defendant in certain legal
proceedings. Although the outcome of these matters cannot be determined, the
Company believes the disposition of these proceedings will not materially affect
the financial position or results of operations of the Company.

On or about September 29, 1997, RAI Credit Corporation (RAI) filed an
adversary proceeding against the Company in the Court. The Company and RAI had
entered into an Account Purchase and Service Agreement dated July 11, 1997
(Agreement) pursuant to which RAI had agreed to establish and service a
private-label credit card program for the Company. In September 1997, the
Company notified RAI that it was terminating the Agreement on the ground that
RAI had materially breached and failed to perform under the Agreement. RAI's
complaint alleges that the Company wrongfully terminated the Agreement and seeks
compensatory damages of not less than $10,741,960 and an injunction prohibiting
the Company from entering into a private-label credit card program with any
entity other than RAI prior to the beginning of 1999, as well as attorneys' fees
and costs.

NOTE 13: RELATED PARTY TRANSACTIONS

Mr. Forman is chairman of the board of directors and owns, together with his
family, 70% of the voting securities of Forman Enterprises. Forman Enterprises
owns and operates approximately 60 factory outlets stores that sell casual
apparel similar to that sold by the Company. Mr. Forman's sons, Brett Forman and
Richard Forman, and his daughter, Wendy Forman, have relationships with both the
Company and with Forman Enterprises.

The Company has engaged Forman Enterprises to perform certain consulting
services for the Company. The Company entered into a consulting agreement with
Forman Enterprises to provide the

F-19
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED BALANCE SHEET (CONTINUED)

NOTE 13: RELATED PARTY TRANSACTIONS (CONTINUED)
Company with sourcing, merchandising, budgeting, store management, and related
services for a payment of $40,000 per month. Certain employees of Forman
Enterprises will provide such services to the Company, and the Company will
reimburse Forman Enterprises for the salary of these employees for the time
spent working, based on a fixed percentage. In 1997, the Company purchased
$1,666,827 of merchandise and paid consulting fees and related expenses of
$321,739 to Forman Enterprises.

Thirty percent of the equity of Forman Enterprises is owned by Mr. Larry
Ashinoff, (Mr. Ashinoff). Coronet, an entity controlled by Mr. Ashinoff, sells
merchandise to both the Company and Forman Enterprises. In addition, Forman
Enterprises and the Company utilize many of the same suppliers. During 1997,
payments for merchandise to Coronet totaled approximately $762,000.

Felenstein, Koniver & Associates (FKA) was engaged by the Company in 1997 to
act as a real estate consultant to the Company for a fee of $3,000 a month.
Total payments to FKA in 1997 were $117,219. Mr. Felenstein, a member of the
Company's board of directors, is a principal of FKA.

The Company's legal counsel is Eaton & Van Winkle, who also provide personal
legal counsel to Mr. Forman. Work performed by Eaton & Van Winkle, includes Mr.
Forman's employment contract with the Company.

NOTE 14: RETIREMENT PLAN

The Company has an Employee 401(k) Savings Plan (the 401K Plan), which is
independently administered. All employees consistently working a minimum of
20-hour weeks and completing one year of service, as defined in the plan
document, are eligible to participate in the 401(K) Plan. The Company is
required to match 25% of the first 6% of compensation contributed by each
employee.

NOTE 15: STOCK-BASED EMPLOYEE COMPENSATION

Pursuant to the Plan and a warrant agreement, the Company granted Mr. Forman
warrants to purchase 15% of the common stock of the Company (See Note 11,
- --Series C Warrants). As such, these warrants represent Stock-Based Employee
Compensation (Stock Compensation) as defined by APB Opinion No. 25.

As the exercise price is not currently determinable and a measurement date
did not occur, the Company is unable to record compensation expense with respect
to the Series C Warrants in accordance with APB Opinion No. 25. In addition,
management is unable to provide the disclosures required by SFAS No. 123 as a
measurement date has not occurred.

NOTE 16: SUBSIDIARY GUARANTOR

CSS Trade Names, Inc. (Trade Names), a wholly-owned subsidiary, owns the
County Seat Stores, Inc.'s service marks and licenses the rights to the Company.
Trade Names guaranteed repayment of the Notes and indebtedness arising from
borrowings under the Company's Credit Agreement (see Note 9). Trade Names is not
an active Company, and as such, their financial statements are not presented
herein.

NOTE 17: SUBSEQUENT EVENT

In connection with the closing of the Company's current distribution center
in Brooklyn Park, Minnesota during the early summer of 1998, the Company on
February 26, 1998 signed a ten-year lease agreement for a new distribution
center located near Baltimore, Maryland. Aggregate base rental commitments are
$11.3 million.

F-20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of County Seat Stores, Inc.:

We have audited the accompanying consolidated balance sheets of County Seat
Stores, Inc. (a Minnesota corporation) and subsidiary as of February 1, 1997 and
February 3, 1996, and the related consolidated statements of operations,
shareholder's equity (deficit) and cash flows for the fifty-two week periods
ended February 1, 1997 and January 28, 1995, and the fifty-three week period
ended February 3, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of County Seat Stores, Inc. and
Subsidiary as of February 1, 1997 and February 3, 1996, and the results of their
operations and their cash flows for the fifty-two week periods ended February 1,
1997 and January 28, 1995 and the fifty-three week period ended February 3,
1996, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Dallas, Texas

April 24, 1997, except for

Note 15, as to which the

date is October 29, 1997

F-21
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)

CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................................... $ 6,356 $ 8,166
Receivables............................................................................. 1,983 2,658
Merchandise inventories................................................................. 72,628 110,744
Prepaid expenses........................................................................ 8,347 11,188
Deferred tax benefit.................................................................... -- 989
----------- -----------
Total current assets.................................................................. 89,314 133,745
----------- -----------
Property and equipment, at cost......................................................... 90,668 120,277
Less--Accumulated depreciation and amortization......................................... (48,787) (61,674)
----------- -----------
Property and equipment, net........................................................... 41,881 58,603
----------- -----------
Other Assets, net:
Debt issuance costs..................................................................... 1,159 3,073
Deferred income taxes................................................................... -- 2,368
Other................................................................................... 528 1,303
----------- -----------
Total other assets, net............................................................... 1,687 6,744
----------- -----------
$ 132,882 $ 199,092
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current Liabilities:
Borrowings under credit agreement....................................................... $ 38,600 $ 27,000
Current maturities of long-term debt.................................................... -- 25
Accounts payable........................................................................ 30,009 36,754
Accrued expenses........................................................................ 11,565 19,913
Accrued income taxes.................................................................... -- 3,007
Accrued restructuring expenses.......................................................... 3,838 --
----------- -----------
Total current liabilities............................................................. 84,012 86,699
----------- -----------
Long-term borrowings under credit agreement............................................. -- 25,000
Other long-term liabilities............................................................. 9,118 11,242
Liabilities Subject to Compromise:
Accounts payable and accrued liabilities................................................ 16,089 --
Reserves for lease settlements.......................................................... 25,600 --
Long-term debt.......................................................................... 105,007 105,031
Redeemable preferred stock.............................................................. 50,347 44,319
Commitments and contingencies
Shareholder's Equity (Deficit):
Common stock: par value $1.00 per share; 1,000 shares authorized,
issued and outstanding................................................................ 1 1
Paid-in capital......................................................................... 49,789 49,789
Accumulated deficit..................................................................... (207,081) (122,989)
----------- -----------
Total shareholder's equity (deficit).................................................. (157,291) (73,199)
----------- -----------
$ 132,882 $ 199,092
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-22
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED 52 WEEKS ENDED
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Net sales..................................................... $ 538,260 $ 619,225 $ 588,327
Cost of sales, including buying and occupancy (includes $4,311
inventory write-down charges related to restructuring in
fiscal 1996)................................................ 416,389 452,014 420,478
--------------- --------------- ---------------
Gross profit.............................................. 121,871 167,211 167,849
Selling, general and administrative expenses.................. 126,561 132,699 119,638
Depreciation and amortization................................. 11,051 13,237 16,668
Write-off of certain long-lived assets........................ -- 80,241 --
Reorganization costs.......................................... 43,752 -- --
Interest expense, net......................................... 15,445 20,435 21,025
--------------- --------------- ---------------
Income (loss) before income taxes and extraordinary
items................................................... (74,938) (79,401) 10,518
--------------- --------------- ---------------
--------------- --------------- ---------------
Income taxes.................................................. (762) 7,632 5,295
--------------- --------------- ---------------
Income (loss) before extraordinary items.................. (74,176) (87,033) 5,223
Extraordinary items, net of income tax benefit................ 2,692 9,997 --
--------------- --------------- ---------------
Net income (loss)............................................. $ (76,868) $ (97,030) $ 5,223
--------------- --------------- ---------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-23
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)

(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
TOTAL
ACCUMULATED SHAREHOLDER'S
PAR PAID-IN EARNINGS EQUITY
SHARES VALUE CAPITAL (DEFICIT) (DEFICIT)
----------- ----- --------- ------------ --------------
<S> <C> <C> <C> <C> <C>
COMMON STOCK
-----------------------------------
Balance, January 29, 1994............................... 1,000 $ 1 $ 49,789 $ (13,050) $ 36,740
Net income............................................ -- -- -- 5,223 5,223
Redeemable preferred stock dividends and accretion.... -- -- -- (6,085) (6,085)
--
----- --------- ------------ --------------
Balance, January 28, 1995............................... 1,000 1 49,789 (13,912) 35,878
Net loss.............................................. -- -- -- (97,030) (97,030)
Redeemable preferred stock dividends and accretion.... -- -- -- (8,645) (8,645)
Dividend to parent.................................... -- -- -- (2,102) (2,102)
Receivable from parent................................ -- -- -- (1,300) (1,300)
--
----- --------- ------------ --------------
Balance, February 3, 1996............................... 1,000 1 49,789 (122,989) (73,199)
Net loss.............................................. -- -- -- (76,868) (76,868)
Redeemable preferred stock dividends and accretion.... -- -- -- (6,029) (6,029)
Dividend to parent.................................... -- -- -- (1,051) (1,051)
Receivable from parent................................ -- -- -- (144) (144)
--
----- --------- ------------ --------------
Balance, February 1, 1997............................... 1,000 $ 1 $ 49,789 $ (207,081) $ (157,291)
--
--
----- --------- ------------ --------------
----- --------- ------------ --------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-24
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED 52 WEEKS ENDED
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)........................................... $ (76,868) $ (97,030) $ 5,223
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Noncash reorganization costs............................ 33,563 -- --
Extraordinary items..................................... 2,692 9,997 --
Write-off of certain long-lived assets.................. -- 80,241 --
Depreciation and amortization........................... 11,051 13,237 16,668
Amortization of debt issuance costs and discount........ 835 1,272 2,599
Rent expense in excess of cash outlays, net............. 460 494 768
Deferred tax provision (benefit)........................ (762) 6,500 --
Changes in operating assets and liabilities:
Receivables........................................... (141) 1,534 (1,819)
Merchandise inventories............................... 38,116 (14,473) (13,088)
Prepaid expenses...................................... 2,841 (1,300) (771)
Accounts payable...................................... (6,290) (3,307) (2,482)
Accrued expenses...................................... (5,610) (2,522) 2,217
Accrued income taxes.................................. 361 1,263 3,151
Other non-current assets and liabilities.............. (68) (1,673) (196)
Operating liabilities subject to compromise........... 16,089 -- --
--------------- --------------- ---------------
Net cash provided by (used for) operating
activities.......................................... 16,269 (5,767) 12,270
--------------- --------------- ---------------
Cash Flows from Financing Activities:
Borrowing (repayments) under credit agreement, net.......... (13,400) 52,000 --
Issuance of long-term debt.................................. -- 104,943 --
Debt and equity issuance costs and prepayment premiums...... (1,649) (6,998) (81)
Principal payments on long-term debt and capital leases..... (25) (150,836) (45)
Dividend to parent.......................................... (1,051) (2,102) --
Advance to parent........................................... (237) (350) (623)
--------------- --------------- ---------------
Net cash used for financing activities................ (16,362) (3,343) (749)
--------------- --------------- ---------------
Cash Flows from Investing Activities:
Capital expenditures........................................ (1,841) (13,199) (14,785)
--------------- --------------- ---------------
Proceeds from disposal of property and equipment............ 124 16 32
--------------- --------------- ---------------
Net cash used for investing activities................ (1,717) (13,183) (14,753)
--------------- --------------- ---------------
Net Decrease in Cash and Cash Equivalents..................... (1,810) (22,293) (3,232)
Cash and Cash Equivalents:
Beginning of period......................................... 8,166 30,459 33,691
--------------- --------------- ---------------
End of period............................................... $ 6,356 $ 8,166 $ 30,459
--------------- --------------- ---------------
Cash Paid During the Period For:
Interest.................................................... $ 12,308 $ 19,459 $ 18,449
--------------- --------------- ---------------
Income taxes................................................ $ (361) $ 520 $ 2,144
--------------- --------------- ---------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-25
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. REORGANIZATION AND NATURE OF BUSINESS

The accompanying consolidated financial statements represent those of County
Seat Stores, Inc. (County Seat) and its wholly-owned subsidiary, CSS Trade
Names, Inc. (Trade Names) (together, the Company). The Company is a wholly-owned
subsidiary of County Seat, Inc. (CSI) (see Note 3).

The Company is a specialty apparel retailer selling both brand name and
private-label jeans and jeanswear. The Company currently operates 537 stores in
42 states. The Company's 500 County Seat stores, located almost exclusively in
regional shopping malls, offer one-stop shopping for daily casual wear featuring
a contemporary jeanswear look. The Company's selection of popular brands
includes Levi's, and its proprietary brands, County Seat-Registered Trademark-,
Nuovo-Registered Trademark- and Ten Star-Registered Trademark-. The Company also
operates 13 County Seat Outlet stores offering discount pricing on special
purchase and clearance merchandise and 21 Levi's Outlet stores under license
from Levi Strauss & Co. (Levi Strauss) offering a full range of Levi's and
Docker's off-price merchandise for both adults and children. The Company
operates three The Old Farmer's Almanac General Stores, a new retail concept
selling products associated with American country living, under license from
Yankee Publishing, Inc., the publisher of THE OLD FARMER'S ALMANAC.

The activities of CSI consist principally of its investment in County Seat.
The activities of Trade Names consist principally of licensing the rights to the
County Seat service marks to these stores.

On October 17, 1996, County Seat, Trade Names and CSI each filed voluntary
petitions for relief under Chapter 11 (Chapter 11) of Title 11 of the United
States Code (the Bankruptcy Code) in the United States Bankruptcy Court for the
District of Delaware (the Court). The Company and CSI are presently operating
their business as debtors-in-possession under the jurisdiction of the Court. As
debtors-in-possession, the Company and CSI may not engage in transactions
outside of the ordinary course of business without approval of the Court, after
notice and hearing.

Under Chapter 11, actions to enforce certain claims against the Company are
stayed if the claims arose, or are based on events that occurred, on or before
the petition date of October 17, 1996 (the Filing Date). Other liabilities may
arise or be subject to compromise as a result of rejection of executory
contracts, including leases, or the Court's determination of the allowed amount
of contingent or other disputed claims. The ultimate terms of settlement of
these claims will be determined in accordance with a plan of reorganization
which requires the approval of impaired prepetition creditors and stockholders
and confirmation by the Court. Liabilities subject to compromise (see Note 10)
in the accompanying consolidated balance sheets represent the Company's estimate
of liabilities as of February 1, 1997 subject to adjustment in the
reorganization process.

Following approval by the Court on October 17, 1996, the Company and CSI
entered into a debtor-in-possession credit agreement (the DIP Credit Agreement)
with a syndicate of commercial banks (the Banks) to provide working capital and
longer-term financing through the Chapter 11 process. The Banks previously
provided funding under the Company's pre-existing credit agreement and all
outstanding obligations under the pre-existing credit agreement were secured and
funded through the DIP Credit Agreement.

On November 6, 1996, the Company and CSI notified the Securities and
Exchange Commission of the suspension of the duty to file reports under Sections
13 and 15(d) of the Securities Exchange Act of 1934, as amended.

F-26
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. REORGANIZATION AND NATURE OF BUSINESS (CONTINUED)
The Company has experienced significant losses from operations and has a net
capital deficiency as of February 1, 1997. The Company's board of directors and
management are in the process of implementing several steps to reorganize County
Seat to provide for profitable operations in the future. Executive management,
including the Chief Executive Officer and several Senior Vice-Presidents, has
substantially been replaced with a new management team. Management is in the
process of implementing new merchandising strategies with the intention of
expanding the Company's customer base while improving retail gross margins.
Approximately 200 under-performing stores were closed in the fourth quarter of
fiscal 1996 to focus efforts on potentially profitable locations. The operating
performance of the remaining store locations is continuing to be evaluated and
the Company is negotiating with landlords for more favorable lease terms.
Administrative costs have been reduced with a reduction in the administrative
work force. Management is also in the process of working with its creditors and
equity holders to develop a plan of reorganization under Chapter 11 for the
financial restructuring of the Company and the settlement of its liabilities
(the Plan).

Successful development and implementation of the Plan will depend on, among
other things, the availability of long-term financing on acceptable terms and
conditions, and acceptance of the Plan by the prepetition creditors and
stockholders as required by the Bankruptcy Code. There can be no assurance that
the Company will be successful in the development, implementation and validation
of a business plan. If no plan of reorganization is successfully implemented,
the Company could be liquidated.

At this time it is not possible to predict the outcome of the Company's
Chapter 11 proceedings as a general matter, or the effect of the proceedings on
the Company or on the interests of prepetition creditors and stockholders. The
uncertainty regarding the eventual outcome of the Chapter 11 proceedings and the
effects of other unknown adverse factors could threaten the Company's existence
as a going concern.

The accompanying consolidated financial statements have been presented on
the basis that the Company is a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. As a result of the Chapter 11 filing and circumstances relating to
this event, realization of assets and satisfaction of liabilities is subject to
uncertainty. The final plan of reorganization could materially change the
amounts reported in the accompanying consolidated financial statements, which do
not give effect to adjustments to the carrying values of assets and liabilities
which may be necessary as a consequence of a plan reorganization. The ability of
the Company to continue as a going concern is dependent on, among other things,
confirmation of an acceptable plan of reorganization, a successful senior
management transition, future profitable operations, compliance with
debtor-in-possession financing agreements, availability of long-term financing
on acceptable terms and conditions, maintenance of vendor and factor confidence,
renewal of desirable store leases, and the ability to generate sufficient cash
from operations.

In view of the Chapter 11 reorganization, there is uncertainty with respect
to the Company's liquidity. The Company believes that at the present time its
working capital, anticipated net cash provided by operating activities, factor
and vendor trade credit, and debtor-in-possession financing should enable the
Company to meet its short-term liquidity requirements. However, any change in
the current status of these or other items affecting the Company, including
adverse operating results, a reduction in vendor or factor

F-27
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. REORGANIZATION AND NATURE OF BUSINESS (CONTINUED)
trade credit, loss or inadequacy of debtor-in-possession financing could have a
materially adverse effect on the Company's liquidity and on its operations.

See Note 15 for the subsequent event relating to the Company's emergence
from Chapter 11 bankruptcy.

2. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

All significant intercompany accounts and transactions have been eliminated.
Certain prior year amounts have been reclassified to conform to the current
presentation.

The preparation of financial statements in conformity with generally
accepted accounting principles requires Management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

YEAR-END

CASH AND CASH EQUIVALENTS

Short-term investments included in cash and cash equivalents have original
maturities of three months or less.

MERCHANDISE INVENTORIES

Merchandise inventories are stated at the lower of first-in, first-out
(FIFO) cost or market, using the retail inventory method.

PROPERTY AND EQUIPMENT

Effective October 28, 1995, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121
establishes accounting standards for recognizing and recording the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets. The

F-28
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Company evaluates the recoverability of the net book value of property and
equipment based on an analysis of expected cash flows. In fiscal 1996, the
Company closed approximately 200 stores as part of the Company's reorganization.
Restructuring charges of $7,239,000 were recorded in fiscal 1996 for the write-
off of the net book value of assets disposed of in the store closing process. In
fiscal 1995, certain fixed assets with a net book value of $5,523,000 were
written off because the Company did not expect to recover their net book value
(see Note 6).

OTHER ASSETS

Other assets consist principally of debt issuance costs, deferred income
taxes and other deferred charges. Debt issuance costs are amortized on a
straight-line basis over the life of the related debt. Amortization expense was
$776,000, $1,938,000 and $5,966,000 in fiscal 1996, 1995 and 1994, respectively.
Amortization of debt issuance costs related to the Company's long-term debt was
suspended as of the Filing Date. Deferred costs related to the pre-existing
credit agreement were written off as an extraordinary charge in the third
quarter of fiscal 1996 (see Note 7). Deferred income tax assets of $42,238,000
have been reduced in their entirety by a valuation allowance at February 1, 1997
(see Note 11). Other deferred charges are being amortized over 1 to 5 years
(which represents the life of the related assets). In fiscal 1995, the
$74,718,000 of remaining goodwill was written off to reflect a change in the
Company's estimate of its fair value (see Note 6).

STORE OPENING AND CLOSING COSTS

Store opening costs are expensed as incurred. Costs of store closings,
principally lease commitment costs and estimated losses on store asset
dispositions, are provided for in the period when the decision is made to close
the store.

PROVISION FOR INCOME TAXES

The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 utilizes an asset and liability
approach and deferred taxes are determined based on the estimated future tax
effects of differences between the financial statement and tax bases of assets
and liabilities given the provisions of the enacted tax laws.

REORGANIZATION

The Company accounts for its reorganization activities under the provisions
of Statement of Position (SOP) 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code". Under SOP 90-7, reorganization
charges and prepetition liabilities subject to compromise are reported
separately in the Company's financial statements. Liabilities subject to
compromise are valued based on current estimates of the amount of the allowed
claim under the Chapter 11 reorganization process. Interest accruals on the
Company's and CSI's long-term debt and dividends and accretion on the Company's
and CSI's preferred stock have been suspended as of the Filing Date.

F-29
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS

As the market for claims against companies under Chapter 11 is not well
developed, no reliable source of market prices is available for estimating the
fair value of the Company's long-term debt and liabilities subject to
compromise.

3. COUNTY SEAT, INC.

On December 4, 1989, CSI, formed by Donaldson, Lufkin & Jenrette Securities
Corporation (DLJ) and certain members of the Company's management, acquired all
of County Seat's outstanding capital stock from Carson Pirie Scott & Company
(Carson). The activities of CSI consist principally of its investment in County
Seat. A receivable from CSI totaling $1,444,000 was included in the accumulated
deficit of County Seat at February 1, 1997.

The consolidated financial position of CSI was comprised of the following
(in thousands):

<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
<S> <C> <C>
Current assets.......................................................................... $ 89,314 $ 133,896
Property and equipment, net............................................................. 41,881 58,603
Other assets, net....................................................................... 1,687 6,862
----------- -----------
Total assets........................................................................ $ 132,882 $ 199,361
----------- -----------
----------- -----------
Current liabilities..................................................................... $ 84,012 $ 85,416
Long-term borrowing under credit agreement.............................................. -- 25,000
Other long-term liabilities............................................................. 10,141 12,044
Liabilities subject to compromise:
Accounts payable and accrued liabilities............................................ 16,889 --
Reserves for lease settlements...................................................... 25,600 --
Long-term debt...................................................................... 122,747 122,365
Minority interest redeemable preferred stock of Stores.............................. 50,347 44,319
Redeemable preferred stock of CSI................................................... 66,969 58,628
----------- -----------
Total liabilities subject to compromise......................................... 282,552 225,312
Shareholders' equity (deficit):
Common stock........................................................................ 33 33
Paid-in capital..................................................................... 24,793 24,793
Common stock notes receivable....................................................... (5,203) (4,982)
Accumulated deficit................................................................. (263,446) (168,255)
----------- -----------
Total shareholders' equity (deficit)............................................ (243,823) (148,411)
----------- -----------
----------- -----------
Total liabilities and shareholders' equity (deficit)............................ $ 132,882 $ 199,361
----------- -----------
----------- -----------
</TABLE>

F-30
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. COUNTY SEAT, INC. (CONTINUED)
The consolidated results of operations of CSI were (in thousands):

<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED 52 WEEKS ENDED
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Net sales..................................................... $ 538,260 $ 619,225 $ 588,327
Gross profit.............................................. 121,871 167,211 167,849
Selling, general and administrative expenses.................. 126,619 132,746 119,649
Depreciation and amortization................................. 11,051 13,237 16,668
Write-off of certain long-lived assets and other deferred
costs....................................................... -- 81,462 --
Reorganization costs.......................................... 43,752 -- --
Interest expense, net......................................... 17,327 23,087 23,522
Minority interest dividends and accretion of redeemable
preferred stock of Stores................................... 6,029 8,645 6,085
--------------- --------------- ---------------
Income (loss) before income taxes and extraordinary
items................................................... (82,907) (91,966) 1,925
Income taxes.................................................. 1,252 6,548 4,527
Extraordinary items, net of income tax benefit................ 2,692 9,997 --
--------------- --------------- ---------------
Net loss.................................................... $ (86,851) $ (108,511) $ (2,602)
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>

Long-term debt consisted of the following (in thousands):

<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
<S> <C> <C>
Long-term borrowings under credit agreement............................................. $ -- $ 25,000
9% junior subordinated exchange debentures.............................................. 17,740 17,334
County Seat Stores, Inc. long-term debt................................................. 105,007 105,031
----------- -----------
$ 122,747 $ 147,365
----------- -----------
----------- -----------
</TABLE>

The aggregate redemption values of redeemable preferred stock were as
follows (in thousands):

<TABLE>
<CAPTION>
FEBRUARY 1,
1997
-----------
<S> <C>
Junior exchangeable preferred stock of CSI....................................... $ 66,969
County Seat Stores, Inc. senior exchangeable preferred stock..................... 51,351
</TABLE>

The components of long-term debt, redeemable preferred stock and
shareholders' investment of CSI are as follows:

LONG-TERM DEBT

On June 1, 1993 CSI exchanged all of the then outstanding shares of CSI
senior exchangeable preferred stock (CSI Senior Preferred) for 9% junior
subordinated exchange debentures (9% Exchange Debentures) due 2004, in the
principal amount of $20,466,000. The 9% Exchange Debentures were issued

F-31
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. COUNTY SEAT, INC. (CONTINUED)
at a discount of approximately $7,500,000 which was being amortized over the
life of the debentures. The unamortized discount on the 9% Exchange Debentures
was $5,612,000 and $6,018,000 at February 1, 1997 and February 3, 1996,
respectively. The 9% Exchange Debentures are subordinated to all senior and
senior subordinated debt of the Company and are due November 30, 2004, or
earlier upon a change in control of CSI. Interest on the 9% Exchange Debentures
was payable semi-annually at an annual rate of 9%. During 1996, CSI made a cash
interest payment on the 9% Exchange Debentures of $1,051,000 which was funded
through cash dividends from County Seat to CSI. The 9% Exchange Debentures are
classified as subject to compromise in the consolidated financial position of
CSI. The Company has suspended interest accruals and discount amortization on
the 9% Exchange Debentures as of the Filing Date. An interest payment due
November 1996 and future interest payments have been suspended until the Court
authorizes payment or confirms a plan of reorganization defining the repayment
terms. Accrued interest was $800,000 as of the Filing Date and at February 1,
1997.

See Note 10 for discussion of County Seat Stores, Inc. long-term debt.

JUNIOR EXCHANGEABLE PREFERRED STOCK

As part of the Acquisition, CSI issued 1,381,128 shares of Series A junior
exchangeable preferred stock and 282,766 shares of Series B junior exchangeable
preferred stock, par value $.01, (together, the CSI Junior Preferred) for $12.02
per share.

The CSI Junior Preferred is mandatorily redeemable at $25 per share on
November 30, 2004, or earlier upon change in control of CSI, at the optional
redemption price which increases ratably to $25 per share through November 30,
2004. In addition, CSI can redeem the CSI Junior Preferred at any time at the
optional redemption price.

Dividends on the Series A junior exchangeable preferred stock (Series A
Junior Preferred) are cumulative and payable quarterly. Under the terms of the
Series A Junior Preferred, the Company has the option of declaring stock
dividends in lieu of cash dividends through February 15, 2000. For the quarterly
dividends at February 29, 1996, May 31, 1996, and August 31, 1996, the Company
was restricted from declaring dividends on the Series A Junior Preferred until
sufficient net earnings are generated to permit the declaration of dividends
under Delaware corporate law. As a result, under the terms of the CSI Junior
Preferred, the annual dividend rate was increased from $3.00 per share to $3.50
per share beginning the quarter ending August 31, 1996. Unpaid dividends on the
Series A Junior Preferred cumulate and compound until paid. As a result of the
Chapter 11 Filing, accrued dividends and accretion on the CSI Junior Preferred
were suspended on the Filing Date. At October 17, 1996, the optional redemption
price was $17.76. Cumulative undeclared, unpaid Series A Junior Preferred stock
dividends were $4,883,000 and equivalent to 274,937 shares as of the Filing Date
and at February 1, 1997. These equivalent shares are not issued or outstanding.

Cumulative dividends on the Series B junior exchangeable preferred stock
(Series B Junior Preferred) compound as if a stock dividend was declared at each
quarterly dividend date. Undeclared, unpaid Series B Junior Preferred stock
dividends were $6,129,000 and equivalent to 345,099 shares as of the Filing Date
and at February 1, 1997. At February 3, 1996, undeclared, unpaid Series B Junior
Preferred stock dividends were $4,920,000 and equivalent to 289,238 shares.
These equivalent shares are not issued or outstanding.

F-32
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. COUNTY SEAT, INC. (CONTINUED)
The CSI Junior Preferred has a liquidation preference over CSI common stock
equal to the optional redemption price plus accrued dividends. At CSI's option,
the CSI Junior Preferred is exchangeable for 12% Exchange Debentures, due 2004,
at the rate of $25 face value of debt for each share of stock. The 12% Exchange
Debentures would be redeemable under the same conditions and at the same
redemption price as the CSI Junior Preferred. The 12% Exchange Debentures would
be subordinated to all senior and senior subordinated debt of the Company (see
Note 10).

In May 1994, CSI repurchased 3,666 shares of CSI Junior Preferred held by a
former officer and director of the Company at the optional redemption price of
$15.37 per share.

Of the 6,000,000 shares of CSI Junior Preferred authorized 3,085,164 shares
were issued and outstanding at February 1, 1997 and February 3, 1996.

COMMON STOCK

As part of the Acquisition, CSI issued 3,375,000 shares of common stock, par
value $.01, (CSI Common Stock) for $6.67 per share. Of the 50,000,000 shares
authorized, 3,327,042 shares were issued and outstanding at February 1, 1997 and
February 3, 1996.

In 1994, in accordance with the terms of the Management Stock Subscription
Agreement, CSI repurchased 170,119 shares of CSI Common Stock held by former
officers of the Company. Vested shares were repurchased at $10.00 per share.
Non-vested shares were repurchased at the original purchase price of $6.67 per
share plus accrued interest on the notes issued to purchase the shares. The cash
payments to repurchase the shares were reduced by approximately $1,187,000 in
common stock notes receivable and interest due from the former officers. Net
cash payments of $464,000 were made in settlement of these transactions.

In September 1994, CSI reissued 138,000 shares of previously repurchased CSI
Common Stock to current members of management at $10.00 per share. As payment
for the shares, CSI received $46,000 in cash, $306,000 in notes due September 1,
1995 and $1,028,000 in notes due November 30, 1997. Interest on these notes
receivable accrues at 9% per year. During fiscal 1995 and 1994, principal and
interest on the common stock notes receivable due September 1, 1995 were repaid.

On November 17, 1994, the Board of Directors effected a 2.25 for 1 stock
split on the CSI Common Stock and authorized an additional 5,000,000 shares of
preferred stock. On June 1, 1995, the Board of Directors effected a 2 for 3
stock split on the CSI Common Stock. All presentations of common shares and per
common share data have been adjusted to reflect these changes.

DIVIDENDS

Under the terms of its DIP Credit Agreement (see Note 4), the Company cannot
pay any dividends to CSI to fund payment of dividends to holders of CSI Common
Stock. The indenture for the 12% Senior Subordinated Notes also restricts the
ability of the Company to pay dividends to CSI to fund payment of dividends to
holders of CSI Common Stock.

F-33
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. COUNTY SEAT, INC. (CONTINUED)
WARRANTS

In connection with the 1993 senior subordinated notes issuance discussed in
Notes 7 and 10, CSI issued 105,000 Warrants to purchase 183,000 shares of CSI
Common Stock. The Warrants were valued at $24.76 per Warrant, and the $2,600,000
proceeds to CSI for the Warrants were contributed to the Company as a capital
contribution. The Warrants are exercisable after April 15, 1994, upon the
earlier of a change in control or initial public offering, as defined, or April
15, 1998, at $.007 per share, subject to adjustment. The Warrants expire on
October 15, 1998.

STOCK OPTIONS

The CSI stock program, consisting of an incentive stock option plan and a
director stock option plan, provides for the grant of options to purchase up to
375,000 shares of CSI Common Stock. As of February 1, 1997, options to purchase
141,652 shares of CSI Common Stock have been granted to management at $9.00 to
$15.00 per share. These grants are exercisable 25% per year and expire five
years from the date of the grant. At February 1, 1997, grants of 11,526, 39,000
and 34,688 shares were exercisable at $9.00, $10.00 and $15.00 per share,
respectively. In February 1995, certain members of management exercised 14,649
common stock options at a total exercise price of $97,565. In June 1995, a
former member of management exercised 505 common stock options at a total
exercise price of $6,185.

As of February 1, 1997, options to purchase 18,000 shares of CSI Common
Stock have been granted to a director at $6.67 per share which are currently
exercisable through January 2001 pursuant to a separate stock option agreement.
In addition, options to purchase 3,000 shares of CSI Common Stock have been
granted to a director at $15.00 per share, exercisable when vested through
November, 2003 pursuant to a separate stock option agreement. These options to
purchase 3,000 shares of CSI Common Stock vested 25% per year through November,
1996. As of February 1, 1997, options to purchase 3,000 shares were exercisable.

4. DEBTOR-IN-POSSESSION CREDIT AGREEMENT

Following approval by the Court on October 17, 1996, the Company and CSI
entered into the DIP Credit Agreement, which was subsequently amended as of
March 5, 1997. The DIP Credit Agreement is funded through the Banks to provide
working capital and longer-term financing. The DIP Credit Agreement matures
January 31, 1998 or the effective date of a plan of reorganization under the
Chapter 11 process. The Banks previously provided funding under the Company's
pre-existing credit agreement and all outstanding obligations under the
pre-existing credit agreement were secured and funded through the DIP Credit
Agreement.

The commitment under the DIP Credit Agreement provides for a revolving
credit facility up to $125,000,000 including a $65,000,000 letter of credit
facility. Availability under the DIP Credit Agreement is limited to certain
percentages of eligible inventory. Availability is reduced by any amounts drawn
under the facility as well as outstanding letters of credit and bank
acceptances. The DIP Credit Agreement also requires that for a period of 30
consecutive days after each December 15 and before each February 15 of the
following year, the Company must not have any aggregate borrowings (including
Bankers Acceptances) outstanding under the DIP Credit Agreement, less cash on
deposit, in excess of $65,000,000. Borrowings

F-34
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. DEBTOR-IN-POSSESSION CREDIT AGREEMENT (CONTINUED)
under the facility are secured by the Company's assets and guaranteed by CSI.
CSI's guarantee is secured by a pledge of its primary asset, the outstanding
common stock of the Company.

At the option of the Company, interest is payable on borrowings under the
DIP Credit Agreement at a prime rate plus 1.5% or a Eurodollar rate plus 2.5%.
The DIP Credit Agreement provides for a commitment fee during the period prior
to maturity of 0.5% of the unutilized commitment under the DIP Credit Agreement.

The DIP Credit Agreement contains certain covenants which, among other
things, limit the amount of debt of the Company, restrict the payment of
interest or principal on the Company's or CSI's prepetition debt or liabilities,
restrict the payment of dividends on the Company's or CSI's redeemable preferred
stock, limit the maximum value of inventory, limit expenditures for property and
equipment and require the Company to maintain certain financial performance
levels. The most restrictive financial performance levels at February 1, 1997
for the Company on a consolidated basis with CSI included maximum inventory
levels of $81,000,000, minimum adjusted net worth, as defined, (including
redeemable preferred stock and excluding the effect of certain restructuring
charges) of $(150,000,000). For fiscal 1997, required financial performance
levels, as amended, include, as defined, a minimum EBITDA of $22,298,000,
minimum adjusted net worth of $(150,000,000), various limits on the permitted
levels of inventory throughout the year and capital expenditure limitations of
$3,500,000. The Company obtained a waiver with respect to certain of its
financial covenants at February 1, 1997. The Company was in compliance with all
other restrictive and financial covenants at February 1, 1997.

Loans, borrowing base and letter of credit commitments under the DIP Credit
Agreement and the pre-existing credit agreement were as follows (dollars in
thousands):

<TABLE>
<CAPTION>
FEBRUARY 1,
1997
-----------
<S> <C>
AT PERIOD-END
Loans outstanding.............................................................. $ 38,600
Borrowing base................................................................. 88,531
Available borrowing base....................................................... 14,348
Letter of credit commitments outstanding....................................... 20,612
Bank Acceptances outstanding................................................... 14,971
DURING THE 52 WEEK PERIOD
Days loans were outstanding.................................................... 364
Maximum loan borrowing......................................................... $ 91,000
Average loan borrowing......................................................... 61,010
Weighted average interest rate................................................. 8.48%
</TABLE>

F-35
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. REORGANIZATION COSTS

Reorganization costs primarily relate to stores closed during fiscal year
1996 and stores which Management has decided to close and is in the process of
closing. Reorganization costs associated with additional store closings, if any,
would be recorded in the period in which the decision is made. Reorganization
costs recorded in fiscal 1996 were as follows (amounts in thousands):

<TABLE>
<S> <C>
Estimated lease rejection claims for closed stores................. $ 25,600
Write-off of fixed assets associated with stores closed............ 7,239
Operating and other costs associated with closing stores........... 7,206
Professional fees and other reorganization costs................... 3,707
---------
$ 43,752
---------
---------
</TABLE>

In addition, the Company recorded inventory write-down charges of $4,311,000
as additional cost of goods sold, to adjust inventory liquidated in connection
with closing stores, to net realizable value.

6. WRITE-OFF OF CERTAIN LONG-LIVED ASSETS

In fiscal 1995, the Company recorded an $80,241,000 non-cash write-off of
certain long-lived assets. The $74,718,000 of remaining goodwill was written off
to reflect a change in the Company's estimate of its fair value. Certain fixed
assets with a net book value of $5,523,000 were included in the write-off based
on Management's estimate of the recoverability of their net book value.

Goodwill of $87,596,000 was initially recorded at the time CSI acquired
County Seat through a leveraged buyout transaction (the Acquisition) in 1989.
The goodwill represented the excess of the purchase price over the valuation of
the net assets acquired in the Acquisition. The purchase price was based on
Management's expectations of future performance at the time of the Acquisition,
considering historical experience and industry trends. These expectations
assumed significant growth rates in revenue, improved store sales productivity,
stable gross profit margins and sufficient cash flow from operations to repay
Acquisition indebtedness in addition to funding capital expansion.

During the third quarter of fiscal 1995, the Company revised its projections
of earnings before interest and taxes. As a result of these revised projections
and the Company's significant accumulated deficit, combined with CSI's inability
to successfully complete its initial public offering, Management reevaluated its
goodwill based on a fair value approach. The Company believes fair value is the
preferable method of estimating goodwill, as it better reflects the impact of
the Company's capital structure on the fair value of goodwill. The result of
this reevaluation indicated the remaining unamortized balance of goodwill had no
value.

Also in the third quarter of fiscal 1995, the Company performed an analysis
of the recoverability of the net book value of property and equipment. The
Company analyzed cash flows on an individual store level to assess
recoverability of store fixed assets. This analysis identified stores with a
history of negative cash flows which were not expected to recover the carrying
value of their fixed assets in the future. A non-cash charge of approximately
$5,523,000 was recorded in fiscal 1995, representing the write-off of the net
book value of non-recoverable property and equipment. Property and equipment
associated with stores consists primarily of leasehold improvements and fixtures
which have minimal residual value.

F-36
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. EXTRAORDINARY ITEMS

In the third quarter of fiscal 1996, the Company recorded an extraordinary
charge of $2,692,000, with no tax benefit. The extraordinary charge represented
the write-off of debt issuance costs related to the pre-existing credit
agreement, which was replaced with the DIP Credit Agreement as of the Filing
Date (see Note 4).

In fiscal 1995, the Company recorded extraordinary charges totaling
$9,997,000 in connection with certain refinancing activities. As a result of the
redemption of the Company's then outstanding senior notes, an extraordinary
charge of $2,362,000 was recorded, consisting of $1,640,000 of prepayment
premiums on the senior notes and the write-off of $722,000 of debt issuance
costs related to the early retirement of the senior notes, all net of related
income tax benefits of $1,510,000. As a result of the exchange of substantially
all of the Company's then-outstanding 12% senior subordinated notes maturing
October 1, 2001 (the Old Notes) with 12% senior subordinated notes maturing
October 1, 2002, an extraordinary charge of $7,635,000 was recorded. This
extraordinary charge consisted of the write-off of $5,099,000 of unamortized
issuance discount and $2,057,000 of debt issuance costs related to the early
retirement of the Old Notes and $479,000 of prepayment premiums on the Old
Notes, all net of related income tax benefits of $1,622,000.

8. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following (in thousands):

<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
<S> <C> <C>
Land.................................................................................... $ 765 $ 765
Buildings and improvements.............................................................. 4,235 4,235
Leasehold improvements.................................................................. 42,175 57,613
Furniture, fixtures and equipment....................................................... 43,376 55,205
Leasehold rights........................................................................ -- 134
Construction in progress................................................................ 117 2,325
----------- -----------
90,668 120,277
Less-Accumulated depreciation and amortization...................................... (48,787) (61,674)
----------- -----------
$ 41,881 $ 58,603
----------- -----------
</TABLE>

F-37
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. ACCRUED EXPENSES

Accrued expenses consisted of the following (in thousands):

<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
<S> <C> <C>
Interest................................................................................ $ 119 $ 4,701
Payroll and related benefits............................................................ 3,582 3,585
Taxes other than income taxes........................................................... 1,392 2,644
Rent.................................................................................... 442 1,697
Other................................................................................... 6,030 7,286
----------- -----------
$ 11,565 $ 19,913
----------- -----------
</TABLE>

10. LIABILITIES SUBJECT TO COMPROMISE

Certain prepetition liabilities have been approved by the Court for payment.
As of February 1, 1997, such amounts, to the extent not paid, were included in
accrued expenses and other payables. The remainder of the Company's liabilities
as of the Filing Date, and certain other prepetition claims, are classified as
liabilities subject to compromise as of February 1, 1997. The reported amount of
liabilities subject to compromise represents the Company's estimates of the
amount of allowed claims under the Chapter 11 process. These estimates may be
subject to change due to reconciliation of the bankruptcy claims through the
Chapter 11 process, the termination of contractual obligations and the
settlement of disputed claims (see Note 1).

RESERVES FOR LEASE SETTLEMENTS

As part of the Company's reorganization, approximately 200 stores were
closed in the fourth quarter of fiscal 1996 (see Note 1). Leases for the closed
stores were rejected under the Chapter 11 process. The reserve for lease
settlements represents the Company's estimate of allowable claims for rejected
lease contracts under the Chapter 11 process. The ultimate settlement of the
claims for rejected contracts may vary significantly from the estimate.

LONG-TERM DEBT

Long-term debt subject to compromise consisted primarily of $105,000,000
principal amount of 12% senior subordinated notes, of which $104,959,000 matures
October 1, 2002 and $41,000 matures October 1, 2001.

The Company did not make the semi-annual interest payment on the 12% senior
subordinated notes scheduled for October 1, 1996. This constituted a default
under the indenture for the 12% senior subordinated notes. Interest accruals on
the 12% senior subordinated notes were suspended as of the Filing Date.
Prepetition accrued interest of $6,934,000 is included in the accrual balance of
liabilities subject to compromise. Net interest expense included $835,000,
$936,000 and $1,810,000 of debt issuance cost amortization and $56,000, $192,000
and $446,000 of interest income for 1996, 1995 and 1994, respectively.
Additionally, net interest expense in 1995 and 1994 included $336,000 and
$790,000 of issuance discount amortization, respectively, arising from the
original issuance of the Old Notes.

F-38
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. LIABILITIES SUBJECT TO COMPROMISE (CONTINUED)
COUNTY SEAT STORES, INC. SENIOR EXCHANGEABLE PREFERRED STOCK

In June 1991, County Seat issued 506,974 shares of Series A senior
exchangeable preferred stock and 293,026 shares of Series B senior exchangeable
preferred stock, par value $.01 (together, the County Seat Senior Preferred) for
$25 per share.

Dividends are cumulative and payable quarterly at an annual cash dividend
rate of $4.50 per share through August 31, 2004. Each quarter thereafter, the
rate increases $0.25 per share to a maximum of $5.75 per share. In addition, a
dividend rate adjustment of $0.125 per quarter per share will occur if dividends
remain unpaid for two consecutive quarters. County Seat may declare stock
dividends in lieu of cash dividends for the Series A senior exchangeable
preferred stock through February 15, 2000. Cash dividends can only be paid on
the Series B senior exchangeable preferred stock if cash dividends are paid on
the Series A senior exchangeable preferred stock.

Cumulative stock dividends on the Series B senior exchangeable preferred
stock compound as if a stock dividend was declared at each quarterly dividend
date through February 15, 2000. As a result of the Chapter 11 filing, dividend
accruals and issuance cost accretion on the County Seat Senior Preferred were
suspended as of the Filing Date. Undeclared, unpaid stock dividends were
$11,066,000 as of the Filing Date and at February 1, 1997 and $8,791,000 at
February 3, 1996. These undeclared, unpaid stock dividends were equivalent to
442,643 shares as of the Filing Date and at February 1, 1997 and 351,638 shares
at February 3, 1996. These equivalent shares are not issued or outstanding.

The County Seat Senior Preferred is redeemable at the option of the
shareholder only upon certain events, as defined, that primarily relate to a
change in control of County Seat or CSI. In addition, County Seat can redeem the
stock at any time for $25 per share plus accrued dividends. The County Seat
Senior Preferred has a liquidation preference over the CSI Junior Preferred and
the County Seat common stock equal to the redemption price of $25 per share plus
accrued dividends. The County Seat Senior Preferred is exchangeable at the
option of County Seat for 18% Exchange Debentures, due 2004, at the rate of $25
face value of debt for each share of stock. The 18% Exchange Debentures would be
redeemable under the same conditions and at the same redemption price as the
County Seat Senior Preferred. The 18% Exchange Debentures would be subordinated
to all senior and senior subordinated debt of the Company.

In connection with the issuance of the County Seat Senior Preferred, the
Company recorded issuance costs of $1,476,000 as a reduction of the net carrying
value of the County Seat Senior Preferred. The issuance costs were being
amortized through 2004 as preferred stock accretion. The unamortized issuance
costs were $1,004,000 as of the Filing Date and at February 1, 1997 and
$1,093,000 at February 3, 1996.

Of the 4,000,000 shares of County Seat Senior Preferred authorized,
1,565,695 and 1,408,272 shares were issued and outstanding at February 1, 1997
and February 3, 1996, respectively.

F-39
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. INCOME TAXES

The Company's tax year-end is the Saturday closest to July 31. A
consolidated federal income tax return is filed. For the purpose of these
financial statements, the Company has calculated income taxes as if it filed
federal and state income tax returns for its fiscal years.

The provision (benefit) for income taxes, excluding the income tax benefit
of the extraordinary items, includes the following (in thousands):

<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED 52 WEEKS ENDED
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Current
Federal..................................................... $ -- $ 900 $ 3,941
State....................................................... -- 232 1,016
------- ------- -------
-- 1,132 4,957
------- ------- -------
------- ------- -------
Deferred
Federal..................................................... (664) 5,805 295
State....................................................... (98) 695 43
------- ------- -------
(762) 6,500 338
------- ------- -------
------- ------- -------
Total
Federal..................................................... (664) 6,705 4,236
State....................................................... (98) 927 1,059
------- ------- -------
$ (762) $ 7,632 $ 5,295
------- ------- -------
------- ------- -------
</TABLE>

As of February 1, 1997, the Company had a net operating loss carryforward of
approximately $42,500,000. The Company's plan of reorganization or significant
changes in ownership of the Company could substantially limit the use of the net
operating loss carryforward.

F-40
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. INCOME TAXES (CONTINUED)
filing, the Company recorded a valuation reserve of $42,238,000 against the
entire balance of deferred tax assets as of February 1, 1997. The net deferred
tax asset is comprised of the following (in thousands):

<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
<S> <C> <C>
Current deferred taxes:
Gross assets............................................................................ $ 35,973 $ 4,105
Gross liabilities....................................................................... (227) (483)
Valuation allowance..................................................................... (35,746) (2,633)
----------- -----------
Total current deferred taxes........................................................ -- 989
----------- -----------
----------- -----------
Non-current deferred taxes:
Gross assets............................................................................ 6,492 8,715
Gross liabilities....................................................................... -- (375)
Valuation allowance..................................................................... (6,492) (5,972)
----------- -----------
Total non-current deferred taxes.................................................... -- 2,368
----------- -----------
----------- -----------
Total deferred taxes................................................................ $ -- $ 3,357
----------- -----------
----------- -----------
</TABLE>

The tax effect of significant temporary differences representing deferred
tax assets and liabilities are as follows (in thousands):

<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
<S> <C> <C>
Net operating losses.................................................................... $ 20,885 $ --
Lease settlement reserve................................................................ 9,984 --
Depreciation............................................................................ 2,999 4,799
Accrued rent............................................................................ 2,458 3,001
Other restructuring reserves............................................................ 1,814 --
Book accruals........................................................................... 1,506 584
Acquisition related reserves............................................................ 1,170 1,170
Inventory valuation..................................................................... 817 1,696
Deferred revenue........................................................................ 400 715
Other................................................................................... 205 (3)
----------- -----------
Temporary differences................................................................... 42,238 11,962
Valuation allowance..................................................................... (42,238) (8,605)
----------- -----------
Net deferred tax asset.................................................................. $ -- $ 3,357
----------- -----------
----------- -----------
</TABLE>

F-41
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. INCOME TAXES (CONTINUED)
The Company's effective income tax rate was different than the statutory
federal income tax rate for the following reasons (in thousands):

<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED 52 WEEKS ENDED
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Federal income taxes (benefit) at statutory rate.............. $ (25,479) $ (26,996) $ 3,576
State taxes, net of federal income tax benefit................ (3,747) (3,970) 525
Valuation allowance........................................... 28,476 8,605 --
Tax effect of nondeductible amortization expense and write-off
related to goodwill......................................... -- 29,762 854
Tax effect of amortization of discount on long-term debt...... -- 131 309
Other......................................................... (12) 100 31
--------------- --------------- -------
Income tax provision (benefit)................................ $ (762) $ 7,632 $ 5,295
--------------- --------------- -------
--------------- --------------- -------
</TABLE>

12. COMMITMENTS AND CONTINGENCIES

LEASES

The Company's leases are principally for the use of retail store facilities
and equipment and certain non-store equipment and are generally for a period of
up to ten years. Most store leases are net leases which require the Company to
pay real estate taxes, maintenance costs, insurance and other operating costs.
Rent payments are based upon a combination of fixed rentals and rentals
contingent upon sales levels.

Subject to the approval of the Court, the Company can reject executory
contracts, including leases, under the relevant provisions of the Bankruptcy
Code. Rejection of a lease gives the lessor the right to assert a prepetition
claim against the Company as though the lease had been terminated as of the date
of the Chapter 11 filing. However, the amount of the claim may be limited by the
Bankruptcy Code. Estimated allowed claims for rejected leases related to stores
closed are included in reorganization costs (see Note 10). The analysis of lease
commitments below has not been adjusted to reflect possible future lease
rejections related to additional store closures, if any.

At February 1, 1997, future annual minimum rentals for all noncancelable
operating leases were as follows (in thousands):

<TABLE>
<S> <C>
1997.............................................................. $ 49,560
1998.............................................................. 45,692
1999.............................................................. 39,796
2000.............................................................. 35,024
2001.............................................................. 30,082
Thereafter........................................................ 62,929
---------
$ 263,083
---------
---------
</TABLE>

F-42
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Total rent expense was as follows (in thousands):

<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED 52 WEEKS ENDED
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Minimum rents................................................. $ 65,863 $ 65,240 $ 58,750
Contingent rents.............................................. 97 336 693
------- ------- -------
$ 65,960 $ 65,576 $ 59,443
------- ------- -------
------- ------- -------
</TABLE>

LITIGATION

The Company is a defendant in legal proceedings arising in the ordinary
course of business. Although the outcome of these matters cannot be determined,
Management does not expect disposition of these proceedings to have a material
impact on the financial position, results of operations or liquidity of the
Company. Under Chapter 11, actions to pursue litigation against the Company are
automatically stayed if the claim arose, or is based on events that occurred on
or before the petition date of October 17, 1996.

SUPPLIERS

Levi Strauss is a significant supplier of brand name goods, representing
approximately 31% of County Seat's total sales in fiscal 1996.

13. RELATED PARTY TRANSACTIONS

Affiliates of DLJ held 1,407,630 and 1,407,630 shares of CSI Junior
Preferred and 788,141 and 709,483 shares of the County Seat Senior Preferred at
February 1, 1997 and February 3, 1996, respectively. Undeclared, unpaid stock
dividends on the CSI Junior Preferred and County Seat Senior Preferred held by
affiliates of DLJ, if issued, would be equivalent to 137,992 and 229,943 shares,
respectively, as of February 1, 1997. In addition, affiliates of DLJ held
917,746 shares of CSI Common Stock at February 1, 1997 and February 3, 1996.

The Company had a financial advisory and exclusive investment banking
agreement with DLJ dated December 4, 1989 that required an annual retainer fee
of $250,000 plus reimbursement for certain expenses incurred for services
provided. This agreement expired on December 4, 1994. During the 52-week period
ended February 1, 1997, the 53-week period ended February 3, 1996 and the
52-week period ended January 28, 1995, the Company paid to DLJ fees of $167,000,
$556,000 and $257,000, respectively.

14. RETIREMENT PLAN

The Company has an Employee 401(k) Savings Plan (the Plan), which is
independently administered. All employees consistently working a minimum of
20-hour weeks and completing one year of service, as defined, are eligible to
participate in the Plan. The Company is required to match 25% of the first 6% of
compensation contributed by each employee. In addition, a discretionary
contribution may be made if the Company meets its financial objectives. The
Company's contributions under the Plan were $260,000, $297,000 and $252,000 for
1996, 1995 and 1994, respectively.

F-43
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. RETIREMENT PLAN (CONTINUED)
In January, 1991, the Company amended the Plan to include an employee profit
sharing feature which covers all employees consistently working a minimum of
20-hour weeks and completing one year of service, as defined. Each year, a
contribution up to 3% of an employee's compensation may be made if the Company
meets its financial objectives. Eligible employees are immediately vested in
profit sharing contributions made by the Company. The Company made a profit
sharing contribution of $222,000 under the Plan in 1994. There were no
contributions for 1996 or 1995. The Company does not provide other post-
retirement benefits.

15. SUBSEQUENT EVENTS

On August 22, 1997 the Company filed the "First Amended Disclosure Statement
with Respect to the Plan of Reorganization of County Seat Stores, Inc." with the
Court which was confirmed on October 1, 1997 and consummated on October 29, 1997
(Effective Date). Therefore, the Company emerged from bankruptcy as a newly
reorganized entity. The plan of reorganization segregated creditors into three
classes--unclassified claims, unimpaired claims and impaired claims.
Unclassified and unimpaired claims were satisfied by cash payments totaling
$4,234,286. In exchange for impaired claims of approximately $151.0 million,
creditors received $4.2 million. In exchange for impaired claims of
approximately $151.0 million, creditors received 20 million shares of the new
common stock of the Company (100% of the Company's stock) valued at $66.9
million representing 44% recovery of their claims. Previous preferred
stockholders received warrants valued at $1.6 million in exchange for their
claims of $50.3 million. Additionally, a $1.5 million security account was
established to pay lease cures, disputed claims and holdback professional fees.

The effects of the Company's reorganization under Chapter 11 has been
accounted for in the Company's consolidated balance sheet at November 1, 1997
using principles required by the American Institute of Certified Public
Accountants, Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" (Fresh Start Accounting). Fresh Start
Accounting results in a revaluation of the Company's assets and liabilities as
of the Effective Date to reflect the estimated fair market values of those
assets and liabilities in conformity with the procedures specified by Accounting
Principles Board (APB) No. 16, "Business Combinations". The valuation
differences are charged to the Reorganization Value in Excess of Amounts
Allocable to Identified Assets account (Excess Reorganization Value).

On or about September 29, 1997, RAI Credit Corporation (RAI) filed an
adversary proceeding against the Company in the Court. The Company and RAI had
entered into an Account Purchase and Service Agreement dated July 11, 1997
(Agreement) pursuant to which RAI had agreed to establish and service a
private-label credit card program for the Company. In September 1997, the
Company notified RAI that it was terminating the Agreement on the ground that
RAI had materially breached and failed to perform under the Agreement. RAI's
complaint alleges that the Company wrongfully terminated the Agreement and seeks
compensatory damages of no less than $10,741,960 and an injunction prohibiting
the Company from entering into a private-label credit card program with any
person other than RAI prior to the beginning of 1999, as well as attorneys' fees
and costs.

F-44
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15. SUBSEQUENT EVENTS (CONTINUED)
predicted at this time, management believes that any resolution of this matter
will not have a material adverse effect on the Company's financial position or
future results of operations.

F-45
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE 52 WEEKS ENDED FEBRUARY 1, 1997

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA AS
HISTORICAL ADJUSTMENTS ADJUSTED
---------- ----------- ----------
<S> <C> <C> <C>
Net sales................................................................ $ 538,260 $(156,741)(a) $ 381,519
Cost of sales, including buying and occupancy............................ 416,389 (132,651)(a) 283,738
---------- ----------- ----------
Gross profit......................................................... 121,871 (24,090) 97,781
Selling, general and administrative expenses............................. 126,561 (39,118)(a) 82,143
(400)(b)
(4,900)(c)
Depreciation and amortization............................................ 11,051 (3,444)(d) 12,212
4,605(e)
Reorganization costs..................................................... 43,752 (43,752)(f) --
Interest expense, net.................................................... 15,445 (2,557)(g) 12,888
---------- ----------- ----------
Loss before income taxes and extraordinary item...................... (74,938) (65,476) (9,462)
---------- ----------- ----------
Income taxes (benefit)................................................... (762) -- (762)
---------- ----------- ----------
Loss before extraordinary item....................................... $ (74,176) $ (65,476) (8,700)
---------- ----------- ----------
---------- ----------- ----------
Other Data:
EBITDA(h).............................................................. $ (4,490) $ 15,638
---------- ----------
---------- ----------
</TABLE>

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

(a) Reflects the elimination of results related to the 341 closed or decided to
be closed stores from the beginning of 1996 through the end of 1997 and the
consolidation of certain regional offices.

(b) Reflects the planned closing of the Dallas and Minneapolis corporate offices
and the opening of the Company's new corporate headquarters in New York.

(e) Reflects the amortization of the Reorganization Value in Excess of Amounts
Allocated to Identified Assets over a 15 year period, assuming fresh start
accounting was recorded as of February 4, 1996.

(h) EBITDA represents income (loss) before interest, income taxes, depreciation
and amortization and reorganization costs. EBITDA is presented here to
provide additional information about the Company's operations. EBITDA is not
a measure of financial performance in accordance with Generally Accepted
Accounting Principles (GAAP) and should not be considered as an alternative
to (i) net income (loss) as a measure of performance (or any other measure
of performance under GAAP) or (ii) cash flows from operating, investing, or
financing activities as an indicator of cash flows or as a measure of
liquidity.

PF-1
<PAGE>
COUNTY SEAT STORES, INC. AND SUBSIDIARY

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE 39 WEEKS ENDED NOVEMBER 1, 1997

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA AS
HISTORICAL ADJUSTMENTS ADJUSTED
---------- ----------- ----------
<S> <C> <C> <C>
Net sales.......................................................... $ 277,137 $ (43,427)(a) $ 233,710
Cost of sales, including buying and occupancy...................... 202,824 (35,725)(a) 167,099
Cost of sales, special charge...................................... 11,975 (11,975) --
---------- ----------- ----------
Gross profit................................................... 62,338 4,273 66,611
Selling, general and administrative expenses....................... 71,465 (8,762)(a) 58,803
(300)(b)
(3,600)(c)
Depreciation and amortization...................................... 6,136 (3,150)(d) 6,468
3,482(e)
Reorganization costs............................................... 38,405 (38,405)(f)
Interest expense, net.............................................. 4,019 5,647(g) 9,666
---------- ----------- ----------
Loss before income taxes....................................... (57,687) (49,361) (8,326)
---------- ----------- ----------
Income taxes (benefit)............................................. -- -- --
---------- ----------- ----------
Net loss....................................................... $ (57,687) $ (49,361) $ (8,326)
---------- ----------- ----------
---------- ----------- ----------
Other Data:
EBITDA(h)........................................................ $ (9,127) $ 7,808
---------- ----------
---------- ----------
</TABLE>

- ------------------------
(a) Reflects the elimination of results related to the 137 closed or decided to
be closed stores during the 39-week period and the consolidation of certain
regional offices.

(b) Reflects the planned closing of the Dallas and Minneapolis corporate offices
and the opening of the Company's new corporate headquarters in New York.

(h) EBITDA represents income (loss) before interest, income taxes, depreciation
and amortization and reorganization costs. EBITDA is presented here to
provide additional information about the Company's operations. EBITDA is not
a measure of financial performance in accordance with Generally Accepted
Accounting Principles (GAAP) and should not be considered as an alternative
to (i) net income (loss) as a measure of performance (or any other measure
of performance under GAAP) or (ii) cash flows from operating, investing, or
financing activities as an indicator of cash flows or as a measure of
liquidity.

PF-2
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE
NOTES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.

UNTIL 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE
NOTES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Notice to Investors.......................................................
Special Note Regarding Forward-Looking....................................
Statements................................................................
Capitalization............................................................
Available Information.....................................................
Summary...................................................................
Risk Factors..............................................................
No Cash Proceeds to the Company...........................................
Price Range of the Private Notes..........................................
Selected Historical Financial Data........................................
Management's Discussion and Analysis of Financial Condition and Results of
Operations..............................................................
Business..................................................................
Management................................................................
Certain Relationships.....................................................
Principal Stockholders....................................................
The Exchange Offer........................................................
Description of the Notes..................................................
Certain Provisions of the Articles of Incorporation and By-laws...........
Plan of Reorganization....................................................
Description of Certain Indebtedness.......................................
Plan of Distribution......................................................
Certain U.S. Federal Income Tax Considerations............................
Legal Matters.............................................................
Independent Public Accountants............................................
Index to Financial Statements, Pro Forma Financial Statements, and
Financial Projections................................................... I-1
Financial Statements...................................................... F-1
Pro Forma Financial Statements............................................ PF-1
</TABLE>

OFFER TO EXCHANGE

12 3/4% SENIOR NOTES
DUE 2004

FOR ALL OUTSTANDING
12 3/4% SENIOR NOTES
DUE 2004
($85,000,000 PRINCIPAL
AMOUNT OUTSTANDING)

OF
COUNTY SEAT STORES, INC. , 1998

- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

MINNESOTA BUSINESS CORPORATION ACT

Under Section 302A.521 of the MBCA, a corporation shall indemnify a past or
present director, officer or employee who is made or threatened to be made a
party to a proceeding by reason of actions undertaken in the person's official
capacity. Such persons shall be indemnified against judgments, penalties, fines
(including, without limitation, excise taxes assessed against the person with
respect to an employee benefit plan), settlements, and reasonable expenses,
including attorneys' fees and disbursements, incurred in connection with the
proceeding, as long as the person: (1) has not been indemnified by another
organization or employee benefit plan against the same items arising out of the
same acts or omissions; (2) acted in good faith; (3) received no improper
personal benefit and, if there was a conflict of interest, statutory procedures
were followed; (4) in the case of a criminal proceeding, had no reasonable cause
to believe the conduct was unlawful; and (5) reasonably believed that his/her
conduct was in the best interests of the corporation (or where any such person
was acting on the behest of the corporation as a director, officer, employee or
agent of another entity, the person reasonably believed that the conduct was not
opposed to the best interests of the corporation). Eligibility for
indemnification is determined by the board, a committee or special legal counsel
under procedures specified by the statute.

Nothing in the statute shall be construed to limit the power of the
corporation to indemnify persons other than a director, officer, employee, or
member of a committee of the board of the corporation by contract or otherwise.

MBCA Section 302A.521 also permits the reimbursement of an indemnified
person by the corporation of reasonable expenses (including attorneys' fees and
disbursements) incurred by the person in advance of the final disposition of the
proceeding, upon compliance with certain statutory procedures. The corporation
may also reimburse expenses, including attorneys' fees and disbursements,
incurred by a person in connection with an appearance as a witness in a
proceeding at a time when the person has not been made or threatened to be made
a party to a proceeding.

A corporation's articles or bylaws may prohibit, limit or impose conditions
on indemnification or advances of expenses otherwise required by Section
302A.521 if the prohibition, limitation or conditions apply equally to all
persons or to all persons within a given class. No such prohibition or limit on
indemnification may affect the right of a person to indemnification or advances
of expenses with respect to any acts or omissions of the person occurring prior
to the effective date of the prohibition or limit on indemnification or
advances.

A corporation may purchase and maintain insurance on behalf of a person in
that person's official capacity against any liability asserted against and
incurred by the person in or arising from that capacity, whether or not the
corporation would have been required to indemnify the person against the
liability under the provisions of this section.

A corporation that indemnifies or advances expenses to a person in
accordance with Section 302A.521 in connection with a proceeding by or on behalf
of the corporation shall report to the shareholders in writing the amount of the
indemnification or advance and to whom and on whose behalf it was paid not later
than the next meeting of shareholders.

II-1
<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION

The Company's Amended and Restated Articles of Incorporation provide that
the Company shall indemnify its directors and officers and any other permitted
persons to the fullest extent permitted by Section 302A.521 of the MBCA.

The Company maintains policies insuring its officers and directors against
certain civil liabilities, including liabilities under the Securities Act.

Pursuant to the Registration Rights Agreement, the Company has agreed to
indemnify holders of registrable Notes against certain liabilities. Also
pursuant to the Registration Rights Agreement, the Company and certain
broker-dealers, including certain persons associated with such broker-dealers,
have agreed to indemnify each other against certain liabilities.

ITEM 21. EXHIBITS AND FINANCIAL SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ----------- ------------------------------------------------------------------------------------------------- -----
<C> <S> <C>

2.1 First Amended Plan of Reorganization of County Seat Stores, Inc., dated August 22, 1997.

2.2 Order of United States Bankruptcy Court, dated October 1, 1997, confirming First Amended Plan of
Reorganization of County Seat Stores, Inc.

3.1 Articles of Amendment and Restatement of the Articles of Incorporation of County Seat Stores,
Inc.

3.2 Amended and Restated Bylaws of County Seat Stores, Inc.

4.1 Indenture, dated as of October 29, 1997 between County Seat Stores, Inc. and First Trust National
Association as Trustee, with respect to $85,000,000 principal amount of 12 3/4% Senior Notes due
November 1, 2004 and Series A Common Stock Purchase Warrants.

4.2 Specimen Certificate of 12 3/4% Senior Notes due November 1, 2004 (the "Private Notes") (included
in Exhibit 4.1 hereto).

4.3 Specimen Certificate of 12 3/4% Senior Notes due November 1, 2004 (the "Exchange Notes")
(included in Exhibit 4.1 hereto).

4.4 Series A Warrant Agreement, dated as of October 29, 1997 between County Seat Stores, Inc. and
First National Trust.

4.5 Form of Series A Warrant Certificate.

4.6 Subsidiary Guarantee of CSS Trade Names, Inc. with Respect to Indenture dated as of October 29,
1997.

4.7 Registration Rights Agreement dated October 29, 1997 between County Seat Stores, Inc. and
Jefferies & Company, Inc.

4.8 Security Agreement dated October 29, 1997 between County Seat Stores, Inc. and First National
Trust Association.

*5.1 Opinion of Eaton & Van Winkle with respect to the validity of the Exchange Notes.

10.1 Loan and Security Agreement dated October 29, 1997 between BankBoston Retail Finance, Inc. and
County Seat Stores, Inc.

10.2 Revolving Credit Note dated December 11, 1997 between BankBoston Retail Finance, Inc. and Count
Seat Stores, Inc.
</TABLE>

II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ----------- ------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
10.3 Revolving Credit Note dated December 11, 1997 between BankAmerica Business Credit, Inc. and
County Seat Stores, Inc.

10.4 Revolving Credit Note dated December 11, 1997 between Congress Financial Corporation Central and
County Seat Stores, Inc.

10.5 Revolving Credit Note dated December 11, 1997 between Foothill Capital Corporation and County
Seat Stores, Inc.

10.6 Revolving Credit Note dated December 11, 1997 FINOVA Capital Corporation and County Seat Stores,
Inc.

10.7 Revolving Credit Note dated December 11, 1997 between The CIT Group/Business Credit, Inc. and
County Seat Stores, Inc.

10.8 Non-Encumbrance Agreement dated October 29, 1997 between BankBoston Retail Finance, Inc. and
County Seat Stores, Inc.

10.9 Trademark and Trademark Applications Security Agreement dated October 29, 1997 between BankBoston
Retail Finance, Inc. and County Seat Stores, Inc.

10.10 Copyright and Copyright Applications Security Agreement dated October 29, 1997 between BankBoston
Retail Finance, Inc. and County Seat Stores, Inc.

10.11 Form of Guaranty between BankBoston Retail Finance, Inc. and County Seat Stores, Inc.

10.12 Form of Trademark and Trademark Applications Security Agreement between BankBoston Retail
Finance, Inc. and CSS Trade Names, Inc.

10.13 Form of Trademark License Agreement between Levi Strauss & Co. and County Seat Stores, Inc.

10.14 Lease Agreement dated June 30, 1990 by and between CB Institutional Fund VIII and County Seat
Stores, Inc. incorporated herein by reference to the Company's Registration Statement on Form
S-1. (No. 33-66868).

10.15 Consulting Agreement dated November 14, 1997, between County Seat Stores, Inc. and Forman
Enterprises, Inc.

10.16 Consulting Agreement dated July 30, 1996, between County Seat Stores, Inc. and Retail Consulting
Services, Inc.

10.17 Amendment to Consulting Agreement dated March 12, 1997, between County Seat Stores, Inc. and
Retail Consulting Services, Inc.

10.18 Employment Agreement dated August 11, 1997, between Sam Forman and County Seat Stores, Inc.

12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges.

21.1 Subsidiaries of the Registrant.

*23.1 Consent of Eaton & Van Winkle (included in their opinion filed as Exhibit 5.1 hereto).

23.2 Consent of Arthur Anderson L.L.P.

24.1 Power of Attorney of County Seat Stores, Inc. (included on signature page to this Registration
Statement on S-4).

25.2 Statement of Eligibility and Qualification (Form T-1) under Trust Indenture Act of 1939 of First
Trust National Association.

27.1 Financial Data Schedule.

*99.1 Form of Letter of Transmittal.
</TABLE>

II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ----------- ------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
*99.2 Form of Notice of Guaranteed Delivery.

*99.3 Form of Exchange Agent Agreement.
</TABLE>

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

* To be filed by amendment.

ITEM 22. UNDERTAKINGS

1. The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrants' annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

2. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suite or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
offered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

3. The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.

4. The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
Company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.

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

* To be filed by amendment.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on March 13, 1998.

COUNTY SEAT STORES, INC.

BY: /S/ SAM FORMAN
-----------------------------------------
Sam Forman
CHIEF EXECUTIVE OFFICER

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Sam Forman and Brett Forman and each and
either of them, his or her true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all amendments
(including, without limitation, post-effective amendments) to this Registration
Statement, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.

SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------

/s/ SAM FORMAN President; Chief Executive
- ------------------------------ Officer; Director March 13, 1998
Sam Forman

/s/ BRETT D. FORMAN Executive Vice President;
- ------------------------------ Director March 13, 1998
Brett D. Forman

/s/ PAUL J. KITTNER Senior Vice President;
- ------------------------------ Chief Financial Officer; March 13, 1998
Paul J. Kittner Treasurer

/s/ JOHN S. BELISLE Director
- ------------------------------ March 13, 1998
John S. Belisle

/s/ MARSHALL FELENSTEIN Director
- ------------------------------ March 13, 1998
Marshall Felenstein

/s/ FAITH LARSEN Director
- ------------------------------ March 13, 1998
Faith Larsen

/s/ JOHN MEINERT Director
- ------------------------------ March 13, 1998
John Meinert

/s/ M. BRENT STEVENS Director
- ------------------------------ March 13, 1998
M. Brent Stevens

II-5
<PAGE>
SIGNATURES

CSS TRADE NAMES, INC.

BY: /S/ SAM FORMAN
-----------------------------------------
Sam Forman
CHIEF EXECUTIVE OFFICER

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.

SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------

/s/ SAM FORMAN President; Chief Executive
- ------------------------------ Officer; Director March 13, 1998
Sam Forman

/s/ BRETT D. FORMAN Senior Vice President;
- ------------------------------ Director March 13, 1998
Brett D. Forman

/s/ PAUL J. KITTNER Senior Vice President;
- ------------------------------ Chief Financial Officer; March 13, 1998
Paul J. Kittner Director

/s/ PAUL ROTH Executive Vice President;
- ------------------------------ Director March 13, 1998
Paul Roth

II-6
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ----------- ----------------------------------------------------------------------------------------------- -----------
<C> <S> <C>

2.1 First Amended Plan of Reorganization of County Seat Stores, Inc., dated August 22, 1997.

2.2 Order of United States Bankruptcy Court, dated October 1, 1997, confirming First Amended Plan
of Reorganization of County Seat Stores, Inc.

3.1 Articles of Amendment and Restatement of the Articles of Incorporation of County Seat Stores,
Inc.

3.2 Amended and Restated Bylaws of County Seat Stores, Inc.

4.1 Indenture, dated as of October 29, 1997 between County Seat Stores, Inc. and First Trust
National Association as Trustee, with respect to $85,000,000 principal amount of 12 3/4% Senior
Notes due November 1, 2004 and Series A Common Stock Purchase Warrants.

4.2 Specimen Certificate of 12 3/4% Senior Notes due November 1, 2004 (the "Private Notes")
(included in Exhibit 4.1 hereto).

4.3 Specimen Certificate of 12 3/4% Senior Notes due November 1, 2004 (the "Exchange Notes")
(included in Exhibit 4.1 hereto).

4.4 Series A Warrant Agreement, dated as of October 29, 1997 between County Seat Stores, Inc. and
First National Trust.

4.5 Form of Series A Warrant Certificate.

4.6 Subsidiary Guarantee of CSS Trade Names, Inc. with Respect to Indenture dated as of October 29,
1997.

4.7 Registration Rights Agreement dated October 29, 1997 between County Seat Stores, Inc. and
Jefferies & Company, Inc.

4.8 Security Agreement dated October 29, 1997 between County Seat Stores, Inc. and First National
Trust Association.

*5.1 Opinion of Eaton & Van Winkle with respect to the validity of the Exchange Notes.

10.1 Loan and Security Agreement dated October 29, 1997 between BankBoston Retail Finance, Inc. and
County Seat Stores, Inc.

10.2 Revolving Credit Note dated December 11, 1997 between BankBoston Retail Finance, Inc. and Count
Seat Stores, Inc.

10.3 Revolving Credit Note dated December 11, 1997 between BankAmerica Business Credit, Inc. and
County Seat Stores, Inc.

10.4 Revolving Credit Note dated December 11, 1997 between Congress Financial Corporation Central
and County Seat Stores, Inc.

10.5 Revolving Credit Note dated December 11, 1997 between Foothill Capital Corporation and County
Seat Stores, Inc.

10.6 Revolving Credit Note dated December 11, 1997 FINOVA Capital Corporation and County Seat
Stores, Inc.

10.7 Revolving Credit Note dated December 11, 1997 between The CIT Group/Business Credit, Inc. and
County Seat Stores, Inc.

10.8 Non-Encumbrance Agreement dated October 29, 1997 between BankBoston Retail Finance, Inc. and
County Seat Stores, Inc.

10.9 Trademark and Trademark Applications Security Agreement dated October 29, 1997 between
BankBoston Retail Finance, Inc. and County Seat Stores, Inc.

10.10 Copyright and Copyright Applications Security Agreement dated October 29, 1997 between
BankBoston Retail Finance, Inc. and County Seat Stores, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ----------- ----------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
10.11 Form of Guaranty between BankBoston Retail Finance, Inc. and County Seat Stores, Inc.

10.12 Form of Trademark and Trademark Applications Security Agreement between BankBoston Retail
Finance, Inc. and CSS Trade Names, Inc.

10.13 Form of Trademark License Agreement between Levi Strauss & Co. and County Seat Stores, Inc.

10.15 Consulting Agreement dated November 14, 1997, between County Seat Stores, Inc. and Forman
Enterprises, Inc.

10.16 Consulting Agreement dated July 30, 1996, between County Seat Stores, Inc. and Retail
Consulting Services, Inc.

10.17 Amendment to Consulting Agreement dated March 12, 1997, between County Seat Stores, Inc. and
Retail Consulting Services, Inc.

10.18 Employment Agreement dated August 11, 1997, between Sam Forman and County Seat Stores, Inc.

12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges

21.1 Subsidiaries of the Registrant.

*23.1 Consent of Eaton & Van Winkle (included in their opinion filed as Exhibit 5.1 hereto).

23.2 Consent of Arthur Anderson L.L.P.

24.1 Power of Attorney of County Seat Stores, Inc. (included on signature page to this Registration
Statement on S-4).

25.2 Statement of Eligibility and Qualification (Form T-1) under Trust Indenture Act of 1939 of
First Trust National Association.

27.1 Financial Data Schedule.

*99.1 Form of Letter of Transmittal.

*99.2 Form of Notice of Guaranteed Delivery.

*99.3 Form of Exchange Agent Agreement.
</TABLE>

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

* To be filed by amendment.

<PAGE>

EXHIBIT 2.1

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

- - - - - - - - - - - - - - - - - - -x

In re : Chapter 11

COUNTY SEAT, INC., COUNTY : Case No. 96-1637 (HSB)
SEAT STORES, INC. and
CSS TRADE NAMES, INC. : Jointly Administered

Debtors. :

- - - - - - - - - - - - - - - - - - -x

FIRST AMENDED PLAN OF REORGANIZATION
OF COUNTY SEAT STORES, INC.

SKADDEN, ARPS, SLATE, MEAGHER & FLOM
(ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606-1285
Attn: J. Eric Ivester
John K. Lyons
George N. Panagakis

- and -

SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
One Rodney Square
Wilmington, Delaware 19899
Attn: Gregg M. Galardi

ATTORNEYS FOR
COUNTY SEAT STORES, INC.
DEBTOR AND DEBTOR-IN-POSSESSION

Dated: August 22, 1997
Wilmington, Delaware

<PAGE>

TABLE OF CONTENTS

PAGE

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1

ARTICLE I DEFINITIONS, RULES OF INTERPRETATION,
AND COMPUTATION OF TIME. . . . . . . . . . . . . . . . . . . . .A-1
A. Scope of Definitions . . . . . . . . . . . . . . . . . . . . . .A-1
B. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
1.1 "Administrative Claim" . . . . . . . . . . . . . . . . .A-1
1.2 "Administrative Convenience Claim" . . . . . . . . . . .A-1
1.3 "Allowed Claim". . . . . . . . . . . . . . . . . . . . .A-1
1.4 "Allowed Class . . . Claim". . . . . . . . . . . . . . .A-2
1.5 "Allowed Class . . . Interest" . . . . . . . . . . . . .A-2
1.6 "Ballot" . . . . . . . . . . . . . . . . . . . . . . . .A-2
1.7 "Bank Agent" . . . . . . . . . . . . . . . . . . . . . .A-2
1.8 "Bankruptcy Code". . . . . . . . . . . . . . . . . . . .A-2
1.9 "Bankruptcy Court" . . . . . . . . . . . . . . . . . . .A-2
1.10 "Bankruptcy Rules" . . . . . . . . . . . . . . . . . . .A-2
1.11 "Bar Date" . . . . . . . . . . . . . . . . . . . . . . .A-2
1.12 "Bar Date Order" . . . . . . . . . . . . . . . . . . . .A-2
1.13 "Business Day" . . . . . . . . . . . . . . . . . . . . .A-2
1.14 "Cash" . . . . . . . . . . . . . . . . . . . . . . . . .A-2
1.15 "Causes of Action" . . . . . . . . . . . . . . . . . . .A-2
1.16 "Chapter 11 Case". . . . . . . . . . . . . . . . . . . .A-2
1.17 "Claim". . . . . . . . . . . . . . . . . . . . . . . . .A-3
1.18 "Claims Objection Deadline". . . . . . . . . . . . . . .A-3
1.19 "Class". . . . . . . . . . . . . . . . . . . . . . . . .A-3
1.20 "Confirmation Date". . . . . . . . . . . . . . . . . . .A-3
1.21 "Confirmation Hearing" . . . . . . . . . . . . . . . . .A-3
1.22 "Confirmation Hearing Notice". . . . . . . . . . . . . .A-3
1.23 "Confirmation Order" . . . . . . . . . . . . . . . . . .A-3
1.24 "Consummation Date". . . . . . . . . . . . . . . . . . .A-3
1.25 "County Seat". . . . . . . . . . . . . . . . . . . . . .A-3
1.26 "Creditors' Committee" . . . . . . . . . . . . . . . . .A-3
1.27 "CSI". . . . . . . . . . . . . . . . . . . . . . . . . .A-3
1.28 "Cure" . . . . . . . . . . . . . . . . . . . . . . . . .A-3
1.29 "DIP Facility" . . . . . . . . . . . . . . . . . . . . .A-3
1.30 "DIP Facility Claim" . . . . . . . . . . . . . . . . . .A-3
1.31 "DIP Facility Order" . . . . . . . . . . . . . . . . . .A-3
1.32 "DIP Lenders". . . . . . . . . . . . . . . . . . . . . .A-4
1.33 "Disallowed Claim" . . . . . . . . . . . . . . . . . . .A-4
1.34 "Disbursing Agent" . . . . . . . . . . . . . . . . . . .A-4
1.35 "Disclosure Statement" . . . . . . . . . . . . . . . . .A-4
1.36 "Disputed Claim" . . . . . . . . . . . . . . . . . . . .A-4
1.37 "Distribution Date". . . . . . . . . . . . . . . . . . .A-4
1.38 "Distribution Reserve" . . . . . . . . . . . . . . . . .A-4
1.39 "Estate" . . . . . . . . . . . . . . . . . . . . . . . .A-4
1.40 "Existing Securities". . . . . . . . . . . . . . . . . .A-4
1.41 "Face Amount". . . . . . . . . . . . . . . . . . . . . .A-4

A-i
<PAGE>

PAGE

1.42 "Final Order". . . . . . . . . . . . . . . . . . . . . .A-4
1.43 "Fiscal Year". . . . . . . . . . . . . . . . . . . . . .A-4
1.44 "General Unsecured Claim". . . . . . . . . . . . . . . .A-4
1.45 "Impaired" . . . . . . . . . . . . . . . . . . . . . . .A-5
1.46 "Indemnification Rights" . . . . . . . . . . . . . . . .A-5
1.47 "Indemnitees". . . . . . . . . . . . . . . . . . . . . .A-5
1.48 "Indenture". . . . . . . . . . . . . . . . . . . . . . .A-5
1.49 "Interest" . . . . . . . . . . . . . . . . . . . . . . .A-5
1.50 "Internal Revenue Code". . . . . . . . . . . . . . . . .A-5
1.51 "Jefferies". . . . . . . . . . . . . . . . . . . . . . .A-5
1.52 "Miscellaneous Secured Claim". . . . . . . . . . . . . .A-5
1.53 "New Common Stock" . . . . . . . . . . . . . . . . . . .A-5
1.54 "New Credit Facility". . . . . . . . . . . . . . . . . .A-5
1.55 "New Forman Employment Agreement". . . . . . . . . . . .A-5
1.56 "New Senior Note and Warrant Purchase Agreement. . . . .A-5
1.57 "New Senior Notes" . . . . . . . . . . . . . . . . . . .A-5
1.58 "Old Common Stock" . . . . . . . . . . . . . . . . . . .A-5
1.59 "Old Preferred Stock". . . . . . . . . . . . . . . . . .A-5
1.60 "Other Priority Claim" . . . . . . . . . . . . . . . . .A-6
1.61 "Person" . . . . . . . . . . . . . . . . . . . . . . . .A-6
1.62 "Petition Date". . . . . . . . . . . . . . . . . . . . .A-6
1.63 "Plan" . . . . . . . . . . . . . . . . . . . . . . . . .A-6
1.64 "Prepetition Notes". . . . . . . . . . . . . . . . . . .A-6
1.65 "Priority Tax Claim" . . . . . . . . . . . . . . . . . .A-6
1.66 "Pro Rata" . . . . . . . . . . . . . . . . . . . . . . .A-6
1.67 "Professional Fees". . . . . . . . . . . . . . . . . . .A-6
1.68 "Projections". . . . . . . . . . . . . . . . . . . . . .A-6
1.69 "Record Date". . . . . . . . . . . . . . . . . . . . . .A-6
1.70 "Registration Rights Agreements" . . . . . . . . . . . .A-6
1.71 "Reinstated" or "Reinstatement". . . . . . . . . . . . .A-6
1.72 "Reorganized County Seat". . . . . . . . . . . . . . . .A-7
1.73 "Reorganized County Seat Securities" . . . . . . . . . .A-7
1.74 "Scheduled". . . . . . . . . . . . . . . . . . . . . . .A-7
1.75 "Schedules". . . . . . . . . . . . . . . . . . . . . . .A-7
1.76 "Secured Claim". . . . . . . . . . . . . . . . . . . . .A-7
1.77 "Series A Warrants". . . . . . . . . . . . . . . . . . .A-7
1.78 "Series B Warrants". . . . . . . . . . . . . . . . . . .A-7
1.79 "Series C Warrants". . . . . . . . . . . . . . . . . . .A-7
1.80 "Subordinated Securities Claim". . . . . . . . . . . . .A-7
1.81 "Unimpaired" . . . . . . . . . . . . . . . . . . . . . .A-7
1.82 "Voting Deadline". . . . . . . . . . . . . . . . . . . .A-7
C. Rules of Interpretation. . . . . . . . . . . . . . . . . . . . .A-7
D. Computation of Time. . . . . . . . . . . . . . . . . . . . . . .A-8

ARTICLE II ADMINISTRATIVE EXPENSES AND PRIORITY TAX CLAIMS. . . . . . . . .A-8
2.1 Administrative Claims. . . . . . . . . . . . . . . . . .A-8
2.2 Priority Tax Claims. . . . . . . . . . . . . . . . . . .A-8

A-ii
<PAGE>

PAGE

ARTICLE III CLASSIFICATION OF CLAIMS AND INTERESTS . . . . . . . . . . . . .A-8
3.1 Class 1. . . . . . . . . . . . . . . . . . . . . . . . .A-8
3.2 Class 2. . . . . . . . . . . . . . . . . . . . . . . . .A-8
3.3 Class 3. . . . . . . . . . . . . . . . . . . . . . . . .A-9
3.4 Class 4. . . . . . . . . . . . . . . . . . . . . . . . .A-9
3.5 Class 5. . . . . . . . . . . . . . . . . . . . . . . . .A-9
3.6 Class 6. . . . . . . . . . . . . . . . . . . . . . . . .A-9
3.7 Class 7. . . . . . . . . . . . . . . . . . . . . . . . .A-9

ARTICLE IV IDENTIFICATION OF CLASSES OF CLAIMS AND
INTERESTS IMPAIRED AND NOT IMPAIRED BY THE PLAN. . . . . . . . .A-9
4.1 Unimpaired Classes of Claims and Interests.. . . . . . .A-9
4.2 Impaired Classes of Claims and Interests . . . . . . . .A-9

ARTICLE V PROVISIONS FOR TREATMENT OF
CLAIMS AND INTERESTS . . . . . . . . . . . . . . . . . . . . . .A-9
5.1 Class 1 (Other Priority Claims). . . . . . . . . . . . .A-9
5.2 Class 2 (Miscellaneous Secured Claims) . . . . . . . . .A-9
5.3 Class 3 (Administrative Convenience Claims). . . . . . .A-9
5.4 Class 4 (General Unsecured Claims) . . . . . . . . . . A-10
5.5 Class 5 (Subordinated Securities Claims) . . . . . . . A-10
5.6 Class 6 (Old Preferred Stock Interests). . . . . . . . A-10
5.7 Class 7 (Old Common Stock Interests) . . . . . . . . . A-10

ARTICLE VI ALLOWANCE OF CERTAIN CLAIMS AND INTERESTS. . . . . . . . . . . A-10
6.1 Administrative Claims. . . . . . . . . . . . . . . . . A-10
6.2 Old Preferred Stock Interests. . . . . . . . . . . . . A-10

ARTICLE VII ACCEPTANCE OR REJECTION OF THE PLAN;
EFFECT OF REJECTION BY ONE OR MORE IMPAIRED
CLASSES OF CLAIMS OR INTERESTS . . . . . . . . . . . . . . . . A-11
7.1 Impaired Classes of Claims and Interests Entitled
to Vote. . . . . . . . . . . . . . . . . . . . . . . . A-11
7.2 Acceptance by an Impaired Class. . . . . . . . . . . . A-11
7.3 Presumed Acceptances by Unimpaired Classes . . . . . . A-11
7.4 Classes Deemed to Reject Plan. . . . . . . . . . . . . A-11
7.5 Confirmation Pursuant to Section 1129(b) of the
Bankruptcy Code. . . . . . . . . . . . . . . . . . . . A-11

ARTICLE VIII UNEXPIRED LEASES AND EXECUTORY CONTRACTS. . . . . . . . . . A-11
8.1 Assumed Contracts and Leases . . . . . . . . . . . . . A-11
8.2 Rejected Contracts and Leases. . . . . . . . . . . . . A-12
8.3 Payments Related to Assumption of Executory
Contracts and Unexpired Leases . . . . . . . . . . . . A-12
8.4 Rejection Damages Bar Date . . . . . . . . . . . . . . A-12

ARTICLE IX MEANS FOR IMPLEMENTATION OF THE PLAN . . . . . . . . . . . . . A-12
9.1 Revesting of Assets. . . . . . . . . . . . . . . . . . A-12
9.2 Continued Corporate Existence. . . . . . . . . . . . . A-13
9.3 Directors and Officers . . . . . . . . . . . . . . . . A-13

A-iii
<PAGE>

PAGE

9.4 Certificate of Incorporation and Bylaws. . . . . . . . A-13
9.5 Termination of DIP Facility. . . . . . . . . . . . . . A-13
9.6 Postpetition Financing . . . . . . . . . . . . . . . . A-13
9.7 Issuance of New Common Stock and Series B Warrants . . A-14
9.8 Preservation of Causes of Action . . . . . . . . . . . A-14
9.9 Substantial Contribution Compensation and Expenses
Bar Date . . . . . . . . . . . . . . . . . . . . . . . A-14
9.10 Cancellation of Existing Securities and Agreements . . A-14
9.11 Exclusivity Period . . . . . . . . . . . . . . . . . . A-15
9.12 Effectuating Documents; Further Transactions . . . . . A-15

ARTICLE X PROVISIONS GOVERNING DISTRIBUTIONS . . . . . . . . . . . . . . A-15
10.1 Time of Distributions. . . . . . . . . . . . . . . . . A-15
10.2 Interest on Claims . . . . . . . . . . . . . . . . . . A-15
10.3 Disbursing Agent . . . . . . . . . . . . . . . . . . . A-15
10.4 Surrender of Securities or Instruments . . . . . . . . A-15
10.5 Instructions to Disbursing Agent . . . . . . . . . . . A-16
10.6 Services of Indenture Trustees, Agents and
Servicers. . . . . . . . . . . . . . . . . . . . . . . A-16
10.7 Record Date for Distributions to Holders of
Prepetition Notes. . . . . . . . . . . . . . . . . . . A-16
10.8 Delivery of Distributions. . . . . . . . . . . . . . . A-16
10.9 Procedures for Treating and Resolving Disputed
and Contingent Claims. . . . . . . . . . . . . . . . . A-16
10.10 Fractional Securities; De Minimis Distributions. . . . A-17

ARTICLE XI DISCHARGE, RELEASES AND SETTLEMENTS OF CLAIMS. . . . . . . . . A-17
11.1 Discharge of County Seat and Releases. . . . . . . . . A-17
11.2 Compromises and Settlements. . . . . . . . . . . . . . A-18
11.3 Setoffs. . . . . . . . . . . . . . . . . . . . . . . . A-18
11.4 Satisfaction of Subordination Rights . . . . . . . . . A-18
11.5 Exculpation and Limitation of Liability. . . . . . . . A-19
11.6 Indemnification Obligations. . . . . . . . . . . . . . A-19
11.7 Injunction.. . . . . . . . . . . . . . . . . . . . . . A-19

ARTICLE XII CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . A-20
12.1 Conditions to Confirmation . . . . . . . . . . . . . . A-20
12.2 Conditions to Consummation . . . . . . . . . . . . . . A-20
12.3 Waiver of Conditions to Confirmation or Consummation . A-21

ARTICLE XIII RETENTION OF JURISDICTION . . . . . . . . . . . . . . . . . A-21

ARTICLE XIV MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . A-22
14.1 Binding Effect . . . . . . . . . . . . . . . . . . . . A-22
14.2 Modification and Amendments. . . . . . . . . . . . . . A-22
14.3 Withholding and Reporting Requirements . . . . . . . . A-23
14.4 Committees . . . . . . . . . . . . . . . . . . . . . . A-23
14.5 Revocation, Withdrawal or Non-Consummation . . . . . . A-23
14.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . A-23
14.7 Term of Injunctions or Stays . . . . . . . . . . . . . A-23
14.8 Governing Law. . . . . . . . . . . . . . . . . . . . . A-24

A-iv

<PAGE>

Exhibit A -- Schedule of Old Preferred Stock Interests
Exhibit B -- Schedule of Rejected Leases and Executory Contracts
Exhibit C -- Restated Certificate of Incorporation
Exhibit D -- Restated Bylaws
Exhibit E -- Series B Warrant Agreement

A-v
<PAGE>

INTRODUCTION

County Seat Stores, Inc. ("County Seat" or the "Debtor"), as a debtor and
debtor-in-possession in one of the above-captioned jointly administered Chapter
11 reorganization cases, hereby proposes the following reorganization plan for
the resolution of County Seat's outstanding creditor Claims and equity
Interests. Reference is made to the Disclosure Statement (as that term is
defined herein) for results of operations, projections for future operations,
risk factors, a summary and analysis of the Plan and certain related matters.
County Seat is a proponent of this Plan within the meaning of section 1129 of
the Bankruptcy Code (as such term is defined in this Plan).

All holders of Claims and holders of Interests are encouraged to read this
Plan and the Disclosure Statement in their entirety before voting to accept or
reject this Plan.

Subject to the restrictions on modifications set forth in section 1127 of
the Bankruptcy Code and Bankruptcy Rule 3019 and those restrictions on
modifications set forth in Article XIV of this Plan, County Seat expressly
reserves its right to alter, amend or modify this Plan, one or more times,
before its substantial consummation.

ARTICLE I

DEFINITIONS, RULES OF INTERPRETATION,
AND COMPUTATION OF TIME

A. SCOPE OF DEFINITIONS

For purposes of this Plan, except as expressly provided or unless the
context otherwise requires, all capitalized terms not otherwise defined shall
have the meanings ascribed to them in Article I of this Plan. Any term used in
this Plan that is not defined herein, but is defined in the Bankruptcy Code or
the Bankruptcy Rules, shall have the meaning ascribed to that term in the
Bankruptcy Code or the Bankruptcy Rules. Whenever the context requires, such
terms shall include the plural as well as the singular number, the masculine
gender shall include the feminine, and the feminine gender shall include the
masculine.

B. DEFINITIONS

1.1 "Administrative Claim" means a Claim for payment of an administrative
expense of a kind specified in section 503(b) of the Bankruptcy Code and
entitled to priority pursuant to section 507(a)(1) of the Bankruptcy Code,
including, but not limited to, DIP Facility Claims, the actual, necessary costs
and expenses, incurred after the Petition Date, of preserving the Estate and
operating the business of County Seat, including wages, salaries or commissions
for services rendered after the commencement of the Chapter 11 Case,
Professional Fees, and all fees and charges assessed against the Estate under
chapter 123 of title 28, United States Code, and all Allowed Claims that are
entitled to be treated as Administrative Claims pursuant to a Final Order of the
Bankruptcy Court under section 546(c)(2)(A) of the Bankruptcy Code.

1.2 "Administrative Convenience Claim" means a Claim against County Seat
that otherwise would be classified as a Class 4 General Unsecured Claim (other
than Claims of holders of Prepetition Notes) that is (a) for $500 or less, or
(b) for more than $500 but less than $1,000 if the holder of such Claim has
elected, on the Ballot provided for voting on the Plan within the time fixed by
the Bankruptcy Court for completing and returning such Ballot, to accept $500 in
Cash in full satisfaction, discharge and release of such Claim.

1.3 "Allowed Claim" means a Claim or any portion thereof (a) that has been
allowed by a Final Order, (b) as to which, on or by the Consummation Date, (i)
no proof of claim has been filed with the Bankruptcy Court and (ii) the
liquidated and noncontingent amount of which is Scheduled, other than a Claim
that is Scheduled at zero or as disputed, or (c) for which a proof of claim in a
liquidated amount has been timely filed with the Bankruptcy

A-1
<PAGE>

Court pursuant to the Bankruptcy Code, any Final Order of the Bankruptcy Court
or other applicable bankruptcy law, and as to which either (i) no objection to
its allowance has been filed within the periods of limitation fixed by the
Bankruptcy Code or by any order of the Bankruptcy Court or (ii) any objection to
its allowance has been settled or withdrawn, or has been denied by a Final
Order, or (d) that is expressly allowed in a liquidated amount in the Plan.

1.4 "Allowed Class . . . Claim" means an Allowed Claim in the particular
Class described.

1.5 "Allowed Class . . . Interest" means an Interest in the particular
Class described (a) that has been allowed by a Final Order, (b) for which (i) no
objection to its allowance has been filed within the periods of limitation fixed
by the Bankruptcy Code or by any Final Order of the Bankruptcy Court or (ii) any
objection to its allowance has been settled or withdrawn, or (c) that is
expressly allowed in the Plan.

1.6 "Ballot" means each of the ballot forms that are distributed with the
Disclosure Statement to holders of Claims and Interests in Classes that are
impaired under the Plan and entitled to vote under Article VII hereof in
connection with the solicitation of acceptances of the Plan.

1.7 "Bank Agent" means the agent for the group of financial institutions
who are party to the New Credit Facility.

1.8 "Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended
and codified in title 11 of the United States Code, 11 U.S.C. Sections
101-1330.

1.9 "Bankruptcy Court" means the Bankruptcy Court of the United States
District Court for the District of Delaware or such other court as may have
jurisdiction over the Chapter 11 Case.

1.10 "Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure and
the Official Bankruptcy Forms, as amended, the Federal Rules of Civil Procedure,
as amended, as applicable to the Chapter 11 Case or proceedings therein, and the
Local Rules of the Bankruptcy Court, as applicable to the Chapter 11 Case or
proceedings therein, as the case may be.

1.11 "Bar Date" means the deadline for filing proofs of claims established
by the Bankruptcy Court as 5:00 p.m. Eastern Standard Time on April 4, 1997.

1.12 "Bar Date Order" means that order entered by the Bankruptcy Court on
February 3, 1997 which established a deadline for filing proofs of claim.

1.13 "Business Day" means any day, excluding Saturdays, Sundays and legal
holidays, on which commercial banks are open for business in New York City.

1.14 "Cash" means legal tender of the United States.

1.15 "Causes of Action" means any and all actions, causes of action, suits,
accounts, controversies, agreements, promises, rights to legal remedies, rights
to equitable remedies, rights to payment and claims, whether known, unknown,
reduced to judgment, not reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, secured or unsecured and
whether asserted or assertable directly or derivatively, in law, equity or
otherwise.

1.16 "Chapter 11 Case" means the Chapter 11 Case of County Seat pending in
the Bankruptcy Court and being jointly administered with the cases filed by CSI
and Trade Names under case number 96-1637 (HSB).

A-2
<PAGE>

1.17 "Claim" means a claim against County Seat, whether or not asserted, as
defined in section 101(5) of the Bankruptcy Code.

1.18 "Claims Objection Deadline" means that day which is 180 days after the
Consummation Date, unless extended by the Bankruptcy Court for cause shown by
County Seat or the Creditors' Committee.

1.19 "Class" means a category of holders of Claims or holders of Interests
described in Article II of the Plan.

1.20 "Confirmation Date" means the date of entry of the Confirmation Order.

1.21 "Confirmation Hearing" means the hearing on confirmation of the Plan
under section 1128 of the Bankruptcy Code.

1.22 "Confirmation Hearing Notice" means the notice of, among other things,
the time for submitting Ballots to accept or reject the Plan, the date, time and
place of the hearing to consider the confirmation of the Plan and related
matters, and the time for filing objections to the confirmation of the Plan.

1.23 "Confirmation Order" means the order, entered by the Bankruptcy Court,
confirming the Plan.

1.24 "Consummation Date" means the Business Day on which all conditions to
the consummation of the Plan set forth in Section 12.2 hereof have been
satisfied or waived as provided in Section 12.3 hereof and is the effective date
of the Plan.

1.25 "County Seat" means County Seat Stores, Inc., debtor-in-possession in
the above-captioned case number 96-01638 (HSB) pending in the Bankruptcy Court.
County Seat also means Reorganized County Seat from and after the Consummation
Date.

1.26 "Creditors' Committee" means the Official Committee of Unsecured
Creditors appointed pursuant to section 1102(a) of the Bankruptcy Code in the
Chapter 11 Case.

1.27 "CSI" means County Seat, Inc., debtor and debtor-in-possession in case
number 96-01637 (HSB) pending in the Bankruptcy Court.

1.28 "Cure" means the distribution within a reasonable period of time
following the Consummation Date of Cash, or such other property as may be agreed
upon by the parties or ordered by the Bankruptcy Court, with respect to the
assumption of an executory contract or unexpired lease, pursuant to section
365(b) of the Bankruptcy Code, in an amount equal to all unpaid monetary
obligations, without interest, or such other amount as may be agreed upon by the
parties, under such executory contract or unexpired lease, to the extent such
obligations are enforceable under the Bankruptcy Code and applicable bankruptcy
law.

1.29 "DIP Facility" means the debtor-in-possession financing facility
authorized by the Bankruptcy Court pursuant to the Final Financing Order.

1.30 "DIP Facility Claim" means all Claims of the DIP Lenders arising under
the DIP Facility dated as of October 17, 1996, as amended.

1.31 "DIP Facility Order" means the interim Order entered by the Bankruptcy
Court on October 17, 1996, with final approval becoming effective on November 8,
1996, authorizing and approving the DIP Facility and the agreements related
thereto.

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1.32 "DIP Lenders" means those lenders under the DIP Facility including:
Bankers Trust Company; Banque Paribas; The First National Bank of Chicago;
Citibank, N.A.; Credit Lyonnais Cayman Island Branch; BankBoston, N.A.; First
Bank National Association; Bank of America; Banque Francaise du Commerce
Exterieur; and Goldman Sachs Credit Partners, L.P.

1.33 "Disallowed Claim" means a Claim, or any portion thereof, that (a) has
been disallowed by a Final Order, (b) is Scheduled at zero or as contingent,
disputed or unliquidated and as to which a proof of claim bar date has been
established but no proof of claim has been filed or deemed timely filed with the
Bankruptcy Court pursuant to either the Bankruptcy Code or any Final Order of
the Bankruptcy Court or otherwise deemed timely filed under applicable law, or
(c) is the subject of an objection filed by County Seat with the Court and which
objection has not been withdrawn or overruled by a Final Order of the Bankruptcy
Court.

1.34 "Disbursing Agent" means the party designated by County Seat, in its
sole discretion, to serve as a disbursing agent under Article X of the Plan.

1.35 "Disclosure Statement" means the written disclosure statement that
relates to the Plan, as approved by the Bankruptcy Court pursuant to section
1125 of the Bankruptcy Code and Bankruptcy Rule 3017, as such disclosure
statement may be amended, modified or supplemented from time to time.

1.36 "Disputed Claim" means a Claim, or any portion thereof, that is
neither an Allowed Claim nor a Disallowed Claim, and includes, without
limitation, Claims that (a) (i) have not been Scheduled by County Seat or (ii)
have been Scheduled at zero or as contingent, unliquidated or disputed, (b) are
not the subject of an objection in the Bankruptcy Court by County Seat, and (c)
the allowance or disallowance of which is not yet the subject of a Final Order.

1.37 "Distribution Date" means the date, occurring as soon as practicable
after the Consummation Date, upon which distributions are made to holders of
Allowed Class 4 Claims and Allowed Class 6 Interests.

1.38 "Distribution Reserve" means the Cash and securities to be reserved
pending allowance of Disputed Claims in accordance with Section 10.9 of the
Plan.

1.39 "Estate" means the bankruptcy estate of County Seat pursuant to
section 541 of the Bankruptcy Code.

1.40 "Existing Securities" means, collectively, the Prepetition Notes, the
Old Preferred Stock and the Old Common Stock.

1.41 "Face Amount" means, (a) when used in reference to a Disputed or
Disallowed Claim, the full stated amount claimed by the holder of such Claim in
any proof of Claim timely filed with the Bankruptcy Court or otherwise deemed
timely filed by any Final Order of the Bankruptcy Court or other applicable
bankruptcy law, and (b) when used in reference to an Allowed Claim, the allowed
amount of such Claim.

1.42 "Final Order" means an order or judgment, the operation or effect of
which has not been stayed, reversed or amended and as to which order or judgment
(or any revision, modification or amendment thereof) the time to appeal or seek
review or rehearing has expired and as to which no appeal or petition for review
or rehearing was filed or, if filed, remains pending.

1.43 "Fiscal Year" means, with respect to County Seat, the fiscal year
ending on the Saturday closest to January 31 of each year, or such other fiscal
year as County Seat may designate.

1.44 "General Unsecured Claim" means a Claim that is not a Secured Claim,
Administrative Claim, Priority Tax Claim, Other Priority Claim or Subordinated
Securities Claim.

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1.45 "Impaired" refers to any Claim or Interest that is impaired within the
meaning of section 1124 of the Bankruptcy Code.

1.46 "Indemnification Rights" means any obligations or rights of County
Seat to indemnify or contribute to the losses, liabilities or expenses of an
Indemnitee pursuant to County Seat's certificate of incorporation, bylaws or
policy of providing employee indemnification, or applicable state law or
specific agreement in respect of any claims, demands, suits, causes of action or
proceedings against an Indemnitee based upon any act or omission related to an
Indemnitee's service with, for or on behalf of County Seat.

1.47 "Indemnitees" means all present and former directors, officers,
employees, agents or representatives of County Seat who are entitled to assert
Indemnification Rights.

1.48 "Indenture" means the indenture for the New Senior Notes to be issued
pursuant to the Plan.

1.49 "Interest" means the rights of any current or former holder or owner
of any shares of Old Common Stock, Old Preferred Stock or any other equity
securities of County Seat authorized and issued prior to the Confirmation Date.

1.50 "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.

1.51 "Jefferies" means Jefferies & Company, Inc.

1.52 "Miscellaneous Secured Claim" means any Secured Claim, other than any
Claims arising under the DIP Facility, including the Secured Claims of Raymond
Leasing Co. and Pitney Bowes Credit Corp.

1.53 "New Common Stock" means the shares of common stock of Reorganized
County Seat authorized under Article IX of the Plan and under the certificate of
incorporation of Reorganized County Seat.

1.54 "New Credit Facility" means the revolving credit facility to be issued
as a means of implementing the Plan and described in Section 9.6 of the Plan,
the documentation of which shall be in form and substance reasonably
satisfactory to the Creditors' Committee.

1.55 "New Forman Employment Agreement" means that employment agreement
between County Seat and Sam Forman with respect to, among other things, Mr.
Forman's services to be rendered to Reorganized County Seat as its President and
Chief Executive Officer after the Consummation Date and as to which the Debtors
filed a motion seeking Bankruptcy Court approval on August 13, 1997.

1.56 "New Senior Note and Warrant Purchase Agreement" means that agreement,
dated as of the Consummation Date, in form and substance satisfactory to County
Seat and reasonably satisfactory to the Creditors' Committee, to be entered into
by and between Jefferies and Reorganized County Seat with respect to the New
Senior Notes and Series A Warrants.

1.57 "New Senior Notes" means the notes to be issued on or before the
Consummation Date by Reorganized County Seat pursuant to the New Senior Note and
Warrant Purchase Agreement.

1.58 "Old Common Stock" means shares of County Seat's common stock and all
options, warrants or rights, contractual or otherwise, if any, to acquire any
such common stock.

1.59 "Old Preferred Stock" means, collectively, all classes of preferred
stock of County Seat, including (a) the 506,974 shares of certain Series A
Senior Exchangeable Preferred Stock issued by County Seat in June 1991, par
value $.01, for $25.00 per share, and all quarterly pay-in-kind dividend shares
declared and issued with respect thereto, and (b) the 293,026 shares of certain
Series B Senior Exchangeable Preferred Stock issued by County Seat

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in June 1991, par value $.01, for $25.00 per share, and all quarterly
pay-in-kind dividend shares cumulated, but undeclared, on the books of County
Seat with respect thereto; and all options, warrants or rights, contractual or
otherwise, related to either of such classes of preferred stock.

1.60 "Other Priority Claim" means a Claim entitled to priority pursuant to
section 507(a) of the Bankruptcy Code other than a Priority Tax Claim or an
Administrative Claim.

1.61 "Person" means an individual, corporation, partnership, joint venture,
association, joint stock company, limited liability company, limited liability
partnership, trust, estate, unincorporated organization or other entity.

1.62 "Petition Date" means October 17, 1996, the date on which County Seat
filed its petition for reorganization commencing the Chapter 11 Case.

1.63 "Plan" means this plan of reorganization proposed by County Seat for
the resolution of outstanding Claims and Interests in the Chapter 11 Case, as
such plan may be amended from time to time in accordance with the Bankruptcy
Code.

1.64 "Prepetition Notes" means, collectively, (a) the 12.00% Senior
Subordinated Notes maturing October 1, 2001, issued by County Seat on
October 14, 1993, and (b) the 12.00% Senior Subordinated Notes maturing
October 1, 2002, issued by County Seat on July 6, 1995.

1.65 "Priority Tax Claim" means a Claim entitled to priority pursuant to
section 507(a)(8) of the Bankruptcy Code.

1.66 "Pro Rata" means, at any time, the proportion that the Face Amount of
a Claim in a particular Class bears to the aggregate Face Amount of all Claims
(including Disputed Claims, but excluding Disallowed Claims) in such Class,
unless the Plan provides otherwise.

1.67 "Professional Fees" means a Claim of a professional retained in the
Chapter 11 Case pursuant to sections 327 and 1103 of the Bankruptcy Code or
otherwise, for compensation or reimbursement of costs and expenses relating to
services incurred after the Petition Date and prior to and including the
Confirmation Date.

1.68 "Projections" means those financial projections covering County Seat's
operations through Fiscal Year 2001 set forth by County Seat in Appendix B
attached to the Disclosure Statement.

1.69 "Record Date" means the record date for purposes of making
distributions under the Plan on account of Allowed Claims, which date shall be
the fifth (5th) Business Day following the Confirmation Date.

1.70 "Registration Rights Agreements" means the agreements to be entered
into by Reorganized County Seat pursuant to Section 9.7 of the Plan in form and
substance reasonably satisfactory to the Creditors' Committee.

1.71 "Reinstated" or "Reinstatement" means (a) leaving unaltered the legal,
equitable and contractual rights to which a Claim entitles the holder of such
Claim so as to leave such Claim unimpaired in accordance with section 1124 of
the Bankruptcy Code, or (b) notwithstanding any contractual provision or
applicable law that entitles the holder of such Claim to demand or receive
accelerated payment of such Claim after the occurrence of a default (i) curing
any such default that occurred before or after the Petition Date, other than a
default of a kind specified in section 365(b)(2) of the Bankruptcy Code; (ii)
reinstating the maturity of such Claim as such maturity existed before such
default; (iii) compensating the holder of such Claim for any damages incurred as
a result of any reasonable reliance by such holder on such contractual provision
or such applicable law; and (iv) not otherwise altering the legal, equitable or
contractual rights to which such Claim entitles the holder of such Claim;
PROVIDED, HOWEVER, that any contractual right that does not pertain to the
payment when due of principal and interest on the

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obligation on which such Claim is based, including, but not limited to,
financial covenant ratios, negative pledge covenants, covenants or restrictions
on merger or consolidation, and affirmative covenants regarding corporate
existence prohibiting certain transactions or actions contemplated by the Plan,
or conditioning such transactions or actions on certain factors, shall not be
required to be reinstated in order to accomplish Reinstatement.

1.72 "Reorganized County Seat" means County Seat from and after the
Consummation Date.

1.73 "Reorganized County Seat Securities" means, collectively, the New
Common Stock, the Series A Warrants, the Series B Warrants and the Series C
Warrants.

1.74 "Scheduled" means, with respect to any Claim or Interest, the status
and amount, if any, of such Claim or Interest as set forth in the Schedules.

1.75 "Schedules" means the schedules of assets and liabilities and the
statements of financial affairs filed in the Bankruptcy Court by County Seat, as
such schedules or statements have been or may be further amended or supplemented
from time to time in accordance with Bankruptcy Rule 1009 or orders of the
Bankruptcy Court.

1.76 "Secured Claim" means a Claim secured by a security interest in or
lien upon property of the Estate to the extent of the value, as of the
Consummation Date or such later date as is established by the Bankruptcy Court,
of such interest or lien as determined by a Final Order of the Bankruptcy Court
pursuant to section 506 of the Bankruptcy Code or as otherwise agreed upon in
writing by County Seat and the holder of such Claim.

1.77 "Series A Warrants" means those warrants to be issued along with the
New Senior Notes on or before the Consummation Date pursuant to the New Senior
Note and Warrant Purchase Agreement.

1.78 "Series B Warrants" means the Series B Warrants to be issued as
contemplated by the Plan to holders of Class 6 Old Preferred Stock Interests
pursuant to a warrant agreement in form and substance reasonably satisfactory to
the Creditors' Committee and substantially in the form attached hereto as
Exhibit E.

1.79 "Series C Warrants" means the Series C Warrants to be issued to Sam
Forman as contemplated by the Plan and the New Forman Employment Agreement.

1.80 "Subordinated Securities Claim" means a Claim subject to subordination
under section 510(b) of the Bankruptcy Code that arises from rescission of, or
for damages, reimbursement or contribution with respect to, a purchase or sale
of Old Preferred Stock, Old Common Stock or other equity securities of County
Seat or its affiliates prior to the Petition Date.

1.81 "Unimpaired" refers to any Claim or Interest which is not Impaired.

1.82 "Voting Deadline" means September 23, 1997 at 4:00 p.m. (EDT).

C. RULES OF INTERPRETATION

For purposes of the Plan (a) any reference in the Plan to a contract,
instrument, release, indenture or other agreement or documents being in a
particular form or on particular terms and conditions means that such document
shall be substantially in such form or substantially on such terms and
conditions, (b) any reference in the Plan to an existing document or exhibit
filed or to be filed means such document or exhibit as it may have been or may
be amended, modified or supplemented, (c) unless otherwise specified, all
references in the Plan to Sections, Articles, Schedules and Exhibits are
references to Sections, Articles, Schedules and Exhibits of or to the Plan, (d)
the words "herein" and "hereto" refer to the Plan in its entirety rather than to
a particular portion of the Plan, (e) captions and headings to Articles and
Sections are inserted for convenience of reference only and are not intended to
be a part

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of or to affect the interpretation of the Plan, and (f) the rules of
construction set forth in section 102 of the Bankruptcy Code and in the
Bankruptcy Rules shall apply.

D. COMPUTATION OF TIME

In computing any period of time prescribed or allowed by the Plan, unless
otherwise expressly provided, the provisions of Bankruptcy Rule 9006(a) shall
apply.

ARTICLE II

ADMINISTRATIVE EXPENSES AND PRIORITY TAX CLAIMS

2.1 ADMINISTRATIVE CLAIMS. Subject to the provisions of Section 6.1 of
the Plan, on the Consummation Date, or as soon thereafter as practicable, a
holder of an Allowed Administrative Claim shall receive, in full satisfaction,
settlement, release and discharge of and in exchange for such Allowed
Administrative Claim, (a) Cash equal to the unpaid portion of such Allowed
Administrative Claim, or (b) such other treatment as to which County Seat and
such holder shall have agreed upon in writing; PROVIDED, HOWEVER, that Allowed
Administrative Claims with respect to liabilities incurred by County Seat in the
ordinary course of business during the Chapter 11 Cases shall be paid in the
ordinary course of business in accordance with the terms and conditions of any
agreements relating thereto.

2.2 PRIORITY TAX CLAIMS. With respect to each Allowed Priority Tax Claim,
at the sole option of Reorganized County Seat, the holder of an Allowed Priority
Tax Claim shall be entitled to receive on account of such Allowed Priority Tax
Claim, in full satisfaction, settlement, release and discharge of and in
exchange for such Allowed Priority Tax Claim, (a) equal Cash payments made on
the last Business Day of every three-month period following the Consummation
Date, over a period not exceeding six years after the assessment of the tax on
which such Claim is based, totalling the principal amount of such Claim plus
simple interest on any outstanding balance from the Consummation Date calculated
at the interest rate available on ninety (90) day United States Treasuries on
the Consummation Date, (b) such other treatment agreed to by the holder of such
Allowed Priority Tax Claim and County Seat or Reorganized County Seat, provided
such treatment is on more favorable terms to County Seat or Reorganized County
Seat, as the case may be, than the treatment set forth in clause (a) hereof, or
(c) payment in full; PROVIDED THAT, with respect to clauses (b) and (c) hereof,
such treatment is approved by the Bankruptcy Court.

ARTICLE III

CLASSIFICATION OF CLAIMS AND INTERESTS

Pursuant to section 1122 of the Bankruptcy Code, set forth below is a
designation of classes of Claims against and Interests in County Seat. A Claim
or Interest is also placed in a particular Class for the purposes of voting on a
plan of reorganization and of receiving distributions pursuant to the Plan only
to the extent that such Claim or Interest is an Allowed Claim or Interest in
that Class and such Claim or Interest has not been paid, released or otherwise
settled prior to the Consummation Date. In accordance with section 1123(a)(1)
of the Bankruptcy Code, Administrative Claims and Priority Tax Claims of the
kinds specified in sections 507(a)(1) and 507(a)(8) of the Bankruptcy Code have
not been classified and their treatment is set forth in Article II above.

3.1 CLASS 1. Class 1 consists of all Other Priority Claims.

3.2 CLASS 2. Class 2 consists of all Miscellaneous Secured Claims.

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3.3 CLASS 3. Class 3 consists of all Administrative Convenience Claims.

3.4 CLASS 4. Class 4 consists of all General Unsecured Claims.

3.5 CLASS 5. Class 5 consists of all Subordinated Securities Claims.

3.6 CLASS 6. Class 6 consists of all Old Preferred Stock Interests.

3.7 CLASS 7. Class 7 consists of all Old Common Stock Interests.

ARTICLE IV

IDENTIFICATION OF CLASSES OF CLAIMS AND
INTERESTS IMPAIRED AND NOT IMPAIRED BY THE PLAN

4.1 UNIMPAIRED CLASSES OF CLAIMS AND INTERESTS. Class 1 (Other Priority
Claims), Class 2 (Miscellaneous Secured Claims) and Class 3 (Administrative
Convenience Claims) are not Impaired by the Plan.

4.2 IMPAIRED CLASSES OF CLAIMS AND INTERESTS. Class 4 (General Unsecured
Claims), Class 5 (Subordinated Securities Claims), Class 6 (Old Preferred Stock
Interests) and Class 7 (Old Common Stock Interests) are Impaired Classes under
the Plan.

ARTICLE V

PROVISIONS FOR TREATMENT OF
CLAIMS AND INTERESTS

5.1 CLASS 1 (OTHER PRIORITY CLAIMS). On the Consummation Date, or as soon
as practicable thereafter, each holder of an Allowed Class 1 Other Priority
Claim shall receive, in full satisfaction, settlement, release, and discharge of
and in exchange for such Allowed Class 1 Other Priority Claim, (a) Cash equal to
the amount of such Allowed Class 1 Other Priority Claim, or (b) such other
treatment as to which County Seat and such holder shall have agreed upon in
writing.

5.2 CLASS 2 (MISCELLANEOUS SECURED CLAIMS). The legal, equitable and
contractual rights of holders of Allowed Miscellaneous Secured Claims shall be
Reinstated. County Seat's failure to object to such Claims in the Chapter 11
Case shall be without prejudice to Reorganized County Seat's right to contest or
otherwise defend against such Claim in the appropriate forum when and if such
Claim is sought to be enforced by the holder thereof. Notwithstanding section
1141(c) or any other provision of the Bankruptcy Code, all prepetition liens on
property of County Seat held by or on behalf of the holders of Claims in this
Class with respect to such Claims shall survive the Consummation Date and
continue in accordance with the contractual terms of the underlying agreements
with such holders until, as to each such holder, the Allowed Claims of such
holder in this Class are paid in full.

5.3 CLASS 3 (ADMINISTRATIVE CONVENIENCE CLAIMS). On the Consummation
Date, or as soon as practicable thereafter, each holder of an Allowed Class 3
Administrative Convenience Claim shall receive, in full satisfaction,
settlement, release and discharge of and in exchange for such Class 3
Administrative Convenience Claim, Cash equal to (a) the amount of such Allowed
Claim if such amount is less than or equal to $500, or (b) $500, if the amount
of such Allowed Claim is greater than $500 and less than $1,000.

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5.4 CLASS 4 (GENERAL UNSECURED CLAIMS). On the Distribution Date, each
holder of an Allowed Class 4 General Unsecured Claim shall receive, in full
satisfaction, settlement, release and discharge of and in exchange for such
Class 4 General Unsecured Claim, such holder's Pro Rata share of the New Common
Stock in accordance with Article X of the Plan; PROVIDED, HOWEVER, that CSS
Trade Names, Inc., will not receive any distribution with respect to its
intercompany Claim against County Seat and any such Claims are hereby waived,
released and discharged.

5.5 CLASS 5 (SUBORDINATED SECURITIES CLAIMS). The holders, if any, of
Allowed Class 5 Subordinated Securities Claims will not receive any distribution
under the Plan on account of such Claims.

5.6 CLASS 6 (OLD PREFERRED STOCK INTERESTS). On the Consummation Date,
each holder of an Allowed Class 6 Old Preferred Stock Interest shall receive, in
full satisfaction, settlement, release and discharge of and in exchange for such
Allowed Class 6 Old Preferred Stock Interest, such holder's pro rata share of
the Series B Warrants based on the distribution provisions of the agreements
governing the Old Preferred Stock Interests, all in accordance with Article X of
the Plan.

5.7 CLASS 7 (OLD COMMON STOCK INTERESTS). The holders of Allowed Class 7
Old Common Stock Interests will not receive any distribution of property under
the Plan on account of their Interests and, on the Consummation Date, the Old
Common Stock Interests shall be cancelled.

ARTICLE VI

ALLOWANCE OF CERTAIN CLAIMS AND INTERESTS

6.1 ADMINISTRATIVE CLAIMS.

(a) DIP FACILITY CLAIM. On the Consummation Date, all obligations of
County Seat under the DIP Facility shall be paid or otherwise satisfied in full
in accordance with the terms of the DIP Facility.

(b) PROFESSIONAL FEES. All final requests for payment of
Professional Fees must be filed no later than sixty (60) days after the
Consummation Date. After notice and a hearing in accordance with the procedures
established by the Bankruptcy Code and prior orders of the Bankruptcy Court, the
allowed amounts of such Professional Fees shall be determined by the Bankruptcy
Court.

(c) OTHER ADMINISTRATIVE FEES. All other requests for payment of an
Administrative Claim must be filed with the Bankruptcy Court and served on
counsel for County Seat and the Creditors' Committee no later than thirty (30)
days after the Consummation Date. Unless County Seat or the Creditors'
Committee objects to an Administrative Claim within ten (10) Business Days after
receipt, such Administrative Claim shall be deemed allowed in the amount
requested. In the event that County Seat or the Creditors' Committee objects to
an Administrative Claim, the Bankruptcy Court shall determine the allowed amount
of such Administrative Claim. Notwithstanding the foregoing, no request for
payment of an Administrative Claim need be filed with respect to an
Administrative Claim which is paid or payable by County Seat or Reorganized
County Seat in the ordinary course of business.

6.2 OLD PREFERRED STOCK INTERESTS. The Interests of each holder of an Old
Preferred Stock Interest shall be allowed based on the amount of Old Preferred
Stock shares listed on Exhibit A attached hereto. Distributions of Series B
Warrants to holders of Allowed Class 6 Interests will be made pro rata based
upon the number of shares of Old Preferred Stock held by a particular holder as
listed on Exhibit A attached hereto in relation to the aggregate number of
shares so listed.

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ARTICLE VII

ACCEPTANCE OR REJECTION OF THE PLAN;
EFFECT OF REJECTION BY ONE OR MORE IMPAIRED
CLASSES OF CLAIMS OR INTERESTS

7.1 IMPAIRED CLASSES OF CLAIMS AND INTERESTS ENTITLED TO VOTE. Subject to
Section 7.4 of the Plan, the holders of Claims or Interests in each Impaired
Class of Claims or Interests are entitled to vote as a class to accept or reject
the Plan.

7.2 ACCEPTANCE BY AN IMPAIRED CLASS.

(a) IMPAIRED CLAIMS. In accordance with section 1126(c) of the
Bankruptcy Code and except as provided in section 1126(e) of the Bankruptcy
Code, an Impaired Class of Claims shall have accepted the Plan if the Plan is
accepted by the holders of at least two-thirds (2/3) in dollar amount and more
than one-half (1/2) in number of the Allowed Claims of such Class that have
timely and properly voted to accept or reject the Plan.

(b) IMPAIRED INTERESTS. In accordance with section 1126(d) of the
Bankruptcy Code and except as provided in section 1126(e) of the Bankruptcy
Code, an Impaired Class of Interests shall have accepted the Plan if the Plan is
accepted by the holders of at least two-thirds (2/3) in dollar amount of the
Allowed Interests of such Class that have timely and properly voted to accept or
reject the Plan.

7.3 PRESUMED ACCEPTANCES BY UNIMPAIRED CLASSES. Claims in Class 1 (Other
Priority Claims), Class 2 (Miscellaneous Secured Claims) and Class 3
(Administrative Convenience Claims) are Unimpaired by the Plan. Under section
1126(f) of the Bankruptcy Code, the holders of such Claims and Interests are
conclusively presumed to accept the Plan and the votes of such holders will not
be solicited.

7.4 CLASSES DEEMED TO REJECT PLAN. Claims in Class 5 (Subordinated
Securities Claims) and Interests in Class 7 (Old Common Stock Interests) are not
entitled to receive or retain any property under the Plan. Under section
1126(g) of the Bankruptcy Code, the holders of Claims and Interests in such
Classes are deemed to reject the Plan and the votes of such holders will not be
solicited.

7.5 CONFIRMATION PURSUANT TO SECTION 1129(B) OF THE BANKRUPTCY CODE. To
the extent that any Impaired Class entitled to vote rejects the Plan, County
Seat will request confirmation of the Plan, as it may be modified from time to
time, under section 1129(b) of the Bankruptcy Code.

ARTICLE VIII

UNEXPIRED LEASES AND EXECUTORY CONTRACTS

8.1 ASSUMED CONTRACTS AND LEASES. Each executory contract and unexpired
lease to which County Seat is a party shall be deemed automatically assumed as
of the Consummation Date, unless such executory contract or unexpired lease (a)
shall have been previously rejected by County Seat, (b) is the subject of a
motion to reject filed on or before the Confirmation Date, or (c) is listed on
the schedule of rejected contracts and leases annexed hereto as Exhibit B.
Without limiting the foregoing, the Confirmation Order shall provide for the
assumption of the New Forman Employment Agreement with such assumption effective
as of the Consummation Date. The Confirmation Order shall constitute an order
of the Bankruptcy Court approving such assumptions, pursuant to section
365(b)(1) of the Bankruptcy Code and, to the extent applicable, section
365(b)(3) of the Bankruptcy Code, as of the Consummation Date.

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Each executory contract and unexpired lease that is assumed and relates to
the use, ability to acquire or occupancy of real property shall include (a) all
modifications, amendments, supplements, restatements or other agreements made
directly or indirectly by any agreement, instrument or other document that in
any manner affect such executory contract or unexpired lease and (b) all
executory contracts or unexpired leases appurtenant to the premises, including
all easements, licenses, permits, rights, privileges, immunities, options,
rights of first refusal, powers, uses, reciprocal easement agreements and any
other interests in real estate or rights in rem related to such premises, unless
any of the foregoing agreements has been rejected pursuant to a Final Order of
the Bankruptcy Court or is listed on the schedule of rejected contracts and
leases annexed as Exhibit B hereto.

8.2 REJECTED CONTRACTS AND LEASES. All executory contracts and unexpired
leases specifically listed on the schedule of rejected executory contracts and
unexpired leases annexed hereto as Exhibit B shall be deemed automatically
rejected as of the Consummation Date. The Confirmation Order shall constitute
an order of the Bankruptcy Court approving such rejections, pursuant to section
365 of the Bankruptcy Code. County Seat reserves the right to file a motion on
or before the Confirmation Date to reject an executory contract or unexpired
lease that (a) is not listed on Exhibit B hereto, or (b) has not been previously
rejected by a Final Order of the Bankruptcy Court.

8.3 PAYMENTS RELATED TO ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED
LEASES. Any monetary amounts by which each executory contract and unexpired
lease to be assumed under the Plan may be in default shall be satisfied, under
section 365(b)(1) of the Bankruptcy Code, at the option of County Seat or the
assignee of County Seat assuming such contract or lease, by Cure. In the event
of a dispute regarding (a) the nature or the amount of any Cure, (b) the ability
of Reorganized County Seat or any assignee to provide "adequate assurance of
future performance" (within the meaning of section 365 of the Bankruptcy Code)
under the contract or lease to be assumed, or (c) any other matter pertaining to
assumption, Cure shall occur following the entry of a Final Order resolving the
dispute and approving the assumption and, as the case may be, assignment.
Notwithstanding the foregoing, to the extent that there are disputes with
respect to proper Cure amounts, County Seat shall place in a segregated account
any undisputed amount and shall attempt within 45 days after the Consummation
Date to resolve such disputes. If such disputes are not resolved within such
45-day period, County Seat shall serve notice of a hearing to resolve disputed
Cure amounts at which hearing the Bankruptcy Court shall adjudicate any and all
outstanding Cure amount disputes. County Seat shall pay such Cure amounts as
soon as practicable after determination by the Bankruptcy Court of the
appropriate Cure amount.

8.4 REJECTION DAMAGES BAR DATE. If the rejection by County Seat, pursuant
to the Plan or otherwise, of an executory contract or unexpired lease results in
a Claim, then such Claim shall be forever barred and shall not be enforceable
against County Seat or Reorganized County Seat or the properties of either of
them unless a proof of claim is filed with the clerk of the Bankruptcy Court and
served upon counsel to County Seat within thirty (30) days after service of the
earlier of (a) notice of the Confirmation Order, or (b) other notice that the
executory contract or unexpired lease has been rejected.

ARTICLE IX

MEANS FOR IMPLEMENTATION OF THE PLAN

9.1 REVESTING OF ASSETS. The property of the Estate shall revest in
County Seat on the Consummation Date. Thereafter, County Seat may operate its
business and may use, acquire and dispose of property free of any restrictions
of the Bankruptcy Code, the Bankruptcy Rules and the Bankruptcy Court. As of
the Consummation Date, all property of County Seat shall be free and clear of
all Claims and Interests, except as specifically provided in the Plan or the
Confirmation Order. Without limiting the foregoing, County Seat may, without
application to or approval by the Bankruptcy Court, pay fees that it incurs
after the Consummation Date for professional fees and expenses.

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9.2 CONTINUED CORPORATE EXISTENCE. County Seat shall continue to exist
after the Consummation Date as a separate corporate entity, in accordance with
the applicable law in the jurisdiction in which it is incorporated and pursuant
to the certificate of incorporation and bylaws in effect prior to the
Consummation Date, except to the extent such certificate of incorporation and
bylaws are amended by this Plan. Notwithstanding the forgoing, County Seat may
change its state of incorporation from Minnesota to Delaware prior to the
Confirmation Date by merging with a newly formed Delaware entity and filing with
the Bankruptcy Court appropriate modifications to the articles of incorporation
and bylaws of Reorganized County Seat attached hereto as Exhibits C and D,
respectively.

9.3 DIRECTORS AND OFFICERS. The existing senior officers of County Seat
shall serve initially in their current capacities after the Consummation Date.
On the Consummation Date, the term of the current members of the board of
directors of County Seat shall expire. The initial board of directors of
Reorganized County Seat will consist of seven (7) directors. As contemplated
under the terms of the New Forman Employment Agreement, Sam Forman shall serve
as a director and shall be entitled to select an additional director. The
remaining five (5) directors shall be selected by the Creditors' Committee by
giving written notice of the identities of such members to County Seat not less
than five (5) days prior to the Confirmation Date; PROVIDED, HOWEVER, that if
and to the extent that the Creditors' Committee fails to give such notice,
County Seat shall designate the members of the board of directors of Reorganized
County Seat by announcing their identities at the Confirmation Hearing.

9.4 CERTIFICATE OF INCORPORATION AND BYLAWS. The articles of
incorporation and bylaws of County Seat shall be amended as necessary to satisfy
the provisions of the Plan and the Bankruptcy Code. The articles of
incorporation of Reorganized County Seat shall be amended to, among other
things: (a) authorize 40,000,000 shares of New Common Stock, $0.01 par value per
share (of which up to 20,000,000 shares will be issued under the Plan), (b)
authorize 1,000,000 shares of preferred stock, and (c) provide, pursuant to
section 1123(a)(6) of the Bankruptcy Code, for (i) a provision prohibiting the
issuance of non-voting equity securities, and, if applicable, (ii) a provision
as to the classes of securities issued pursuant to the Plan or thereafter
possessing voting power, for an appropriate distribution of such power among
such classes, including, in the case of any class of equity securities having a
preference over another class of equity securities with respect to dividends,
adequate provisions for the election of directors representing such preferred
class in the event of default in the payment of such dividends. The restated
articles of incorporation of Reorganized County Seat are attached hereto as
Exhibit C and the bylaws of Reorganized County Seat are attached hereto as
Exhibit D. Any amendment to the articles of incorporation of County Seat may be
filed after the Confirmation Date and may become effective on or prior to the
Consummation Date or within ten (10) days thereafter.

9.5 TERMINATION OF DIP FACILITY. On the Consummation Date, all
obligations of County Seat under the DIP Facility shall be paid or otherwise
satisfied in full in accordance with the terms of the DIP Facility. Without
limiting the foregoing, with the consent of the DIP Lenders, any letters of
credit that have not expired shall be replaced with letters of credit as a part
of County Seat's post-confirmation financing. Upon payment or satisfaction in
full of all obligations under the DIP Facility in accordance with the terms
thereof, all liens and security interests granted to secure such obligations
shall be deemed cancelled and shall be of no further force and effect.

9.6 POSTPETITION FINANCING. County Seat expects to enter into the New
Credit Facility and to issue the New Senior Notes and Series A Warrants in order
to obtain the working capital and cash necessary to pay off the DIP Facilities,
make other payments required to be made on the Consummation Date and maintain
its operations.

The New Credit Facility, or a commitment letter with respect thereto, shall
be filed by County Seat with the Bankruptcy Court no later than a date which is
five (5) days prior to the Voting Deadline. Notice of any modification to the
New Credit Facility after its filing with the Bankruptcy Court shall be provided
to the Creditors' Committee. The terms and conditions of the New Credit
Facility shall include in all respects the terms and conditions of the
commitment letter executed between County Seat and the Bank Agent and the New
Credit Facility term sheet, except to the extent that County Seat and the Bank
Agent agree otherwise. In the Confirmation Order, the Bankruptcy Court shall
approve the New Credit Facility in substantially the form filed with the
Bankruptcy Court

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and authorize County Seat to execute the same together with such other documents
as the Bank Agent may reasonably require in order to effectuate the treatment
afforded to the lenders under the New Credit Facility.

On or before the Consummation Date, County Seat shall issue in accordance
with the provisions of the Plan the New Senior Notes and Series A Warrants. The
sale of the New Senior Notes and Series A Warrants shall occur following and
subject to confirmation of the Plan by the Bankruptcy Court and simultaneously
with the consummation of the Plan, and shall be exempt from registration
pursuant to section 4(2) of the Securities Act of 1933.

9.7 ISSUANCE OF NEW COMMON STOCK AND SERIES B WARRANTS. On or before the
Distribution Date, County Seat shall issue for distribution in accordance with
the terms of the Plan the New Common Stock to holders of Allowed Class 4 General
Unsecured Claims and the Series B Warrants to holders of Allowed Class 6
Interests. The New Common Stock and the Series B Warrants shall be exempt from
registration pursuant to section 1145(a) of the Bankruptcy Code. However,
Reorganized County Seat will enter into a Registration Rights Agreement with
each holder of an Allowed Class 4 General Unsecured Claim who, as of the
Consummation Date, (a) holds Prepetition Notes entitling such holder to receive
ten percent (10%) or more of the shares of the New Common Stock, and (b)
requests in writing that Reorganized County Seat execute such agreement. Drafts
of such Registration Rights Agreements will be filed by County Seat with the
Bankruptcy Court no later than a date which is five (5) days prior to the first
date set by the Bankruptcy Court as the Voting Deadline. The Registration
Rights Agreements shall contain certain shelf, demand and piggyback registration
rights for the benefit of the signatories thereto.

9.8 PRESERVATION OF CAUSES OF ACTION. In accordance with section
1123(b)(3) of the Bankruptcy Code and except as otherwise provided in the Plan,
Reorganized County Seat shall retain and may enforce all claims, rights of
action, suits and proceedings, whether in law or in equity, whether known or
unknown, which County Seat may hold against any entity, including, without
limitation, any causes of action brought prior to the Petition Date, actions
against any Persons for failure to pay for products or services rendered by
County Seat, all claims, causes of action, suits and proceedings relating to
strict enforcement of County Seat's intellectual property rights, including
patents, copyrights and trademarks, and all causes of action which may exist
under sections 510, 542, 544 through 550 and 553 of the Bankruptcy Code or under
similar state laws, including, without limitation, fraudulent conveyance claims,
if any, and all other causes of action of a trustee and debtor-in-possession
under the Bankruptcy Code. County Seat, in the exercise of its business
judgment, will determine whether to enforce such rights. Reorganized County Seat
or any successors may pursue such litigation claims in accordance with the best
interests of Reorganized County Seat or the successors holding such rights of
action.

9.9 SUBSTANTIAL CONTRIBUTION COMPENSATION AND EXPENSES BAR DATE. Any
person or entity who requests compensation or expense reimbursement for making a
substantial contribution in the Chapter 11 Case pursuant to section 503(b)(3),
(4), and (5) of the Bankruptcy Code must file an application with the clerk of
the Bankruptcy Court, on or before forty-five (45) days after the Consummation
Date (the "503 Deadline"), and serve such application on counsel for County Seat
and as otherwise required by the Bankruptcy Court on or before the 503 Deadline,
or be forever barred from seeking such compensation or expense reimbursement.

9.10 CANCELLATION OF EXISTING SECURITIES AND AGREEMENTS. On the
Consummation Date, except as otherwise provided for herein, (a) the Existing
Securities and any other note, bond, indenture, or other instrument or document
evidencing or creating any indebtedness or obligation of County Seat, except
such notes or other instruments evidencing indebtedness or obligations of County
Seat that are Reinstated under the Plan, shall be cancelled, and (b) the
obligations of, and/or Claims against, County Seat under, relating or pertaining
to any agreements, indentures or certificates of designations governing the
Existing Securities and any other note, bond, indenture or other instrument or
document evidencing or creating any indebtedness or obligation of County Seat,
except such notes or other instruments evidencing indebtedness or obligations of
County Seat that are Reinstated under the Plan, as the case may be, shall be
released and discharged; PROVIDED, HOWEVER, that each indenture or other
agreement

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that governs the rights of the holder of a Claim and that is administered by an
indenture trustee, an agent or a servicer shall continue in effect solely for
the purposes of allowing such indenture trustee, agent or servicer to make the
distributions to be made on account of such Claims under the Plan as provided in
Article X of the Plan; PROVIDED, FURTHER, that the provisions of this proviso
shall not affect the discharge of County Seat's liabilities under the Bankruptcy
Code and the Confirmation Order or result in any expense or liability to
Reorganized County Seat.

9.11 EXCLUSIVITY PERIOD. County Seat shall retain the exclusive right to
amend or modify the Plan, and to solicit acceptances of any amendments to or
modifications of the Plan, through and until the Consummation Date.

9.12 EFFECTUATING DOCUMENTS; FURTHER TRANSACTIONS. The Chairman of the
Board of Directors, the Chief Executive Officer or any other appropriate officer
of County Seat, shall be authorized to execute, deliver, file or record such
contracts, instruments, releases, indentures and other agreements or documents,
and take such actions as may be necessary or appropriate to effectuate and
further evidence the terms and conditions of the Plan. The Secretary or
Assistant Secretary of County Seat shall be authorized to certify or attest to
any of the foregoing actions.

ARTICLE X

PROVISIONS GOVERNING DISTRIBUTIONS

10.1 TIME OF DISTRIBUTIONS. Except as otherwise provided for herein or
ordered by the Bankruptcy Court, distributions under the Plan shall be made on
the Distribution Date to holders of Allowed Class 4 Claims and Allowed Class 6
Interests, and on the Consummation Date, or as soon thereafter as is
practicable, to holders of all other Allowed Claims entitled to receive a
distribution under the Plan.

10.2 INTEREST ON CLAIMS. Unless otherwise specifically provided for in the
Plan, Confirmation Order or DIP Facility Order, or required by applicable
bankruptcy law, postpetition interest shall not accrue or be paid on Claims, and
no holder of a Claim shall be entitled to interest accruing on or after the
Petition Date on any Claim. Interest shall not accrue or be paid upon any
Disputed Claim in respect of the period from the Petition Date to the date a
final distribution is made thereon if and after such Disputed Claim becomes an
Allowed Claim.

10.3 DISBURSING AGENT. The Disbursing Agent shall make all distributions
required under this Plan except with respect to a holder of a Claim whose
distribution is governed by an indenture or other agreement and is administered
by an indenture trustee, agent or servicer, which distributions shall be
deposited with the appropriate indenture trustee, agent or servicer, who shall
deliver such distributions to the holders of Claims in accordance with the
provisions of this Plan and the terms of the relevant indenture or other
governing agreement; PROVIDED, HOWEVER, that if any such indenture trustee,
agent or servicer is unable to make such distributions, the Disbursing Agent,
with the cooperation of such indenture trustee, agent or servicer, shall make
such distributions.

10.4 SURRENDER OF SECURITIES OR INSTRUMENTS. On or before the Distribution
Date, or as soon as practicable thereafter, each holder of an instrument
evidencing a Claim on account of Prepetition Notes or an Interest (a
"Certificate") shall surrender such Certificate to the Disbursing Agent, or,
with respect to indebtedness that is governed by an indenture or other
agreement, the respective indenture trustee, agent or servicer, as the case may
be, and such Certificate shall be cancelled. No distribution of property
hereunder shall be made to or on behalf of any such holder unless and until such
Certificate is received by the Disbursing Agent or the respective indenture
trustee, agent or servicer, as the case may be, or the unavailability of such
Certificate is reasonably established to the satisfaction of the Disbursing
Agent or the respective indenture trustee, agent or servicer, as the case may
be. Any such holder who fails to surrender or cause to be surrendered such
Certificate or fails to execute and deliver an affidavit of loss and indemnity
reasonably satisfactory to the Disbursing Agent or the respective indenture
trustee, agent or servicer, as the case may be, prior to the fifth (5th)
anniversary of the Consummation Date, shall be

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deemed to have forfeited all rights and Claims in respect of such Certificate
and shall not participate in any distribution hereunder, and all property in
respect of such forfeited distribution, including interest accrued thereon,
shall revert to Reorganized County Seat notwithstanding any federal or state
escheat laws to the contrary.

10.5 INSTRUCTIONS TO DISBURSING AGENT. Prior to any distribution on
account of any Prepetition Notes, the indenture trustee, agent or servicer of
the Prepetition Notes shall (a) inform the Disbursing Agent as to the amount of
properly surrendered Prepetition Notes and (b) instruct the Disbursing Agent, in
a form and manner that the Disbursing Agent reasonably determines to be
acceptable, of the names of the holders of Prepetition Notes with Allowed Class
4 General Unsecured Claims and denominations of New Common Stock to be issued
and distributed to or on behalf of such holders of Allowed Class 4 General
Unsecured Claims in exchange for properly surrendered Prepetition Notes.

10.6 SERVICES OF INDENTURE TRUSTEES, AGENTS AND SERVICERS. The services,
with respect to consummation of the Plan, of indenture trustees, agents and
servicers under indentures and other agreements that govern the rights of
holders of Claims, shall be as set forth in Section 9.10 and elsewhere in the
Plan.

10.7 RECORD DATE FOR DISTRIBUTIONS TO HOLDERS OF PREPETITION NOTES. At the
close of business on the Record Date, the transfer ledgers of the indenture
trustees, agents and servicers of the Prepetition Notes shall be closed, and
there shall be no further changes in the record holders of the Prepetition
Notes. Reorganized County Seat and the indenture trustees, agents and servicers
for such Prepetition Notes and the Disbursing Agent shall have no obligation to
recognize any transfer of such Prepetition Notes occurring after the Record
Date. Reorganized County Seat and the indenture trustees, agents and servicers
for such Prepetition Notes and the Disbursing Agent shall be entitled instead to
recognize and deal for all purposes hereunder with only those record holders
stated on the transfer ledgers as of the close of business on the Record Date.

10.8 DELIVERY OF DISTRIBUTIONS. Distributions to holders of Allowed Claims
or Allowed Interests shall be made by the Disbursing Agent or the appropriate
indenture trustee, agent or servicer, as the case may be, (a) at the addresses
set forth on the proofs of claim filed by such holders (or at the last known
addresses of such holders if no proof of claim is filed or if County Seat has
been notified of a change of address), (b) at the addresses set forth in any
written notices of address changes delivered to the Disbursing Agent after the
date of any related proof of claim, (c) at the addresses reflected in the
Schedules if no proof of claim has been filed and the Disbursing Agent has not
received a written notice of a change of address, (d) in the case of the holder
of a Claim that is governed by an indenture or other agreement and is
administered by an indenture trustee, agent or servicer, at the addresses
contained in the official records of such indenture trustee, agent or servicer,
or (e) in the case of an Allowed Interest, at the last known address for such
parties as set forth on County Seat's books and records. If any holder's
distribution is returned as undeliverable, no further distributions to such
holder shall be made unless and until the Disbursing Agent or the appropriate
indenture trustee, agent or servicer is notified of such holder's then current
address, at which time all missed distributions shall be made to such holder
without interest. Amounts in respect of undeliverable distributions made
through the Disbursing Agent or the indenture trustee, agent or servicer shall
be returned to Reorganized County Seat until such distributions are claimed.
All claims for undeliverable distributions shall be made on or before the fifth
(5th) anniversary of the Consummation Date. After such date, all unclaimed
property shall revert to Reorganized County Seat and the claim of any holder or
successor to such holder with respect to such property shall be discharged and
forever barred notwithstanding any federal or state escheat laws to the
contrary.

10.9 PROCEDURES FOR TREATING AND RESOLVING DISPUTED AND CONTINGENT CLAIMS.

(a) NO DISTRIBUTIONS PENDING ALLOWANCE. No payments or distributions
will be made with respect to all or any portion of a Disputed Claim unless and
until all objections to such Disputed Claim have been settled or withdrawn or
have been determined by Final Order, and the Disputed Claim has become an
Allowed Claim. All objections to Claims must be filed on or before the Claims
Objection Deadline.

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(b) DISTRIBUTION RESERVE. The Disbursing Agent will withhold the
Distribution Reserve from the property to be distributed under the Plan. As to
any Disputed Claim, upon a request for estimation by County Seat, the Bankruptcy
Court will determine what amount is sufficient to withhold as the Distribution
Reserve. County Seat will request estimation for every Disputed Claim that is
unliquidated and the Disbursing Agent will withhold the Distribution Reserve
based upon the estimated amount of each such Claim as set forth in a Final
Order. County Seat may also request estimation of a Disputed Claim that is
liquidated. If County Seat elects not to request such an estimation from the
Bankruptcy Court with respect to a Disputed Claim that is liquidated, the
Disbursing Agent will withhold the Distribution Reserve based upon the Face
Amount of such Claim. The Disbursing Agent will also place in the Distribution
Reserve any dividends, payments or other distributions made on account of, as
well as any obligations arising from, the property withheld as the Distribution
Reserve, to the extent that such property continues to be withheld as the
Distribution Reserve at the time such distributions are made or such obligations
arise. If practicable, the Disbursing Agent will invest any Cash that is
withheld as the Distribution Reserve in a manner that will yield a reasonable
net return, taking into account the safety of the investment. Nothing in the
Plan or herein will be deemed to entitle the holder of a Disputed Claim to
postpetition interest on such Claim.

Neither the Disbursing Agent, nor any other party, shall be entitled to
vote any shares of the New Common Stock held in the Distribution Reserve. In
the event that any matter requires approval by the shareholders of Reorganized
County Seat prior to the distribution or cancellation of all shares of New
Common Stock held in the Distribution Reserve, the shares of New Common Stock
held by the Disbursing Agent shall be deemed only for voting purposes not to
have been issued.

(c) DISTRIBUTIONS AFTER ALLOWANCE. Payments and distributions from
the Distribution Reserve to each holder of a Disputed Claim, to the extent that
it ultimately becomes an Allowed Claim, will be made in accordance with
provisions of the Plan that govern the Class of Claims to which the respective
holder belongs. Promptly after the date when the order or judgment of the
Bankruptcy Court allowing all or part of such Claim becomes a Final Order, the
Disbursing Agent will distribute to the holder of such Claim any Cash and other
property in the Distribution Reserve that would have been distributed on the
Distribution Date had such Allowed Claim been an Allowed Claim on the
Distribution Date. After a Final Order has been entered, or other final
resolution has been reached, with respect to all Disputed Claims, (i) any New
Common Stock held in the Distribution Reserve will be distributed Pro Rata to
holders of Allowed Class 4 General Unsecured Claims, and (ii) any Cash or other
property remaining in the Distribution Reserve will become property of
Reorganized County Seat. All distributions made under Section 10.9 of the Plan
on account of an Allowed Claim will be made together with any dividends,
payments or other distributions made on account of, as well as any obligations
arising from, the distributed property as if such Allowed Claim had been an
Allowed Claim on the Distribution Date.

10.10 FRACTIONAL SECURITIES; DE MINIMIS DISTRIBUTIONS. Any other
provision of the Plan notwithstanding, payments of fractions of shares of New
Common Stock or Series B Warrants shall not be made. Whenever any payment of a
fraction of a share of New Common Stock or Series B Warrant under the Plan would
otherwise be called for, the actual payment made shall reflect a rounding of
such fraction to the nearest whole share (up or down), with half shares being
rounded down.

ARTICLE XI

DISCHARGE, RELEASES AND SETTLEMENTS OF CLAIMS

11.1 DISCHARGE OF COUNTY SEAT AND RELEASES.

(a) All consideration distributed under the Plan shall be in exchange
for, and in complete satisfaction, settlement, discharge and release of, all
Claims of any nature whatsoever against County Seat or any of its assets or
properties, and, except as otherwise provided herein or in the Confirmation
Order, and regardless

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of whether any property shall have been distributed or retained pursuant to the
Plan on account of such Claims, upon the Consummation Date, County Seat shall be
deemed discharged and released under section 1141(d)(1)(A) of the Bankruptcy
Code from any and all Claims, including, but not limited to, demands and
liabilities that arose before the Confirmation Date, any liability (including
withdrawal liability) to the extent such Claims relate to services performed by
employees of County Seat prior to the Petition Date and that arise from a
termination of employment or a termination of any employee or retiree benefit
program regardless of whether such termination occurred prior to or after the
Confirmation Date, and all debts of the kind specified in sections 502(g),
502(h) or 502(i) of the Bankruptcy Code, whether or not (i) a proof of claim
based upon such debt is filed or deemed filed under section 501 of the
Bankruptcy Code, (ii) a Claim based upon such debt is Allowed under section 502
of the Bankruptcy Code, or (iii) the holder of a Claim based upon such debt
accepted the Plan. The Confirmation Order shall be a judicial determination of
discharge of all liabilities of County Seat, subject to the Consummation Date
occurring.

(b) Except as otherwise specifically provided in this Plan, the
distributions and rights that are provided in this Plan shall be in complete
satisfaction, discharge and release, effective as of the Confirmation Date (but
subject to the occurrence of the Consummation Date) of (i) Claims and Causes of
Action, whether known or unknown, against, liabilities of, liens on, obligations
of and Interests in County Seat or Reorganized County Seat and (ii) all Causes
of Action (whether known or unknown, either directly or derivatively through
County Seat or Reorganized County Seat) against, claims against, liabilities of,
liens on the direct or indirect assets and properties of, and obligations of
County Seat, Reorganized County Seat and such parties' respective present or
former members, officers, directors, employees, advisors, attorneys,
representatives, financial advisors, investment bankers or agents or any of such
parties' successors or assigns, based (x) on the same subject matter as any
Claim or Interest, in each case regardless of whether a proof of claim or
interest was filed, whether or not Allowed and whether or not the holder of the
Claim or Interest has voted on this Plan, or (y) on any act or omission,
transaction or other activity or security, instrument or other agreement of any
kind or nature occurring, arising or existing prior to the Consummation Date
that was or could have been the subject of any Claim or Interest, in each case
regardless of whether a proof of Claim or Interest was filed, whether or not
Allowed and whether or not the holder of the Claim or Interest has voted on this
Plan.

11.2 COMPROMISES AND SETTLEMENTS. Pursuant to Bankruptcy Rule 9019(a),
County Seat may compromise and settle various Claims (a) against it and (b) that
it has against other Persons. County Seat expressly reserves the right (with
Bankruptcy Court approval, following appropriate notice and opportunity for a
hearing) to compromise and settle Claims against it and Claims that it may have
against other Persons up to and including the Consummation Date. After the
Consummation Date, such right shall pass to Reorganized County Seat pursuant to
Article IX of the Plan.

11.3 SETOFFS. County Seat may, but shall not be required to, set off
against any Claim, and the payments or other distributions to be made pursuant
to the Plan in respect of such Claim, claims of any nature whatsoever that
County Seat may have against the holder of such Claim; but neither the failure
to do so nor the allowance of any Claim hereunder shall constitute a waiver or
release by County Seat of any such claim that County Seat may have against such
holder.

11.4 SATISFACTION OF SUBORDINATION RIGHTS. All Claims against County Seat
and all rights and claims between or among holders of Claims relating in any
manner whatsoever to Claims against County Seat, based upon any claimed
subordination rights (if any), shall be deemed satisfied by the distributions
under the Plan to holders of Claims having such subordination rights, and such
subordination rights shall be deemed waived, released, discharged and terminated
as of the Consummation Date. Distributions to the various Classes of Claims
hereunder shall not be subject to levy, garnishment, attachment or like legal
process by any holder of a Claim by reason of any claimed subordination rights
or otherwise, so that each holder of a Claim shall have and receive the benefit
of the distributions in the manner set forth in the Plan.

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11.5 EXCULPATION AND LIMITATION OF LIABILITY. Except as otherwise
specifically provided in this Plan, County Seat, Reorganized County Seat, any
statutory committee, any of such parties' respective present or former members,
officers, directors, employees, advisors, attorneys, representatives, financial
advisors, investment bankers or agents and any of such parties' successors and
assigns, shall not have or incur, and are hereby released from, any claim,
obligation, Cause of Action or liability to one another or to any holder of a
Claim or an Interest, or any other party in interest, or any of their respective
agents, employees, representatives, financial advisors, attorneys or affiliates,
or any of their successors or assigns, for any act or omission in connection
with, relating to or arising out of County Seat's Chapter 11 Case, the pursuit
of confirmation of the Plan, the consummation of the Plan, the administration of
the Plan or the property to be distributed under the Plan, except for their
willful misconduct, and in all respects shall be entitled to reasonably rely
upon the advice of counsel with respect to their duties and responsibilities
under the Plan.

Notwithstanding any other provision of this Plan, no holder of a Claim or
Interest, or other party in interest, none of their respective agents,
employees, representatives, financial advisors, attorneys or affiliates, and no
successors or assigns of the foregoing, shall have any right of action against
County Seat, Reorganized County Seat or any statutory committee, or any of such
parties' respective present or former members, officers, directors, employees,
advisors, attorneys, representatives, financial advisors, investment bankers or
agents or such parties' successors and assigns, for any act or omission in
connection with, relating to or arising out of County Seat's Chapter 11 Case,
the pursuit of confirmation of the Plan, the consummation of the Plan, the
administration of the Plan or the property to be distributed under the Plan,
except for their willful misconduct.

11.6 INDEMNIFICATION OBLIGATIONS. In satisfaction and compromise of the
Indemnitees' Indemnification Rights: (i) all Indemnification Rights except those
based upon any act or omission arising out of or relating to any Indemnitee's
service with, for or on behalf of County Seat or CSI on or after the Petition
Date (the "Post-Petition Indemnification Rights") shall be released and
discharged on and as of the Consummation Date, provided that the Post-Petition
Indemnification Rights shall remain in full force and effect on and after the
Consummation Date and shall not be modified, reduced, discharged or otherwise
affected in any way by the Chapter 11 Case, (ii) County Seat covenants to
purchase and maintain directors and officers liability insurance providing
coverage for the Indemnitees for a period of two years after the Consummation
Date insuring such parties in respect of any claims, demands, suits, causes of
action or proceedings against such Indemnitees based upon any act or omission
related to such Indemnitee's service with, for or on behalf of County Seat or
CSI in at least the scope and amount as currently maintained by County Seat (the
"Insurance Coverage"), PROVIDED, HOWEVER, that County Seat shall not be
obligated hereby to purchase Insurance Coverage in excess of such coverage that
can be purchased for an annual premium of $250,000, and (iii) County Seat hereby
indemnifies Indemnitees and agrees to pay for any deductible or retention amount
(not in excess of $250,000 (or any higher amount resulting from the purchase of
Insurance Coverage at a lower premium cost on County Seat's reasonable
judgment)) that may be payable in connection with any claim covered by either
under the foregoing Insurance Coverage or any prior similar policy.

11.7 INJUNCTION. The satisfaction, release and discharge pursuant to
Article XI of this Plan shall also act as an injunction against any Person
commencing or continuing any action, employment of process, or act to collect,
offset or recover any Claim or Cause of Action satisfied, released or discharged
under this Plan to the fullest extent authorized or provided by the Bankruptcy
Code, including, without limitation, to the extent provided for or authorized by
sections 524 and 1141 thereof.

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<PAGE>

ARTICLE XII

CONDITIONS PRECEDENT

12.1 CONDITIONS TO CONFIRMATION. The following are conditions precedent to
confirmation of the Plan that may be satisfied or waived in accordance with
Section 12.3 of the Plan:

(a) The Bankruptcy Court shall have approved by Final Order a
disclosure statement with respect to the Plan in form and substance reasonably
acceptable to County Seat.

(b) The Confirmation Order shall be in form and substance reasonably
acceptable to County Seat.

12.2 CONDITIONS TO CONSUMMATION. The Consummation Date shall occur on or
prior to November 30, 1997, unless such date is extended by agreement of County
Seat and the Creditors' Committee. The following are conditions precedent to
the occurrence of the Consummation Date, each of which may be satisfied or
waived in accordance with Section 12.3 of the Plan:

(a) The Bankruptcy Court shall have entered one or more orders (which
may be the Confirmation Order) authorizing the assumption of all leases and
executory contracts by Reorganized County Seat.

(b) County Seat shall have entered into the New Credit Facility and
all conditions precedent to the consummation thereof shall have been waived or
satisfied.

(d) The Confirmation Order shall have been entered by the Bankruptcy
Court and shall be a Final Order, and no request for revocation of the
Confirmation Order under section 1144 of the Bankruptcy Code shall have been
made, or, if made, shall remain pending.

(e) The Confirmation Date shall have occurred and the Confirmation
Order shall, among other things, provide that:

(i) the provisions of the Confirmation Order are non-severable and
mutually dependent;

(ii) all executory contracts or unexpired leases assumed by County
Seat during the Chapter 11 Case or under the Plan shall be assigned and
transferred to, and remain in full force and effect for the benefit of,
Reorganized County Seat, notwithstanding any provision in such contract or lease
(including those described in sections 365(b)(2) and (f) of the Bankruptcy Code)
that prohibits such assignment or transfer or that enables or requires
termination of such contract or lease;

(iii) the transfers of property by County Seat (A) to Reorganized
County Seat (1) are or shall be legal, valid, and effective transfers of
property, (2) vest or shall vest Reorganized County Seat with good title to such
property free and clear of all liens, charges, claims, encumbrances or
interests, except as expressly provided in the Plan or Confirmation Order, (3)
do not and shall not constitute avoidable transfers under the Bankruptcy Code or
under applicable nonbankruptcy law, and (4) do not and shall not subject
Reorganized County Seat to any liability by reason of such transfer under the
Bankruptcy Code or under applicable nonbankruptcy law, including, without
limitation, any laws affecting successor or transferee liability, and (B) to
holders of Claims and Interests under the Plan are for good consideration and
value and are in the ordinary course of County Seat's business;

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<PAGE>

(iv) except as expressly provided in the Plan, County Seat is
discharged effective upon the Consummation Date from any "debt" (as that term is
defined in section 101(12) of the Bankruptcy Code), and County Seat's liability
in respect thereof is extinguished completely, whether reduced to judgment or
not, liquidated or unliquidated, contingent or noncontingent, asserted or
unasserted, fixed or unfixed, matured or unmatured, disputed or undisputed,
legal or equitable, known or unknown, or that arose from any agreement of County
Seat entered into or obligation of County Seat incurred before the Consummation
Date, or from any conduct of County Seat prior to the Consummation Date, or that
otherwise arose before the Consummation Date, including, without limitation, all
interest, if any, on any such debts, whether such interest accrued before or
after the Petition Date;

(v) the Plan does not provide for the liquidation of all or
substantially all of the property of County Seat and its confirmation is not
likely to be followed by the liquidation of Reorganized County Seat or the need
for further financial reorganization;

(vi) except as expressly provided in the Plan, all Interests shall
be terminated effective upon the Consummation Date; and

(vii) the Bankruptcy Court shall have determined that the New
Common Stock and Series B Warrants issued under the Plan in exchange for Claims
against or Interests in County Seat are exempt from registration under the
Securities Act of 1933 pursuant to section 1145 of the Bankruptcy Code, except
to the extent that holders of New Common Stock or Series B Warrants are
"underwriters," as that term is defined in section 1145 of the Bankruptcy Code.

12.3 WAIVER OF CONDITIONS TO CONFIRMATION OR CONSUMMATION. The conditions
set forth in Sections 12.1 and 12.2 of the Plan may be waived by County Seat in
its sole discretion, without any notice to parties in interest or the Bankruptcy
Court and without a hearing (but with the concurrence of the Creditors'
Committee). The failure to satisfy or waive any condition to the Confirmation
Date or the Consummation Date may be asserted by County Seat in its sole
discretion regardless of the circumstances giving rise to the failure of such
condition to be satisfied (including any action or inaction by County Seat in
its sole discretion). The failure of County Seat in its sole discretion to
exercise any of the foregoing rights shall not be deemed a waiver of any other
rights, and each such right shall be deemed an ongoing right, which may be
asserted at any time.

ARTICLE XIII

RETENTION OF JURISDICTION

Pursuant to sections 105(a) and 1142 of the Bankruptcy Code, the
Bankruptcy Court shall have exclusive jurisdiction of all matters arising out
of, and related to, the Chapter 11 Case and the Plan, including, among other
things, the following matters:

(a) to hear and determine pending motions for the assumption or
rejection of executory contracts or unexpired leases or the assumption and
assignment, as the case may be, of executory contracts or unexpired leases to
which County Seat is a party or with respect to which County Seat may be liable,
and to hear and determine the allowance of Claims resulting therefrom including
the amount of Cure, if any, required to be paid to the holders of such Claims;

(b) to determine any and all pending adversary proceedings,
applications and contested matters;

A-21
<PAGE>

(d) to hear and determine any and all objections to the allowance or
estimation of Claims filed, both before and after the Confirmation Date,
including any objections to the classification of any Claim or Interest, and to
allow or disallow any Claim, in whole or in part;

(e) to enter and implement such orders as may be appropriate if the
Confirmation Order is for any reason stayed, revoked, modified or vacated;

(f) to issue orders in aid of execution, implementation or
consummation of the Plan;

(g) to consider any modifications of the Plan, to cure any defect or
omission, or to reconcile any inconsistency in any order of the Bankruptcy
Court, including, without limitation, the Confirmation Order;

(h) to hear and determine all applications for compensation and
reimbursement of Professional Fees under the Plan or under sections 330, 331,
503(b), 1103 and 1129(a)(4) of the Bankruptcy Code;

(i) to determine requests for the payment of Claims entitled to
priority under section 507(a)(1) of the Bankruptcy Code, including compensation
of and reimbursement of expenses of parties entitled thereto;

(j) to hear and determine disputes arising in connection with the
interpretation, implementation or enforcement of the Plan, including disputes
arising under agreements, documents or instruments executed in connection with
this Plan;

(k) to recover all assets of County Seat and property of its Estate,
wherever located;

(l) to hear and determine matters concerning state, local and federal
taxes in accordance with sections 346, 505 and 1146 of the Bankruptcy Code;

(m) to hear any other matter not inconsistent with the Bankruptcy
Code;

(n) to hear and determine all disputes arising in connection with the
interpretation, implementation or enforcement of the New Senior Note and Warrant
Purchase Agreement;

(o) to hear and determine all disputes involving the existence,
nature or scope of County Seat's discharge, including any dispute relating to
any liability arising out of the termination of employment or the termination of
any employee or retiree benefit program, regardless of whether such termination
occurred prior to or after the Consummation Date; and

(p) to enter a final decree closing the Chapter 11 Case.

ARTICLE XIV

MISCELLANEOUS PROVISIONS

14.1 BINDING EFFECT. The Plan shall be binding upon and inure to the
benefit of County Seat, all present and former holders of Claims, all present
and former holders of Interests, other parties in interest and their respective
successors and assigns.

14.2 MODIFICATION AND AMENDMENTS. County Seat may alter, amend or modify
the Plan or any Exhibits thereto under section 1127(a) of the Bankruptcy Code at
any time. After the Confirmation Date and prior to substantial consummation of
the Plan as defined in section 1101(2) of the Bankruptcy Code, County Seat may,
under

A-22
<PAGE>

section 1127(b) of the Bankruptcy Code, institute proceedings in the Bankruptcy
Court to remedy any defect or omission or reconcile any inconsistencies in the
Plan, the Disclosure Statement or the Confirmation Order, and such matters as
may be necessary to carry out the purposes and effects of the Plan, so long as
such proceedings do not materially adversely affect the treatment of holders of
Claims or holders of Interests under the Plan; PROVIDED, HOWEVER, that prior
notice of such proceedings shall be served in accordance with the Bankruptcy
Rules or order of the Bankruptcy Court.

14.3 WITHHOLDING AND REPORTING REQUIREMENTS. In connection with the Plan
and all instruments issued in connection therewith and distributions thereon,
County Seat shall comply with all withholding and reporting requirements imposed
by any federal, state, local or foreign taxing authority, and all distributions
hereunder shall be subject to any such withholding and reporting requirements.

14.4 COMMITTEES. Effective on the Consummation Date, the duties of the
Creditors' Committee shall terminate, except with respect to any appeal of an
order in the Chapter 11 Case and applications for Professional Fees.

14.5 REVOCATION, WITHDRAWAL OR NON-CONSUMMATION.

(a) RIGHT TO REVOKE OR WITHDRAW. County Seat reserves the right to
revoke or withdraw the Plan at any time prior to the Consummation Date.

(b) EFFECT OF WITHDRAWAL, REVOCATION OR NON-CONSUMMATION. If County
Seat revokes or withdraws the Plan prior to the Consummation Date, or if the
Confirmation Date or the Consummation Date does not occur, then the Plan, any
settlement or compromise embodied in the Plan (including the fixing or limiting
to an amount certain any Claim or Class of Claims), the assumption or rejection
of executory contracts or leases effected by the Plan, and any document or
agreement executed pursuant to the Plan shall be null and void. In such event,
nothing contained herein, and no acts taken in preparation for consummation of
the Plan, shall be deemed to constitute a waiver or release of any Claims by or
against County Seat or any other Person, to prejudice in any manner the rights
of County Seat or any Person in any further proceedings involving County Seat or
to constitute an admission of any sort by County Seat or any other Person.

14.6 NOTICES. Any notice required or permitted to be provided to County
Seat under the Plan shall be in writing and served by (a) certified mail, return
receipt requested, (b) hand delivery, or (c) overnight delivery service, to be
addressed as follows:

County Seat Stores, Inc.
6585 City West Parkway
Eden Prairie, Minnesota 55344
Attention: General Counsel

with a copy to:

Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606-1285
Attention: J. Eric Ivester, Esq.

14.7 TERM OF INJUNCTIONS OR STAYS. Unless otherwise provided herein or in
the Confirmation Order, all injunctions or stays provided for in the Chapter 11
Case under sections 105 or 362 of the Bankruptcy Code or otherwise, and extant
on the Confirmation Date, shall remain in full force and effect until the
Consummation Date.

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<PAGE>

14.8 GOVERNING LAW. Unless a rule of law or procedure is supplied by
federal law (including the Bankruptcy Code and Bankruptcy Rules) or unless
otherwise specifically stated, the laws of the State of Delaware shall govern
the construction and implementation of the Plan, any agreements, documents and
instruments executed in connection with the Plan, and corporate governance
matters.

Dated: Wilmington, Delaware
August 22, 1997

Respectfully submitted,

COUNTY SEAT STORES, INC.

Debtor-in-Possession

By: /s/ Sam Forman
-----------------------------

Its PRESIDENT
-----------------------------

SKADDEN, ARPS, SLATE, MEAGHER & FLOM
(ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606-1285

By: /s/ J. Eric Ivester
-------------------------------------
J. Eric Ivester
John K. Lyons
George N. Panagakis

- and -

SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
One Rodney Square
Wilmington, Delaware 19899

By: /s/ Gregg M. Galardi
-------------------------------------
Gregg M. Galardi

ATTORNEYS FOR
COUNTY SEAT STORES, INC.
DEBTOR AND DEBTOR-IN-POSSESSION

A-24

<PAGE>

EXHIBIT 2.2

UNITED STATES BANKRUPTCY COURT

DISTRICT OF DELAWARE

- - - - - - - - - - - - - - - - - - - x

In re : Chapter 11

COUNTY SEAT, INC., COUNTY : Case No. 96-1637 (HSB)
SEAT STORES, INC., and
CSS TRADE NAMES, INC. : Jointly Administered

Debtors. :

- - - - - - - - - - - - - - - - - - - x

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER UNDER
11 U.S.C. Sections 1129(a) AND (b) AND FED. R. BANKR. P. 3020
CONFIRMING FIRST AMENDED PLAN OF REORGANIZATION OF
COUNTY SEAT STORES, INC., DATED AUGUST 22, 1997, AS MODIFIED

RECITALS

WHEREAS, on August 22, 1997, County Seat Stores, Inc. ("County Seat"
or the "Debtor"), one of the debtors and debtors-in-possession (collectively the
"Debtors") in the above-captioned cases, filed the First Amended Plan of
Reorganization of County Seat Stores, Inc. (such plan, as transmitted to
parties-in-interest being the "Original Plan" and, as modified by this
Confirmation Order the "Plan")(1) and the First Amended Disclosure

___________________
(1) Unless otherwise defined, capitalized terms used herein shall have the
meanings ascribed to them in the Plan (a copy of which is annexed hereto as
Exhibit A). Any term used in the Plan or this Confirmation Order that is
not defined in the Plan or this Confirmation Order, but that is used in the
United States Bankruptcy Code, 11 U.S.C. Sec. 101-1330, as amended (the
"Bankruptcy Code"), or the Federal Rules of Bankruptcy Procedure (the
"Bankruptcy Rules"), shall have the meaning ascribed to that term in the
Bankruptcy Code or the Bankruptcy Rules.

<PAGE>

Statement with Respect to Plan Of Reorganization of County Seat Stores, Inc. (as
subsequently amended and transmitted to parties-in-interest, the "Disclosure
Statement");

WHEREAS, on August 22, 1997, the Court entered an order (such order,
as corrected and entered on August 27, 1997, the "Solicitation Procedures
Order") that, among other things, (i) approved the Disclosure Statement under
section 1125 of the Bankruptcy Code and Fed. R. Bankr. P. 3017, (ii) fixed
October 1, 1997, as the date for the commencement of the hearing to consider
confirmation of the Original Plan (the "Confirmation Hearing"), (iii) approved
the form and method of notice of the Confirmation Hearing (the "Confirmation
Hearing Notice"), and (iv) established certain procedures for soliciting and
tabulating votes with respect to the Original Plan; and

WHEREAS, the Confirmation Hearing Notice, the Disclosure Statement,
the Original Plan, and, as to Class 4 General Unsecured Claims and Class 6 Old
Preferred Stock Interests, a ballot and return envelope (such ballot and
envelope being referred to as a "Ballot"), were transmitted in accordance with
Fed. R. Bankr. P. 3017(d) and the Solicitation Procedures Order as set forth in
the declaration of mailing of Daniel Oscar Porcelli of Donlin, Recano & Co.,
Inc., dated September 22, 1997, and the supplemental declaration of mailing of
Ferdinand Pineda of Donlin, Recano & Co., Inc. dated September 22, 1997; and

WHEREAS, the Debtor filed the affidavits of John Manfredi, Advertising
Clerk of the Publisher of THE WALL STREET

2
<PAGE>

JOURNAL (national edition), sworn to September 5, 1997, Tom Cucullu, Advertising
Clerk of THE DALLAS MORNING NEWS, sworn to September 5, 1997, and Katherine L.
McCurry, an employee of the MINNEAPOLIS STAR TRIBUNE sworn to September 5, 1997,
attesting to the fact that the Confirmation Hearing Notice was published in
accordance with the Solicitation Procedures Order; and

WHEREAS, the Debtor filed the affidavit of Gerard A. Mortillaro of
Donlin, Recano & Company, sworn to September 30, 1997, attesting to and
certifying (i) the method and results of the ballot tabulation for the Class 4
General Unsecured Claims and Class 6 Old Preferred Stock Interests voting to
accept or reject the Original Plan, and (ii) those Classes of Claims and
Interests in which creditors were entitled to, but did not, vote (the "Voting
Report"); and

WHEREAS, the Confirmation Hearing was held on October 1, 1997.

NOW, THEREFORE, based upon (i) the Court's review of the affidavits
and Voting Report previously filed with the court, (ii) all of the evidence
proffered or adduced at, objections filed in connection with, and arguments of
counsel made at, the Confirmation Hearing, and (iii) the entire record of these
Chapter 11 cases (the "Chapter 11 Cases"); and after due deliberation thereon
and good cause appearing therefor,

3
<PAGE>

FINDINGS OF FACT AND CONCLUSIONS OF LAW

IT IS HEREBY FOUND AND DETERMINED THAT(2)

A. EXCLUSIVE JURISDICTION; VENUE; CORE PROCEEDING (28 U.S.C. Sections
157(B)(2) AND 1334(A)). This Court has jurisdiction over the Chapter 11 Cases
pursuant to 28 U.S.C. Sections 157 and 1334 and the standing orders of
referral, dated July 23, 1984 and June 13, 1994, of the United States District
Court for the District of Delaware. Venue is proper pursuant to 28 U.S.C.
Sections 1408 and 1409. Confirmation of the Plan is a core proceeding under 28
U.S.C. Section 157(b)(2), and this Court has exclusive jurisdiction to
determine whether the Plan complies with the applicable provisions of the
Bankruptcy Code and should be confirmed.

B. JUDICIAL NOTICE. This Court takes judicial notice of the docket of
the Chapter 11 Cases maintained by the Clerk of the Court and/or its duly-
appointed agent, including, without limitation, all pleadings and other
documents filed, all orders entered, and all evidence and argument made,
proffered or adduced at, the hearings held before the Court during the pendency
of the Chapter 11 Cases, including, but not limited to, the hearing to consider
the adequacy of the Debtor's Disclosure Statement.

C. TRANSMITTAL AND MAILING OF MATERIALS; NOTICE. All due, adequate
and sufficient notice of the Plan and of the Confirmation Hearing, along with
all deadlines for voting on or

_________________
(2) Findings of fact shall be construed as conclusions of law and conclusions
of law shall be construed as findings of fact when appropriate. SEE Fed.
R. Bankr. P. 7052.

4
<PAGE>

filing objections to the Plan, has been given to all known holders of Claims and
Interests in accord with the procedures set out in the Solicitation Procedures
Order. The Disclosure Statement, Original Plan, Ballots, and Confirmation
Hearing Notice were transmitted and served in compliance with the Solicitation
Procedures Order and the Bankruptcy Rules, and such transmittal and service were
adequate and sufficient. Adequate and sufficient notice of the Confirmation
Hearing and the other bar dates and hearings described in the Solicitation
Procedures Order was given in compliance with the Bankruptcy Rules and the
Solicitation Procedures Order, and no other or further notice is or shall be
required.

D. SOLICITATION. Votes for acceptance or rejection of the Plan were
solicited in good faith and complied with sections 1125 and 1126 of the
Bankruptcy Code, Bankruptcy Rules 3017 and 3018, the August Disclosure
Statement, all other applicable provisions of the Bankruptcy Code, and all other
rules, laws, and regulations.

E. DISTRIBUTION. All procedures used to distribute and tabulate
ballots to the applicable holders of Claims and Interests were fair and
conducted in accordance with the Bankruptcy Code, the Bankruptcy Rules, the
local rules of the Bankruptcy Court, and all other rules, laws, and regulations.

F. CLASSES THAT HAVE VOTED TO ACCEPT THE PLAN. As evidenced by the
Voting Report which certified both the method and results of the voting, Classes
4 and 6, have accepted the

5
<PAGE>

Plan pursuant to the requirements of sections 1124 and 1126 of the Bankruptcy
Code. Thus, at least one impaired class of claims has voted to accept the Plan.

G. CLASSES DEEMED TO HAVE ACCEPTED PLAN. Classes 1, 2, and 3 are not
impaired and are deemed to have accepted the Plan pursuant to section 1126(f) of
the Bankruptcy Code.

H. CLASSES DEEMED TO HAVE REJECTED PLAN. Classes 5 and 7 will receive
no distribution under the Plan and are deemed to have rejected the Plan pursuant
to section 1126(g) of the Bankruptcy Code.

I. BURDEN OF PROOF. The Debtor, as proponent of the Plan, has the
burden of proving the elements of sections 1129(a) and (b) by a preponderance of
the evidence.

J. PLAN COMPLIANCE WITH BANKRUPTCY CODE (11 U.S.C. Section
1129(A)(1)). The Plan complies with the applicable provisions of the
Bankruptcy Code, thereby satisfying section 1129(a)(1) of the Bankruptcy Code.

1. PROPER CLASSIFICATION (11 U.S.C. Sections 1122,
1123(A)(1)). In addition to Administrative Claims and Priority Tax
Claims, which need not be designated, the Plan designates seven (7)
Classes of Claims and Interests. The Claims and Interests placed in
each Class are substantially similar to other Claims or Interests, as
the case may be, in each such Class. Valid business, factual and
legal reasons exist for separately classifying the various Classes of
Claims

6
<PAGE>

and Interests created under the Plan, and such Classes do not unfairly
discriminate between holders of Claims or Interests. Thus, the Plan
satisfies sections 1122 and 1123(a)(1) of the Bankruptcy Code.

2. SPECIFY UNIMPAIRED CLASSES (11 U.S.C. Section
1123(A)(2)). The Plan specifies that Classes 1, 2 and 3 are not
impaired under the Plan, thereby satisfying section 1123(a)(2) of the
Bankruptcy Code.

3. SPECIFY TREATMENT OF IMPAIRED CLASSES (11 U.S.C. Section
1123(A)(3)). Section 4.2 of the Plan designates Classes 4, 5, 6, and
7 as impaired and specifies the treatment of Claims and Interests in
those Classes, thereby satisfying section 1123(a)(3) of the Bankruptcy
Code.

4. NO DISCRIMINATION (11 U.S.C. Section 1123(A)(4)). The
Plan provides for the same treatment by the Debtor for each Claim or
Interest in each respective Class unless the holder of a particular
Claim or Interest has agreed to less favorable treatment with respect
to such Claim or Interest, thereby satisfying section 1123(a)(4) of
the Bankruptcy Code.

5. IMPLEMENTATION OF PLAN (11 U.S.C. Section 1123(A)(5)).
The Plan provides adequate and proper means for implementation of the
Plan, thereby satisfying section 1123(a)(5) of the Bankruptcy Code.

7
<PAGE>

6. NONVOTING EQUITY SECURITIES (11 U.S.C. Section
1123(A)(6)). Pursuant to Section 9.4 of the Plan, Reorganized County
Seat's Restated Certificate of Incorporation and Bylaws, filed with
the Court as Exhibits C and D of the Plan, respectively, prohibit the
issuance of non-voting equity securities, thereby satisfying section
1123(a)(6) of the Bankruptcy Code.

7. SELECTION OF OFFICERS AND DIRECTORS (11 U.S.C. Section
1123(A)(7)). At or prior to the Confirmation Hearing, the Debtor
properly and adequately disclosed or otherwise identified the
procedures for determining the identity and affiliations of all
individuals proposed to serve as directors or officers on and after
the Consummation Date. The appointment or employment of such
individuals and the proposed compensation and indemnification
arrangements for the officers and directors of Reorganized Count Seat
is consistent with the interests of the creditors and equity security
holders and with public policy and, accordingly, satisfies the
requirements of Section 1123(a)(7) of the Bankruptcy Code.

8. ADDITIONAL PLAN PROVISIONS (11 U.S.C. Section 1123(B)).
The Plan's provisions are appropriate and not inconsistent with the
applicable provisions of the Bankruptcy Code, including provisions for
(i) the disposition of executory contracts and unexpired

8
<PAGE>

leases; (ii) Reorganized County Seat's retention of, and right to enforce,
sue on, settle or compromise (or refuse to do any of the foregoing with
respect to) all claims, rights or causes of action, suits and proceedings,
whether in law or in equity, known and unknown, that the Debtor may have
against various Persons; and (iii) releases of and covenants not to sue
various Persons, exculpation of various persons and entities with respect
to actions taken in furtherance of the Chapter 11 Cases, and preliminary
and permanent injunctions against certain actions against the Debtor and
its property.

9. FED. R. BANKR. P. 3016(A). The Original Plan is dated
and identifies the entity submitting it, thereby satisfying Fed. R.
Bankr. P. 3016(a).

K. DEBTOR'S COMPLIANCE WITH BANKRUPTCY CODE (11 U.S.C. Section
1129(A)(2)). The Debtor has complied with the applicable provisions of the
Bankruptcy Code, thereby satisfying section 1129(a)(2) of the Bankruptcy Code.
Specifically:

1. The Debtor is a proper debtor under section 109 of the
Bankruptcy Code and proper proponent of the Plan under section 1121(a)
of the Bankruptcy Code.

2. The Debtor has complied with applicable provisions of the
Bankruptcy Code, except as otherwise provided or permitted by orders
of this Court.

9
<PAGE>

3. The Debtor has complied with the applicable provisions of
the Bankruptcy Code, the Bankruptcy Rules, and the Solicitation
Procedures Order in transmitting the Original Plan, the Disclosure
Statement, the Ballots and related documents and notices, and in
soliciting and tabulating votes on the Original Plan.

L. PLAN PROPOSED IN GOOD FAITH (11 U.S.C. Section 1129(A)(3)). The
Debtor has proposed the Plan in good faith and not by any means forbidden by
law, thereby satisfying section 1129(a)(3) of the Bankruptcy Code. In
determining that the Plan has been proposed in good faith, the Court has
examined the totality of the circumstances surrounding the filing of the Chapter
11 Cases and the formulation of the Plan and taken into account the absence of
any objections pursuant to section 1129(a)(3) of the Bankruptcy Code. SEE Fed.
R. Bankr. P. 3020(b). The Debtor's Chapter 11 Case was filed, and the Plan was
proposed, with the legitimate and honest purpose of reorganizing the Debtor's
business and maximizing the recovery to creditors and equity security holders
and preserving the jobs of the Debtor's employees.

M. PAYMENTS FOR SERVICES OR COSTS AND EXPENSES (11 U.S.C. Section
1129(A)(4)). Any payment made or to be made by the Debtor for services or for
costs and expenses in or in connection with its Chapter 11 Case, including all
administrative expense and substantial contribution claims under sections 503
and 507 of

10
<PAGE>

the Bankruptcy Code, or in connection with the Plan and incident to the Chapter
11 Case, has been approved by, or is subject to the approval of, the Court as
reasonable, thereby satisfying section 1129(a)(4) of the Bankruptcy Code.

N. DIRECTORS, OFFICERS, AND INSIDERS (11 U.S.C. Section 1129(A)(5)).
The Debtor has complied with section 1129(a)(5) of the Bankruptcy Code and has
disclosed the identity of the directors and senior officers of Reorganized
County Seat.

O. NO RATE CHANGES (11 U.S.C. Section 1129(A)(6)). Section 1129(a)(6)
of the Bankruptcy Code is satisfied because the Plan does not provide for any
change in rates over which a governmental regulatory commission has
jurisdiction.

P. BEST INTERESTS OF CREDITORS TEST (11 U.S.C. Section 1129(A)(7)).
The Plan satisfies section 1129(a)(7) of the Bankruptcy Code. The liquidation
analysis in Section XI.D of the Disclosure Statement and other evidence
proffered or adduced at the Confirmation Hearing (a) are persuasive, credible
and accurate as of the dates such evidence was prepared or presented, or (b)
have not been controverted by other evidence or challenged in any of the
Objections, (c) are based upon reasonable and sound assumptions, (d) provide a
reasonable estimate of the liquidation values upon conversion to a Chapter 7
proceeding, and (e) establish that each holder of a Claim or Interest in an
impaired Class either (i) has accepted the Plan or (ii) will receive or retain
under the Plan, on account of such Claim or Interest, property of a value, as of
the effective date of the Plan, that

11
<PAGE>

is not less that the amount that it would receive if the Debtor were liquidated
under Chapter 7 of the Bankruptcy Code on such date.

Q. ACCEPTANCE BY CERTAIN CLASSES (11 U.S.C. Section 1129(A)(8)). The
Claims in Classes 1, 2 and 3 are Unimpaired and are conclusively presumed to
have accepted the Plan under section 1126(f) of the Bankruptcy Code. Claims in
Classes 4 and the Interests in Class 6 are Impaired and the holders of Claims
and Interests in such Classes were notified of the consequences of voting to
accept the Plan and have accepted the Plan in accordance with sections 1126(c)
and (d) of the Bankruptcy Code. The holders of Claims in Classes 5 and
Interests 7 are not entitled to receive or retain any property under the Plan
and, therefore, are deemed to have rejected the Plan pursuant to section 1126(g)
of the Bankruptcy Code. Although section 1129(a)(8) of the Bankruptcy Code has
not been satisfied with respect to Classes 5 and 7, the Plan is confirmable
because the Plan satisfies section 1129(b) of the Bankruptcy Code with respect
to those Classes. SEE paragraph W below.

R. TREATMENT OF ADMINISTRATIVE AND TAX CLAIMS (11 U.S.C. Section
1129(A)(9)). The treatment of Administrative Claims under Section 2.1 of the
Plan, Other Priority Claims under Section 5.1 of the Plan, and Priority Tax
Claims under Section 2.2 of the Plan satisfies the requirements of section
1129(a)(9)(A), (B) and (C) of the Bankruptcy Code, respectively.

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<PAGE>

S. ACCEPTANCE BY IMPAIRED CLASS (11 U.S.C. Section 1129(A)(10)).
Class 4 (General Unsecured Claims), is an Impaired class of Claims that has
voted to accept the Plan, and, to the Debtor's knowledge, does not contain
"insiders", thus satisfying section 1129(a)(10) of the Bankruptcy Code.

T. FEASIBILITY (11 U.S.C. Section 1129(A)(11)). The Plan satisfies
section 1129(a)(11) of the Bankruptcy Code because confirmation of the Plan is
not likely to be followed by the liquidation or the need for further financial
reorganization of Reorganized County Seat. The Plan presents a workable scheme
of organization and operation and there is a reasonable probability that the
provisions of the Plan will be performed. The Plan is found and determined to
be feasible. Reorganized County Seat will have adequate capital to undertake
its business plan and meet its ongoing obligations, and will be under the
control of competent management.

U. PAYMENT OF FEES (11 U.S.C. Section 1129(A)(12)). All fees payable
under 28 U.S.C. Section 1930 have been paid or will be paid on the Consummation
Date thereby satisfying section 1129(a)(12) of the Bankruptcy Code.

V. CONTINUATION OF RETIREE BENEFITS (11 U.S.C. Section 1129(A)(13)).
The Debtors are not obligated to, and do not, pay any "retiree benefits" as
defined in section 1114(a) of the Bankruptcy Code. Thus, section 1129(a)(13) of
the Bankruptcy Code is not applicable in these Chapter 11 Cases.

13
<PAGE>

W. FAIR AND EQUITABLE; NO UNFAIR DISCRIMINATION (11 U.S.C. Section
1129(B)). Classes 5 and 7 (the "Rejecting Classes") are impaired Classes of
unsecured Claims and Interests that are deemed to have rejected the Plan
pursuant to section 1126(g) of the Bankruptcy Code. These are the only Classes
that have not accepted, or been deemed to have accepted, the Plan. The Debtor
had previously requested confirmation of the Plan notwithstanding the
requirement of Section 1129(c)(8) of the Bankruptcy Code. At the Confirmation
Hearing the Debtor presented uncontroverted evidence that the Plan does not
discriminate unfairly and is fair and equitable with respect to each of the
Rejecting Classes, as required by section 1129(b)(1) of the Bankruptcy Code.
Thus, the Plan may be confirmed notwithstanding the Debtor's failure to satisfy
section 1129(a)(8) of the Bankruptcy Code.

X. PRINCIPAL PURPOSE OF PLAN (11 U.S.C. Section 1129(D)). The
principal purpose of the Plan is not the avoidance of taxes or the avoidance of
the application of Section 5 of the Securities Act of 1933 (15 U.S.C. Section
77e).

Y. MODIFICATIONS TO PLAN. The modifications to the Original Plan set
forth in this Order constitute technical changes and do not materially adversely
affect or change the treatment of any Claim or Interest. Accordingly, pursuant
to Fed. R. Bankr. P. 3019, these modifications do not require additional
disclosure under section 1125 of the Bankruptcy Code or resolicitation of
acceptances or rejections under section 1126 of the Bankruptcy Code, nor do they
require that holders of

14
<PAGE>

Claims or Interests be afforded an opportunity to change previously cast
acceptances or rejections of the Original Plan. Disclosure of the modifications
on the record at the Confirmation Hearing constitutes due and sufficient notice
thereof under the circumstances of this case.

Z. GOOD FAITH SOLICITATION (11 U.S.C. Section 1125(E)). The Debtor
and its agents, accountants, business consultants, representatives, attorneys,
and advisors, have solicited votes on the Plan in good faith and in compliance
with the applicable provisions of the Bankruptcy Code and are entitled to the
protections afforded by section 1125(e) of the Bankruptcy Code and the
exculpation provisions set forth in Section 11.5 of the Plan.

AA. ADEQUATE ASSURANCE. No non-Debtor party to any executory
contract or unexpired lease assumed pursuant to Section 8.1 of the Plan has
objected to such assumption. The Debtor has (i) cured, or provided adequate
assurance that Reorganized County Seat will cure, defaults (if any) under or
relating to each executory contract or unexpired lease assumed under the Plan
and (ii) pursuant to Section 8.3 of the Plan, provided a reasonable and
appropriate procedure for resolving disputes, if any, to cure amounts.

BB. REORGANIZED COUNTY SEAT WILL NOT BE INSOLVENT NOR LEFT WITH
UNREASONABLY SMALL CAPITAL. As of the occurrence of the Consummation Date,
Reorganized County Seat will not be insolvent and will not reasonably be
expected to be rendered

15
<PAGE>

insolvent or left with unreasonably small capital to operate its business as a
result of the Plan, the issuance of the New Senior Notes, entering into the New
Credit Facility or any other transactions contemplated by the Plan.

CC. SATISFACTION OF CONFIRMATION REQUIREMENTS. The Plan satisfies
the requirements for confirmation set forth in section 1129 of the Bankruptcy
Code.

DD. SATISFACTION OF CONDITIONS TO CONFIRMATION. The conditions to
confirmation set forth in Section 12.1 of the Plan have been satisfied or will
be satisfied by entry of this Confirmation Order.

EE. SATISFACTION OF CONDITIONS TO CONSUMMATION. The conditions to
consummation set forth in Section 12.2 of the Plan will be satisfied or
authorized by the entry of this Confirmation Order.

FF. WAIVER OF CONDITIONS. The conditions to Confirmation and
Consummation, set forth in Sections 12.1 and 12.2 of the Plan, shall be subject
to waiver by County Seat in its sole discretion.

GG. EXIT FINANCING. The exit financing required under the Plan will
take the form of: (a) entrance into the New Credit Facility and (b) issuance of
New Senior Notes and Series A Warrants. The exit financing agreements and all
documents, instruments, certificates, opinions and assurances as may be
requested in connection therewith are in the best interests of the Debtor, its
estate, and Reorganized Debtor.

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<PAGE>

HH RELEASES AND DISCHARGES. The releases and discharges of claims
and Causes of Action described in Article XI of the Plan constitute a good faith
compromise and settlement of the matters covered thereby. Such compromises and
settlements are made in exchange for consideration and are in the best interests
of holders of Claims and Interests, are fair, equitable, reasonable and are
integral elements of the restructuring an resolution of this case in accordance
with the Plan.

II. RETENTION OF JURISDICTION. The Court may properly retain
jurisdiction over the matters set forth in Article XIII of the Plan and
paragraph 29 below.

DECREES

NOW THEREFORE, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED THAT,

1. CONFIRMATION. The Plan, as modified herein, is approved and
confirmed under section 1129 of the Bankruptcy Code. The terms of the Plan and
the exhibits thereto are incorporated by reference into and are an integral part
of the Plan and this Confirmation Order.

2. OBJECTIONS. All Objections to confirmation of the Plan that have
not been withdrawn, waived, or settled, and all reservations of rights included
therein, are overruled on the merits. With respect to the three objections as
to the treatment of certain Priority Tax Claims, the Debtor is hereby authorized
to pay the taxing authorities making such objections the full Allowed amount of
their Priority Tax Claim on the Consummation

17
<PAGE>

Date pursuant to Section 2.2(c) of the Plan and the terms set forth on the
record at the Confirmation Hearing.

3. PROVISIONS OF PLAN AND ORDER NONSEVERABLE AND MUTUALLY DEPENDENT.
The provisions of the Plan and this Confirmation Order, including the findings
of fact and conclusions of law set forth herein, are nonseverable and mutually
dependent.

4. PLAN CLASSIFICATION CONTROLLING. The classification of Claims for
purposes of the distributions to be made under the Plan shall be governed solely
by the terms of the Plan. The classifications set forth on the Ballots tendered
to and/or returned by the Debtors' creditors in connection with voting on the
Plan (a) were set forth on the Ballots solely for purposes of voting to accept
or reject the Plan, (b) do not necessarily represent, and in no event shall be
deemed to modify or otherwise affect, the actual classification of such Claims
under the Plan for distribution purposes, and (c) may not be relied upon by any
creditor as representing the actual classification of such Claims under the Plan
for distribution purposes.

5. BINDING EFFECT. Pursuant to section 1141 of the Bankruptcy Code,
effective as of the Confirmation Date, but subject to consummation of the Plan,
and except as expressly provided in the Plan or this Confirmation Order, the
provisions of the Plan (including the exhibits to, and all documents and
agreements executed pursuant to, the Plan) and the Confirmation Order shall be
binding on (a) the Debtor, (b) Reorganized County

18
<PAGE>

Seat, (c) all holders of Claims against and Interests in the Debtor, whether or
not impaired under the Plan and whether or not, if impaired, such holders
accepted the Plan, (e) each Person acquiring property under the Plan, (f) any
other party in interest, (g) any Person making an appearance in these Chapter 11
Cases, and (h) each of the foregoing's respective heirs, successors, assigns,
trustees, executors, administrators, affiliates, officers, directors, agents,
representatives, attorneys, beneficiaries, or guardians.

6. REVESTING OF ASSETS. As provided in Section 9.1 of the Plan, the
property of the Debtor's bankruptcy estate shall revest in Reorganized County
Seat on or following the Consummation Date. Reorganized County Seat may operate
its business and may use, acquire and dispose of property free of any
restrictions of the Bankruptcy Code, the Bankruptcy Rules and the Bankruptcy
Court. As of the Consummation Date, all property of County Seat shall be free
and clear of all Claims and Interests, except as specifically provided in the
Plan or this Order.

7. PAYMENT OF DIP FACILITY. On the Consummation Date, all obligations
of County Seat under the DIP Facility shall be paid or otherwise satisfied in
full in accordance with the terms of the DIP Facility. Without limiting the
foregoing, with the consent of the DIP Lenders, any letters of credit that have
not expired will be replaced with letters of credit as a part of the post-
confirmation financing to be obtained by County Seat or Reorganized County Seat,
as the case may be. Upon payment or

19
<PAGE>

satisfaction in full of all obligations under the DIP Facility in accordance
with the terms thereof, all liens and security interests granted to secure such
obligations will be deemed canceled and will be of no further force and effect.

8. DISCHARGE, RELEASES, LIMITATIONS OF LIABILITY AND INDEMNIFICATION.
The discharge of County Seat and releases provided in Section 11.1 of the Plan,
the exculpation and limitation of liability provisions set forth in Section 11.5
of the Plan and the indemnification obligations set forth in Section 11.6 of the
Plan are hereby approved.

9. AUTOMATIC STAY. The stay in effect in this case pursuant to
Section 362(a) of the Bankruptcy Code shall continue to be effect until the
Consummation Date, and at that time shall be dissolved and of no further force
or effect, subject to the injunction in the Plan and/or Sections 524 and 1141 of
the Bankruptcy Code except that nothing herein shall bar the filing of financing
documents or the taking of such other actions as are necessary to effectuate the
transactions specifically contemplated by the Plan or by this Order.

10. ASSUMPTION OR REJECTION PRIOR TO CONSUMMATION. Unless previously
assumed or rejected by order of the Court or pursuant to Section 365 of the
Bankruptcy Code prior to the date hereof and notwithstanding anything to the
contrary contained in the Plan, the Debtor may assume, reject and/or assume and
assign any executory contract or unexpired lease in accordance with Section 365
of the Bankruptcy Code to the extent a motion seeking

20
<PAGE>

the assumption, rejection and/or assumption and assignment of such leases or
executory contracts is filed on or before entry of this Order (the "Pending
Motions"). County Seat shall have the right to request alternative relief with
respect to the Pending Motions, prior to the granting thereof.

11. POST CONFIRMATION LEASE AMENDMENTS. County Seat is hereby
authorized to amend the leases identified at the Confirmation Hearing (the
"Pending Leases") upon terms substantially similar to the reflected on the
respective summary of basic economic terms which was submitted into evidence at
the Confirmation Hearing. Each Pending Lease shall be deemed amended and
assumed as of the Consummation Date upon execution of final documentation
mutually acceptable to County Seat and the non-Debtor parties to such lease. In
the event County Seat and the non-Debtor parties to any Pending Lease are unable
to reach an agreement with respect to final documentation by November 1, 1997,
County Seat may, by providing written notice to such non-Debtor parties within 7
days thereafter (i) reject such Pending Lease effective as of the Confirmation
Date or such other date as the Court may order, in which case the non-Debtor
parties to such lease shall retain the right to file a claim for rejection
damages in accordance with paragraph 13 of this Confirmation Order as if such
lease were listed on the schedule of rejected leases attached as Exhibit B of
the Plan, PROVIDED THAT, such non-Debtor parties shall have 30 days after the
mailing of County Seat's notice to reject such lease to file such claim, or (ii)

21
<PAGE>

assume such Pending Lease in accordance with Paragraph 12 of this Confirmation
Order, PROVIDED THAT, the 45-day period referred to in Section 8.3 of the Plan
shall commence 45 days after the mailing of written notice of County Seat's
election to assume such lease. The Bankruptcy Court shall retain jurisdiction
to resolve any disputes with respect to any amendments to, or the rejection or
assumption of, the Pending Leases.

12. ASSUMED CONTRACTS AND LEASES. Except as otherwise provided in the
Plan, this Confirmation Order, or in any contract, instrument, release, or other
agreement or document entered into in connection with the Plan, all of the
executory contracts and unexpired leases to which the Debtor is a party are
hereby deemed assumed (including the New Forman Employment Agreement), effective
as of the Consummation Date, except those contracts or leases which (a) have
previously been rejected by County Seat, (b) are the subject of a motion to
reject filed on or before the Confirmation Date, (c) have been previously
terminated by the parties, or (d) are listed on the schedule of Rejected
Contracts annexed to the Plan as Exhibit B. Any monetary amounts by which an
executory contract or unexpired lease may be in default shall be satisfied in
accordance with section 365(b)(1) of the Bankruptcy Code and any disputes with
respect thereto shall be resolved in accordance with Section 8.3 of the Plan.

13. REJECTED CONTRACTS AND LEASES. The executory contracts and
unexpired leases listed on Exhibit B of the Plan

22
<PAGE>

are hereby deemed rejected. If the Debtor's rejection of any such executory
contract or unexpired lease gives rise to a Claim by the non-Debtor party or
parties to such contract or lease, such Claim shall be forever barred and shall
not be enforceable against the Debtor or Reorganized County Seat unless a proof
of Claim is filed with the Bankruptcy Court and served on counsel for
Reorganized County Seat within 30 days after the service of notice (described in
paragraph 31 below) of entry of this Confirmation Order.

14. CERTAIN LANDLORD'S RIGHTS RESERVED. Notwithstanding anything to
the contrary in the Plan or this Confirmation Order (but subject to the
provisions of paragraph 15 below), the Plan shall not affect, nor constitute a
release of, any rights of Berkshire Mall Group, Poughkeepsie Galleria Company,
PCK Development Company, Pyramid Company of Ithaca, Pyramid Champlain Company,
Crystal Run Company, LP, successor to PCM Development Company, Silver City
Galleria Group, Independence Mall Group, Pyramid Company of Buffalo, Pyramid
Company of Watertown, Pyramid Company of Holyoke, Carousel Center Company, LP,
and Pyramid Crossgates Company (collectively, the "Pyramid Landlords") to (a)
offset a mutual debt owing by any of the Pyramid Landlords to the Debtor
pursuant to Sections 553 and 506 of the Bankruptcy Code, or (b) assert rights of
recoupment against the Debtor (in accordance with applicable law), all of such
rights, debts and claims are specifically preserved and reserved notwithstanding
any release, discharge, satisfaction or

23
<PAGE>

settlement under the Plan or this Order, and the Pyramid Landlord's liens, if
any, shall survive confirmation of the Plan.

15. TREATMENT OF CERTAIN OFFSET RIGHTS. Notwithstanding anything
to the contrary in the Plan or this Confirmation Order, to the extent any final
judgment or order is rendered in the currently pending action in the United
States District Court for the Northern District of New York, Civ.No.
96-CIV-1215-RSP-DNH, or in any other action alleging the same or similar facts
brought by the Debtor against the Pyramid Landlords (collectively, the
"Action"), then, to the extent that a Pyramid Landlord is entitled to assert
counterclaims or rights of offset or recoupment in the Action:

a. if the final judgment or order is in the Debtor's favor
against any Pyramid Landlord for an amount less than such Pyramid
Landlord's claim against the Debtor, the amount by which that Pyramid
Landlord's claim exceeds the amount of any such final judgment or order
against the Pyramid Landlord shall be treated as an unsecured claim under
and in accordance with the Plan.

b. if the final judgment or order is in the Debtor's favor
against any Pyramid Landlord for an amount in excess of that Pyramid
Landlord's claim against the Debtor, the amount of such judgment or order
shall be reduced by the amount of the Pyramid Landlord's claim.

c. if the final judgment or order dismisses the Debtor's causes
of action against any Pyramid Landlord, the

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<PAGE>

amount of such Pyramid Landlord's claim against the Debtor shall be treated
as an unsecured claim under and in accordance with the Plan.

16. ASSIGNMENT AND SUBLETTING OF CERTAIN LEASES. Notwithstanding
anything contained in either the Plan or the Disclosure Statement to the
contrary, the provisions of the leases between Pyramid Crossgates Company,
Crystal Run Company, LP, Corporate Property Investors and the Debtor regarding
the assignment or subletting of leases shall be applicable to any attempted
assignment or sublet occurring after the Consummation Date, and any assignment
or subletting before the Consummation Date shall be on notice to the affected
landlords and in accordance with section 365(b)(1) of the Bankruptcy Code.

17. EXTENSION OF TIME TO ASSUME OR REJECT COMDISCO EQUIPMENT LEASE.
Notwithstanding any provision in the Plan or this Order to the contrary, in
order to preserve the status quo while the Debtor and Comdisco, Inc. attempt to
finalize documentation with respect to a proposed amendment to a certain Master
Lease Agreement dated July 7, 1995 (the "Master Lease") and obtain the approval
of the Bankruptcy Court and the Creditors' Committee with respect to such
amendment, the Debtor shall have until the Consummation Date to determine
whether to assume or reject the Master Lease

18. MODIFICATIONS TO PLAN. At the request of its proponents, the
Original Plan is hereby modified pursuant to 11 U.S.C. Section 1127(a) as set
forth in this Confirmation Order,

25
<PAGE>

including, but not limited to, decretal paragraphs 11, 14, 15, 16, 17 and 21
hereof AND as follows:

a. With respect to Section 5.2 of the Plan, there shall be
deemed inserted after the word "agreements" in the second to the last line
of such section, the phrase "or the statutes giving rise to such claims".

b. With respect to Section 11.1(b) of the Plan, the period at
the end of such section shall be deemed deleted and after the word "Plan"
there shall be deemed inserted the phrase "; PROVIDED, HOWEVER, that the
releases provided in this section shall not apply to or otherwise affect
the claims, if any, of the United States of America EX REL, the Internal
Revenue Service against parties other than County Seat or Reorganized
County Seat."

c. With respect to the second grammatical paragraph of Section
9.6 of the Plan, the phrase beginning "a date which is" through the end of
such sentence shall be deemed deleted and there shall be deemed inserted in
its place the phrase "Consummation Date."

d. The last sentence of Section 9.3 of the Plan shall be deemed
deleted and in its place there shall be deemed inserted the following:
"Three additional directors (the "Committee Designated Directors") shall be
selected by the Creditors' Committee by announcing their identities at the
Confirmation Hearing. The remaining two directors shall be selected by the
Committee Designated Directors at the

26
<PAGE>

first meeting of directors held after the Consummation Date."

The Original Plan and the modifications set forth above together constitute the
Plan.

19. GENERAL AUTHORIZATIONS. County Seat is authorized and empowered
(i) to execute, deliver, modify and/or file all exhibits to the Plan, documents
and agreements introduced into evidence by the Debtor at the Confirmation
Hearing (including all exhibits and attachments thereto) and any and all other
documents and agreements necessary to consummate and implement the Plan and (ii)
to perform any and all corporate acts and/or actions in implementing the Plan,
including but not limited to the following:

a. ARTICLES OF INCORPORATION. To file the Restated Certificate
of Incorporation substantially in the form as that attached as Exhibit C to
the Plan with the Secretary of State of the State of Minnesota, and upon
such filing, the Restated Bylaws substantially in the form as that attached
as Exhibit D to the Plan shall be deemed effective pursuant the general
corporate laws of the state of Minnesota without further corporate act or
action and without any requirement of further action by the stockholders or
directors of County Seat. Without limitation, as of the Consummation Date,
each of the directors of the Debtor shall be deemed to have resigned and
each of the persons designated in the Plan, this Confirmation Order or by
the

27
<PAGE>

Creditors' Committee and disclosed at the Confirmation Hearing shall be
deemed to be elected as a member of the Post Reorganization Board.
b. NEW CREDIT FACILITY. To execute and deliver any of the
documents and to perform any and all actions related to the New Credit
Facility without further corporate act or action under applicable law and
without any requirement of further action by the stockholders or directors
of County Seat. The New Credit Facility contemplates the creation of new
liens and security interests. The security interests and liens granted to
the New Credit Facility lenders under the New Credit Facility documents
(and all documents, instruments and agreements related thereto and annexes,
exhibits and schedules appended thereto, and/or other documents related to
the Plan) shall constitute, as of the Consummation Date, legal, valid and
duly perfected first priority liens and security interests in and to the
collateral specified therein, subject only, where applicable, to the
pre-existing liens and security interests specified therein or contemplated
thereby.

On the Consummation Date, all of the security interests and liens
to be created pursuant to the New Credit Facility shall be deemed created
and shall be valid and perfected without any requirement of filing or
recording of financing statements, mortgages or other evidence of such
security interests and liens and without any approvals or

28
<PAGE>

consents from governmental entities or any other persons and regardless of
whether or not there are any omissions, errors or deficiencies in the
property descriptions attached to any filing or New Credit Facility
document.

c. NEW COMMON STOCK. To execute and deliver any and all
documents and perform any and all actions relating to the issuance and
distribution of the New Common Stock, as well as all other matters
involving undertakings and commitments relating to such securities as
contemplated by the Plan, including but not limited to the listing of
securities for trading and the registration of the offer and sale of
securities of County Seat, all of which shall be deemed effective and
authorized without further corporate act or action under applicable law and
without any requirement of further action by the stockholders or directors
of County Seat.

d. NEW SENIOR NOTES. To issue the New Senior Notes, as well as
all other matters involving undertakings and commitments relating to such
securities as contemplated by the Plan, including but not limited to the
listing of securities for trading and the registration of the offer and
sale of securities of County Seat.

e. NEW SENIOR NOTE AND WARRANT PURCHASE AGREEMENT. To execute,
deliver and perform any and all of the documents or acts related to the New
Senior Note and Warrant Purchase Agreement and any indenture related
thereto, all of

29
<PAGE>

which shall be deemed authorized pursuant to applicable law without further
corporate act or action and without requirement of further action by the
stockholders or directors of County Seat.

f. NEW SERIES B WARRANTS. To execute, deliver and perform any
and all of the documents or acts related to the New Series B Warrants, as
well as all other matters involving undertakings and commitments relating
to such securities as contemplated by the Plan, including but not limited
to the listing of securities for trading and the registration of the offer
and sale of securities of County Seat.

g. REGISTRATION RIGHTS AGREEMENT. To execute, deliver and
perform any and all of the documents or acts related to the Registration
Rights Agreement.

20. EXEMPTION FROM CERTAIN TAXES. Pursuant to section 1146(c) of the
Bankruptcy Code, the issuance, transfer, or exchange of any security, or the
making, delivery, filing, or recording of any instrument of transfer under the
Plan, shall not be taxed under any law imposing a recording tax, stamp tax,
transfer tax, or similar tax. All filing or recording officers, wherever
located and by whomever appointed, are hereby directed to comply with the
foregoing and this Court specifically retains jurisdiction to enforce the
foregoing direction, by contempt or otherwise.

30
<PAGE>

21. BAR DATE FOR ADMINISTRATIVE CLAIMS. Pursuant to Section 6.1 of
the Plan and unless as otherwise ordered by this Court, all holders of asserted
Administrative Claims, other than Professional Fees and Claims arising under the
DIP Facility, not paid prior to the Confirmation Date must file with the
Bankruptcy Court and serve on counsel for the Debtor and the Creditors'
Committee requests for payment on or before 30 days after the Consummation Date
(the "Administrative Claims Bar Date") or forever be barred from doing so. All
applications for final allowance of compensation and reimbursement of
Professional Fees and expenses ("Final Fee Applications") pursuant to sections
327, 328, 330, 331, or 1103 of the Bankruptcy Code must be filed with the
Bankruptcy Court and served on counsel for County Seat and the Creditors'
Committee on or before 60 days after the Consummation Date (the "Professional
Fees Bar Date"). Notice of the occurrence of the Consummation Date served on
all parties entitled to notice of entry of this Confirmation Order shall set
forth the Administrative Claims Bar Date and the Professional Fees Bar Date and
constitute adequate and sufficient notice of the such bar dates. The Debtor
shall have 60 days after the Administrative Claims Bar Date to review and object
to such request for payment and 45 days following the Professional Fees Bar Date
to review and object to Final Fee Applications (unless such objection periods
are extended by order of this Court). Notwithstanding the foregoing, (i) no
request for payment of an Administrative Claim which is paid or payable by the
Debtor or

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<PAGE>

Reorganized County Seat in the ordinary course of business need be filed, and
(ii) the Debtor and Reorganized County Seat shall be authorized to pay any
expenses, including any fees and expenses of professionals, accruing from and
after the Consummation Date without any application to the Court.

22. RESOLUTION OF CLAIMS. Except as otherwise ordered by this Court,
any Claim other than an Administrative Claim that is not an Allowed Claim shall
be determined, resolved, or adjudicated in accordance with the terms of the
Plan. The Debtor or Reorganized County Seat, may (a) until 180 days after the
Consummation Date (unless extended by order of this Court) file objections in
this Court to the allowance of any Claims not heretofore objected to (whether or
not a proof of Claim has been filed) and/or (b) amend its schedules at any time
before its Chapter 11 Case is closed; PROVIDED, HOWEVER, that notwithstanding
anything in the Plan or the Confirmation Order to the contrary, the agreements
and contentions of the Debtor and the Pyramid Landlords regarding (i) whether
section 502(b)(6) of the Bankruptcy Code or any other section of the Bankruptcy
Code limits the amount of the Pyramid Landlords' claims and/or counterclaims
against the Debtor, and (ii) in which court such claims and counterclaims should
be determined, are not adjudicated pursuant hereto and are reserved by the
Debtor and the Pyramid Landlords.

23. ALLOWED INTERESTS. The Old Preferred Stock Interests shall be
Allowed Interests with respect to each holder

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<PAGE>

thereof based on the Share totals listed on Exhibit A of the Plan.

24. EXEMPTION FROM SECURITIES LAWS. The provisions of Section 1145 of
the Bankruptcy Code shall be applicable to the offering, issuance, and
distribution of the New Common Stock and the Series B Warrants and the New
Common Stock upon exercise of such Warrants. Therefore, these securities are
exempt from the requirements of Section 5 of the Securities Act of 1933, as
amended, as well as any state or local law requiring registration for the offer
or the sale of these securities or the registration of the issuer.

25. RECORD DATE. For purposes of determining the record holder of
claims for distributions under the Plan, the record date shall be the fifth (5)
Business Day following the Consummation Date.

26. PAYMENT OF FEES. All fees payable by County Seat under 28 U.S.C.
Section 1930 shall be paid.

27. DISTRIBUTION OF EXCESS FUNDS. Amounts in respect of undeliverable
distributions made through the Disbursing Agent of the indenture trustee, agent
or servicer shall be returned to Reorganized County Seat until such
distributions are claimed. All claims for undeliverable distributions shall be
made on or before the fifth (5th) anniversary of the Consummation Date. After
such date, all unclaimed property shall revert to Reorganized County Seat and
the claim of any holder or successor to such holder with respect to such
property shall be discharged and

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<PAGE>

forever barred notwithstanding any federal or state escheat laws to the
contrary.

28. FAILURE TO CONSUMMATE PLAN. In accordance with Section 14.5 of
the Plan, if consummation of the Plan does not occur, then (a) the Plan and (b)
any settlement or compromise embodied in the Plan (including the fixing or
limiting to an amount certain any Claim or Class of Claims), assumption or
rejection of executory contracts or leases affected by the Plan, and any
document or agreement executed pursuant to the Plan, shall be null and void in
all respects. In such event, nothing contained in the Plan or this Confirmation
Order, and no acts taken in preparation for consummation of the Plan, shall
(i) constitute a waiver or release of any Claims by or against, or any Interests
in, the Debtor or any other Person, (ii) prejudice in any manner the rights of
the Debtor or any other Person, (iii) constitute an admission of any sort by the
Debtor or any other Person, or (iv) be construed as a finding of fact or
conclusion of law with respect thereto.

29. RETENTION OF JURISDICTION. Pursuant to sections 105(a) and 1142
of the Bankruptcy Code, and notwithstanding the entry of this Confirmation Order
or the occurrence of the Consummation Date, this Court shall retain exclusive
jurisdiction over all matters arising out of, and related to, the Chapter 11
Cases and the Plan to the fullest extent permitted by law, including, among
other things, jurisdiction over those items and matters set forth in Article
XIII of the Plan.

34
<PAGE>

30. AUTHORIZATION TO CONSUMMATE PLAN. The Court directs that Fed. R.
Civ. P. 62(a) shall not apply to this Confirmation Order and authorizes the
Debtor to consummate the Plan immediately after entry of this Confirmation
Order.

31. NOTICE OF ENTRY OF CONFIRMATION ORDER. On or before the tenth
(10th) Business Day following the date of entry of this Confirmation Order, the
Debtor shall serve notice of entry of this Confirmation Order pursuant to Fed.
R. Bankr. P. 2002(f)(7), 2002(k), and 3020(c) on all creditors, equity security
holders, the United States Trustee and other parties in interest, by causing a
notice of entry of the Confirmation Order in substantially the form of the
notice annexed hereto as Exhibit B, which form is hereby approved (the "Notice
of Confirmation"), to be delivered to such parties by first class mail, postage
prepaid. The Debtor is hereby authorized and directed to effect mailing of the
Notice of Confirmation to holders of public debt and equity securities in the
manner set forth in the Solicitation Procedures Order; PROVIDED, HOWEVER, that
notice need not be given or served under the Bankruptcy Code, the Bankruptcy
Rules, or this Confirmation Order to any Person to whom the Debtor mailed a
notice of the Confirmation Hearing, but received such notice returned marked
"undeliverable as addressed," "moved - left no forwarding address" or
"forwarding order expired," or similar reason, unless the Debtor has been
informed in writing by such Person of that Person's new address. The notice
described

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<PAGE>

herein is adequate under the particular circumstances and no other or further
notice is necessary.

32. CONSUMMATION DATE. Upon the occurrence of the Consummation Date,
the Plan shall be deemed substantially consummated.

33. REFERENCES TO PLAN PROVISIONS. The failure specifically to
include or reference any particular provision of the Plan in this Confirmation
Order shall not diminish or impair the effectiveness of such provision, it being
the intent of the Court that the Plan be confirmed in its entirety.

34. CONFIRMATION ORDER CONTROLLING. The provisions of the Plan and of
this Confirmation Order shall be construed in a manner consistent with each
other so as to effect the purposes of each; PROVIDED, HOWEVER, that if there is
determined to be any inconsistency between any Plan provision and any provision
of this Confirmation Order that cannot be so reconciled, then, solely to the
extent of such inconsistency, the provisions of this Confirmation Order shall
govern and any such provision of this Confirmation Order shall be deemed a
modification to the Plan and shall control and take precedence.

35. Reorganized County Seat shall be authorized to pay any expenses,
including any fees and expenses of professionals accruing from and after the
Consummation Date, without any application to the Court.

36. County Seat is authorized and empowered to retain, without
further order of this Court, one or more exchange,

36
<PAGE>

disbursing or similar agents with respect to the distributions to be made under
the Plan.

37. PUBLICATION/NOTICE. Within five (5) Business Days after entry of
this Confirmation Order, or within such further time as this Court may allow,
the Debtor shall cause to be published one time in THE WALL STREET JOURNAL, the
DALLAS MORNING NEWS and the MINNEAPOLIS STAR TRIBUNE notice of entry of this
Confirmation Order in substantially the same form as that attached as Exhibit B
hereto.

38. RIGHTS OF DIP LENDERS. Notwithstanding anything herein to the
contrary, nothing in this Confirmation Order shall be deemed to alter, amend, or
modify the terms, conditions, rights, and remedies of the agent and lender
parties under the DIP Facility.

Dated: Wilmington, Delaware
October 1, 1997

/s/ Helen S. Balick
------------------------------
Hon. Helen S. Balick

<PAGE>

EXHIBIT 3.1

ARTICLES OF AMENDMENT AND RESTATEMENT
OF THE ARTICLES OF INCORPORATION

COUNTY SEAT STORES, INC.

1. The name of the Corporation is County Seat stores, Inc. (hereinafter
referred to as the "Corporation").

2. These Articles of Amendment and Restatement of the Articles of
Incorporation have been adopted and effected in conformity with chapter 302A of
the Business Corporation Act of the State of Minnesota pursuant to the order,
dated October 1, 1997, of the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"), confirming the Plan of Reorganization of
County Seat Stores, Inc., dated August 22, 1997, in Chapter 11 case number 96-
1638 (HSB). The Bankruptcy Court has jurisdiction over the Corporation's
Chapter 11 case pursuant to 28 U.S.C. Sections 157 and 1334.

3. The text of the Articles of Incorporation is hereby amended and
restated to read in its entirety as follows:

AMENDED AND RESTATED
ARTICLES OF INCORPORATION

COUNTY SEAT STORES, INC.

ARTICLE I

The name of the Corporation is County Seat Stores, Inc. (hereinafter
referred to as the "Corporation").

ARTICLE II

The address of the registered office of the Corporation in the State of
Minnesota is Multifoods Tower, 33 South Sixth Street, Minneapolis, Minnesota
55402. The name of the registered agent of the Corporation at such address is
The Prentice-Hall Corporation.

ARTICLE III

The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the laws of the State of
Minnesota.

<PAGE>

ARTICLE IV

(A) The total number of shares of stock that the Corporation shall have
authority to issue is 40,000,000 shares of common stock, par value $.0l per
share, and 1,000,000 shares of preferred stock, par value $.0l per share (the
"Preferred Stock").

(B) The board of directors of the Corporation is expressly authorized, by
resolution or resolutions, to provide for the issue of all or any shares of the
Preferred stock, in one or more series, and to fix for each such series such
voting powers, full or limited, and such designations, preferences and relative,
participating, optional, or other special rights and such qualifications,
limitations, or restrictions thereon, as shall be stated and expressed in the
resolution or resolutions adopted by the board of directors of the Corporation
as are consistent with paragraph (C) of this ARTICLE IV. The number of
authorized shares of Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
a majority of the holders of the voting power of all the then outstanding shares
of the capital stock of the Corporation entitled to vote generally in the
election of directors voting together as a single class, without a separate vote
of the holders of the Preferred Stock, or any series thereof, unless a vote of
any such holders is required pursuant to any Preferred Stock designation.

(C) The Corporation is subject to the requirements of section 1123 (a) (6)
of the United States Bankruptcy Code, 11 U.S.C. Sections 101-1330, as amended
(the "Bankruptcy Code"), and shall be prohibited from issuing any nonvoting
equity securities, and shall, at all times, provide, as to the several classes
of securities from time-to-time possessing voting power, an appropriate
distribution of power among such classes, including, in the case of any class of
equity securities having a preference over another class of equity securities
with respect to dividends, adequate provisions for the election of directors
representing such preferred class in the event of default in the payment of such
dividends consistent with the requirements of section 1123(a)(6) of the
Bankruptcy Code.

ARTICLE V

Any action required or permitted to be taken at a meeting of the board of
directors of the Corporation, other than an action requiring shareholder
approval, may be taken by written action

2
<PAGE>

signed by the number of directors that would be required to take the same action
at a meeting of the board of directors at which all directors were present.

ARTICLE VI

No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty by such director as a director; provided, however, that this Article VI
shall not eliminate or limit the liability, of a director to the extent provided
by applicable law (i) for any breach of the director's duty of loyalty to the
Corporation or its shareholders, (ii) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (iii) under
Section 302A.559 of the Business Corporation Act of the State of Minnesota (the
"Business Corporation Act") or Section 80A.23 of the Minnesota Statutes, (iv)
for any transaction from which the director derived an improper personal
benefit, or (v) for any act or omission occurring prior to the effective date of
this Article VI. No amendment to or repeal of this Article VI shall apply to or
have any affect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.

ARTICLE VII

The Corporation shall, to the fullest extent permitted by Section 302A.521
of the Business Corporation Act, as the same may be amended and supplemented,
indemnify any and all persons whom it shall have power to indemnify under said
section from and against any and all expenses, liabilities, or other matters
referred to in or covered by said section.

IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
and Restatement of the Articles of Incorporation to be signed by Matthew J.
Knopf, its senior vice president and general counsel, this 23rd day of October,
1997.

COUNTY SEAT STORES, INC.

/s/ Matthew J. Knopf
------------------------
Matthew J. Knopf

<PAGE>

EXHIBIT 3.2

AMENDED AND RESTATED BYLAWS

COUNTY SEAT STORES, INC.
(A MINNESOTA CORPORATION)

ARTICLE I

SHAREHOLDERS

1. CERTIFICATES REPRESENTING SHARES. All the shares of the corporation
shall be certificated. A certificate representing shares of the corporation
shall contain on its face the statements required by Section 302A.417, Minnesota
Statutes, and by any other applicable provision of law, and shall be signed as
provided in Article III, Section 5 of these Bylaws, provided that if a
certificate is signed by a transfer agent or registrar, the signature of any
such officer and the corporate seal, if any, upon such certificate may be
facsimiles, engraved or printed. If a person signs or has a facsimile signature
placed upon a certificate while an officer, transfer agent, or registrar of the
corporation, the certificate may be issued by the corporation, even if the
person has ceased to have that capacity before the certificate is issued, with
the same effect as if the person had that capacity at the date of its issue.

2. FRACTIONS OF A SHARE. The corporation may issue fractions of a share
originally or upon transfer. Fractions of a share, if issued shall entitle the
holder to exercise voting rights or to receive distributions. Fractions of a
share may be represented by a certificate. If the corporation does not issue
fractions of a share, it shall comply with the alternative requirements of
Section 302A.423, Minnesota Statutes, as applicable.

3. SHARE TRANSFERS. Upon compliance with any provisions restricting the
transferability of shares that may be set forth in the Articles of
Incorporation, these Bylaws, or any resolution or written agreement in respect
thereof, transfers of shares of the corporation shall be made only on the books
of the corporation by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney duly executed and filed with an
officer of the corporation, or with a transfer agent or a registrar and on
surrender of the certificate or certificates for such shares properly endorsed
and the payment of all taxes thereon. Except as may be otherwise provided by
law or these Bylaws, the person in whose name shares stand on the books of the
corporation shall be deemed the owner thereof for all purposes as regards the
corporation.

4. CERTIFICATION OF BENEFICIAL OWNER. A resolution approved by the
affirmative vote of a majority of the directors present may establish a
procedure whereby a shareholder may certify in writing to the corporation that
all or a portion of the shares registered in the name of

<PAGE>

the shareholder are held for the account of one or more beneficial owners. Upon
receipt by the corporation of such certification, the persons specified as
beneficial owners' rather than the actual shareholders, are deemed the
shareholders for the purposes specified in such certification.

5. MEANING OF CERTAIN TERMS. As used herein in respect of the right to
notice of a meeting of shareholders or a waiver thereof or to participate or
vote thereat or to consent in writing in lieu of a meeting, as the case may be,
the term "share" or "shares" or "shareholder" or "shareholders" refers to an
outstanding share or shares and to a holder or holders of record of outstanding
shares when the corporation is authorized to issue only one class of shares, and
said references are also intended to include any outstanding share or shares and
any holder or holders of record of outstanding shares of any class upon which or
upon whom the Articles of Incorporation confer such rights where there are two
or more classes or series of shares or upon which or upon whom Chapter 302A,
Minnesota Statutes, confers such rights notwithstanding that the Articles of
Incorporation may provide for more than one class or series of shares, one or
more of which are limited or denied such rights thereunder.

6. SHAREHOLDER MEETINGS

PLACE OF MEETINGS. Each meeting of the shareholders shall be held at
the principal executive office of the corporation or at such other place as may
be designated by the Board of Directors or the chief executive officer of the
corporation; provided, however, that any meeting called by or at the demand of a
shareholder or shareholders shall be held in the county where the principal
executive office of the corporation is located.

REGULAR MEETINGS. Regular meetings of the shareholders shall be held
during the month of April, on the date and at the time and place fixed, from
time to time, by the Board of Directors of the corporation; provided, however,
that if the Board of Directors fails to designate a date for such regular
meeting or if for any other reason a regular meeting has not been held during
the immediately preceding 15 months, a shareholder or shareholders holding three
percent or more of the voting power of all shares entitled to vote may demand a
regular meeting of shareholders by written demand given to the chief executive
officer or chief financial officer of the corporation. At each regular meeting
the shareholders shall elect qualified successors for directors who serve for an
indefinite term or whose terms have expired or are due to expire within six
months after the date of the meeting and may transact any other business,
provided, however, that no business with respect to which special notice is
required by law shall be transacted unless such notice shall have been given.

SPECIAL MEETINGS. In addition to any procedures for calling special
meetings of the shareholders provided for in the Articles of Incorporation of
the corporation, a special meeting of the shareholders may be called for any
purpose or purposes at any time by the chief executive officer of the
corporation, the chief financial officer of the corporation, or any two or more
members of the Board of Directors of the corporation; or by one or more
shareholders holding not less than ten percent of the voting power of all shares
of the corporation entitled to

2
<PAGE>

vote, who shall demand such special meeting by written notice given to the chief
executive officer or the chief financial officer of the corporation specifying
the purposes of such meeting.

MEETINGS HELD UPON SHAREHOLDER DEMAND. Within 30 days of receipt of a
demand upon the chief executive officer or the chief financial officer of the
corporation from any shareholder or shareholders entitled to call a meeting of
the shareholders, it shall be the duty of the Board of Directors of the
corporation to cause a special or regular meeting of shareholders, as the case
may be, to be duly called and held on notice no later than ninety days after
receipt of such demand. If the Board of Directors of the corporation fails to
cause such a meeting to be called and held as required by this Section, the
shareholder or shareholders making the demand may call the meeting by giving
notice as provided herein at the expense of the corporation.

NOTICE OR WAIVER OF NOTICE. Notice, as defined by Section 302A.011,
Minnesota Statutes, of all meetings shall be given by, or at the direction of
the person calling the meeting, except where the meeting is an adjourned meeting
and the date, time, and place of the meeting were announced at the time of
adjournment of the meeting. Except as may otherwise be required herein or by
any provision of law, the notice shall be given at least ten days, and not more
than sixty days, before the date of the meeting. The notice shall contain the
date, time, and place of the meeting, and any other information required by
Chapter 302A, Minnesota Statutes. The business transacted at a special meeting
shall be limited to the purposes stated in the notice of the meeting;
shareholder may waive notice of the date, time, place and purpose of any meeting
of shareholders. A waiver of notice by a shareholder is effective whether given
before, at, or after the meeting, and whether given in writing, orally, or by
attendance.

Attendance by a shareholder at a meeting is a waiver of notice of that meeting,
except where the shareholder objects at the beginning of the meeting to the
transaction of business because the meeting is not lawfully called or convened,
or objects before a vote on an item of business because the item may not
lawfully be considered at that meeting and does not participate in the
consideration of the item at that meeting.

DETERMINATION OF SHAREHOLDERS ENTITLED TO NOTICE AND VOTE. The
directors shall fix a date not more than sixty nor less than three days before
the date of a meeting of shareholders as the date for the determination of the
holders of shares entitled to notice of and entitled to vote at the meeting.

PROXY REPRESENTATION. A shareholder may cast or authorize the casting
of a vote by filing a written appointment of a proxy with an officer of the
corporation at or before the meeting at which the appointment is to be
effective. The appointment of a proxy is valid for eleven months, unless a
longer period is expressly provided in the appointment. No appointment is
irrevocable unless the appointment is coupled with an interest in the shares or
in the corporation.

3
<PAGE>

QUORUM. Except as otherwise required by the Articles of Incorporation
of the corporation, the holders of a majority of the voting power of the shares
entitled to vote at a meeting are a quorum for the transaction of business. If
a quorum is present when a duly called or held meeting is convened, the
shareholders present may continue to transact business until adjournment, even
though the withdrawal of a number of shareholders originally present leaves less
than the proportion or number otherwise required for quorum.

ACTS OF SHAREHOLDERS. Except where the Articles of Incorporation of
the corporation or Chapter 302A, Minnesota Statutes, requires a larger
proportion or number, the shareholders shall take action by the affirmative vote
of the holders of a majority of the voting power of the shares present and
entitled to vote at a duly held meeting.

VOTING RIGHTS. A shareholder shall have one vote for each share held
which is entitled to vote. Except as otherwise required by law, a holder of
shares entitled to vote may vote any portion of the shares in any way the
shareholder chooses. If a shareholder votes without designating the proportion
or number of shares voted in a particular way, the shareholder is deemed to have
voted all of the shares in that way.

7. WRITTEN ACTION. An action required or permitted to be taken at a
meeting of the shareholders may be taken without a meeting by written action
signed by all of the shareholders entitled to vote on that action. The written
action is effective when it has been signed by all of those shareholders, unless
a different effective time is provided in the written action.

ARTICLE II

BOARD OF DIRECTORS

1. FUNCTIONS GENERALLY. The business and affairs of the corporation
shall be managed by or under the direction of a Board of Directors. The Board
of Directors of the corporation may fix the compensation of directors.

2. QUALIFICATIONS AND NUMBER. Each director shall be a natural person.
A director need not be a shareholder, a citizen of the United States, or a
resident of the State of Minnesota. The Board of Directors of the corporation
shall consist of at least seven (7) directors. Subject to the Articles of
Incorporation of the corporation, the shareholders at each regular meeting shall
determine the number of directors (but not less than seven) to constitute the
Board, provided that thereafter the authorized number of directors may be
increased by the shareholders or the Board or, subject to the provisions of
Section 302A.223, Minnesota Statutes, decreased (but not less than one) by the
shareholders.

3. ELECTION AND TERM. Upon confirmation of the corporation's plan of
reorganization dated August 22, 1997 (the "Plan), the Board of Directors of the
corporation shall consist of

4
<PAGE>

those persons selected pursuant to Section 9.3 of the Plan who shall hold office
until the first annual meeting of the shareholders, and until their successors
are elected and qualified. Thereafter directors who are elected at an annual
meeting of shareholders shall hold office until the next annual meeting of
shareholders and until their successors are elected and qualified, and directors
who are elected in the interim to fill vacancies and newly created directorships
shall hold office until qualified successors are elected at the next annual or
special meeting of the shareholders, or, in each case, until the earlier death,
resignation, removal or disqualification of the director. Vacancies on the
Board of Directors resulting from the death, resignation, removal, or
disqualification of a director may be filed by the affirmative vote of a
majority of the remaining directors, even though less than a quorum. Vacancies
on the Board of Directors resulting from newly created directorships may be
filled by the affirmative vote of a majority of the directors serving at the
time of the increase.

4. MEETINGS

ANNUAL MEETING. The annual meeting of the Board of Directors shall be
held immediately following the annual meeting of the shareholders and no notice
of such meeting shall be necessary to the directors in order legally to
constitute the meeting, provided a quorum shall be present. In the event that
the annual meeting is not held immediately following the annual meeting of the
shareholders, the annual meeting shall be held at such time and place as shall
be specified in a notice given as hereinafter provided for meetings of the Board
of Directors of the corporation, or as shall be specified in a written waiver of
notice signed by all of the directors as hereinafter provided.

SPECIAL MEETINGS. A special meeting of the Board of Directors may be
called for any purpose or purposes at any time by any member of the Board by
giving notice as hereinafter provided to all directors of the date, time and
place of the meeting. The notice need not state the purpose of the meeting.

TIME. Meetings shall be held at such time as the Board of Directors
or any committee thereof, as the case may be, shall fix.

PLACE. Meetings shall be held at such place within or without the
State of Minnesota as shall be fixed by the Board.

CALL, NOTICE, WAIVER OF NOTICE. Meetings may be called by giving ten
days' notice, as defined by Section 302A.011, Minnesota Statutes, to all
directors, or a shorter time period of notice as may be sufficient for the
convenient assembly of the directors there at. If the day or date, time, and
place of a meeting have been announced at a previous meeting of the Board, no
notice is required. A director may waive notice of a meeting of the board or of
any committee thereof. A waiver of notice by a director entitled to notice is
effective whether given before, at, or after the meeting, and whether given in
writing, orally, or by attendance. Attendance by a director at a meeting is a
waiver of notice of that meeting, except where the

5
<PAGE>

director objects at the beginning of the meeting to the transaction of business
because the meeting is not lawfully called or convened and does not participate
thereafter in the meeting.

QUORUM. At all meetings of the Board, the greater of a majority of
the directors currently holding office or five of the directors then in office
(or, in the event there are less than five directors, then all directors), but
in any case not less than one-third of the entire board (including any
vacancies), shall constitute a quorum. In the absence of a quorum, a majority
of the directors present may adjourn a meeting from time to time until a quorum
is present. If a quorum is present when a duly called or held meeting is
convened, the directors present may continue to transact business until
adjournment, even though the withdrawal of a number of directors originally
present leaves less than the proportion or number otherwise required for a
quorum.

ACTION. Except where the Articles of Incorporation of the
corporation, Chapter 302A, Minnesota Statutes, or the provisions of the
following sentence requires a larger proportion or number, the Board shall take
action by the affirmative vote of a majority of directors present at a duly held
meeting.

CHAIRMAN OF THE MEETING. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, of any, and if present and acting,
otherwise by any other director chosen by the Board.

5. REMOVAL OF DIRECTORS. One or more directors may be removed in
accordance with the provisions of Section 302A.223, Minnesota Statutes.

6. COMMITTEES. A resolution approved by the affirmative vote of a
majority of the Board may establish one or more committees having the authority
of the Board in the management of the business of the corporation only to the
extent provided in the resolution. Committees may include a special litigation
committee consisting of one or more independent directors or other independent
persons to consider legal rights or remedies of the corporation and whether
those rights and remedies should be pursued. Committees, other than the special
litigation committee, are subject at all times to the direction and control of
the Board Committee members shall be natural persons. A committee shall consist
of one or more persons, who need not be directors, and who shall be appointed by
affirmative vote of a majority of the directors present at a duly held Board
meeting.

7. WRITTEN ACTION. An action which requires shareholder approval and
which is required or permitted to be taken at a Board meeting may be taken by
written action signed by all of the directors. An action which does not require
shareholder approval and which is required or permitted to be taken at a Board
meeting may be taken by written action signed by the number of directors that
would be required to take the same action at a meeting of the Board at which all
directors were present. The written action is effective when signed by the
required number of directors, unless different effective time is provided in the
written action. When

6
<PAGE>

written action is permitted to be taken by less than all directors, all
directors shall be notified immediately of the text of such action and its
effective date.

8. TELEPHONE MEETINGS AND PARTICIPATION. A conference among directors by
any means of communication through which the directors may simultaneously hear
each other during the conference constitutes a Board meeting, if the same notice
is given of the conference as would be required for a meeting, and if the number
of directors participating in the conference as would be required for a meeting,
and if the number of directors participating in the conference would be
sufficient to constitute a quorum at a meeting. Participation in a meeting by
that means constitutes presence in person at the meeting. A director may
participate in a Board meeting not heretofore described in this paragraph, by
any means of communication through which the director, other directors so
participating, and all directors physically present at the meeting may
simultaneously hear each other during the meeting. Participation in a meeting
by that means constitutes presence in person at the meeting.

9. ABSENT DIRECTORS. A director may give advance written consent or
opposition to a proposal to be acted on at a Board meeting. If the director is
not present at the meeting, consent or opposition to a proposal does not
constitute presence for purposes of determining the existence of a quorum, but
consent or opposition shall be counted as a vote in favor of or against the
proposal and shall be entered in the minutes or other record of action at the
meeting, if the proposal acted on at the meeting is substantially the same or
has substantially the same effect as the proposal to which the director has
consented or objected.

10. SHAREHOLDER AGREEMENTS. The provisions of this Article II are and
shall remain subject to the terms and provisions of any agreement or agreements
among the shareholders of the corporation, or the shareholders of the parent
corporation of the corporation.

ARTICLE III

OFFICERS

1. OFFICERS' ELECTION. Subject to the provisions of subsection (b) of
this Section 1, the officers of the corporation shall be chosen by the Board of
Directors and shall be a chairman of the board, chief executive officer,
president, one or more vice presidents, a secretary and a treasurer. The Board
of Directors may also elect one or more assistant secretaries and assistant
treasurers and such other officers and agents as the Board may at any time and
from time to time determine to be advisable. All such officers shall be elected
at the annual meeting of directors provided for in Article II, Section 4 of
these Bylaws. If any office is not filled at such annual meeting, it may be
filled at any subsequent regular or special meeting at the Board. The Board of
Directors at such annual meeting, or any subsequent regular or special meeting
may also elect or appoint such other officers and assistant officers and agents
as may be deemed advisable. The chief executive officer, president, or other
officers, need not be directors. Any two or more

7
<PAGE>

offices may be held by the same person. All officers and assistant officers
shall hold office until their successors are elected or until their earlier
death, resignation or removal; provided that any officer or assistant officer
elected or appointed by the Board of Directors may be removed with or without
cause at any regular or special meeting of the Board, but such removal shall be
without prejudice to the contract rights, if any, of the person removed.

2. VACANCIES. A vacancy in an office because of death, resignation,
removal, disqualification or other cause may, or in the case of a vacancy in the
office of chief executive officer or chief financial officer, shall be filled
for the unexpired portion of the term by the Board, except that, at any time
that the shareholders are entitled to elect the Chairman of the Board pursuant
to Section 1(b) of this Article III, a vacancy in that office may only be filled
by the shareholders.

3. POWER OF OFFICERS. Each officer shall have, subject to these Bylaws,
in addition to the duties and powers specifically set forth herein, such powers
and duties as are commonly incident to his office and such duties and powers as
the Board of Directors shall from time to time designate. All officers shall
perform their duties subject to the directions and under the supervision of the
Board of Directors.

4. THE CHAIRMAN OF THE BOARD. The chairman of the board shall preside at
all meetings of the shareholders, of the Board of Directors and of the executive
committee, if any, and he shall have such other powers and duties as the Board
of Directors may from time to time prescribe.

5. THE CHIEF EXECUTIVE OFFICER. The chief executive officer shall be the
chief executive officer of the corporation. He shall have responsibility for
the general and active management of the business of the corporation, shall see
to it that all orders and resolutions of the Board are carried out, and in
connection therewith, shall be authorized to delegate to the president and the
other executive officers of the corporation such of his powers and duties as
chief executive officer at such time and in such manner as he shall deem
advisable. In the absence of the chairman of the board, he shall preside at all
meetings of the shareholders of the Board of Directors and of the executive
committee, if any, and shall designate the acting secretary for such meetings to
take the minutes thereof for delivery to the secretary. He or the president or
any vice president, shall sign, with the secretary, assistant secretary,
treasurer or assistant treasurer, certificates for shares of the corporation,
and may sign any policies, deeds, mortgages, bonds, contracts, or other
instruments including any of the foregoing requiring a seal which the Board of
Directors has authorized to be executed, except in cases where the signing and
execution thereof shall be expressly delegated by the Board of Directors or by
the Bylaws to some other officer or agent of the corporation, or shall be
required by law to be otherwise signed or executed.

6. THE PRESIDENT. In the absence of the chief executive officer or in
the event of his inability or refusal to act, the president shall perform the
duties of the chief executive officer, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the

8
<PAGE>

chief executive officer. The president shall perform such other duties and have
such other powers as the Board of Directors may from time to time prescribe.

7. THE VICE PRESIDENTS. In the absence of the president, or in the event
of his inability or refusal to act, the vice president, if there be any, (or in
the event there be more than one vice president, the vice presidents in the
order designated, or in the absence of any designation, then in the order of
their election) shall perform the duties of the president, and when so acting,
shall have all of the powers of and be subject to all the restrictions upon the
president. The vice presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.

8. THE SECRETARY. The secretary shall attend all meetings of the Board
of Directors and all meetings of the shareholders and record all the proceedings
of the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the shareholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
chief executive officer, under whose supervision he shall be. He shall have
authority to certify the Bylaws, resolutions of the shareholders and Board of
Directors and committees thereof, and other documents of the corporation as true
and correct copies thereof. He shall have custody of the corporate seal of the
corporation and he, or an assistant secretary shall have authority to affix the
same to any instrument requiring it and when so affixed, it may be attested by
his signature or by the signature of such assistant secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his signature.

9. THE ASSISTANT SECRETARY. The assistant secretary, or if there be more
than one, the assistant secretaries in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.

10. THE TREASURER. The treasurer shall have the custody of the corporate
funds and securities of the corporation and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the corporation in such depositories as may be designated by the Board
of Directors. He shall disburse the funds of the corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the chief executive officer and the Board of Directors, at its
regular meetings, or when the Board of Directors so requires, an account of all
his transactions as treasurer and of the financial condition of the corporation.
If required by the Board of Directors, he shall give the corporation a bond
(which shall be renewed every six (6) years) in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance

9
<PAGE>

of the duties of his office and for the restoration to the corporation, in case
of his death, resignation, retirement or removal form office, of all books,
papers, vouchers, money and other property of whatever kind in his possession or
under his control belonging to the corporation.

11. THE ASSISTANT TREASURER. The assistant treasurer, or if there shall
be more than one, the assistant treasurers in the order determined by the Board
of Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.

12. CHIEF FINANCIAL OFFICER. The chief financial officer of the
corporation shall be the officer of the corporation designated as such by the
Board of Directors of the corporation or, in the absence of such designation,
the officer(s) of the corporation performing the functions of the chief
financial officer as set forth in Section 302A.305, Minnesota Statutes.

ARTICLE IV

INSURANCE

The corporation may, if deemed necessary and advisable by the Board of
Directors of the corporation, purchase and maintain insurance on behalf of any
person in such person's official capacity against any liability asserted against
and incurred by such person in or arising from that capacity, whether or not the
corporation would otherwise be required to indemnify the person against any such
liability.

ARTICLE V

BOOKS AND RECORDS

The corporation shall keep at its principal executive office, or at another
place or places within the United States determined by the Board, a share
register, updated at least annually, containing the names and addresses of the
shareholders and the number and classes of shares held by each shareholder.

The corporation shall also keep, at its principal executive office, or at
another place or places within the United States determined by the Board, a
record of the dates on which certificates representing shares were issued.

10
<PAGE>

The corporation shall keep at its principal executive office, or, if its
principal executive office is outside of the State of Minnesota, shall make
available at its registered office within ten days after receipt by an officer
of the corporation of a written demand for them made by a person described in
subdivision 4 of Section 302A.461, Minnesota Statutes, originals or copies of:

(a) Records of all proceedings of shareholders for the last three years;

(b) Records of all proceedings of the Board for the last three years;

(d) The corporation's Bylaws and all amendments currently in effect;

(e) Financial statements required by Section 302A.463, Minnesota Statutes,
and the financial statement for the most recent interim period
prepared in the course of the operation of the corporation for
distribution to the shareholders or to a governmental agency as a
matter of public record;

(f) Reports made to shareholders generally within the last three years;

(g) A statement of the names and usual business addresses of its directors
and principal officers;

(h) Voting trust agreements described in Section 302.453, Minnesota
Statutes; and

(i) Shareholder control agreements described in Section 302A.457,
Minnesota Statutes.

ARTICLE VI

CORPORATE SEAL

The Corporation may have a corporate seal which shall have inscribed
thereon the word "seal" and shall be in such form and contain such other words
and/or figures as the Board of Directors shall determine or the law require.

11
<PAGE>

ARTICLE VII

FISCAL YEAR

The fiscal year of the corporation shall be fixed, and shall be subject to
change, by the Board of Directors.

ARTICLE VIII

CONTROL OVER BYLAWS

The power to amend or repeal these Bylaws and to adopt new Bylaws shall be
vested in the Board of Directors, subject to the requirements of Section
302A.181, Minnesota Statutes

<PAGE>

EXHIBIT 4.1

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

COUNTY SEAT STORES, INC.,

AS ISSUER,

AND

THE SUBSIDIARY GUARANTORS NAMED HEREIN

AND

FIRST TRUST NATIONAL ASSOCIATION

AS TRUSTEE,

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

INDENTURE

DATED AS OF OCTOBER 29, 1997

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

$85,000,000

12 3/4% SENIOR NOTES DUE 2004

WITH

SERIES A WARRANTS TO PURCHASE SHARES OF COMMON STOCK

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

TABLE OF CONTENTS

PAGE

ARTICLE ONE

DEFINITIONS AND INCORPORATION BY REFERENCE................................. 1

SECTION 1.1 Definitions.............................................. 1
SECTION 1.2 Other Definitions........................................ 18
SECTION 1.3 Incorporation by Reference of TIA........................ 19
SECTION 1.4 Rules of Construction.................................... 20

ARTICLE TWO

THE NOTES.................................................................. 20

SECTION 2.1 Form and Dating.......................................... 20
SECTION 2.2 Execution and Authentication; Aggregate
Principal Amount........................................21
SECTION 2.3 Registrar and Paying Agent............................... 22
SECTION 2.4 Paying Agent To Hold Assets in Trust..................... 23
SECTION 2.5 Holder Lists............................................. 23
SECTION 2.6 Transfer and Exchange.................................... 23
SECTION 2.7 Replacement Notes........................................ 24
SECTION 2.8 Outstanding Notes........................................ 25
SECTION 2.9 Treasury Notes........................................... 25
SECTION 2.10 Temporary Notes.......................................... 25
SECTION 2.11 Cancellation............................................. 26
SECTION 2.12 CUSIP Number............................................. 26
SECTION 2.13 Deposit of Monies........................................ 26
SECTION 2.14 Book-Entry Provisions for Global Note.................... 27
SECTION 2.15 Special Transfer Provisions.............................. 28
SECTION 2.16 Defaulted Interest....................................... 30

ARTICLE THREE

REDEMPTION................................................................. 31

SECTION 3.1 Notices to Trustee....................................... 31
SECTION 3.2 Selection of Notes To Be Redeemed........................ 32
SECTION 3.3 Optional Redemption...................................... 32
SECTION 3.4 Notice of Redemption..................................... 33
SECTION 3.5 Effect of Notice of Redemption........................... 34
SECTION 3.6 Deposit of Redemption Price.............................. 34

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<PAGE>

SECTION 3.7 Notes Redeemed in Part................................... 34

ARTICLE FOUR

COVENANTS.................................................................. 35

SECTION 4.1 Payment of Notes......................................... 35
SECTION 4.2 Maintenance of Office or Agency.......................... 35
SECTION 4.3 Corporate Existence...................................... 35
SECTION 4.4 Payment of Taxes and other Claims........................ 36
SECTION 4.5 Maintenance of Properties and Insurance.................. 36
SECTION 4.6 Compliance Certificate; Notice of Default................ 36
SECTION 4.7 Compliance with Laws..................................... 37
SECTION 4.8 Reports.................................................. 37
SECTION 4.9 Waiver of Stay, Extension or Usury Laws.................. 38
SECTION 4.10 Limitation on Restricted Payments........................ 38
SECTION 4.11 Limitation on Transactions with Affiliates............... 40
SECTION 4.12 Limitation on Incurrence of Additional
Indebtedness and Issuance of Preferred Stock........... 41
SECTION 4.13 Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries.................... 41
SECTION 4.14 Repurchase Upon Change of Control........................ 42
SECTION 4.15 Limitation on Asset Sales................................ 43
SECTION 4.16 Limitation on Issuances and Sales of
Capital Stock of Restricted Subsidiaries............... 46
SECTION 4.17 Impairment of Security Interest.......................... 47
SECTION 4.18 Limitation on Liens...................................... 47
SECTION 4.19 Conduct of Business...................................... 47
SECTION 4.20 Payments For Consent..................................... 47
SECTION 4.21 Registration Rights Agreement............................ 48
SECTION 4.22 Warrant Agreement........................................ 48
SECTION 4.23 Intercompany Indebtedness................................ 48
SECTION 4.24 Key Man Life Insurance................................... 48
SECTION 4.25 Use of Proceeds.......................................... 48

ARTICLE FIVE

SUCCESSOR CORPORATION...................................................... 49

SECTION 5.1 Merger, Consolidation and Sale of Assets................. 49
SECTION 5.1 Successor Corporation Substituted........................ 50

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<PAGE>

ARTICLE SIX

DEFAULT AND REMEDIES....................................................... 51

SECTION 6.1 Events of Default........................................ 51
SECTION 6.2 Acceleration............................................. 52
SECTION 6.3 Other Remedies........................................... 53
SECTION 6.4 Waiver of Past Defaults.................................. 54
SECTION 6.5 Control by Majority...................................... 54
SECTION 6.6 Limitation on Suits...................................... 54
SECTION 6.7 Rights of Holders To Receive Payment..................... 55
SECTION 6.8 Collection Suit by Trustee............................... 55
SECTION 6.9 Trustee May File Proofs of Claim......................... 55
SECTION 6.10 Priorities............................................... 56
SECTION 6.11 Undertaking for Costs.................................... 56
SECTION 6.12 Restoration of Rights and Remedies....................... 57
SECTION 6.13 Rights and Remedies Cumulative........................... 57
SECTION 6.14 Delay or Omission Not Waiver............................. 57

ARTICLE SEVEN

TRUSTEE.................................................................... 57

SECTION 7.1 Duties of Trustee........................................ 57
SECTION 7.2 Rights of Trustee........................................ 59
SECTION 7.3 Individual Rights of Trustee............................. 60
SECTION 7.4 Trustee's Disclaimer..................................... 60
SECTION 7.5 Notice of Default........................................ 60
SECTION 7.6 Reports by Trustee to Holders............................ 60
SECTION 7.7 Compensation and Indemnity............................... 61
SECTION 7.8 Replacement of Trustee................................... 62
SECTION 7.9 Successor Trustee by Merger, Etc......................... 63
SECTION 7.10 Eligibility; Disqualification............................ 63
SECTION 7.11 Preferential Collection of Claims
Against Company........................................ 64

ARTICLE EIGHT

SATISFACTION AND DISCHARGE OF INDENTURE.................................... 64

SECTION 8.1 Legal Defeasance and Covenant Defeasance................. 64
SECTION 8.2 Satisfaction and Discharge............................... 65
SECTION 8.3 Survival of Certain Obligations.......................... 66
SECTION 8.4 Acknowledgment of Discharge by Trustee................... 66
SECTION 8.5 Application of Trust Monies.............................. 67
SECTION 8.6 Repayment to the Company; Unclaimed Money................ 67
SECTION 8.7 Reinstatement............................................ 68

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<PAGE>

ARTICLE NINE

AMENDMENTS, SUPPLEMENTS AND WAIVERS........................................ 68

SECTION 9.1 Without Consent of Holders............................... 68
SECTION 9.2 With Consent of Holders.................................. 69
SECTION 9.3 Compliance with TIA...................................... 70
SECTION 9.4 Revocation and Effect of Consents........................ 70
SECTION 9.5 Notation on or Exchange of Notes......................... 71
SECTION 9.6 Trustee To Sign Amendments, Etc.......................... 71

ARTICLE TEN

GUARANTEE.................................................................. 72

SECTION 10.1 Unconditional Guarantee.................................. 72
SECTION 10.2 Subsidiary Guarantees.................................... 73
SECTION 10.3 Limitations on Subsidiary Guarantees..................... 73
SECTION 10.4 Evidence of Execution and Delivery of
Subsidiary Guarantee................................... 74
SECTION 10.5 Release of a Subsidiary Guarantor........................ 74
SECTION 10.6 Waiver of Subrogation.................................... 75
SECTION 10.7 Immediate Payment........................................ 76
SECTION 10.8 No Set-Off............................................... 76
SECTION 10.9 Obligations Absolute..................................... 76
SECTION 10.10 Obligations Continuing................................... 76
SECTION 10.11 Obligations Not Reduced.................................. 77
SECTION 10.12 Obligations Reinstated................................... 77
SECTION 10.13 Obligations Not Affected................................. 77
SECTION 10.14 Waiver................................................... 79
SECTION 10.15 No Obligation To Take Action Against
the Company............................................ 79
SECTION 10.16 Dealing with the Company and Others...................... 79
SECTION 10.17 Default and Enforcement.................................. 80
SECTION 10.18 Certain Bankruptcy Events................................ 80
SECTION 10.19 Acknowledgment........................................... 80
SECTION 10.20 Costs and Expenses....................................... 80
SECTION 10.21 No Merger or Waiver; Cumulative Remedies................. 80
SECTION 10.22 Survival of Obligations.................................. 81
SECTION 10.23 Subsidiary Guarantee in Addition to
Other Obligations...................................... 81
SECTION 10.24 Severability............................................. 81
SECTION 10.25 Successors and Assigns................................... 81

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ARTICLE ELEVEN

SECURITY ACCOUNT........................................................... 82

ARTICLE TWELVE

MISCELLANEOUS.............................................................. 84

SECTION 12.1 TIA Controls............................................. 84
SECTION 12.2 Notices.................................................. 84
SECTION 12.3 Communications by Holders with Other Holders............. 85
SECTION 12.4 Certificate and Opinion as to Conditions Precedent....... 85
SECTION 12.5 Statements Required in Certificate or Opinion............ 85
SECTION 12.6 Rules by Trustee, Paying Agent, Registrar................ 86
SECTION 12.7 Legal Holidays........................................... 86
SECTION 12.8 Governing Law; Jurisdiction; Submission to Venue......... 86
SECTION 12.9 No Adverse Interpretation of other Agreements............ 87
SECTION 12.10 No Recourse Against Others............................... 87
SECTION 12.11 Successors............................................... 88
SECTION 12.12 Duplicate Originals...................................... 88
SECTION 12.13 Severability............................................. 88
SECTION 12.14 Independence of Covenants................................ 88
SECTION 12.15 Table of Contents, Headings, Etc......................... 88

SIGNATURES................................................................. 89

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CROSS-REFERENCE TABLE

TIA SECTION INDENTURE SECTION
310(a)(1)............................................................... 7.10
(a)(2)............................................................... 7.10
(a)(3)............................................................... N.A.
(a)(4)............................................................... N.A.
(a)(5)......................................................... 7.08; 7.10
(b)..................................................... 7.08; 7.10; 12.02
(c).................................................................. N.A.
311(a).................................................................. 7.11
(b).................................................................. 7.11
(c).................................................................. N.A.

312(a).................................................................. 2.05
(b)................................................................. 12.03
(c)................................................................. 12.03

313(a).................................................................. 7.06
(b)(1).................................................................N.A.
(b)(2)............................................................... 7.07
(c)........................................................... 7.06; 12.02
(d).................................................................. 7.06

314(a)..................................................... 4.07; 4.08; 12.02
(b).................................................................. N.A.
(c)(1).............................................................. 12.04
(c)(2).............................................................. 12.04
(c)(3)............................................................... N.A.
(d).................................................................. N.A.
(e)................................................................. 12.05
(f).................................................................. N.A.
315(a)............................................................... 7.01(b)
(b)........................................................... 7.05; 12.02
(c)............................................................... 7.01(a)
(d)............................................................... 7.01(c)
(e).................................................................. 6.11
316(a) (last sentence).................................................. 2.09
(a)(1)(A)............................................................ 6.05
(a)(1)(B)............................................................ 6.04
(a)(2)............................................................... N.A.
(b).................................................................. 6.07
(c).................................................................. 9.04
317(a)(1)............................................................... 6.08
(a)(2)............................................................... 6.09
(b).................................................................. 2.04
318(a).................................................................. 12.01
(c).................................................................. 12.01

- --------------
N.A. means not applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture.

<PAGE>
EXHIBITS

EXHIBIT A - FORM OF INITIAL NOTES....................................A-1

EXHIBIT B - FORM OF EXCHANGE NOTES...................................B-1

EXHIBIT C - FORM OF LEGEND FOR GLOBAL NOTES..........................C-1

EXHIBIT D - CERTIFICATE IN CONNECTION WITH TRANSFERS TO
INSTITUTIONAL ACCREDITED INVESTORS.......................D-1

EXHIBIT E - CERTIFICATE IN CONNECTION WITH
REGULATION S TRANSFERS...................................E-1

EXHIBIT F - FORM OF NOTATION ON NOTE RELATING
TO SUBSIDIARY GUARANTEE..................................F-1

<PAGE>

INDENTURE, dated as of October 29, 1997, among County Seat Stores,
Inc., a Minnesota corporation (the "Company"), the Subsidiary Guarantors
referred to below and First Trust National Association, as trustee (the
"Trustee").

The Company has duly authorized the creation of an issue of 12 3/4%
Senior Notes (the "Initial Notes") and 12 3/4% Senior Notes due November 1,
2004, Series B to be issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement (as defined) (the "Exchange Notes" and, together
with the Private Exchange Notes (as defined) and the Initial Notes, the "Notes")
and, to provide therefor, the Company has duly authorized the execution and
delivery of this Indenture. The Notes will be jointly and severally guaranteed,
by the Subsidiary Guarantors (as defined). All things necessary to make the
Notes, when duly issued and executed by the Company and authenticated and
delivered hereunder, the valid obligations of the Company and the Subsidiary
Guarantors, and to make this Indenture a valid and binding agreement of the
Company and the Subsidiary Guarantors, have been done.

Each party hereto agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders (as defined).

ARTICLE ONE

DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.1 DEFINITIONS.
-----------

"ACQUIRED DEBT" means, with respect to any specified Person,
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person, excluding
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person.

"ADDITIONAL INTEREST" has the meaning set forth in the
Registration Rights Agreement.

"AFFILIATE" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any specified Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management of policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise; PROVIDED,
HOWEVER, that in the case of a corporation, beneficial ownership of 10% or more
of the aggregate voting power of the Voting Stock of a person shall be deemed to
be control. In

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<PAGE>

the case of an individual, (A) members of such Person's immediate
family (as defined in Instruction 2 of Item 404(a) of Regulation S-K under the
Securities Act) and (B) trusts, any trustee or beneficiaries of which are such
Person or members of such Person's immediate family, shall be under common
control with such individual. Notwithstanding the foregoing, neither the Initial
Purchaser nor any of its Affiliates will be deemed to be Affiliates of the
Company.

"AGENT" means any Registrar, Paying Agent, Authenticating Agent
or co-Registrar.

"ASSET SALE" means, with respect to any transaction or series of
transactions, any direct or indirect sale, issuance, conveyance, transfer, lease
(other than operating leases entered into in the ordinary course of business),
assignment or other transfer for value by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or a Wholly-Owned Restricted
Subsidiary of the Company of (a) any Capital Stock of any Restricted Subsidiary
of the Company; or (b) any other property or assets of the Company or any
Restricted Subsidiary of the Company other than in the ordinary course of
business; PROVIDED, HOWEVER, that Asset Sales shall not include (i) the sale,
lease, conveyance, disposition or other transfer of all or substantially all the
assets of the Company as permitted under Section 5.1 hereof, (ii) the sale,
conveyance, transfer or other disposition by the Company or any of its
Restricted Subsidiaries of (x) obsolete or unusable inventory or other assets or
(y) receivables generated by customer purchases in the ordinary course of
business, (iii) Sale and Leaseback Transactions or (iv) the incurrence by the
Company of any Permitted Liens.

"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors.

"BOARD OF DIRECTORS" means, as to any Person, the board of directors
of such Person or any duly authorized committee thereof.

"BOARD RESOLUTION" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.

"BUSINESS DAY" means a day that is not a Legal Holiday.

"CAPITAL LEASE OBLIGATION" means, as to any Person, the obligations
of such Person under a lease that are required to be classified and accounted
for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.

"CAPITAL STOCK" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations, rights or other
equivalents (however designated) of

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<PAGE>

corporate stock, including, without limitation, partnership interests and other
indicia of ownership and (ii) with respect to any other Person, any and all
partnership or other equity interests of such Person.

"CASH EQUIVALENTS" means: (i) obligations issued or unconditionally
guaranteed by the United States of America or any agency thereof, or obligations
issued by any agency or instrumentality thereof and backed by the full faith and
credit of the United States of America; (ii) commercial paper rated the highest
grade by Moody's Investors Service, Inc. and Standard & Poor's Corporation and
maturing not more than one year from the date of creation thereof; (iii) time
deposits with, and certificates of deposit and banker's acceptances issued by,
any bank having capital surplus and undivided profits aggregating at least $500
million and maturing not more than one year from the date of creation thereof;
(iv) repurchase agreements that are secured by a perfected security interest in
an obligation described in clause (i) and are with any bank described in clause
(iii); (v) money market accounts with any bank having capital surplus and
undivided profits aggregating at least $500 million; (vi) readily marketable
direct obligations issued by any state of the United States of America or any
political subdivision thereof having one of the two highest rating categories
obtainable from either Moody's Investors Service, Inc. or Standard & Poor's
Corporation; and (vii) money market funds investing only in U.S. Government
Obligations or repurchase agreements backed only by U.S. Government Obligations.

"CHANGE OF CONTROL" means the occurrence of any of the following (in
one transaction or a series of transactions): (i) the sale, lease, transfer,
conveyance or other disposition of all or substantially all of the Company's
assets to any "person" or "group" (as such terms are used in Section 13(d) and
14(d) of the Exchange Act) other than to one or more Existing Holders; (ii) the
liquidation or dissolution of the Company or the adoption of a plan by the
stockholders of the Company relating to the dissolution or liquidation of the
Company; (iii) at any time following the first anniversary of the Effective
Date, any "person" or "group" (as such terms are used in Section 13(d) and 14(d)
of the Exchange Act), except for one or more Existing Holders, is or becomes the
"beneficial owner" (as such term is defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the aggregate ordinary voting power
of the total outstanding Voting Stock of the Company; or (iv) at any time
following the first anniversary of the Effective Date, with respect to the
Company's Board of Directors as such board is constituted on and after the
Effective Date, during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the Company
(together with any new directors who are approved by a vote of at least 662/3%
of the directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then still in office.

"CHAPTER 11 FILING" means the filing by the Company of a petition
for reorganization relief under Chapter 11 of the United States Bankruptcy Code
on October 17, 1996 with the United States Bankruptcy Court for the District of
Delaware.

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<PAGE>

"COMMON STOCK" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.

"COMPANY" means the party named as such above, until a successor
replaces such Person in accordance with the terms of this Indenture, and
thereafter means such successor.

"CONSOLIDATED CASH FLOW" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (to the
extent such amounts are deducted in calculating such income (loss) from
operations of such Person for such period and without duplication) (a) provision
for taxes based on income or profits to the extent such provision for taxes was
included in computing Consolidated Net Income, (b) consolidated interest expense
of such person for such period, whether paid or accrued (including deferred
financing costs, non-cash interest payments and the interest component of
capital lease obligations), to the extent such expense was deducted in computing
Consolidated Net Income, and (c) depreciation and amortization (including
amortization of goodwill and other intangibles) for such period to the extent
such depreciation or amortization were deducted in computing Consolidated Net
Income, in each case, on a consolidated basis and determined in accordance with
GAAP.

"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP, plus extraordinary charges deducted in computing Net Income to the
extent related to and incurred in respect of the Chapter 11 Filing, the Offering
and the issuance of the New Notes; PROVIDED, that (i) the Net Income of any
Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid to the referent Person or a Wholly-Owned
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary will not be
included to the extent that declarations of dividends or similar distributions
by that Restricted Subsidiary are not at the time permitted, directly or
indirectly, by operation of the terms of its organization document or any
agreement, instrument, judgment or state or government regulation, (iii) the Net
Income of any person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded and (iv) the
cumulative effect of a change in accounting principles shall be excluded.

"CONSOLIDATED NET WORTH" means, with respect to any Person, the sum
of (i) the consolidated equity of the common stockholders of such Person and its
consolidated Restricted Subsidiaries plus (ii) the respective amounts reported
on such Person's most recent balance sheet with respect to any series of
preferred stock (other than Disqualified Stock) that by its terms is not
entitled to the payment of dividends unless such dividends may be declared and
paid only out of net earnings in respect of the year of such declaration and
payment, but only to the extent of (a) any cash received by such Person upon
issuance of

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such preferred stock and (b) the fair market value of any non-cash consideration
received by such Person upon issuance of such preferred stock; PROVIDED that
such value has been determined in good faith by a nationally recognized
investment bank, less (x) all write-ups, subsequent to the date of this
Indenture, in the book value of assets owned by such Person or a consolidated
Restricted Subsidiary of such Person, other than (a) write-ups resulting from
foreign currency translations and (b) write-ups upon the acquisition of assets
acquired in a transaction to be accounted for by purchase accounting under GAAP,
(y) all investments in persons that are not consolidated Restricted Subsidiaries
(except, in each case, a Permitted Investment), and (z) all unamortized debt
discount and expense and unamortized deferred financing charges (except such
amounts arising from the issuance of the Notes), all of the foregoing determined
in accordance with GAAP.

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

"DEFAULT" means any event known to the Company or which should have
been known to the Company after due inquiry that is, or with the passage of time
or the giving of notice or both would be, an Event of Default.

"DEPOSITORY" means The Depository Trust Company, its nominees and
successors.

"DISBURSEMENT FUNDS" means the proceeds from the sale of the Units
to be deposited in the Security Account in an aggregate amount specified in the
Security and Disbursement Agreement to, among other things, pay interest on the
Notes that accrues and is unpaid from the Issue Date through and including the
Interest Payment Date on May 1, 1999.

"DISQUALIFIED STOCK" means any Capital Stock which, (i) either by
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the holder thereof, in whole or in part, on or prior
to the Maturity Date or (ii) is convertible or exchangeable at the option of the
issuer thereof or any other Person for debt securities.

"DTC" means The Depository Trust Company, a New York corporation.

"EQUITY INTERESTS" means Capital Stock or warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.

"EXCHANGE NOTES" has the meaning provided in the Preamble to this
Indenture.

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"EXCHANGE OFFER" means the offer that may be made by the Company
pursuant to the Registration Rights Agreement to exchange New Notes for the
Notes.

"EXISTING HOLDERS" shall mean, collectively, the record and
beneficial holders of Common Stock that receive such Common Stock in connection
with the Plan of Reorganization.

"FAIR MARKET VALUE" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length, free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of whom
is under undue pressure or compulsion to complete the transaction. Unless
otherwise provided herein, fair market value shall be determined by the Board of
Directors of the Company acting reasonably and in good faith and shall be
evidenced by a Board Resolution of the Board of Directors of the Company
delivered to the Trustee.

"FIXED CHARGE COVERAGE RATIO" means, with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the Company or any of its Restricted Subsidiaries incurs, assumes, guarantees,
repays, repurchases or redeems any Indebtedness (other than revolving credit
borrowings) or issues or redeems Preferred Stock subsequent to the commencement
of the period for which the Fixed Charge Coverage Ratio is being calculated but
prior to the event for which the calculation of the Fixed Charge Coverage Ratio
is made, then the Fixed Charge Coverage Ratio (both the numerator and the
denominator therein) shall be calculated giving pro forma effect to such
incurrence, assumption, guarantee, repayment, repurchase or redemption of
Indebtedness, or such issuance or redemption of Preferred Stock, as if the same
had occurred at the beginning of the applicable period; PROVIDED that pro forma
effect shall be given to repayments, repurchases or redemptions of Indebtedness
or Preferred Stock only to the extent such Indebtedness or Preferred Stock is
permanently retired (and, in the case of the Notes, surrendered to the Trustee
for cancellation). In addition, in the event of any Asset Sale, Consolidated
Cash Flow for such period shall be reduced by an amount equal to the
Consolidated Cash Flow (if positive) directly attributable to the assets sold
and Consolidated Interest Expense shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness assumed
by third parties or repaid with the proceeds of such Asset Sale, in each case as
if the same had occurred at the beginning of the applicable period. In the event
that acquisitions, divestitures, mergers or consolidations have been made by the
Company or any of its Restricted Subsidiaries subsequent to the commencement of
the four-quarter period over which the Fixed Charge Coverage Ratio is being
calculated, but prior to the event for which the calculation of the Fixed Charge
Coverage Ratio is being made, then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such acquisitions, divestitures, mergers
and consolidations as if such transactions had occurred at the beginning of the
applicable period.

"FIXED CHARGES" means, with respect to any Person for any period,
the sum of (a) consolidated interest expense of such Person for such period,
whether paid or accrued, to the extent such expense was deducted in computing
Consolidated Net Income (including

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amortization of non-cash interest payments and the interest component of capital
leases but excluding amortization of deferred financing fees) and (b) the
product of (i) all dividend payments, whether paid in cash, assets, securities
or otherwise, in the case of a Person that is a Subsidiary of the Company, on
any series of preferred stock of such Person, and all dividend payments in
respect of any series of preferred stock of the Company, whether paid in cash,
assets, securities or otherwise (other than dividends payable in additional
shares of the preferred stock on which such dividends are paid), times (ii) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.

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

"HOLDER" OR "HOLDER" means the Person in whose name a Note is
registered on the Registrar's books.

"INDEBTEDNESS" means, with respect to any Person, any indebtedness
of such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or bankers'
acceptances or letters of credit (or reimbursement agreements in respect
thereof) or representing the balance deferred and unpaid of the purchase price
of any property (including pursuant to capital leases) or representing any
Interest Rate Swap Obligations, except any such balance that constitutes an
accrued expense or trade payable, if and to the extent any of the foregoing
Indebtedness (other than Interest Rate Swap Obligations) would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP,
and also includes, to the extent not otherwise included, the guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, by such Person in any manner
(including, without limitation, letters of credit and reimbursement agreements
in respect thereof), of all or any part of any of the items which would be
included within this definition.

"INDENTURE" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.

"INDEPENDENT FINANCIAL ADVISOR" means a nationally recognized
independent public accounting firm or investment banking firm (i) which does
not, and whose directors, officers and employees or Affiliates do not, have a
direct or indirect financial interest in the Company and (ii) which, in the
judgment of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.

"INITIAL NOTES" has the meaning provided in the Preamble to this
Indenture.

"INITIAL PURCHASER" means Jefferies & Company, Inc.

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<PAGE>

"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.

"INTEREST PAYMENT DATE" means the stated maturity of an
installment of interest on the Notes.

"INVESTMENTS" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the form of loans
(including direct or indirect guarantees), advances or capital contributions
(excluding commissions, travel and similar advances to officers and employees
made in the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities and all
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.

"ISSUE DATE" means the date of original issuance of the Initial
Notes under this Indenture.

"LIEN" means, with respect to any asset, mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction,
excluding true lease and consignment filings).

"MATURITY DATE" means November 1, 2004.

"NET CASH PROCEEDS" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions), (b) taxes paid or payable after taking into
account any reduction in consolidated tax liability due to available tax credits
or deductions and any tax sharing arrangements, (c) repayment of Indebtedness
that is required to be repaid in connection with such Asset Sale and (d)
appropriate amounts to be provided by the Company or any Subsidiary, as the case
may be, as a reserve, in accordance with GAAP, against any

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<PAGE>

liabilities associated with such Asset Sale and retained by the Company or any
Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale.

"NET INCOME" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP, excluding, however,
any gain (but not loss), together with any related provision for taxes on such
gain (but not loss), realized in connection with any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions),
and excluding any extraordinary gain (but not loss), together with any related
provisions for taxes on such extraordinary gain (but not loss).

"NEW NOTES" means the Company's 12 3/4% Senior Notes due 2004,
Series B, as described and authenticated and issued under the Indenture.

"NON-U.S. PERSON" means a Person who is not a U.S. Person, as
defined in Regulation S.

"NOTES" has the meaning provided in the Preamble to this Indenture
and means the Initial Notes, the Exchange Notes, and the Private Exchange Notes,
if any, treated as a single class of securities, as amended or supplemented from
time to time in accordance with the terms hereof, that are issued pursuant to
this Indenture.

"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
this Indenture and the Notes.

"OFFERING CIRCULAR" means the Confidential Offering Circular, dated
October 23, 1997, as amended by any amendment or supplement thereto, in each
case relating to the offering of the Initial Notes.

"OFFICER" means, with respect to any Person, the chief executive
officer, the president, any vice president, the chief financial officer, the
treasurer, the controller, or the secretary or assistant secretary of such
Person, or any other officer designated by the Board of Directors to serve in a
similar capacity.

"OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed by two Officers or by an Officer and either an assistant
treasurer or an assistant secretary of such Person and otherwise complying with
the requirements of Sections 12.4 and 12.5, as they relate to the making of an
Officers' Certificate.

"OPINION OF COUNSEL" means a written opinion from legal counsel, who
may be counsel for the Company and who is reasonably acceptable to the Trustee,
complying with the requirements of Sections 12.4 and 12.5, as they relate to the
giving of an Opinion of Counsel.

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"PAYING AGENT" shall initially be the Trustee until a successor
paying agent for the Notes is selected in accordance with the Indenture.

"PERMITTED INDEBTEDNESS" means each of the following:

(a) Indebtedness incurred by the Company and its Subsidiaries under
the Senior Credit Facility in an aggregate principal amount not to exceed
$130 million;

(b) Indebtedness incurred by the Company or its Restricted
Subsidiaries in connection with or arising out of Sale and Leaseback
Transactions, Capital Lease Obligations or Purchase Money Obligations,
PROVIDED, that the aggregate principal amount at any one time outstanding
of all such Sale and Leaseback transactions, Capital Lease Obligations and
Purchase Money Obligations does not exceed $10 million;

(c) Indebtedness of the Company represented by the Notes or the New
Notes and Indebtedness of the Restricted Subsidiaries of the Company
represented by the Subsidiary Guarantees (whether incurred on the Issue
Date, or in connection with the Exchange Offer or any shelf registration
contemplated by the Registration Rights Agreement);

(d) Indebtedness owed by the Company to any of its Wholly-Owned
Subsidiaries for so long as such Indebtedness is held by a Wholly-Owned
Subsidiary of the Company, subject to no Lien except a Lien in favor of or
for the benefit of lenders party to the Senior Credit Facility; PROVIDED
that (i) any such Indebtedness of the Company is unsecured and
subordinated, pursuant to a written agreement, to the Company's
obligations under the Indenture and the Notes and (ii) if as of any date
any Person other than a Wholly-Owned Subsidiary of the Company owns or
holds any such Indebtedness or any Person holds a Lien in respect of such
Indebtedness, such date shall be deemed the date of incurrence of
Indebtedness not constituting Permitted Indebtedness of the Company;

(e) Indebtedness of a Wholly-Owned Subsidiary of the Company to the
Company or to a Wholly-Owned Subsidiary of the Company for so long as such
Indebtedness is held by the Company or a Wholly-Owned Subsidiary of the
Company, in each case subject to no Lien held by a Person other than (x)
the Company or a Wholly-Owned Subsidiary of the Company or (y) the lenders
party to the Senior Credit Facility or a Person acting as their agent;
PROVIDED that if as of any date any Person other than the Company or a
Wholly-Owned Subsidiary of the Company owns or holds such Indebtedness or
holds a Lien in respect of such Indebtedness, such date shall be deemed
the date of incurrence of Indebtedness not constituting Permitted
Indebtedness by the issuer of such Indebtedness;

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Permitted Indebtedness referred to in clauses (a), (b) and (c) above and
outstanding Indebtedness incurred in accordance with Section 4.12 hereof
(other than pursuant to this definition of Permitted Indebtedness except
to the extent provided in clauses (a), (b) and (c) thereof) (the
"Refinancing Indebtedness"); PROVIDED, HOWEVER, that (i) the principal
amount of such Refinancing Indebtedness shall not exceed the principal
amount of Indebtedness so Refinanced (plus the amount of reasonable fees
required to be paid and reasonable expenses incurred in connection
therewith); (ii) the Refinancing Indebtedness shall rank in right of
payment no more senior (and at least as subordinated) to the Notes than
did the Indebtedness being Refinanced; (iii) if the Indebtedness being
Refinanced is Indebtedness of the Company or any Subsidiary, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company or
such Subsidiary; (iv) such Refinancing Indebtedness shall have a Weighted
Average Life equal or longer than, and a stated maturity which is the same
or later than, that of the Indebtedness being Refinanced; and (v) the
Indebtedness so Refinanced is permanently retired (and, in case of the
Notes, surrendered to the Trustee for cancellation); and

(g) Interest Rate Swap Obligations of the Company covering
Indebtedness of the Company or any of its Restricted Subsidiaries and
Interest Rate Swap Obligations of any Restricted Subsidiary covering
Indebtedness of such Restricted Subsidiary; PROVIDED, HOWEVER, that such
Interest Rate Swap Obligations are entered into to protect the Company and
its Restricted Subsidiaries from fluctuations in interest rates on
Indebtedness incurred in accordance with this Indenture to the extent the
notional principal amount of such Interest Rate Swap Obligation does not
exceed the principal amount of the Indebtedness to which such Interest
Rate Swap Obligation relates.

"PERMITTED INVESTMENTS" means: (i) Investments by the Company or any
Wholly-Owned Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly-Owned Subsidiary of the Company or
that will merge or consolidate into the Company or a Wholly-Owned Subsidiary of
the Company, (ii) Investments in the Company by any Restricted Subsidiary of the
Company; PROVIDED that any Indebtedness evidencing such Investment is unsecured
and subordinated, pursuant to a written agreement, to the Company's obligations
under the Notes and this Indenture; (iii) investments in cash and Cash
Equivalents; (iv) Interest Rate Swap Obligations entered into in the ordinary
course of the Company's or its Subsidiaries' businesses and otherwise in
compliance with this Indenture; (v) Investments in securities of trade creditors
or customers received pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of such trade creditors or
customers; (vi) Investments in the Notes; (vii) Investments made by the Company
or its Subsidiaries as a result of an Asset Sale made in compliance with Section
4.15 hereof; (viii) Investments existing on the Issue Date; and (ix) Investments
in joint ventures or other similar arrangements in an aggregate amount not to
exceed $5 million.

"PERMITTED LIENS" means the following types of Liens:

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(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required
pursuant to GAAP;

(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not
yet delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have
been made in respect thereof;

(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business, or to secure the
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);

(iv) judgment Liens not giving rise to an Event of Default so long
as such Lien is adequately bonded and any appropriate legal proceedings
which may have been duly initiated for the review of such judgment shall
not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired;

(vi) any interest or title of a lessor under any Capital Lease
Obligation; PROVIDED that such Liens do not extend to any property or
assets which is not leased property subject to such Capital Lease
Obligation;

(vii) Purchase Money Liens of the Company or any Restricted
Subsidiary of the Company acquired in the ordinary course of business;
PROVIDED, HOWEVER, that (A) the related Purchase Money Obligation shall
not exceed the cost of such property or assets and shall not be secured by
any property or assets of the Company or any Restricted Subsidiary of the
Company other than the property and assets so acquired and (B) the Lien
securing such Indebtedness shall be created within 90 days of such
acquisition;

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<PAGE>

(ix) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Subsidiaries, including rights of offset and
set-off;

(x) Liens incurred in the ordinary course of business securing
Interest Rate Swap Obligations, which Interest Rate Swap Obligations
relate to Indebtedness that is otherwise permitted under this Indenture;

(xi) Liens securing Acquired Debt incurred in accordance with
Section 4.12 hereof; PROVIDED that (A) such Liens secured such Acquired
Debt at the time of and prior to the incurrence of such Acquired Debt by
the Company or a Restricted Subsidiary of the Company and were not granted
in connection with, or in anticipation of, the incurrence of such
Indebtedness by the Company or a Restricted Subsidiary of the Company and
(B) such Liens do not extend to or cover any property or assets of the
Company or of any of its Subsidiaries other than the property or assets
that secured the Acquired Debt prior to the time such Indebtedness became
Acquired Debt of the Company or a Restricted Subsidiary of the Company and
are no more favorable to the lienholders than those securing the Acquired
Debt prior to the incurrence of such Acquired Debt by the Company or a
Restricted Subsidiary of the Company;

(xii) Liens existing on the Issue Date to the extent and in the
manner such Liens are in effect on the Issue Date;

(xiii)Liens securing Indebtedness under the Senior Credit
Facility;

(xiv) Liens of the Company or a Wholly-Owned Subsidiary of the
Company on assets of any Subsidiary of the Company;

(xv) Liens securing Refinancing Indebtedness which is incurred to
Refinance any Indebtedness which has been secured by a Lien permitted
under this Indenture and which has been incurred in accordance with the
provisions of this Indenture; PROVIDED, HOWEVER, that such Liens (a) are
no less favorable to the Holders of Notes and are not more favorable to
the lienholders with respect to such Liens than the Liens in respect of
the Indebtedness being Refinanced and (b) other than Liens securing
Indebtedness under the Senior Credit Facility, do not extend to or cover
any property or assets of the Company or any of its Restricted
Subsidiaries not securing the Indebtedness so Refinanced; and

(xvi) Liens on the Security Account.

"PERSON" or "PERSON" means any individual, corporation, partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.

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"PLAN OF REORGANIZATION" means the Company's plan of reorganization
confirmed by the United States Bankruptcy Court for the District of Delaware on
October 1, 1997.

"PLEDGED SECURITIES" means the U.S. Government Obligations to be
purchased by the Company and held in the Security Account in accordance with
the Security and Disbursement Agreement or any other U.S. Government

Obligations held in the Security Account.

"PREFERRED STOCK" means, with respect to any Person, any Capital
Stock of such Person or its Restricted Subsidiaries in respect of which a holder
thereof is entitled to receive payment upon dissolution or otherwise before any
payment may be made with respect to any other Capital Stock of such Person or
its Restricted Subsidiaries.

"PRIMARY OFFERING" means an underwritten public offering of
Qualified Capital Stock of the Company pursuant to a registration statement
filed with and declared effective by the SEC pursuant to the Securities Act
(other than a registration statement on Form S-8 or otherwise relating to equity
securities under any employee benefit plans) or pursuant to an exemption from
the registration requirements thereof.

"PRIORITY TAX CLAIMS" means tax liabilities of the Company which
have been restructured pursuant to the Plan of Reorganization.

"PRIVATE EXCHANGE NOTES" shall have the meaning assigned to such
term in the Registration Rights Agreement.

"PRIVATE PLACEMENT LEGEND" means the legend initially set forth on
the Notes in the form set forth in Exhibit A attached hereto.

"PRO FORMA" means, with respect to any calculation made or required
to be made pursuant to the terms of this Indenture, a calculation in accordance
with Article Ten of Regulation S-X under the Securities Act, as determined by
the Board of Directors of the Company in consultation with its independent
public accountants.

"PURCHASE MONEY LIENS" means (i) Liens to secure or securing
Purchase Money Obligations permitted to be incurred under this Indenture and
(ii) Liens to secure Refinancing Indebtedness incurred solely to Refinance
Purchase Money Obligations permitted to be incurred under this Indenture,
PROVIDED that such Refinancing Indebtedness is incurred no later than six (6)
months after the satisfaction of such Purchase Money Obligations and such Lien
extends to or covers only the asset or property securing the Purchase Money
Obligations being Refinanced.

"PURCHASE MONEY OBLIGATIONS" means Indebtedness representing, or
incurred to finance, the cost of acquiring any assets (including Purchase Money
Obligations of any other Person at the time such other Person is merged with or
into or is otherwise acquired by the Company or its Wholly-Owned Subsidiaries);
PROVIDED that (i) the principal amount of such Indebtedness does not exceed 100%
of such cost (including the amount of reasonable

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expenses incurred and reasonable fees and interest required to be paid), (ii)
any Lien securing such Indebtedness does not extend to or cover any other asset
or property other than the asset or property being so acquired and (iii) such
Indebtedness is incurred, and any Liens with respect thereto are granted, within
90 days of the acquisition of such property or asset.

"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not
Disqualified Capital Stock.

"QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.

"RECORD DATE" means any of the Record Dates specified in the Notes,
whether or not a Legal Holiday.

"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated of even date herewith, between the Company and the Initial
Purchaser, as the same may be amended or modified from time to time in
accordance with the terms thereof.

"REGULATION S" means Regulation S under the Securities Act, as such
regulation may be amended from time to time.

"RESTRICTED INVESTMENT" means an Investment other than a
Permitted Investment.

"RESTRICTED SECURITY" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; PROVIDED that the Trustee shall be entitled
to request and conclusively rely on an Opinion of Counsel with respect to
whether any Note constitutes a Restricted Security.

"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.

"RULE 144A" means Rule 144A under the Securities Act.

"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which any such Person is a party providing for
the leasing to the Company or a Restricted Subsidiary of any property whether
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such Person or to any other Person from whom funds have
been or are to be advanced by such Person on the security of such Property.

"SEC" means the Securities and Exchange Commission.

"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.

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"SECURITY ACCOUNT" means one or more accounts established with the
Trustee pursuant to the terms of the Security and Disbursement Agreement for the
deposit of the Disbursement Funds and the Pledged Securities.

"SECURITY AGENT" shall mean the Trustee, as security agent under the
Security Agreement.

"SECURITY AND DISBURSEMENT AGREEMENT" means an agreement, dated as
of the Issue Date, between the Trustee, in its capacity as Trustee and as
securities intermediary, and the Company relating to the Security Account.

"SENIOR CREDIT FACILITY" means (i) the credit facility evidenced by
the Loan and Security Agreement, dated as of the Issue Date, among the Company,
BankBoston Retail Finance Inc., and the lenders party thereto, and (ii) any
additional or replacement credit facility entered into by the Company subsequent
to the Issue Date which is permitted to be incurred under clause (a) of the
definition of "Permitted Indebtedness" pursuant to which the Company and its
Subsidiaries may incur Indebtedness thereunder at any time outstanding in an
aggregate principal amount not to exceed $130 million, together with all other
agreements, instruments and documents executed or delivered pursuant thereto or
in connection therewith, in each case, as such agreements, instruments or
documents may be amended, supplemented, extended, renewed, replaced or otherwise
modified from time to time.

"SERIES A WARRANTS" means Series A warrants to purchase shares of
Common Stock (a) comprising the Units and issued by the Company
contemporaneously with the Initial Notes and (b) issued to the Initial
Purchaser, in each case, pursuant to the terms and conditions of the Warrant
Agreement.

"SERIES B WARRANTS" means Series B warrants to purchase shares of
Common Stock issued by the Company to holders of preferred stock interests in
the Company prior to the Chapter 11 Filing.

"SERIES C WARRANTS" means Series C warrants to purchase shares of
Common Stock issued to Sam Forman, the President and Chief Executive Officer of
the Company on the Issue Date, under the Plan of Reorganization.

"SUBSIDIARY" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.

"SUBSIDIARY GUARANTEES" means, individually, the guarantee and,
collectively, the guarantees given by the Subsidiary Guarantors pursuant to
supplemental indentures

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executed by the Subsidiary Guarantors after the Issue Date pursuant to which
such Subsidiary Guarantors agree to be bound by the terms of this Indenture.

"SUBSIDIARY GUARANTOR" means CSS Trade Names, Inc. (after its
Chapter 11 case is dismissed by the United States Bankruptcy Court for the
District of Delaware) and all Restricted Subsidiaries of the Company formed
after the Issue Date.

"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb), as amended, as in effect on the date of this Indenture, until
such time as this Indenture is qualified under the TIA, and thereafter as in
effect on the date of such qualification, except as otherwise provided in
Section 9.3.

"TRUST OFFICER" means any officer of the Trustee assigned by the
Trustee to administer this Indenture, or in the case of a successor trustee, an
officer assigned to the department, division or group performing the corporation
trust work of such successor and assigned to administer this Indenture.

"TRUSTEE" means the party named as such in the Preamble to this
Indenture until a successor replaces it in accordance with the provisions of
this Indenture and thereafter means such successor.

"UNITS" means units consisting of Initial Notes and Series A
Warrants sold to the Initial Purchaser on the Issue Date pursuant to a private
offering conducted by the Company and as described in the Offering Circular.

"UNRESTRICTED SUBSIDIARY" of any Person means (i) any Subsidiary of
such Person that at the time of determination shall be or continue to be
designated an Unrestricted Subsidiary by the Board of Directors of such Person
in the manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; PROVIDED that (v)
immediately after giving effect to such designation, the Company is able to
incur at least $1.00 of additional Indebtedness in compliance with Section 4.12
hereof, (w) immediately before and immediately after giving effect to such
designation, no Default or Event of Default shall have occurred and be
continuing, (x) the Company certifies to the Trustee that such designation
complies with Section 4.10 hereof, and (y) each Subsidiary to be so designated
and each of its Subsidiaries has not at the time of designation, and does not
thereafter, create, incur, issue, assume, guarantee or otherwise become directly
or indirectly liable with respect to any Indebtedness pursuant to which the
lender has recourse to any of the assets of the Company or any of its Restricted
Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary only if (x) immediately after giving effect to
such designation, the Company is able to incur at least $1.00 of additional
Indebtedness in compliance with Section 4.12 hereof, and (y) immediately before
and immediately after giving effect to such designation, no Default or Event of
Default shall have occurred and be

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continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing provisions.

"U.S. GOVERNMENT OBLIGATIONS" means non-callable direct
obligations of, and non-callable obligations guaranteed by, the United States
of America for the payment of which the full faith and credit of the United

States of America is pledged.

"U.S. LEGAL TENDER" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the

payment of public and private debts.

"VOTING STOCK" means, with respect to any Person, (i) one or more
classes of the Capital Stock of such Person having general voting power under
ordinary circumstances to elect at least a majority of the Board of Directors,
managers or trustees of such Person (irrespective of whether or not at the time
Capital Stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency) and (ii) any Capital Stock
of such Person convertible or exchangeable without restriction at the option of
the holder thereof into Capital Stock of such Person described in clause (i)
above.

"WARRANT AGREEMENT" means the Warrant Agreement, dated as of even
date herewith, between the Company and the Trustee, as Warrant Agent, pursuant
to which the Series A Warrants are issued, as amended and supplemented from time
to time in accordance with its terms.

"WEIGHTED AVERAGE LIFE" means, as of the date of determination, with
respect to any Indebtedness, the quotient obtained by dividing (i) the sum of
the products of the numbers of years from the date of determination to the date
of each successive scheduled principal payment of such Indebtedness multiplied
by the amount of such principal payment by (ii) the sum of all such principal
payments.

"WHOLLY-OWNED RESTRICTED SUBSIDIARY" means, with respect to any
Person, a Restricted Subsidiary all the Capital Stock of which (other than
directors' qualifying shares) is owned by such Person or another Wholly-Owned
Restricted Subsidiary of such Person.

SECTION 1.2 OTHER DEFINITIONS.

TERM DEFINED IN SECTION

"Acceleration Notice".......................... 6.2(a)
"Affiliate Transaction"........................4.11
"Agent Members"................................2.14
"Authenticating Agent"..........................2.2
"Change of Control Offer"......................4.14

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"Change of Control Payment"....................4.14
"Change of Control Payment Date"...............4.14
"Clearing Agency"..............................2.14
"Covenant Defeasance"...........................8.1
"Default Interest Payment Date"................2.16
"Event of Default"..............................6.1
"Excess Proceeds"..............................4.15
"Global Note"...................................2.1
"Legal Defeasance"..............................8.1
"Legal Holiday"................................11.7
"Net Proceeds Offer"...........................4.15
"Net Proceeds Offer Amount"....................4.15
"Net Proceeds Offer Payment Date"..............4.15
"Net Proceeds Offer Trigger Date"..............4.15
"New York Presenting Agent".....................2.3
"Paying Agent"..................................2.3
"Physical Notes"................................2.1
"Proceeds Purchase Date".......................4.15
"Registrar".....................................2.3
"Replacement Assets"...........................4.15
"Restricted Payments"..........................4.10
"Separability Date"............................2.15

SECTION 1.3 INCORPORATION BY REFERENCE OF TIA.

Whenever this Indenture or any Exhibit hereto refers to a provision
of the TIA, such provision is incorporated by reference in, and made a part of,
this Indenture. The following TIA terms used in this Indenture have the
following meanings:

"indenture securities" means the Notes.

"indenture security holder" means a Holder.

"indenture to be qualified" means this Indenture.

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

"obligor" on the indenture securities means the Company, the
Subsidiary Guarantors or any other obligor on the Notes.

All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.

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SECTION 1.4 RULES OF CONSTRUCTION.

Unless otherwise expressly provided herein or unless the context
otherwise requires:

(1) a term has the meaning assigned to it;

(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;

(3) words in the singular include the plural, and words in the
plural include the singular;

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

(5) any reference to a statute, law or regulation means that
statute, law or regulation as amended and in effect from time to time and
includes any successor statute, law or regulation; PROVIDED, HOWEVER, that any
reference to the Bankruptcy Law shall mean the Bankruptcy Law as applicable to
the relevant case;

(6) provisions apply to successive events and transactions; and

(7) all references to Sections or Articles refer to Sections or
Articles of this Indenture unless otherwise indicated.

ARTICLE TWO

THE NOTES

SECTION 2.1 FORM AND DATING.

The Initial Notes, the Exchange Notes and the Trustee's respective
certificates of authentication relating thereto shall be substantially in the
forms of Exhibits A and B attached hereto. The Private Exchange Notes, if
required, and the Trustee's certificate of authentication relating thereto shall
be substantially in the form of Exhibit B attached hereto, but shall bear the
Private Placement Legend. The Notes may have notations, legends or endorsements
required by law, stock exchange rule or depository rule or usage. The Company
and the Trustee shall approve the forms of the Notes and any notation, legend or
endorsement on them. Each Note shall be dated the date of its issuance and shall
show the date of its authentication.

The terms and provisions contained in the Notes annexed hereto as
Exhibits A and B shall constitute, and are hereby expressly made, a part of this
Indenture and, to the

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extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.

Initial Notes offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent global notes in registered
form, substantially in the form set forth in Exhibit A attached hereto (each
such Note, a "Global Note"), deposited with the Trustee, as custodian for the
Depository, and shall bear the legend set forth in Exhibit C attached hereto,
and be duly executed by the Company and authenticated by the Trustee as
hereinafter provided. Exchange Notes shall be issued initially in the form of
one or more permanent Global Notes, substantially in the form set forth in
Exhibit B attached hereto, deposited with the Trustee, as custodian for the
Depository, duly executed by the Company and authenticated by the Trustee as
hereinafter provided and shall bear the legend set forth in Exhibit C attached
hereto. The aggregate principal amount of a Global Note may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depository, as hereinafter provided.

Notes issued in exchange for an interest in a Global Note pursuant
to Section 2.14 may be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A attached hereto
(each such Note, a "Physical Note"). Initial Notes offered and sold to
Institutional Accredited Investors and Private Exchange Notes shall be issued in
the form of Physical Notes in substantially the form set forth in Exhibits A and
B, respectively, attached hereto and shall bear the Private Placement Legend.

SECTION 2.2 EXECUTION AND AUTHENTICATION; AGGREGATE.
PRINCIPAL AMOUNT.

Two Officers, or an Officer and an assistant secretary of the
Company, shall sign, or one Officer shall sign and one Officer or an assistant
secretary of the Company (each of whom shall, in each case, have been duly
authorized by all requisite corporate actions) shall attest to, the Notes for
the Company by manual or facsimile signature. The corporate seal of the Company
shall be affixed to each Note or reproduced thereon.

If an Officer or assistant secretary of the Company, whose signature
is on a Note was an Officer or assistant secretary of the Company at the time of
such execution but no longer holds that office or position at the time the
Trustee authenticates the Note, the Note shall nevertheless be valid.

A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.

The Trustee shall authenticate (i) Initial Notes for original issue
in the aggregate principal amount not to exceed $85,000,000, (ii) Private
Exchange Notes from time to time, and (iii) Exchange Notes from time to time for
issue only in exchange for a

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like principal amount of Initial Notes, in each case upon written orders of the
Company in the form of an Officers' Certificate. The Officers' Certificate shall
specify the amount of Notes to be authenticated and the date on which the Notes
are to be authenticated, whether the Notes are to be Initial Notes, Private
Exchange Notes or Exchange Notes, and shall further specify the amount of such
Notes to be issued as the Global Notes or Physical Notes. The aggregate
principal amount of Notes outstanding at any time may not exceed $85,000,000,
except as provided in Section 2.7. In addition, with respect to authentication
pursuant to clauses (ii) and (iii) of the first sentence of this paragraph, the
written orders from the Company shall be accompanied by an Opinion of Counsel of
the Company in a form reasonably satisfactory to the Trustee and the Initial
Purchaser stating, among other things, that the issuance of the Exchange Notes
or Private Exchange Notes, as the case may be, does not give rise to an Event of
Default, complies with this Indenture and has been duly authorized by the
Company.

The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with the
Company and Affiliates of the Company.

The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.

SECTION 2.3 REGISTRAR AND PAYING AGENT.

The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in the City of New York, State of New York),
which shall initially be First Trust National Association, 100 Wall Street, New
York, New York 10005 (the "New York Presenting Agent"), having a principal
office at 180 East Fifth Street, St. Paul, Minnesota 55101 (the "Corporate Trust
Office"), where (a) Notes may be presented or surrendered for registration of
transfer or for exchange, (b) Notes may be presented or surrendered for payment
and (c) notices and demands to or upon the Company in respect of the Notes and
this Indenture may be served in addition to the Corporate Trust Office. In
addition, the Company shall maintain an office or agency to maintain the Note
register, for purposes of registration of record ownership of the Notes
("Registrar") and one or more paying agents ("Paying Agent") for payment of the
Notes. The Company hereby initially appoints the Trustee as Registrar and Paying
Agent. The Registrar shall keep a register of the Notes and of their transfer
and exchange. The Company, upon prior written notice to the Trustee, may have
one or more co-Registrars and one or more additional Paying Agents reasonably
acceptable to the Trustee. Neither the Company nor any Affiliate of the Company
may act as Paying Agent.

The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA

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and implement the provisions of this Indenture that relate to such Agent. The
Company shall notify the Trustee, in advance, of the name and address of any
such Agent. If the Company fails to maintain a Registrar or Paying Agent, or
fails to give the foregoing notice, the Trustee shall act as such (PROVIDED,
HOWEVER, that such requirement shall not be construed to obligate the Trustee to
maintain an office in New York).

The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of demands and notices in connection with the Notes,
until such time as the Trustee has resigned or a successor has been appointed.
The Paying Agent or Registrar may resign upon 30 days notice to the Company.

SECTION 2.4 PAYING AGENT TO HOLD ASSETS IN TRUST.

The Company shall require each Paying Agent other than the Trustee
to agree in writing to hold in trust for the benefit of the Holders or the
Trustee all assets held by the Paying Agent for the payment of principal of,
premium, if any, or interest on, the Notes (whether such assets have been
distributed to it by the Company, a Subsidiary Guarantor or any other obligor on
the Notes), and the Company and the Paying Agent shall notify the Trustee of any
Default by the Company (or any other obligor on the Notes) in making any such
payment. The Company at any time may require a Paying Agent to distribute all
assets held by it to the Trustee and account for any assets disbursed, and the
Trustee may at any time during the continuance of any payment Default, upon
written request to a Paying Agent, require such Paying Agent to distribute all
assets held by it to the Trustee and to account for any assets distributed. Upon
distribution to the Trustee of all assets that shall have been delivered by the
Company, a Subsidiary Guarantor or any other obligor on the Notes, to the Paying
Agent, the Paying Agent shall have no further liability for such assets.

SECTION 2.5 HOLDER LISTS.

The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall furnish or cause the Registrar to furnish
to the Trustee at least seven Business Days before each Record Date and at such
other times as the Trustee may request in writing a list in such form and as of
such date as the Trustee may reasonably require of the names and addresses of
the Holders, including the aggregate principal amount thereof, which list may be
conclusively relied upon by the Trustee.

SECTION 2.6 TRANSFER AND EXCHANGE.

Subject to the provisions of Sections 2.14 and 2.15, when Notes are
presented to the Registrar or a co-Registrar with a request to register the
transfer of such Notes or to exchange such Notes for an equal principal amount
of Notes of other authorized

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denominations, the Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its requirements for such transaction are met,
including an Opinion of Counsel with respect to whether (i) such Note
constitutes a Restricted Security and (ii) the requirements for transfer of such
Note have been satisfied, including the requirements provided for in Section
2.15; PROVIDED, HOWEVER, that the Notes presented or surrendered for
registration of transfer or exchange shall be duly endorsed or accompanied by a
written instrument of transfer in form satisfactory to the Company, the Trustee
and the Registrar or co-Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing. To permit registrations of transfer and
exchanges, the Company shall execute and the Trustee shall authenticate Notes at
the Registrar's or co-Registrar's request. No service charge shall be made for
any registration of transfer or exchange, but the Company may require payment of
a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchanges or transfers pursuant to Sections
2.10, 3.7, 4.14, 4.15 or 9.5, in which event the Company shall be responsible
for the payment of such taxes).

The Registrar or co-Registrar shall not be required to register the
transfer or exchange of any Note during the 15-day period immediately preceding
the redemption date in connection with any redemption of Notes under Section
3.3.

Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Note may be
effected only through a book entry system maintained by the Depository, and that
ownership of a beneficial interest in the Note shall be required to be reflected
in a book entry.

SECTION 2.7 REPLACEMENT NOTES.

If a mutilated Note is surrendered to the Trustee or if the Holder
of a Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Note if the
Trustee's requirements are met. If required by the Trustee or the Company, such
Holder must provide an affidavit of lost certificate and an indemnity bond or
other indemnity, sufficient in the judgment of both the Company and the Trustee,
to protect the Company, the Trustee or any Agent from any loss which any of them
may suffer if a Note is replaced. The Company may charge such Holder for its
reasonable, out-of-pocket expenses in replacing a Note, including any tax or
governmental charge that may be imposed in relation thereto and reasonable fees
and expenses of its counsel and of the Trustee and its counsel. Every
replacement Note shall constitute an additional obligation of the Company and
shall be entitled to all the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.

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

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SECTION 2.8 OUTSTANDING NOTES.

Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those cancelled by it, those delivered to it
for cancellation and those described in this Section as not outstanding. Subject
to the provisions of Section 2.9, a Note does not cease to be outstanding
because the Company or any of its Affiliates holds the Note.

If a Note is replaced pursuant to Section 2.7 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced Note is held by
a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.7.

If on a redemption date or the Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Notes payable on that date and is not
prohibited from paying such money to the Holders thereof pursuant to the terms
of this Indenture, then on and after that date such Notes (to the extent of the
principal amount redeemed, in the case of a partial redemption) cease to be
outstanding and interest on them ceases to accrue.

SECTION 2.9 TREASURY NOTES.

In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver, consent or notice, Notes owned
by the Company or any of its Affiliates shall be considered as though they are
not outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes which a Trust Officer of the Trustee actually knows are so owned shall be
so considered. The Company shall notify the Trustee, in writing (which notice
shall constitute actual notice for purposes of the foregoing sentence), when it
or any of its Affiliates repurchases or otherwise acquires Notes, of the
aggregate principal amount of such Notes so repurchased or otherwise acquired
and such other information as the Trustee may reasonably request and the Trustee
shall be entitled to rely thereon.

SECTION 2.10 TEMPORARY NOTES.

Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes upon receipt of a
written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Notes to be
authenticated and the date on which the temporary Notes are to be authenticated.
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Company considers appropriate for temporary Notes and
so indicates in the Officers' Certificate. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate upon receipt of a
written order of the Company pursuant to Section 2.2 definitive Notes of
authorized denominations and in like principal

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amount as the temporary Notes for which they are being exchanged in exchange for
the temporary Notes, upon surrender of the temporary Notes at the office or
agency of the Company designated for such purpose pursuant to Section 4.2,
without charge to the Holder. Until so exchanged, the temporary Notes shall be
entitled to the same benefits under this Indenture as definitive Notes.

SECTION 2.11 CANCELLATION.

The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee, or
at the direction of the Trustee, the Registrar or the Paying Agent, and no one
else, shall cancel and, at the written direction of the Company, shall dispose,
in its customary manner, of all Notes surrendered for transfer, exchange,
payment or cancellation, and deliver a certificate of destruction to the
Company. Subject to Section 2.7, the Company may not issue new Notes to replace
Notes that it has paid or delivered to the Trustee for cancellation. If the
Company shall acquire any of the Notes, such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Notes unless
and until the same are surrendered to the Trustee for cancellation pursuant to
this Section 2.11.

SECTION 2.12 CUSIP NUMBER.

The Company in issuing the Notes of each series may use "CUSIP",
"CINS" or "ISIN" numbers (if then generally in use), and the Trustee shall use
CUSIP, CINS or ISIN numbers, as the case may be, in notices of redemption or
exchange as a convenience to Holders; PROVIDED that any such notice shall state
that no representation is made as to the correctness of such numbers either as
printed on the Notes or as contained in any notice of redemption or exchange and
that reliance may be placed only on the other identification numbers printed on
the Notes. The Company will promptly notify the Trustee of any change in CUSIP,
CINS or ISIN numbers for the Notes.

SECTION 2.13 DEPOSIT OF MONIES.

Prior to 11:00 a.m. New York City time on each Interest Payment
Date, Maturity Date, redemption date, Change of Control Payment Date and Net
Proceeds Offer Payment Date, the Company shall have deposited with the Paying
Agent in immediately available funds U.S. Legal Tender sufficient to make cash
payments, if any, due on such Interest Payment Date, Maturity Date, redemption
date, Change of Control Payment Date and Net Proceeds Offer Payment Date, as the
case may be, in a timely manner which permits the Paying Agent to remit payment
to the Holders on such Interest Payment Date, Maturity Date, redemption date,
Change of Control Payment Date and Net Proceeds Offer Payment Date, as the case
may be. At the option and direction of the Company, payment of interest on
Physical Notes may be made by the Paying Agent by check mailed to the Holders

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on or before the relevant Interest Payment Date. Payments to Holders to be made
by wire transfer of immediately available funds shall require prior receipt by
the Paying Agent of appropriate wire transfer instructions.

SECTION 2.14 BOOK-ENTRY PROVISIONS FOR GLOBAL NOTE.

(a) The Global Note initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Exhibit C attached hereto.

Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depository, or the Trustee as its custodian, or under the
Global Note, and the Depository may be treated by the Company, the Trustee, any
agent of the Company, or the Trustee as the absolute owner of the Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Note.

(b) Transfers of the Global Note shall be limited to transfers of
such Global Note in whole, but not in part, to the Depository, its successors or
their respective nominees. Interests of beneficial owners in the Global Note may
be transferred or exchanged for Physical Notes in accordance with the rules and
procedures of the Depository and the provisions of Section 2.15. In addition,
Physical Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in the Global Note (in each case directed by the
Depository) if (i) the Depository notifies the Company that it is unwilling or
unable to continue as Depository for the Global Note or the Depository ceases to
be a "Clearing Agency" registered under the Exchange Act and a successor
depositary is not appointed by the Company within 90 days of such notice or (ii)
an Event of Default has occurred and is continuing and the Registrar has
received a request from the Depository to issue Physical Notes.

(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
Physical Notes of like tenor and amount.

(d) In connection with the transfer of the entire Global Note to
beneficial owners pursuant to paragraph (b), the Global Note shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute,
and the Trustee shall authenticate

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and deliver, to each beneficial owner identified by the Depository in exchange
for its beneficial interest in the Global Note, an equal aggregate principal
amount of Physical Notes of authorized denominations.

(e) Any Physical Note constituting a Restricted Security delivered
in exchange for an interest in the Global Note pursuant to paragraph (b) or (c)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.15, bear the legend regarding transfer restrictions applicable to the Physical
Notes set forth in Exhibit A attached hereto.

(f) The Holder of the Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.

(g) Neither the Trustee nor the Paying Agent shall have any
responsibility or liability for the accuracy of the records of the Depository or
its Agent Members, or for any actions or omissions of the Depository or its
Agent Members.

SECTION 2.15 SPECIAL TRANSFER PROVISIONS.

(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS AND
NON-U.S. PERSONS. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to
any Non-U.S. Person:

(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after November
1, 1999; PROVIDED, HOWEVER, that neither the Company nor any Affiliate of
the Company has held any beneficial interest in such Note or portion
thereof, at any time on or prior to November 1, 1999 (as certified to the
Trustee by an Officers' Certificate of the Company), or (y) (1) in the
case of a transfer to an Institutional Accredited Investor which is not a
QIB (excluding Non-U.S. Persons), the proposed transferee has delivered to
the Registrar a certificate substantially in the form of Exhibit D
attached hereto or (2) in the case of a transfer to a Non-U.S. Person, the
proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit E attached hereto; and

(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar of
(x) the certificate, if any, required by paragraph (i) above and (y)
instructions given in accordance with the Depository's and the Registrar's
customary procedures,

whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of the outstanding Physical Notes)
a decrease in the principal amount of the Global Note in an amount equal to the
principal amount of the beneficial

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interest in the Global Note to be transferred, and (b) the Company shall execute
and the Trustee shall authenticate and deliver one or more Physical Notes of
like tenor and amount to that amount of the beneficial interest in the Global
Note to be transferred.

(b) TRANSFERS TO QIBS. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S.
Persons):

(i) the Registrar shall register the transfer if such transfer
is being made by a proposed transferor who has checked the box provided
for on the form of Note stating, or has otherwise advised the Company and
the Registrar in writing, that the sale has been made in compliance with
the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Note stating, or has otherwise
advised the Company and the Registrar in writing, that it is purchasing
the Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
QIB within the meaning of Rule 144A, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested pursuant to
Rule 144A or has determined not to request such information and that it is
aware that the transferor is relying upon its foregoing representations in
order to claim the exemption from registration provided by Rule 144A; and

(ii) if the proposed transferee is an Agent Member, and the
Notes to be transferred consist of Physical Notes which after transfer are
to be evidenced by an interest in the Global Note, upon receipt by the
Registrar of written instructions given in accordance with the
Depository's and the Registrar's customary procedures, the Registrar shall
reflect on its books and records the date and an increase in the principal
amount of the Global Note in an amount equal to the principal amount of
the Physical Notes to be transferred, and the Trustee shall cancel the
Physical Notes so transferred.

(c) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) the circumstance contemplated by paragraph (a)(i)(x) of this Section
2.15 exist or (ii) there is delivered to the Registrar an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act.

(d) GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture. The Registrar shall not register a transfer of

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any Note unless such transfer complies with the restrictions on transfer of such
Note set forth in this Indenture. In connection with any transfer of Notes, each
Holder agrees by its acceptance of the Notes to furnish the Registrar of the
Company such certifications, legal opinions or other information as either of
them may reasonably require to confirm that such transfer is being made pursuant
to an exemption from, or a transaction not subject to, the registration
requirements of the Securities Act; PROVIDED that the Registrar shall not be
required to determine (but may rely on a determination made by the Company with
respect to) the sufficiency of any such certifications, legal opinions or other
information.

(e) TRANSFERS OF NOTES HELD BY AFFILIATES. Any certificate (i)
evidencing a Note that has been transferred to an Affiliate of the Company
within two years after the Issue Date, as evidenced by a notation on the
assignment form for such transfer or in the representation letter delivered in
respect thereof or (ii) evidencing a Note that has been acquired from an
Affiliate (other than by an Affiliate) in a transaction or a chain of
transactions not involving any public offering, shall, until two years after the
last date on which the Company or any Affiliate of the Company was as owner of
such Note, in each case, bear a Private Placement Legend in substantially the
form set forth in this Section 2.15 hereof, unless otherwise agreed by the
Company (with written notice thereof to the Trustee).

(f) NO SEPARATE TRANSFERS PRIOR TO SEPARABILITY DATE.
Notwithstanding any other provision of this Article Two, no Note may be
transferred separately from the Series A Warrants until such date as the Initial
Purchaser may, in its sole discretion, determine, as such date is specified to
the Company and the Trustee in writing (the "Separability Date"). The Company
shall promptly notify the Registrar of the occurrence of the Separability Date.

The Registrar shall retain copies of all letters, notices and other
written communications received by it pursuant to Section 2.14 or this Section
2.15 for so long as this Indenture remains in effect. The Company shall have the
right to inspect and make copies of all such letters, notices or other written
communications at any reasonable time upon the giving of reasonable written
notice to the Registrar.

SECTION 2.16 DEFAULTED INTEREST.

The Company shall pay interest on overdue principal from time to
time on demand at the rate of interest then borne by the Notes. The Company
shall, to the extent lawful, pay interest on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the rate of interest then borne by the Notes. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months, and, in the case of a
partial month, the actual number of days elapsed.

If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, which special record date shall be the fifteenth
day next preceding the date fixed by the Company for the payment of defaulted
interest or the next succeeding Business Day if such date is not a Business Day.

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The Company shall notify the Trustee in writing of the amount of defaulted
interest proposed to be paid on each Note and the date of the proposed payment
(a "Default Interest Payment Date"), and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such defaulted interest or shall make
arrangements satisfactory to the Trustee for such deposit on or prior to the
date of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such defaulted interest as provided in
this Section; PROVIDED, HOWEVER, that in no event shall the Company deposit
monies proposed to be paid in respect of defaulted interest later than 11:00
a.m. New York City time on the proposed Default Interest Payment Date. The
Company shall, with the Trustee's consent, fix or cause to be fixed each such
special record date and payment date. At least 15 days before the special record
date, the Company shall mail (or cause to be mailed) to each Holder, as of a
recent date selected by the Company, with a copy to the Trustee, a notice that
states the special record date, the payment date and the amount of defaulted
interest, and interest payable on such defaulted interest, if any, to be paid.
Notwithstanding the foregoing, any interest which is paid prior to the
expiration of the 10-day period set forth in Section 6.1(a) shall be paid to
Holders as of the regular record date for the Interest Payment Date for which
interest has not been paid. Notwithstanding the foregoing, the Company may make
payment of any defaulted interest in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Notes may be
listed, and upon such notice as may be required by such exchange.

ARTICLE THREE

REDEMPTION

SECTION 3.1 NOTICES TO TRUSTEE.

If the Company elects to redeem Notes pursuant to [Paragraph 5] of
the Notes, it shall deliver to the Trustee and the Paying Agent, at least 30
days but not more than 60 days before a redemption date, a notice complying with
the provisions of Section 3.4 setting forth (i) the redemption date, (ii) the
principal amount of the Notes to be redeemed and that, after the redemption
date, upon cancellation of the original Note, a new Note or Notes in principal
amount equal to the unredeemed portion shall be issued, (iii) the redemption
price, and (iv) the paragraph of the Notes and/or the section of this Indenture
pursuant to which the Notes called for redemption are being redeemed.

The Company shall give each notice provided for in this Section 3.1,
at its expense, at least 30 days before the applicable redemption date (unless a
shorter notice period shall be satisfactory to the Trustee, as evidenced in a
writing signed on behalf of the Trustee), together with an Officers' Certificate
stating that such redemption shall comply with the conditions contained herein
and in the Notes.

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SECTION 3.2 SELECTION OF NOTES TO BE REDEEMED.

If fewer than all of the Notes are to be redeemed at any time,
selection of Notes for redemption will be made by the Trustee in compliance with
the requirements of the national securities exchange, if any, on which the Notes
are listed or, if the Notes are not so listed, on a pro rata basis, by lot or by
such method as the Trustee deems to be fair and appropriate. The Trustee shall
make the selection from the Notes outstanding and not previously called for
redemption and shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes in denominations
of $1,000 or less may not be redeemed in part. The Trustee may select for
redemption portions (equal to $1,000 or any integral multiple thereof) of the
principal of Notes that have denominations larger than $1,000. Provisions of
this Indenture that apply to Notes called for redemption also apply to portions
of Notes called for redemption.

SECTION 3.3 OPTIONAL REDEMPTION.

The Notes are not subject to any mandatory redemption provisions or
sinking fund payments. Except as described below, the Notes are not redeemable
at the Company's option prior to November 1, 2001. Thereafter, the Notes will be
subject to redemption at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest thereon to the applicable redemption date, if redeemed during
the twelve month period beginning on November 1 of the years indicated below:

YEAR PERCENTAGE

2001 106.3750%
2002 103.1875%
2003 and thereafter 100%

Notwithstanding the foregoing, prior to November 1, 2001, the
Company may redeem, at its option, up to one-third of the aggregate principal
amount of the Notes at a redemption price equal to 112.750% of the principal
amount thereof, plus accrued and unpaid interest, if any, thereon, with all or a
portion of the net proceeds of an offering of Capital Stock (other than
Disqualified Stock) of the Company; PROVIDED, that (i) at least 662/3% of
aggregate principal amount of the Notes are outstanding immediately following
such redemption and (ii) such redemption shall occur within 60 days of the date
of the closing of such offering of Capital Stock of the Company. The
restrictions on optional redemptions set forth in the Indenture do not limit the
Company's right to make open market or privately negotiated purchases of the
Notes from time to time.

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SECTION 3.4 NOTICE OF REDEMPTION.

At least 15 days but not more than 60 days before a redemption date,
the Company shall mail or cause to be mailed a notice of redemption by first
class mail, postage prepaid, to each Holder at each Holder's registered address
whose Notes are to be redeemed, with a copy to the Trustee and any Paying Agent.
At the Company's written request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. The Company shall
provide such notices of redemption to the Trustee at least fifteen days before
the intended mailing date.

Each notice for redemption shall state:

(1) the principal amount of Notes to be redeemed;

(2) the redemption date;

(3) the redemption price and the amount of accrued interest, if
any, to be paid;

(4) the name and address of the Paying Agent;

(5) the subparagraph of the Notes pursuant to which such
redemption is being made;

(6) that any Physical Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price plus
accrued interest, if any;

(7) that, unless the Company defaults in making the redemption
payment, interest on Notes (or applicable portions thereof) called for
redemption ceases to accrue on and after the redemption date, and the only
remaining right of the Holders of such Notes is to receive payment of the
redemption price plus accrued interest, if any, as of the redemption date
upon surrender to the Paying Agent of the Notes redeemed;

(8) that if any Physical Note is being redeemed in part, the portion
of the principal amount of such Note to be redeemed and that, after the
redemption date, and upon surrender, and subsequent cancellation of such
Note, a new Note or Notes in the aggregate principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder; and

(9) that, if fewer than all the Notes are to be redeemed, the
identification of the particular Physical Notes (or portion thereof) to be
redeemed, as well as the principal amount of Notes to be redeemed and the
principal amount of Notes to be outstanding after such partial redemption.

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SECTION 3.5 EFFECT OF NOTICE OF REDEMPTION.

Once notice of redemption is mailed in accordance with Section 3.4,
Notes called for redemption become due and payable on the applicable redemption
date and at the applicable redemption price plus accrued interest, if any. Upon
surrender to the Trustee or Paying Agent, such Notes called for redemption shall
be paid at the redemption price (which shall include accrued and unpaid interest
thereon to the redemption date), but installments of interest, the maturity of
which is on or prior to the redemption date, shall be payable to Holders of
record at the close of business on the applicable Record Dates referred to in
the Notes.

SECTION 3.6 DEPOSIT OF REDEMPTION PRICE.

On or before the redemption date, the Company shall deposit with the
Paying Agent U.S. Legal Tender sufficient to pay the redemption price plus
accrued interest to but excluding the redemption date, if any, of all Notes to
be redeemed on that date. The Paying Agent shall promptly return to the Company
any U.S. Legal Tender so deposited which is not required for that purpose,
except with respect to monies owed as obligations to the Trustee pursuant to
Article Seven.

If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such redemption price plus accrued interest,
if any, to but excluding the redemption date, interest on the Notes to be
redeemed will cease to accrue, on and after the applicable redemption date,
whether or not such Notes are presented for payment.

SECTION 3.7 NOTES REDEEMED IN PART.

Upon surrender of a Note that is to be redeemed in part, the Trustee
shall authenticate for the Holder a new Note or Notes equal in principal amount
to the unredeemed portion of the Note surrendered.

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ARTICLE FOUR

COVENANTS

SECTION 4.1 PAYMENT OF NOTES.

The Company shall pay the principal of and interest on the Notes on
the dates and in the manner provided in the Notes and in this Indenture.
Principal of or interest on the Notes shall be considered paid on the date it is
due if the Trustee or Paying Agent (other than the Company or an Affiliate of
the Company) holds on that date U.S. Legal Tender designated for and sufficient
to pay the installment in full and is not prohibited from paying such money to
the Holders pursuant to the terms of this Indenture.

Notwithstanding anything to the contrary contained in this
Indenture, the Company may, to the extent it is required to do so by law, deduct
or withhold income or other similar taxes from principal or interest payments
hereunder.

SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY.

The Company shall maintain the office or agency required under
Section 2.3. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 12.2.

The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the Notes may
be presented or surrendered for any or all such purposes and may from time to
time rescind any such designation; PROVIDED, HOWEVER, that no such designation
or rescission shall in any manner relieve the Company of its obligation to
maintain an office or agency in The City of New York for such purposes. The
Company shall give prompt written notice to the Trustee of any such designation
or rescission and any change in the location of any such other office or agency.

SECTION 4.3 CORPORATE EXISTENCE.

Except as otherwise permitted by Article Five, the Company shall do
or cause to be done, at its own cost and expense, all things necessary to
preserve and keep in full force and effect its corporate existence and the
corporate existence of each of its Restricted Subsidiaries in accordance with
the respective organizational documents of each such Restricted Subsidiary and
the material rights (charter and statutory) and franchises of the Company and
each such Restricted Subsidiary.

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SECTION 4.4 PAYMENT OF TAXES AND OTHER CLAIMS.

The Company shall pay or discharge or cause to be paid or
discharged, on or prior to the date the same shall become delinquent, all
material taxes, assessments and governmental charges (including withholding
taxes and any penalties, interest and additions to taxes) levied or imposed upon
it or any of its Restricted Subsidiaries or its properties or any of its
Restricted Subsidiaries' properties (other than Priority Tax Claims, which shall
be paid or discharged as required under the Plan of Reorganization); PROVIDED,
HOWEVER, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being or shall be contested in good faith by
appropriate proceedings properly instituted and diligently conducted for which
adequate reserves, to the extent required under GAAP, have been taken.

SECTION 4.5 MAINTENANCE OF PROPERTIES AND INSURANCE.

(a) The Company shall, and shall cause each of its Restricted
Subsidiaries to, maintain its properties used or held in the conduct of its
business or the business of any of its Restricted Subsidiaries in good working
order and condition in all material respects (subject to ordinary wear and tear)
and make all necessary repairs, renewals, replacements, additions, betterments
and improvements thereto necessary or desirable to actively conduct and carry on
its business except to the extent failure to maintain such properties and to
take such actions could not reasonably be expected to have a material adverse
effect on the business of the Company.

(b) The Company shall, and shall cause each of its Restricted
Subsidiaries to, maintain insurance (including appropriate self-insurance)
against loss or damage of the kinds that, in the good faith judgment of the
Company, are adequate and appropriate for the conduct of the business of the
Company and its Restricted Subsidiaries in a prudent manner, with reputable
insurers or with the government of the United States of America or an agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as are adequate for the conduct of its business and the value of its
material properties and shall be customary, in the good faith judgment of the
Company, for companies similarly situated within the industry of the Company.

SECTION 4.6 COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.

(a) The Company shall deliver to the Trustee, within 120 days after
the end of the Company's fiscal year, commencing with the fifty-two weeks ending
February 1, 1998, an Officers' Certificate stating that a review of its
activities during the preceding fiscal year has been made under the supervision
of the signing officers with a view to determining whether it has kept,
observed, performed and fulfilled its obligations under this Indenture and
further stating, as to each such Officer signing such certificate, that, to the
best of such Officer's knowledge, after due inquiry, the Company during such
preceding fiscal year has

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kept, observed, performed and fulfilled each and every such covenant under this
Indenture, and that no Default or Event of Default occurred during such year,
and at the date of such certificate there is no Default or Event of Default that
has occurred and is continuing or, if such signers do know of such Default or
Event of Default, the certificate shall describe the Default or Event of Default
and its status with particularity. The Officers' Certificate shall also notify
the Trustee should the Company elect to change the manner in which it fixes its
fiscal year end.

(b) The annual financial statements delivered pursuant to Section
4.8 shall be accompanied by a written report of the Company's independent
accountants (who shall be a firm of established national reputation) that in
conducting their audit of such financial statements nothing has come to their
attention that would lead them to believe that the Company has violated any
provisions of Article Four, Five or Six of this Indenture insofar as they relate
to accounting matters or, if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that such
accountants shall not be liable hereunder directly or indirectly to any Person
for any failure to obtain knowledge of any such violation.

(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, within five
Business Days of its becoming aware of such occurrence, the Company shall
deliver to the Trustee, at its address set forth in Section 12.2 hereof, by
registered or certified mail or by telegram, telex or facsimile transmission
followed by hard copy by registered or certified mail an Officers' Certificate
specifying such event, notice or other action and what action the Company is
taking or proposes to take with respect thereto.

SECTION 4.7 COMPLIANCE WITH LAWS.

The Company shall, and shall cause each of its Restricted
Subsidiaries to, comply with all applicable statutes, rules, regulations, orders
and restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of its businesses and the ownership of its properties, except for
such noncompliances as are not in the aggregate reasonably likely to have a
material adverse effect on the financial condition or results of operations of
the Company and its Restricted Subsidiaries, taken as a whole.

SECTION 4.8 REPORTS.

So long as any Notes are outstanding, the Company will furnish to
the Holders of Notes all quarterly and annual financial information and other
reports filed with the SEC pursuant to the Exchange Act and, whether or not the
Company is required to file any financial information with the SEC, will furnish
to the Holders of the Notes and to

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prospective purchasers of the Notes, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act
for so long as is required for an offer or sale of the Notes under Rule 144A.
From and after the date of effectiveness of any registration statement filed
with the SEC with respect to the Notes, the Company will furnish to the holders
of Notes such quarterly, annual or other reports or information that is required
to be filed with the SEC. The Company will provide a copy of the Registration
Rights Agreement and the Warrant Agreement to holders of Notes or to prospective
purchasers upon request.

SECTION 4.9 WAIVER OF STAY, EXTENSION OR USURY LAWS.

Each of the Company and the Subsidiary Guarantors covenants (to the
extent that it may lawfully do so) that it will not, nor permit its Subsidiaries
to, at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law or any usury law or other
law that would prohibit or forgive the Company or the Subsidiary Guarantors from
paying all or any portion of the principal of or interest on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture; and (to the
extent that it may lawfully do so) each of the Company and the Subsidiary
Guarantors hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.

SECTION 4.10 LIMITATION ON RESTRICTED PAYMENTS.

The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company or dividends or
distributions payable to the Company or any Wholly-Owned Restricted Subsidiary
of the Company); (ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interests of the Company or any Restricted Subsidiary or other
Affiliate of the Company (other than any such Equity Interests owned by the
Company or any Wholly-Owned Restricted Subsidiary of the Company); (iii)
voluntarily purchase, redeem, defease or otherwise acquire or retire for value
any Indebtedness (other than Indebtedness under the Senior Credit Facility or
Indebtedness evidenced by the Notes or the New Notes) that is PARI PASSU with or
subordinated to the Notes; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments") unless, at the time of such
Restricted Payment:

(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and

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(b) immediately after giving effect to such transaction, on a pro
forma basis as if such transaction had occurred at the beginning of the
applicable four-quarter period, the Company would be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.12
hereof; and

(c) the amount of such Restricted Payment, together with the
aggregate amount of all other Restricted Payments made by the Company and
its Restricted Subsidiaries after the Issue Date, is less than the sum of
(x) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first quarter
commencing immediately after the Issue Date to the end of the Company's
most recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, 100% of such
deficit), plus (y) 100% of the net cash proceeds received by the Company
from the issuance or sale of Equity Interests of the Company (other than
Equity Interests sold to a Restricted Subsidiary or Affiliate of the
Company and other than Disqualified Stock) after the Issue Date and on or
prior to the time of such Restricted Payment, plus (z) 100% of the Net
Cash Proceeds received by the Company from the issuance or sale, other
than to a Restricted Subsidiary or Affiliate of the Company, of any debt
security of the Company that has been converted into Equity Interests of
the Company (other than Disqualified Stock) pursuant to the terms thereof
after the Issue Date and on or prior to the time of such Restricted
Payment. For purposes of this clause (c) the amount of any Restricted
Payment paid in property other than cash shall be the fair market value of
such property as determined reasonably and in good faith by the Board of
Directors of the Company (and evidenced by a resolution set forth in an
Officers' Certificate delivered to the Trustee); and

(d) at least two fiscal quarters shall have elapsed since the
Issue Date.

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(v) on or after the date of this Indenture shall not exceed $2.5 million, except
for any such repurchases, redemptions and other acquisitions and retirements
funded with insurance proceeds or proceeds received in connection with the
issuance of Equity Interests of the Company and its Restricted Subsidiaries,
which shall not be subject to such limitation; (vi) the purchase, redemption,
defeasance or other acquisition or retirement of Series A Warrants, Series B
Warrants or Series C Warrants, in each case to the extent required by the terms
of the agreement or agreements relating thereto or governing the terms thereof
as in effect on the Issue Date; (vii) distributions required under the Plan of
Reorganization; or (viii) payments or distributions to dissenting stockholders
required by applicable law pursuant to and in connection with transactions
permitted under the terms of this Indenture.

Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the "Restricted Payments" covenant were computed, which
calculations may be based upon the Company's latest available financial
statements.

SECTION 4.11 LIMITATION ON TRANSACTIONS WITH AFFILIATES.

(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
services or the entering into any contract, agreement, understanding, loan or
guarantee) with, or for the benefit of, any of its Affiliates (each an
"Affiliate Transaction"), other than (x) Affiliate Transactions permitted under
paragraph (b) below and (y) Affiliate Transactions and each series of related
Affiliate Transactions that are similar or part of a common plan, having an
aggregate value of less than $2 million; PROVIDED that such transactions are on
terms that are no less favorable than those that might reasonably have been
obtained in a comparable transaction at such time on an arm's length basis from
a Person that is not an Affiliate of the Company or such Restricted Subsidiary.
All Affiliate Transactions (and each series of related Affiliate Transactions
which are similar or part of a common plan) involving aggregate payments or
other property with a fair market value in excess of $2,000,000 shall be
approved by a majority of the disinterested members of the Board of Directors of
the Company, such approval to be evidenced by a Board Resolution stating that
such Board of Directors has determined that such transaction complies with the
foregoing provisions. If the Company or any such Restricted Subsidiary of the
Company enters into an Affiliate Transaction (or a series of related Affiliate
Transactions which are similar or part of a common plan) that involves an
aggregate fair market value of more than $5,000,000, the Company shall, prior to
the consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company from a financial
point of view from an Independent Financial Advisor and deliver such opinion to
the Trustee.

(b) The restrictions set forth in clause (a) above shall not apply
to: (i) reasonable fees and compensation paid to, and indemnity provided on
behalf of, officers,

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directors, employees or consultants of the Company or any Subsidiary as
determined in good faith by the Company's Board of Directors or senior
management; (ii) transactions exclusively between or among the Company and any
of its Wholly-Owned Restricted Subsidiaries or exclusively between or among such
Wholly-Owned Restricted Subsidiaries, PROVIDED such transactions are not
otherwise prohibited by this Indenture; and (iii) Restricted Payments not
prohibited by this Indenture.

SECTION 4.12 LIMITATION ON INCURRENCE OF ADDITIONAL
ISSUANCE OF PREFERRED STOCK

The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to (collectively,
"incur") any Indebtedness (other than Permitted Indebtedness), and the Company
will not issue any Disqualified Stock and will not permit any of its Restricted
Subsidiaries to issue any shares of Preferred Stock; PROVIDED, HOWEVER, that the
Company may incur Indebtedness which is not Permitted Indebtedness or issue
shares of Disqualified Stock, if (i) no Default or Event of Default shall have
occurred and be continuing or would occur after giving effect on a pro forma
basis to such incurrence or issuance and (ii) the Fixed Charge Coverage Ratio
for the Company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least equal to 2.5:1, determined on a pro forma basis
as if the additional Indebtedness had been incurred, or the Disqualified Stock
had been issued, as the case may be, at the beginning of such four-quarter
period.

SECTION 4.13 LIMITATION ON DIVIDENDS AND OTHER PAYMENT
SUBSIDIARIES

The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrances or restrictions on the ability of any
such Restricted Subsidiary to (i) pay dividends or make any other distributions
to the Company or any of its Restricted Subsidiaries (A) on such Restricted
Subsidiary's Capital Stock or (B) with respect to any other interest or
participation in, or measured by, its profits, or pay any Indebtedness owed to
the Company or any of its Restricted Subsidiaries; (ii) make loans or advances
to the Company or any of its Restricted Subsidiaries; or (iii) transfer any of
its properties or assets to the Company or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of (a)
applicable law, (b) this Indenture, Notes or the Senior Credit Facility, (c)
customary non-assignment provisions of any contract or any lease entered into in
the ordinary course of business, (d) agreements existing on the Issue Date to
the extent and in the manner such agreements are in effect on the Issue Date, or
(e) an agreement governing Indebtedness incurred to Refinance the Indebtedness
issued, assumed or incurred pursuant to an agreement referred to in the
immediately preceding clauses (b) or (d) above; PROVIDED, HOWEVER, that the
provisions relating to such encumbrance or restriction

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contained in any such Indebtedness are no less favorable to the Company in any
material respect as determined by the Board of Directors of the Company in their
reasonable and good faith judgment than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such clauses
(b) or (d).

SECTION 4.14 REPURCHASE UPON CHANGE OF CONTROL.

(a) Upon the occurrence of a Change of Control, the Company will be
required to notify the Trustee in writing thereof and to offer to repurchase all
or any part (equal to $1,000 of principal or an integral multiple thereof) of
each Holder's Notes pursuant to the offer described below (the "Change of
Control Offer") at a purchase price equal to 101% of the principal amount
thereof on the date of purchase, plus accrued and unpaid interest thereon, if
any, through the date of purchase (the "Change of Control Payment").

(b) Within 30 days following any Change of Control, the Company
shall mail a notice to each Holder stating: (1) that the Change of Control Offer
is being made pursuant to this Section 4.14 and that all Notes tendered will be
accepted for payment; (2) the purchase price and the purchase date, which shall
be no earlier than 30 days nor later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"); (3) that any Note not tendered
will continue to accrue interest; (4) that, unless the Company defaults in the
payment of the Change of Control Payment, on and after the Change of Control
Payment Date, all Notes accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest; (5) that Holders electing to have any
Notes purchased pursuant to a Change of Control Offer will be required to
surrender the Notes, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third Business Day
preceding the Change of Control Payment Date; (6) that Holders will be entitled
to withdraw their election if the Paying Agent receives, not later than the
close of business on the second Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of Notes delivered for purchase,
and a statement that such Holder is withdrawing his election to have such Notes
purchased; and (7) that Holders whose Notes are being purchased only in part
will be issued new Notes; PROVIDED, that each Note purchased and each new Note
issued shall be in a principal amount equal to $1,000 or an integral multiple
thereof. On the Business Day immediately preceding the Change of Control Payment
Date, the Trustee shall notify the Company in writing of the Holders who have so
elected to have their Notes purchased pursuant to the Change of Control Offer
(and who have not withdrawn such election pursuant to clause (5) above).

On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent U.S.
Legal Tender in an amount equal to the Change of Control Payment in respect of
all Notes or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee the Notes so accepted together with an Officers'
Certificate stating the amount of the Notes or portions thereof being tendered
to the

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Company. The Paying Agent shall promptly mail to the Holders of the Notes
so accepted payment in an amount equal to the purchase price for such Notes, and
the Trustee shall promptly authenticate and mail to each Holder a new Note equal
in principal amount to any unpurchased portion of the Notes surrendered, if any;
PROVIDED, HOWEVER, that each such new Note shall be in a principal amount of
$1,000 or an integral multiple thereof. Any Notes not so accepted shall be
promptly mailed by the Company to the Holder thereof. For purposes of this
Section 4.14, the Trustee shall act as the Paying Agent.

Any amounts deposited with the Paying Agent and remaining after the
purchase of Notes pursuant to a Change of Control Offer shall be returned by the
Paying Agent to the Company.

The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder, in
each case, to the extent such laws and regulations are applicable in connection
with the repurchase of Notes pursuant to a Change of Control Offer. To the
extent provisions of any securities laws or regulations conflict with this
Section 4.14, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.14 by virtue thereof.

The Company will announce publicly the results of the Change of
Control Offer on as soon as practicable after the Change of Control Date.

Neither the Board of Directors of the Company nor the Trustee may
waive the provisions of this Section 4.14 relating to the Company's obligation
to make a Change of Control Offer under this Section 4.14.

SECTION 4.15 LIMITATION ON ASSET SALES.

(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company or the
applicable Restricted Subsidiary, as the case may be, receives consideration at
the time of such Asset Sale in an amount at least equal to the amount of the
fair market value of the assets sold or otherwise disposed of (A) as determined
in good faith by the Company's Board of Directors (as set forth in a resolution
of such Board of Directors and set forth in an Officers' Certificate delivered
to the Trustee) with respect to any Asset Sale pursuant to which at least 85% of
the consideration received by the Company or the Restricted Subsidiary, as the
case may be, from such Asset Sale shall be in the form of cash or Cash
Equivalents and is received at the time of such disposition or (B) with respect
to any other Asset Sale, as determined by an Independent Financial Advisor (as
evidenced by a favorable opinion delivered by such Independent Financial Advisor
to the Trustee as to (x) the adequacy of the consideration received by the
Company or the Restricted Subsidiary, as the case may be, from such Asset Sale
and (y) the fairness, from a financial point of view, of such Asset Sale); and
(ii) upon the consummation of an Asset Sale, the Company shall (I) apply, or
cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating to
such Asset Sale

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within 180 days of such Asset Sale either (A) to repay any Indebtedness secured
by the assets involved in such Asset Sale or outstanding Indebtedness under the
Senior Credit Facility, in each case, together with a concomitant permanent
reduction in the amount of such Indebtedness (including a permanent reduction in
the committed amounts therefor in the case of any revolving credit facility so
repaid), (B) to make an investment in properties and assets that replace the
properties and assets that were the subject of such Asset Sale or in properties
and assets that will be used in the business of the Company and its Restricted
Subsidiaries ("Replacement Assets"), or (C) to effect a combination of repayment
and investment permitted by the foregoing clauses (ii)(I)(A) and (B) or (II) (A)
enter into a definitive written agreement, within 150 days of such Asset Sale,
committing it, subject to conditions customary in such agreements, to apply, or
cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating to
such Asset Sale within 270 days of such Asset Sale to an investment in
Replacement Assets or (B) effect a combination of repayment and investment
permitted by the foregoing clauses (ii)(I)(A) and (B) and (ii)(II)(A). On (i)
the 181st day after an Asset Sale, (ii) if a definitive written agreement
relating to an investment in Replacement Assets was entered into within 150 days
of such Asset Sale, on the 271st day after such Asset Sale or such earlier date
on which such definitive agreement is for any reason terminated or (iii) such
earlier date as the Board of Directors of the Company or of such Restricted
Subsidiary determines to apply the Net Cash Proceeds relating to such Asset Sale
as set forth in clauses (ii)(I) and (ii)(II) of the immediately preceding
sentence, in each case as applicable (each, a "Net Proceeds Offer Trigger
Date"), such aggregate amount of Net Cash Proceeds which has not been applied on
or before such Net Proceeds Offer Trigger Date ("Excess Proceeds") as permitted
in clauses (ii)(I) or (ii)(II) of the immediately preceding sentence (each a
"Net Proceeds Offer Amount") shall be applied by the Company or such Restricted
Subsidiary to make an offer to purchase (the "Net Proceeds Offer"), on a date
(the "Net Proceeds Offer Payment Date") not less than 30 nor more than 60 days
following the applicable Net Proceeds Offer Trigger Date, from all holders of
Notes on a pro rata basis, according to principal amount of Notes equal to the
Net Proceeds Offer Amount at a price equal to 100% of the principal amount of
the Notes to be purchased, plus accrued and unpaid interest thereon, if any, to
the date of purchase; PROVIDED, HOWEVER, that if at any time any non-cash
consideration received by the Company or any Restricted Subsidiary of the
Company, as the case may be, in connection with any Asset Sale is converted into
or sold or otherwise disposed of for cash (other than interest received with
respect to any such non-cash consideration), then such conversion or disposition
shall be deemed to constitute an Asset Sale hereunder, and the Net Cash Proceeds
thereof shall be applied in accordance with this covenant. The Company may defer
the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer
Amount equal to or in excess of $10 million resulting from one or more Asset
Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not
just the amount in excess of $10 million, shall be applied as required pursuant
to this paragraph).

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covenant with respect to such deemed sale as if it were an Asset Sale. In
addition, the fair market value of such properties and assets of the Company or
its Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash
Proceeds for purposes of this covenant.

(b) Subject to the deferral of the Net Proceeds Offer Trigger Date
contained in subsection (a) above, each notice of a Net Proceeds Offer pursuant
to this Section 4.15 shall be mailed or caused to be mailed, by first class
mail, by the Company within 25 days after the Net Proceeds Offer Trigger Date to
all Holders at their last registered addresses as of a date within 15 days of
the mailing of such notice, with a copy to the Trustee. The notice shall contain
all instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Net Proceeds Offer and shall state the following terms:

(1) that the Net Proceeds Offer is being made pursuant to this
Section 4.15 and that all Notes tendered and not withdrawn, in whole or in
part, in integral multiples of $1,000 will be accepted for payment;
PROVIDED, HOWEVER, that if the aggregate principal amount of Notes
tendered in a Net Proceeds Offer plus accrued interest at the expiration
of such offer exceeds the aggregate amount of the Net Proceeds Offer, the
Company shall select the Notes to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000 principal amount or multiples thereof
shall be purchased);

(2) the purchase price (including the amount of any accrued
interest) and the purchase date (which shall be 20 Business Days from the
date of mailing of notice of such Net Proceeds Offer, or such longer
period as required by law) (the "Proceeds Purchase Date");

(3) that any Note not tendered will continue to accrue interest
on and after the Proceeds Purchase Date;

(4) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Net Proceeds offer shall
cease to accrue interest on and after the Proceeds Purchase Date;

(5) that Holders electing to have a Physical Note purchased pursuant
to a Net Proceeds Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day prior to the
Proceeds Purchase Date;

(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than five Business Days prior to the
Proceeds Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Notes the Holder delivered for purchase and a

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statement that such Holder is withdrawing his election to have such Note
purchased; and

(7) that Holders whose Physical Notes are purchased only in part
will be issued new Physical Notes in a principal amount equal to the
unpurchased portion of the Physical Notes surrendered; PROVIDED that each
Physical Note purchased and each new Physical Note issued shall be in
principal amount of $1,000 or integral multiples thereof.

On the second Business Day immediately preceding the Proceeds
Purchase Date, the Trustee shall notify the Company in writing of the Holders
who have so elected to have their Physical Note purchased pursuant to such Net
Proceeds Offer (and who have not withdrawn such election, as provided above). On
or before the Proceeds Purchase Date, the Company shall (i) accept for payment
Notes or portions thereof tendered pursuant to the Net Proceeds Offer which are
to be purchased in accordance with item (b)(1) above, (ii) deposit with the
Paying Agent U.S. Legal Tender sufficient to pay the purchase price plus accrued
interest, if any, of all Notes to be purchased and (iii) deliver to the Trustee
Notes so accepted together with an Officers' Certificate stating the Notes or
portions thereof being purchased by the Company. The Paying Agent shall promptly
mail to the Holders so accepted payment in an amount equal to the purchase price
for such Notes plus accrued interest, if any, to the Proceeds Purchase Date. For
purposes of this Section 4.15, the Trustee shall act as the Paying Agent.

Any amounts deposited with the Paying Agent and remaining after the
purchase of Notes pursuant to a Net Proceeds Offer shall be returned by the
Paying Agent to the Company.

The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder, in
each case, to the extent such laws and regulations are applicable in connection
with the repurchase of Notes pursuant to a Net Proceeds Offer. To the extent
that the provisions of any securities laws or regulations conflict with this
Section 4.15, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.15 by virtue thereof.

SECTION 4.16 LIMITATION ON ISSUANCES AND SALES OF CAPITAL
SUBSIDIARIES

The Company will not cause or permit any of its Restricted
Subsidiaries to issue or sell any Capital Stock (other than to the Company or to
a Wholly-Owned Restricted Subsidiary of the Company) or permit any Person (other
than the Company or a Wholly-Owned Restricted Subsidiary of the Company) to own
or hold any Capital Stock of any Restricted Subsidiary of the Company or any
Lien or security interest therein (other than Permitted Liens); PROVIDED,
HOWEVER, such covenant shall not prohibit the disposition (by sale, merger or
otherwise) of all of the Capital Stock of a Restricted Subsidiary of the

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Company; PROVIDED any Net Cash Proceeds therefrom are applied in accordance with
Section 4.15 of this Indenture.

SECTION 4.17 IMPAIRMENT OF SECURITY INTEREST.

Neither the Company nor any of its Subsidiaries will take or omit to
take any action which would adversely affect or impair the Security Interests in
favor of the Trustee, on behalf of itself and the Holders, with respect to the
Disbursement Funds, and neither the Company nor its Subsidiaries shall grant to
any Person, or permit any Person (other than the Company) to have (other than to
the Trustee on behalf of the Trustee and the Holders or the securities
intermediary under the Security and Disbursement Agreement) any interest
whatsoever in the Disbursement Funds.

SECTION 4.18 LIMITATION ON LIENS.

Other than Permitted Liens, the Company shall not, and shall not
cause or permit any of its Restricted Subsidiaries to, directly or indirectly,
incur any Liens of any kind against or upon any property or assets of the
Company or any of its Restricted Subsidiaries whether owned on the Issue Date or
acquired after the Issue Date, or any income or profits therefrom, or assign or
otherwise convey any right to receive income or profits therefrom.

SECTION 4.19 CONDUCT OF BUSINESS.

Neither the Company nor any of its Restricted Subsidiaries will
engage in any business other than (a) the business conducted or proposed to be
conducted by the Company and its Restricted Subsidiaries on the Issue Date or
(b) any business reasonably related and complimentary to any business described
in clause (a) above.

SECTION 4.20 PAYMENTS FOR CONSENT.

Neither the Company nor any of the Company's Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for, or as
inducement to, any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Notes unless such consideration is offered
to be paid or agreed to be paid to all Holders of Notes then outstanding that
consent, waive or agree to amend any of such terms or provisions in the time
frame set forth in the solicitation documents relating to such consent, waiver
or agreement.

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SECTION 4.21 REGISTRATION RIGHTS AGREEMENT.

The Company will comply with all of the terms and provisions of the
Registration Rights Agreement, including, without limitation, its obligation to
pay Additional Interest to the Holders, as set forth in Section 4 therein (which
provision is hereby incorporated in its entirety by reference herein) and to
notify the Trustee immediately of the occurrence of any Registration Default (as
defined in the Registration Rights Agreement) thereunder.

SECTION 4.22 WARRANT AGREEMENT.

The Company will comply with all of the terms and provisions of the
Warrant Agreement and on or prior to the Separability Date shall notify the
Trustee immediately of the occurrence of any default or event of default
thereunder.

SECTION 4.23 INTERCOMPANY INDEBTEDNESS.

The Company agrees that any Indebtedness of a Subsidiary of the
Company to the Company or any Subsidiary of the Company, if such Indebtedness of
such Subsidiary exceeds $500,000 in aggregate principal amount shall be
subordinate to the Obligations of the Company and the Subsidiary Guarantors, and
the promissory note or other instrument evidencing such Indebtedness shall
contain language giving effect to such subordination.

SECTION 4.24 KEY MAN LIFE INSURANCE.

The Company shall use commercially reasonable efforts to obtain, not
later than 30 days after the Issue Date, and to maintain, for so long as the
Notes are outstanding, key man life insurance upon the life of Sam Forman, the
Company's Chief Executive Officer, and any successor chief executive officer of
the Company, or other senior executive officer of the Company performing similar
functions, with the death benefit thereunder payable to the Company in an amount
not less than $10,000,000. For purposes of this covenant, the payment by the
Company of annual premiums not in excess of $250,000 in connection with such key
man life insurance shall be considered commerically reasonable. The Company
shall at all times retain all the incidents of ownership of such insurance and
shall not borrow upon or otherwise impair its right to receive the proceeds of
such insurance, except that the Company may incur Permitted Liens on such
insurance and proceeds.

SECTION 4.25 USE OF PROCEEDS.

The Company shall use the proceeds of the Notes substantially in the
manner described in the Offering Circular. The Company will not use any part of
such proceeds to purchase or carry any margin stock or to extend credit to
others for the purpose of

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purchasing or carrying any margin stock. Neither the issuance of any Note nor
the use of the proceeds thereof shall violate or be inconsistent with the
provisions of Regulations G, T, U or X of the Board of Governors of the Federal
Reserve System.

ARTICLE FIVE

SUCCESSOR CORPORATION

SECTION 5.1 MERGER, CONSOLIDATION AND SALE OF ASSETS.

(a) The Company will not, in a single transaction or series of
related transactions, consolidate or merge with or into (whether or not the
Company is the surviving entity), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets to,
another corporation, Person or entity unless: (i) the Company is the surviving
entity, or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
to which such sale, assignment, transfer, lease, conveyance or other disposition
will have been made assumes all the obligations of the Company under the Notes
and this Indenture and the Registration Rights Agreement, pursuant to a
supplemental indenture and any other documents or instruments requested by the
Trustee, in each case, in a form reasonably satisfactory to the Trustee under
the Notes and this Indenture; (iii) immediately after such transaction
(including giving effect to any Indebtedness and Acquired Debt incurred or
expected to be incurred in connection with or in respect of such transaction and
to any assumption required by clause (ii) above) no Default or Event of Default
exists; (iv) the Company or any entity formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer, lease
conveyance or other disposition will have been made (A) will have Consolidated
Net Worth (immediately after the transaction but prior to any purchase
accounting adjustments resulting from the transaction) equal to or greater than
the Consolidated Net Worth of the Company immediately preceding the transaction
and (B) will, at the time of such transaction and after giving PRO FORMA effect
thereto as if such transaction had occurred at the beginning of the applicable
four quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to Section 4.12 of this Indenture and will have a Fixed
Charge Coverage Ratio, determined on a PRO FORMA basis, greater than or equal to
the Fixed Charge Coverage Ratio of the Company immediately prior to the
transaction; and (v) the Company or the entity or Person formed by or surviving
any such consolidation or merger, or to which such sale, assignment, transfer,
lease, conveyance or other disposition will have been made shall have delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel (with respect
to which opinion such counsel may rely solely as to matters of fact on an
Officers' Certificate), each stating that such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition and any
supplemental indenture required in connection with such transaction

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comply with the applicable provisions of this Indenture and that all conditions
precedent in this Indenture relating to such transaction have been satisfied.

(b) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.

(c) Each Restricted Subsidiary (other than any Restricted Subsidiary
whose Subsidiary Guarantee is to be released in accordance with the terms of
such Subsidiary Guarantee and this Indenture in connection with any transaction
made in compliance with the provisions of Section 4.15) will not, and the
Company will not cause or permit any Restricted Subsidiary to, consolidate with
or merge with or into any Person (other than the Company or any Restricted
Subsidiary of the Company), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets (other than to the
Company or any Restricted Subsidiary of the Company), unless: (i) the entity
formed by or surviving any such consolidation or merger (if other than the
Restricted Subsidiary), or to which such disposition shall have been made, is a
corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia; (ii) such entity assumes by
supplemental indenture all of the obligations of the Restricted Subsidiary on
the Subsidiary Guarantee; (iii) immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing; (iv) immediately after giving effect to such transaction and the use
of any net proceeds therefrom on a pro forma basis, the Company could satisfy
the provisions of clause (iv) of paragraph (a) of this Section 5.1; and (v) the
Subsidiary Guarantor or the entity or Person formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made, shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel (with respect to
which opinion such counsel may rely solely as to matters of fact on an Officers'
Certificate), each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and any supplemental indenture
required in connection with such transaction comply with the applicable
provisions of this Indenture and that all conditions precedent in this Indenture
relating to such transactions have been satisfied. Any merger or consolidation
of a Restricted Subsidiary with and into the Company (with the Company being the
surviving entity) or another Restricted Subsidiary need only comply with clause
(iv) of paragraph (a) of this Section 5.1.

SECTION 5.1 SUCCESSOR CORPORATION SUBSTITUTED.

Upon any consolidation, combination or merger or any transfer of all
or substantially all of the assets of the Company in accordance with the
foregoing, in which the Company is not the continuing entity, the successor
Person formed by such consolidation or into which the Company is merged or to
which such conveyance, lease or transfer is made

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shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture and the Notes and the Registration Rights
Agreement, with the same effect as if such surviving entity had been named as
such, and thereafter (except in the case of a lease) the predecessor corporation
will be relieved of all further obligations and covenants hereunder and
thereunder.

ARTICLE SIX

DEFAULT AND REMEDIES

SECTION 6.1 EVENTS OF DEFAULT.

An "Event of Default" occurs if:

(a) for any Interest Payment Date, the Company fails to pay interest
on any Notes when the same becomes due and payable and the Default
continues for a period of 10 days;

(b) the Company fails to pay the principal (or premium, if any) on
any Notes, when such principal becomes due and payable, at maturity, by
acceleration, upon redemption or otherwise (including any default in the
performance or breach of the provisions in Section 4.14 or Section 5.1 of
this Indenture, the failure to make a payment to purchase Notes tendered
pursuant to a Change of Control Offer or a Net Proceeds Offer);

(c) the Company or any of its Subsidiaries defaults in the
observance or performance of any other covenant, provision or agreement
contained in this Indenture or the Notes, which default continues for a
period of 30 days after the Company receives written notice specifying the
nature of such default (and demanding that such default be remedied) from
the Trustee or the Holders of at least 25% of the outstanding principal
amount of the Notes (except in the case of a default under Section 5.1 of
this Indenture, which default will constitute an Event of Default with
such notice requirement but without such passage of time requirement);

(d) a default (after giving effect to any applicable grace periods
or any extension of any maturity date) under any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness of the Company or of any Restricted
Subsidiary of the Company, whether such Indebtedness now exists or is
created after the Issue Date, if (a) either (A) such default results from
the failure to pay principal of or interest on such Indebtedness and the
default continues for a period of 30 days or (B) as a result of such
default the maturity of such Indebtedness has been accelerated, and (b)
the principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness with respect to which a payment
default as described in

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clause (a)(A) (after the expiration of any applicable grace period or any
extension of the maturity date) has occurred, or the maturity of which may
be so accelerated, exceeds $2,000,000 in the aggregate, and the default
continues for a period of 10 days after the Company has received written
notice specifying the default from the Trustee or the Holders of at least
25% of the aggregate principal amount of the then outstanding Notes;

(e) one or more judgments in an aggregate amount in excess of
$2,000,000 (other than any judgment as to which a reputable insurance
company has accepted full liability in writing) shall have been rendered
against the Company or any of its Restricted Subsidiaries and such
judgments remain undischarged, unpaid or unstayed for a period of 60 days
after such judgment or judgments become final and non-appealable;

(f) the Company or any Restricted Subsidiary (A) commences a
voluntary case or proceeding under any Bankruptcy Law with respect to
itself, (B) consents to the entry of a judgment, decree or order for
relief against it in an involuntary case or proceeding under any
Bankruptcy Law, (C) consents to the appointment of a Custodian of it or
for substantially all of its property or assets, (D) consents to or
acquiesces in the institution of a bankruptcy or an insolvency proceeding
against it, (E) makes a general assignment for the benefit of its
creditors, (F) shall generally not pay its debts when such debts become
due or shall admit in writing its inability to pay its debts generally or
(G) takes any action to authorize or effect any of the foregoing;

(g) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company, any Restricted Subsidiary in
an involuntary case or proceeding under any Bankruptcy Law, which shall
(A) approve as properly filed a petition seeking reorganization,
arrangement, adjustment or composition in respect of the Company, or any
Restricted Subsidiary, (B) appoint a Custodian of the Company, or any
Restricted Subsidiary or for substantially all of its property or (C)
order the winding-up or liquidation of its affairs; and such judgment,
decree or order shall remain unstayed and in effect or a period of 60
consecutive days; or

(h) any Subsidiary Guarantee for any reason ceases to be in full
force and effect or becomes or is declared to be null and void,
unenforceable or invalid or any Subsidiary Guarantor denies or disaffirms
its obligations under its Subsidiary Guarantee (other than by reason of
release of a Subsidiary Guarantor in accordance with the terms of this
Indenture).

SECTION 6.2 ACCELERATION.

(a) If an Event of Default (other than an Event of Default specified
in Section 6.1(f) or (g) with respect to the Company or any of its Restricted
Subsidiaries) occurs and is continuing and has not been waived pursuant to
Section 6.4, then the Trustee or the Holders of at least 25% in principal amount
of the outstanding Notes may declare the

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principal of, premium, if any, and accrued interest on all the Notes to be due
and payable immediately by notice in writing to the Company and the Trustee
specifying the respective Event of Default and that it is a "notice of
acceleration" (the "Acceleration Notice"), and the same shall become immediately
due and payable.

(b) If an Event of Default specified in Section 6.1(f) or (g) with
respect to the Company or any of its Restricted Subsidiaries occurs and is
continuing, then all unpaid principal of, and premium, if any, and accrued and
unpaid interest on all of the outstanding Notes shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.

(c) At any time after a declaration of acceleration with respect to
the Notes in accordance with Section 6.2(a), the Holders of a majority in
principal amount of the Notes may on behalf of all of the Holders, by written
notice to the Trustee, (i) waive any existing Default or Event of Default and
its consequences, except a continuing Default or Event of Default under Section
6.1(a) or (b) hereof or a Default or Event of Default with respect to any
covenant or provision which cannot be modified or amended without the consent of
the Holder of each outstanding Note affected, and (ii) rescind and cancel such
declaration of acceleration and its consequences if (A) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction, and
(B) all existing Events of Default have been cured or waived (except any such
Event of Default arising from the nonpayment of principal or interest on the
Notes that has become due solely because of the acceleration).

(d) In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
or any Subsidiary Guarantor with the intention and for the purpose of avoiding
payment of the premium that the Company would have had to pay if the Company
then had elected to redeem the Notes pursuant to Section 3.1 hereof and
Paragraph 5 of the Notes, an equivalent premium shall also become and be
immediately due and payable on Notes of such series to the extent permitted by
law.

SECTION 6.3 OTHER REMEDIES.

If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, premium, if any, or interest on the Notes or to enforce
the performance of any provision of the Notes or this Indenture.

The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy arising
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative to the extent permitted by
law.

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SECTION 6.4 WAIVER OF PAST DEFAULTS.

Subject to Sections 2.9, 6.8 and 9.2, the Holders of a majority in
principal amount of the outstanding Notes by written notice to the Trustee may
waive an existing Default or Event of Default and its consequences, except a
continuing Default or Event of Default in the payment of principal of or
interest on any Note as specified in clauses (a) and (b) of Section 6.1. When a
Default or Event of Default is waived, it is cured and ceases.

SECTION 6.5 CONTROL BY MAJORITY.

Subject to Section 2.9, the Holders of a majority in principal
amount of the outstanding Notes may direct in writing the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, including, without
limitation, any remedies provided for in Section 6.3. Subject to Section 7.1,
however, the Trustee may refuse to follow any direction (i) that the Trustee
reasonably believes conflicts with any law or this Indenture or the Notes, (ii)
that the Trustee determines may be unduly prejudicial to the rights of another
Holder or (iii) that may involve the Trustee in personal liability; PROVIDED,
further, however, that the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction or this Indenture.

SECTION 6.6 LIMITATION ON SUITS.

No Holder will have any right to institute any proceeding, judicial
or otherwise, or pursue any remedy under this Indenture or the Notes unless:

(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;

(2) the Holders of not less than 25% in principal amount of the
outstanding Notes have made a written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee
under this Indenture;

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

(4) the Trustee, for 30 days after its receipt of such notice,
request and offer of indemnity, has failed to institute such proceeding;
and

(5) no direction inconsistent with such written request has been
given to the Trustee during such 30-day period by the Holders of a
majority in principal amount of the outstanding Notes.

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The foregoing limitations shall not apply to a suit instituted by a
Holder for the enforcement of the payment of principal and premium, if any, or
interest on such Note on or after the respective due dates set forth in such
Note (including upon acceleration thereof) or the institution of any proceeding
with respect to this Indenture or any remedy hereunder, including without
limitation, acceleration, by the Holders of a majority in principal amount of
the outstanding Notes; PROVIDED that upon institution of any proceeding or
exercise of any remedy, such Holder provides the Trustee with prompt notice
thereof.

A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.

SECTION 6.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.

Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of, premium, if any, and interest on
a Note, on or after the respective due dates expressed in such Note, or to bring
suit for the enforcement of any such payment on or after such respective dates,
is absolute and unconditional and shall not be impaired or affected without the
written consent of such Holder.

SECTION 6.8 COLLECTION SUIT BY TRUSTEE.

If an Event of Default in payment of principal or interest specified
in clause (a) or (b) of Section 6.1 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Notes for the whole amount of principal of,
premium, if any, and accrued interest remaining unpaid, together with interest
on overdue principal and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest at the rate set forth in Section
2.16 and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.

SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM.

The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents, counsel, accountants and
experts) and the Holders allowed in any judicial proceedings relating to the
Company or Subsidiaries or any other obligor upon the Notes, any of their
respective creditors or any of their respective property and shall be entitled
and empowered to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any Custodian in
any such judicial proceedings is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay

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to the Trustee any amount due to it for the reasonable compensation, expenses,
taxes, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.7. Nothing herein contained
shall be deemed to authorize the Trustee to authorize or consent to or accept or
adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.

SECTION 6.10 PRIORITIES.

If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money in the following order:

First: to the Trustee for amounts due under Section 7.7;

Second: if the Holders are forced to proceed against the Company
directly without the Trustee, to Holders for their collection costs;

Third: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for
principal and interest, respectively; and

Fourth: to the Company or any other obligor on the Notes, as
their interests may appear, or as a court of competent jurisdiction may
direct.

The Trustee, upon prior notice to the Company, may fix a record date
and payment date for any payment to Holders pursuant to this Section 6.10.

SECTION 6.11 UNDERTAKING FOR COSTS.

In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.7, a suit by a Holder or Holders of more than 25% in
principal amount of the outstanding Notes, or a suit by a Holder or Holders for
the enforcement of the payment of the principal of, premium, if any, or interest
on the Notes, on or after the due dates expressed in the Notes.

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SECTION 6.12 RESTORATION OF RIGHTS AND REMEDIES.

If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture or any Note and such proceeding
has been discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every such case, the
Company, the Trustee and the Holders shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.

SECTION 6.13 RIGHTS AND REMEDIES CUMULATIVE.

Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or wrongfully taken Notes in Section 2.7,
no right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.

SECTION 6.14 DELAY OR OMISSION NOT WAIVER.

No delay or omission of the Trustee or of any Holder to exercise any
right or remedy arising upon any Default or Event of Default shall impair any
such right or remedy or constitute a waiver of any such Default or Event of
Default or an acquiescence therein. Every right and remedy given by this Article
Six or by law to the Trustee or to the Holders may be exercised from time to
time, and as may be deemed expedient, by the Trustee or by the Holders, as the
case may be.

ARTICLE SEVEN

TRUSTEE

SECTION 7.1 DUTIES OF TRUSTEE.

The duties and responsibilities of the Trustee shall be as provided
by the TIA and as set forth herein.

(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the

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same degree of care and skill in its exercise thereof as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.

(b) Except during the continuance of a Default or an Event of
Default:

(1) the Trustee need perform only those duties as are specifically
set forth in this Indenture, and no covenants or obligations shall be
implied in this Indenture against the Trustee; and

(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture;
PROVIDED, HOWEVER, that the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture.

(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:

(1) this paragraph does not limit the effect of paragraph (b)
of this Section 7.1;

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

(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.2, 6.4 or 6.5 of this Indenture.

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

(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1 and
Section 7.2 of this Indenture.

(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.

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SECTION 7.2 RIGHTS OF TRUSTEE.

Subject to Section 7.1:

(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any document reasonably believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.

(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of Counsel,
or both, which shall conform to Sections 12.4 and 12.5 of this Indenture. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel.

(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts.

(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized or
within its rights or powers under this Indenture.

(e) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, financial statement, opinion, notice, request, direction, consent,
order, bond, debenture, or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled, upon reasonable notice
to the Company, to examine the books, records, and premises of the Company,
personally or by agent or attorney and to consult with the officers and
representatives of the Company, including the Company's accountants and
attorneys.

(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee security or indemnity
reasonably satisfactory to the Trustee against the costs, expenses and
liabilities which may be incurred by it in compliance with such request, order
or direction.

(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.

(h) Any permissive right or power available to the Trustee under
this Indenture shall not be construed to be a mandatory duty or obligation.

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SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.

The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, any
Subsidiary of the Company, or their respective Affiliates,with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11 of this
Indenture, and the Trustee is subject to TIA Sections 310(b) and 311.

SECTION 7.4 TRUSTEE'S DISCLAIMER.

The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Notes, and it shall not be accountable for the
Company's use of the proceeds from the Notes, and it shall not be responsible
for any statement of the Company in this Indenture or the Notes other than the
Trustee's certificate of authentication.

SECTION 7.5 NOTICE OF DEFAULT.

If a Default or an Event of Default occurs and is continuing and if
it is known to the Trustee, the Trustee shall mail to the Company and each
Holder in the manner and to the extent provided in TIA Section 313(c) notice of
the Default or Event of Default within 45 days after such Default or Event of
Default occurs, unless such Default or Event of Default has been cured. Except
in the case of a Default or an Event of Default in payment of principal of, or
interest on, any Note, including an accelerated payment and the failure to make
payment on the Change of Control Payment Date pursuant to a Change of Control
Offer or on the Net Proceeds Offer Payment Date pursuant to a Net Proceeds
Offer, the Trustee may withhold the notice of a Default or an Event of Default
if and so long as its Board of Directors, the executive committee of its Board
of Directors or a committee of its directors and/or officers charged with such
responsibility in good faith determines that withholding the notice is in the
interest of the Holders.

SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS.

Within 60 days after each May 15, beginning with May 15, 1998, the
Trustee shall, to the extent that any of the events described in Section 313(a)
of the TIA occurred within the previous twelve months, but not otherwise, mail
to each Holder a brief report dated as of such date that complies with Section
313(a) of the TIA. The Trustee also shall comply with Sections 313(b) and (c) of
the TIA.

A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the SEC and each stock exchange or market,
if any, on which the Notes are listed or quoted.

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The Company shall promptly notify the Trustee if the Notes become
listed or quoted on any stock exchange or market and the Trustee shall comply
with Section 313(d) of the TIA.

SECTION 7.7 COMPENSATION AND INDEMNITY.

The Company shall pay to the Trustee from time to time reasonable
compensation for its services as shall from time to time be agreed to in writing
by the Company and the Trustee. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred or made by it in connection with the performance of its duties under
this Indenture, except any such expense as may arise from its negligence, bad
faith or willful misconduct. Such expenses shall include but not be limited to
the reasonable fees and expenses of the Trustee's agents and counsel.

The Company shall indemnify each of the Trustee (or any predecessor
Trustee) and its agents, employees, stockholders and directors and officers for,
and hold them harmless against, any loss, liability, damage, claim or expense
(including reasonable fees and expenses of counsel), including taxes (other than
taxes based on the income of the Trustee) incurred by them except for such
actions to the extent caused by any negligence, bad faith or willful misconduct
on their part, arising out of or in connection with the administration of this
trust including the reasonable costs and expenses of enforcing this Indenture
against the Company (including this Section 7.7) and defending themselves
against any claim or liability in connection with the exercise or performance of
any of their rights, powers or duties hereunder. The Trustee shall notify the
Company promptly of any claim asserted against the Trustee for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve the
Company of its obligations hereunder. At the Trustee's sole discretion, the
Company shall defend the claim and the Trustee shall cooperate and may
participate in the defense; PROVIDED that any settlement of a claim shall be
approved in writing by the Trustee. Alternatively, the Trustee may at its option
have separate counsel of its own choosing and the Company shall pay the
reasonable fees and expenses of such counsel; PROVIDED that the Company will not
be required to pay such fees and expenses if it assumes the Trustee's defense
and there is no conflict of interest between the Company and the Trustee in
connection with such defense as reasonably determined by the Trustee. The
Company need not pay for any settlement made without its written consent, which
consent shall not be unreasonably withheld. The Company need not reimburse any
expense or indemnify against any loss or liability to the extent incurred by the
Trustee through its negligence, bad faith or willful misconduct.

To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a claim prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or interest on particular Notes.

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When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.1(f) or (g) of this Indenture occurs, such
expenses and the compensation for such services are intended to constitute
expenses of administration under any Bankruptcy Law.

The obligations of the Company under this Section 7.7 shall survive
the satisfaction and discharge of this Indenture.

SECTION 7.8 REPLACEMENT OF TRUSTEE.

A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment, as provided in this Section 7.8.

The Trustee may resign by so notifying the Company in writing at
least 30 days prior to the date of the proposed resignation. The Holders of a
majority in principal amount of the outstanding Notes may remove the Trustee by
so notifying the Company and the Trustee and may appoint a successor Trustee.
The Company may remove the Trustee if:

(1) the Trustee fails to comply with Section 7.10;

(2) the Trustee is adjudged bankrupt or insolvent;

(3) a receiver or other public officer takes charge of the
Trustee or its property; or

(4) the Trustee becomes incapable of acting.

If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in aggregate principal
amount of the outstanding Notes may appoint a successor Trustee to replace the
successor Trustee appointed by the Company.

A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.7, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The Company and the successor Trustee shall mail notice of the
successor Trustee's succession to each Holder.

If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least

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10% in principal amount the outstanding Notes may petition any court of
competent jurisdiction for the appointment of a successor Trustee.

If the Trustee is no longer eligible under or otherwise fails to
comply with Section 7.10, any Holder who satisfies the requirements of TIA
Section 310(b) may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.

The Company shall give notice of any resignation and any removal of
the Trustee and each appointment of a successor Trustee to all Holders. Each
notice shall include the name of the successor Trustee and the address of its
corporate trust office.

Notwithstanding any resignation or replacement of the Trustee
pursuant to this Section 7.8, the Company's obligations under Section 7.7 of
this Indenture shall continue for the benefit of the retiring Trustee.

SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC.

If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
Person the resulting, surviving or transferee Person without any further act
shall, if such resulting, surviving or transferee Person is otherwise eligible
hereunder, be the successor Trustee; PROVIDED, HOWEVER, that such Person shall
be otherwise qualified and eligible under this Article Seven.

SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.

This Indenture shall always have a Trustee who satisfies the
requirements of TIA Sections 310(a)(1), (2) and (5). The Trustee (or, in the
case of a corporation included in a bank holding company system, the related
bank holding company) shall have combined capital and surplus of at least
$200,000,000 as set forth in its most recent published annual report of
condition. In addition, if the Trustee is a corporation included in a bank
holding company system, the Trustee, independently of such bank holding company,
shall meet the capital requirements of TIA Section 310(a)(2). The Trustee shall
comply with TIA Section 310(b); PROVIDED, HOWEVER, that there shall be excluded
from the operation of TIA Section 310(b)(1) any indenture or indentures under
which other securities, or certificates of interest or participation in other
securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met. The provisions of TIA
Section 310 shall apply to the Company and the Subsidiary Guarantors, each as an
obligor of the Notes.

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SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY.

The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein. The provisions of TIA Section 311(a) shall apply to the Company and the
Subsidiary Guarantors, each as an obligor on the Notes.

ARTICLE EIGHT

SATISFACTION AND DISCHARGE OF INDENTURE

SECTION 8.1 LEGAL DEFEASANCE AND COVENANT DEFEASANCE

(a) If the Company irrevocably deposits, or causes to be deposited,
in trust with the Trustee or the Paying Agent, at any time prior to the stated
maturity of the Notes or the date of redemption of all the outstanding Notes, as
trust funds in trust, money or direct non-callable obligations of or guaranteed
by the United States of America in an amount sufficient (as to principal,
premium (if any) and interest, but without reinvestment thereof), in the opinion
of a nationally recognized firm of independent public accountants to pay timely
and discharge the principal of and premium, if any, and interest on the
outstanding Notes to maturity or redemption, as the case may be, the Indenture
shall cease to be of further effect as to all outstanding Notes (except, among
other things, as to (i) remaining rights of registration of transfer and
substitution and exchange of the Notes, (ii) rights of holders to receive
payment of principal of and interest on the Notes and (iii) the rights,
obligations and immunities of the Trustee) and the Guarantees will be
discharged.

(b) The following shall be the conditions to application of
paragraph (a) above to the outstanding Notes:

(i) (x) No Default or Event of Default shall have occurred and
be continuing on the date of such deposit (other than a Default or Event
of Default resulting from the incurrence of Indebtedness, all or a portion
of which will be used to defease the Notes concurrently with such
incurrence) or (y) at any time in the period ending on the 91st day after
the date of deposit no Default or Event of Default set forth in Section
6.1(f) or (g) shall have occurred and be continuing;

(ii) Such deposit and the defeasance contemplated hereby will
not result in a Default under, or a breach or violation of, this Indenture
or any other material instrument or agreement to which the Company or any
of its Subsidiaries is a party or by which it or their property or assets
is bound;

(iii) The Company shall deliver to the Trustee an Opinion of
Counsel in the United States, in form and substance reasonably
satisfactory to the Trustee, to

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the effect that (x) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, (y) since the Issue
Date, there has been a change in the applicable Federal income tax law or
(z) based on existing precedents, if the matter were properly briefed, in
any case to the effect that, and based thereon such Opinion of Counsel
shall state that, a court should hold that Holders will not recognize
income, gain or loss for Federal income tax purposes as a result of such
deposit and the defeasance contemplated hereby and will be subject to
Federal income tax in the same amounts and in the same manner and at the
same times as would have been the case if such deposit and defeasance had
not occurred;

(iv) The Company shall have delivered to the Trustee an
Opinion of Counsel, reasonably satisfactory to the Trustee, to the effect
that, or based on existing precedents, if the matter were properly
briefed, a court should state that: (A) the trust funds will not be
subject to the rights of holders of Indebtedness of the Company other than
the Notes and as otherwise permitted herein and (B) assuming no
intervening bankruptcy of the Company between the date of deposit and the
91st day following the deposit and that no Holder is an insider of the
Company, after the 91st day following the deposit, the trust funds will
not be subject to any applicable bankruptcy, insolvency, reorganization or
similar law affecting creditors' rights generally; and

(v) The Company shall have delivered to the Trustee an
Officers' Certificate, stating that the deposit under clause (i) was not
made by the Company with the intent of preferring the Holders over any
other creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or others;

(vi) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent specified herein relating to the defeasance
contemplated by this Section 8.1 have been complied with; PROVIDED,
HOWEVER, that such counsel may rely, as to matters of fact, on Officers'
Certificates of the Company.

In the event all or a portion of the Notes are to be redeemed
through such irrevocable trust, the Company must make arrangements reasonably
satisfactory to the Trustee, at the time of such deposit, for the giving of the
notice of such redemption or redemptions by the Trustee in the name and at the
expense of the Company.

SECTION 8.2 SATISFACTION AND DISCHARGE.

In addition to the Company's rights under Section 8.1, the Company
may terminate all of its obligations under this Indenture (subject to Section
8.3), when:

(1) all Notes theretofore authenticated and delivered (other than
Notes which have been destroyed, lost or stolen and which have been
replaced or paid as

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provided in Section 2.7 and Notes for whose payment money has theretofore
been deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust) have been
delivered to the Trustee for cancellation or all such Notes not
theretofore delivered to the Trustee for cancellation have become due and
payable, and the Company has irrevocably deposited or caused to be
deposited with the Trustee as trust funds in trust solely for that purpose
an amount of money sufficient to pay and discharge the entire Indebtedness
on the Notes not theretofore delivered to the Trustee for cancellation,
for principal of, premium, if any, and interest;

(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company;

(3) the Company has delivered irrevocable instructions to the
Trustee to apply the deposited money toward the payment of the Notes at
maturity or redemption, as the case may be; and

(4) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, stating that all conditions
precedent specified herein relating to the satisfaction and discharge of
this Indenture have been complied with; PROVIDED, HOWEVER, that such
counsel may rely, as to matters of fact, on Officers' Certificates of the
Company.

SECTION 8.3 SURVIVAL OF CERTAIN OBLIGATIONS.

Notwithstanding the satisfaction and discharge of this Indenture and
of the Notes referred to in Section 8.1 or 8.2, the respective obligations of
the Company and the Trustee under Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.10,
2.13, 2.14, 2.16, 4.1, 4.2, 4.9, 4.20, 4.21, 6.7, Article Seven, 8.5, 8.6, 8.7,
10.2 and 10.4 of this Indenture shall survive until the Notes are no longer
outstanding, and thereafter the obligations of the Company and the Trustee under
Sections 7.7, 7.8, 8.5, 8.6 and 8.7 of this Indenture shall survive. Nothing
contained in this Article Eight shall abrogate any of the obligations or duties
of the Trustee under this Indenture.

SECTION 8.4 ACKNOWLEDGMENT OF DISCHARGE BY TRUSTEE.

Subject to Section 8.7, after (i) the conditions of Section 8.1 or
8.2 of this Indenture have been satisfied, (ii) the Company has paid or caused
to be paid all other sums payable hereunder by the Company and (iii) the Company
has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that all conditions precedent referred to in clause (i) above
relating to the satisfaction and discharge of this Indenture have been complied
with, the Trustee upon written request shall acknowledge in writing the
discharge of the Company's obligations under this Indenture except for those
surviving obligations specified in Section 8.3.

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SECTION 8.5 APPLICATION OF TRUST MONIES.

The Trustee or Paying Agent shall hold any U.S. Legal Tender or U.S.
Government Obligations deposited with it in the irrevocable trust established
pursuant to Section 8.1 of this Indenture. The Trustee shall apply the deposited
U.S. Legal Tender or the U.S. Government Obligations, together with earnings
thereon, through the Paying Agent, in accordance with this Indenture and the
terms of the irrevocable trust agreement established pursuant to Section 8.1, to
the payment of principal of and interest on the Notes. Anything in this Article
Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the
Company from time to time upon the Company's request any U.S. Legal Tender or
U.S. Government Obligations held by it as provided in Section 8.1(d) hereof
which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof that would then be required to be
deposited to effect an equivalent defeasance and discharge contemplated by
Section 8.1.

The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed or assessed against the U.S. Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.1 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of outstanding Notes.

SECTION 8.6 REPAYMENT TO THE COMPANY; UNCLAIMED MONEY.

Subject to Sections 7.7, 8.1 and 8.2 of this Indenture, the Trustee
and the Paying Agent shall promptly pay to the Company upon request any excess
U.S. Legal Tender or U.S. Government Obligations held by them at any time. The
Trustee and the Paying Agent will pay to the Company upon receipt by the Trustee
or the Paying Agent, as the case may be, of an Officers' Certificate, any money
held by it for the payment of principal or interest that remains unclaimed for
two years after payment to the Holders is required; PROVIDED, HOWEVER, that the
Trustee and the Paying Agent before being required to make any payment may, but
need not, at the expense of the Company cause to be published once in a
newspaper of general circulation in the City of New York or mail to each Holder
entitled to such money notice that such money remains unclaimed and that after a
date specified therein, which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining will
be repaid to the Company. After payment to the Company, Holders entitled to
money must look solely to the Company for payment as general creditors unless an
applicable abandoned property law designated another Person, and all liability
of the Trustee or Paying Agent with respect to such money shall thereupon cease.

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SECTION 8.7 REINSTATEMENT.

If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government obligations in accordance with Section 8.1 or 8.2 of
this Indenture by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.1 or 8.2 of this Indenture until such time as the
Trustee or Paying Agent is permitted to apply all such U.S. Legal Tender or U.S.
Government Obligations in accordance with Section 8.1 or 8.2 of this Indenture;
PROVIDED, HOWEVER, that if the Company has made any payment of interest on or
principal of any Notes because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.

ARTICLE NINE

AMENDMENTS, SUPPLEMENTS AND WAIVERS

SECTION 9.1 WITHOUT CONSENT OF HOLDERS.

The Company, when authorized by a Board Resolution, and the Trustee,
together, may amend or supplement this Indenture or the Notes without notice to
or consent of any Holder:

(1) to cure any ambiguity, defect or inconsistency; PROVIDED that
such amendment or supplement does not adversely affect the rights of any
Holder;

(2) to provide for the assumption of the Company's obligations to
Holders or any Subsidiary Guarantor's obligation under its Subsidiary
Guarantee if required under the terms hereof in the case of a merger,
consolidation or similar transaction and otherwise as required to comply
with Article Five;

(3) to provide for uncertificated Notes in addition to or in
place of certificated Notes;

(4) to comply with any requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA;

(5) to make any change that would provide any additional benefits or
rights to the Holders or that does not adversely affect the legal rights
hereunder of any Holder; or

(6) to provide for issuance of the Exchange Notes, which will have
terms substantially identical in all material respects to the Initial
Notes (except that the

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transfer restrictions contained in the Initial Notes will be modified or
eliminated, as appropriate), and which will be treated together with any
outstanding Initial Notes, as a single issue of securities;

PROVIDED that the Company has delivered to the Trustee an Opinion of Counsel and
an Officers' Certificate stating that such amendment or supplement complies with
the provisions of this Section 9.1.

SECTION 9.2 WITH CONSENT OF HOLDERS.

Subject to Section 6.7 of this Indenture, the Company, when
authorized by a Board Resolution, and the Trustee, together, with the written
consent of the Holder or Holders of at least a majority in aggregate principal
amount of the outstanding Notes (including consents obtained in connection with
a tender offer or exchange offer for Notes), may amend or supplement this
Indenture or the Notes and may waive compliance by the Company with any
provision of this Indenture or the Notes. Notwithstanding the foregoing, no
amendment, supplement or waiver, including a waiver pursuant to Section 6.4 of
this Indenture, shall, without the consent of each Holder of each Note affected
thereby:

(1) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver of any provision of this Indenture
or the Notes;

(2) reduce the rate of or change or have the effect of changing the
time for payment of interest, including default interest, on any Notes;

(3) reduce the principal of, or the premium on, or change or have
the effect of changing the fixed maturity of any Notes, or alter the
provisions with respect to the redemption of the Notes, or alter the
provisions with respect to repurchases or redemptions of the Notes with
Net Cash Proceeds from Asset Sales or upon a Change of Control;

(4) make any Notes payable in money other than that stated in
the Notes;

(5) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on any Note (other than a Default in
the payment of an amount due as a result of an acceleration, where such
acceleration is rescinded pursuant to this Indenture);

(6) make any change in the provisions of this Indenture relating to
waivers of past Defaults with respect to, or the rights of Holders to
receive, payments of principal of or interest on the Notes;

(7) waive a redemption payment with respect to any Note;

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(8) modify or change any provision of this Indenture affecting the
ranking of the Notes or any Subsidiary Guarantee in a manner which
adversely affects the Holders; or

(9) release any Subsidiary Guarantor from any of its obligations
under its Subsidiary Guarantee or the Indenture, except to the extent such
release is authorized under the terms hereof.

The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Persons entitled to consent to any indenture
supplemental hereto. If a record date is fixed, the Holders on such record date,
or their duly designated proxies, and only such Persons, shall be entitled to
consent to such supplemental indenture, whether or not such Holders remain
Holders after such record date; provided, that unless such consent shall have
become effective by virtue of the requisite percentage having been obtained
prior to the date which is 90 days after such record date, any such consent
previously given shall automatically and without further action by any Holder be
cancelled and of no further effect.

It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.

After an amendment, supplement or waiver under this Section 9.2
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.

SECTION 9.3 COMPLIANCE WITH TIA.

Every amendment, waiver or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect.

SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS.

Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same
Indebtedness as the consenting Holder's Note, even if notation of the consent is
not made on any Note. Subject to the following paragraph, any such Holder or
subsequent Holder may revoke the consent as to such Holder's Note or portion of
such Note by notice to the Trustee or the Company received before the date on
which the Trustee receives an Officers' Certificate certifying that the Holders
of the requisite principal amount of Notes have consented (and not theretofore
revoked such consent) to the

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amendment, supplement or waiver. An amendment, supplement or waiver becomes
effective upon receipt by the Trustee of such Officers' Certificate and evidence
of consent by the Holders of the requisite percentage in principal amount of
outstanding Notes.

The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be at least 30 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to revoke any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 90 days after
such record date, unless consents from Holders of the requisite percentage in
principal amount of the outstanding Notes required hereunder for the
effectiveness of such consents shall have also been given and not revoked within
such 90-day period.

After an amendment, supplement or waiver becomes effective, it shall
bind every Holder.

SECTION 9.5 NOTATION ON OR EXCHANGE OF NOTES.

If an amendment, supplement or waiver changes the terms of a Note,
the Trustee may require the Holder of the Note to deliver the Note to the
Trustee. The Trustee at the written direction of the Company may place an
appropriate notation on the Note about the changed terms and return it to the
Holder, and the Trustee may place an appropriate notation on any Note thereafter
authenticated. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Note shall issue and the Trustee shall authenticate
a new Note that reflects the changed terms. Failure to make the appropriate
notation, or issue a new Note, shall not affect the validity and effect of such
amendment, supplement or waiver. Any such notation or exchange shall be made at
the sole cost and expense of the Company.

SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC.

The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; PROVIDED, HOWEVER, that the Trustee
may, but shall not be obligated to, execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture; PROVIDED, that the legal counsel delivering such Opinion of Counsel
may rely as to matters of fact on one or more Officers' Certificates of the
Company. Such Opinion of Counsel shall not be an expense of the Trustee or the
Holders.

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ARTICLE TEN

GUARANTEE

SECTION 10.1 UNCONDITIONAL GUARANTEE.

(a) In consideration of the promises contained herein and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, each of the Subsidiary Guarantors hereby, jointly and severally,
irrevocably and unconditionally guarantees and agrees to be liable on a senior
basis to each Holder of a Note authenticated and delivered by the Trustee and to
the Trustee and its successors and assigns, irrespective of the validity and
enforceability of this Indenture, the Notes or the Obligations of the Company or
any other Subsidiary Guarantor under this Indenture or the Notes, that: (a) the
principal of, premium, if any, and interest on the Notes (and any Additional
Interest payable thereon) shall be duly and punctually paid in full when due,
whether at maturity, upon redemption (whether upon a Change of Control or
pursuant to a Net Proceeds Offer or otherwise), by acceleration or otherwise,
and interest on the overdue principal and (to the extent permitted by law)
interest, if any, on the Notes and all other Obligations of the Company or the
Subsidiary Guarantors to the Holders or the Trustee hereunder or thereunder
(including amounts due the Trustee under Section 7.7 hereof), shall be promptly
paid in full or performed, all in accordance with the terms hereof and thereof;
and (b) in case of any extension of time of payment or renewal of any Notes or
any of such other Obligations of the Company, the same shall be promptly paid in
full when due or performed in accordance with the terms of extension or renewal,
whether at maturity, upon redemption, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed, or failing performance of any
other Obligation of the Company to the Holders or the Trustee under this
Indenture or under the Notes, for whatever reason, each Subsidiary Guarantor
shall be obligated to pay, or to perform or cause the performance of, the same
immediately. An Event of Default under this Indenture or the Notes shall
constitute an event of default under each such Subsidiary Guarantee, and shall
entitle the Holders or Trustee to accelerate the Obligations of the Subsidiary
Guarantors under the Subsidiary Guarantees in the same manner and to the same
extent as the Obligations of the Company hereunder or under the Notes.

(b) Each of the Subsidiary Guarantors hereby agrees that its
Obligations under its Subsidiary Guarantee shall be unconditional, irrespective
of the validity, regularity or enforceability of the Notes or this Indenture,
the absence of any action to enforce the same, any waiver or consent by any
Holder of the Notes with respect to any provisions thereof, any release of any
other Subsidiary Guarantor, the recovery of any judgment against the Company,
any action to enforce the same, whether or not a Subsidiary Guarantee is affixed
to any particular Note, or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor. Each of the
Subsidiary Guarantors hereby waives the benefit of diligence, presentment,
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever and

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covenants that its Subsidiary Guarantee shall not be discharged except by
complete performance of the Obligations contained in the Notes, this Indenture
and its Subsidiary Guarantee. Each Subsidiary Guarantee shall be a guarantee of
payment and not of collection. If any Holder or the Trustee is required by any
court or otherwise to return to the Company or to any Subsidiary Guarantor, or
any custodian, trustee, liquidator or other similar official acting in relation
to the Company or such Subsidiary Guarantor, any amount paid by the Company or
such Subsidiary Guarantor to the Trustee or such Holder, the Subsidiary
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Subsidiary Guarantor shall further agree that, as between
it, on the one hand, and the Holders and the Trustee, on the other hand, (a)
subject to this Article Ten, the maturity of the Obligations guaranteed may be
accelerated as provided in Article Six hereof for the purposes of its Subsidiary
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the Obligations guaranteed thereby, and (b) in
the event of any acceleration of such Obligations as provided in Article Six
hereof, such Obligations (whether or not due and payable) shall forthwith become
due and payable jointly and severally by each Subsidiary Guarantor for the
purpose of its Subsidiary Guarantee.

SECTION 10.2 SUBSIDIARY GUARANTEES.

(a) As long as any Notes remain outstanding, any Restricted
Subsidiary shall (i) execute and deliver to the Trustee a supplemental indenture
in form reasonably satisfactory to the Trustee pursuant to which such Restricted
Subsidiary shall unconditionally guarantee all the Company's obligations under
the Notes and hereunder on the terms set forth hereunder and (ii) deliver to the
Trustee an opinion of counsel, subject to customary exceptions, that such
supplemental indenture has been duly authorized, executed and delivered by such
Restricted Subsidiary and constitutes a legal, valid, binding and enforceable
obligation of such Restricted Subsidiary. Thereafter, such Restricted Subsidiary
shall be a Subsidiary Guarantor for all purposes hereunder.

(b) Immediately following the dismissal of the Chapter 11 proceeding
of CSS Trade Names, Inc. ("CSS") currently pending in the United States
Bankruptcy Court for the District of Delaware (the "Chapter 11 Proceeding"),
CSS, whose only assets consist of certain service marks of the Company, shall be
a Subsidiary Guarantor of the Company and shall comply with the provisions of
this Section 10.2. The Company shall use its best efforts to have the Chapter 11
Proceeding dismissed within 30 days following the Issue Date.

(c) Notwithstanding any provisions to the contrary herein, the
Company may not transfer assets to CSS until the dismissal of the Chapter 11
Proceeding.

SECTION 10.3 LIMITATIONS ON SUBSIDIARY GUARANTEES.

The Obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee will be limited to the maximum amount which, after giving effect to
all other contingent and

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fixed liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the Obligations of such Subsidiary Guarantor under its
Subsidiary Guarantee or pursuant to its contribution Obligations under this
Indenture, will result in the Obligations of such Subsidiary Guarantor under the
applicable Subsidiary Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under Federal or state law. The net worth of any Subsidiary
Guarantor for such purpose shall include any claim of such Subsidiary Guarantor
against the Company for reimbursement and any claim against any other Subsidiary
Guarantor for contribution.

SECTION 10.4 EVIDENCE OF EXECUTION AND DELIVERY OF
SUBSIDIARY GUARANTEE.

(a) To further evidence each Subsidiary Guarantee referred to in
Section 10.1 hereby, each Subsidiary Guarantor shall agree that a notation of
such Subsidiary Guarantee, substantially in the form of Exhibit F hereto
endorsed by such Subsidiary Guarantor, shall be attached to each Note
authenticated and delivered by the Trustee after the date the Trustee receives
such Subsidiary Guarantee. Each such endorsement shall be executed on behalf of
each Subsidiary Guarantor by either manual or facsimile signature of two
Officers of each Subsidiary Guarantor, each of whom, in each case, shall have
been duly authorized to so execute by all requisite corporate action. The
validity and enforceability of any Subsidiary Guarantee shall not be affected by
the fact that it is not affixed to any particular Note.

(b) Each of the Subsidiary Guarantors hereby agrees that its
Subsidiary Guarantee set forth in Section 10.1 hereof shall remain in full force
and effect notwithstanding any failure to so endorse on each Note a notation of
such Subsidiary Guarantee.

(c) If an Officer of a Subsidiary Guarantor whose signature is on a
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which such Subsidiary Guarantee is endorsed or at any
time thereafter, such Subsidiary Guarantor's Subsidiary Guarantee of such Note
shall be valid nevertheless.

(d) The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of any
Subsidiary Guarantee set forth in this Indenture on behalf of each Subsidiary
Guarantor.

SECTION 10.5 RELEASE OF A SUBSIDIARY GUARANTOR.

(a) If no Default or Event of Default exists or would exist under
this Indenture upon the sale or disposition of all of the Capital Stock of a
Subsidiary Guarantor by the Company or a Subsidiary of the Company in a
transaction constituting an Asset Sale, the Net Cash Proceeds of which are
applied in accordance with Section 4.15, or upon the

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consolidation or merger of a Subsidiary Guarantor with or into any Person in
compliance with Article Five, such Subsidiary Guarantor and each Subsidiary of
such Subsidiary Guarantor that is also a Subsidiary Guarantor shall be deemed
released from all obligations under this Article Ten and its Subsidiary
Guarantee without any further action required on the part of the Trustee or any
Holder. Any Subsidiary Guarantor not so released or the entity surviving such
Subsidiary Guarantor, as applicable, shall remain or be liable under its
Subsidiary Guarantee as provided in this Indenture.

(b) The Trustee shall deliver an appropriate instrument evidencing
the release of a Subsidiary Guarantor upon receipt of a request by the Company
or such Subsidiary Guarantor accompanied by an Officers' Certificate and an
Opinion of Counsel certifying as to the compliance with this Section 10.5,
PROVIDED the legal counsel delivering such Opinion of Counsel may rely as to
matters of fact on one or more Officers' Certificates of the Company.

(c) The Trustee shall execute any documents reasonably requested by
the Company or a Subsidiary Guarantor in order to evidence the release of such
Subsidiary Guarantor from its obligations under its Subsidiary Guarantee,
whether or not endorsed on the Notes and under this Article Ten.

Nothing contained in this Indenture or in any of the Notes shall
prevent any consolidation or merger of a Subsidiary Guarantor with or into the
Company or another Subsidiary Guarantor or shall prevent any sale or conveyance
of the property of a Subsidiary Guarantor as an entirety or substantially as an
entirety to the Company or another Subsidiary Guarantor. Any Subsidiary
Guarantor may cease to be a Subsidiary Guarantor, and the Subsidiary Guarantee
of such Subsidiary Guarantor will terminate at any time that the Board of
Directors designates such Subsidiary Guarantor as an "Unrestricted Subsidiary,"
as provided below.

SECTION 10.6 WAIVER OF SUBROGATION.

Until this Indenture is discharged or defeased as provided in
Article 8 and all of the Notes are discharged and paid in full, each Subsidiary
Guarantor shall irrevocably waive and agree not to exercise any claim or other
rights which it may hereafter acquire against the Company that arise from the
existence, payment, performance or enforcement of the Obligations of the Company
under the Notes or this Indenture and such Subsidiary Guarantor's Obligations
under its Subsidiary Guarantee and this Indenture, in any such instance,
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution, indemnification, and any right to participate in any
claim, remedy or right arises in equity, or under contract, statute or common
law, including, without limitation, the right to take or receive from the
Company directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim or other rights.
If any amount shall be paid to any Subsidiary Guarantor in violation of the
preceding sentence and any amounts owing to the Trustee or the Holders under the
Notes, this Indenture, or any other document or instrument delivered under or in
connection with such

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agreements or instruments, shall not have been paid in full, such amount shall
have been deemed to have been paid to such Subsidiary Guarantor for the benefit
of, and held in trust for the benefit of, the Trustee or the Holders and shall
forthwith be paid to the Trustee for the benefit of itself or such Holders to be
credited against and applied to the Obligations of the Company, whether matured
or unmatured, in accordance with the terms of this Indenture. Each Subsidiary
Guarantor hereby acknowledges that it will receive direct and indirect benefits
from the financing arrangements contemplated by this Indenture and that the
waiver set forth in this Section 10.6 is knowingly made in contemplation of such
benefits.

SECTION 10.7 IMMEDIATE PAYMENT.

Each Subsidiary Guarantor shall agree to make immediate payment to
the Trustee on behalf of the Holders of all Obligations of the Company and such
Subsidiary Guarantor owing or payable to the respective Holders upon receipt of
a demand for payment therefor by the Trustee to such Subsidiary Guarantor in
writing. Each of the Subsidiary Guarantors agrees that neither the Trustee nor
the Holders need attempt to collect any amounts guaranteed hereunder from the
Company, any other Subsidiary Guarantor or any other Person, but may require any
one of the Subsidiary Guarantors to make immediate payment of all of such
guaranteed amounts to the Holders when due, whether by maturity, acceleration,
redemption or otherwise, or at any time thereafter.

SECTION 10.8 NO SET-OFF.

Each payment to be made by a Subsidiary Guarantor hereunder in
respect of the Obligations under its Subsidiary Guarantee shall be payable in
the currency or currencies in which such Obligations are denominated, and shall
be made without set-off, counterclaim, reduction or diminution of any kind or
nature.

SECTION 10.9 OBLIGATIONS ABSOLUTE.

The Obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee shall be absolute and unconditional and any monies or amounts
expressed to be owing or payable by each Subsidiary Guarantor which may not be
recoverable from such Subsidiary Guarantor on the basis of a Subsidiary
Guarantee shall be recoverable from such Subsidiary Guarantor as a primary
obligor and principal debtor in respect thereof.

SECTION 10.10 OBLIGATIONS CONTINUING.

The Obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee shall be continuing and shall remain in full force and effect until
all the Obligations hereunder have been paid and satisfied in full. Each
Subsidiary Guarantor hereby agrees with the Trustee that it will from time to
time deliver to the Trustee suitable

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acknowledgments of this continued liability hereunder and under any other
instrument or instruments in such form as counsel to the Trustee may advise and
as will prevent any action brought against it in respect of any default
hereunder being barred by any statute of limitations now or hereafter in force
and, in the event of the failure of a Subsidiary Guarantor so to do, it shall
irrevocably appoint the Trustee, the attorney and agent of such Subsidiary
Guarantor to make, execute and deliver such written acknowledgment or
acknowledgments or other instruments as may from time to time become necessary
or advisable, in the judgment of the Trustee on the advice of counsel, to fully
maintain and keep in force the liability of such Subsidiary Guarantor under its
Subsidiary Guarantee.

SECTION 10.11 OBLIGATIONS NOT REDUCED.

The Obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee shall not be discharged except by the payment in full of such
Obligations owing or payable under or by virtue of or otherwise in connection
with the Notes of this Indenture.

SECTION 10.12 OBLIGATIONS REINSTATED.

The Obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee shall continue to be effective or shall be reinstated, as the case may
be, if at any time any payment which would otherwise have reduced such
Obligations of any Subsidiary Guarantor (whether such payment shall have been
made by or on behalf of the Company or by or on behalf of a Subsidiary
Guarantor) is rescinded or reclaimed from any of the Holders upon the
insolvency, bankruptcy, liquidation or reorganization of the Company or any
Subsidiary Guarantor or otherwise, all as though such payment had not been made.
If demand for, or acceleration of the time for, payment by the Company is stayed
upon the insolvency, bankruptcy, liquidation or reorganization of the Company,
all such Indebtedness otherwise subject to demand for payment or acceleration
shall nonetheless be payable by each Subsidiary Guarantor as provided herein
subject to Section 10.3.

SECTION 10.13 OBLIGATIONS NOT AFFECTED.

The Obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee shall not be affected, impaired or diminished in any way by any act,
omission, matter or thing whatsoever, occurring before, upon or after any demand
for payment (and whether or not known or consented to by any Subsidiary
Guarantor or any of the Holders) which, but for this provision, might constitute
a whole or partial defense to a claim against any Subsidiary Guarantor under its
Subsidiary Guarantee or might operate to release or otherwise exonerate any
Subsidiary Guarantor from any of its Obligations or otherwise affect such
Obligations, whether occasioned by default of any of the Holders or otherwise,
including, without limitation:

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(a) any limitation of status or power, disability, incapacity or
other circumstance relating to the Company or any other Person, including any
insolvency, bankruptcy, liquidation, reorganization, readjustment, composition,
dissolution, winding-up or other proceeding involving or affecting either the
Company or any other Person;

(b) any irregularity, defect, unenforceability or invalidity in
respect of any Indebtedness or other Obligation of the Company or any other
Person under this Indenture, the Notes or any other document or instrument;

(c) any failure of the Company, whether or not without fault on its
part, to perform or comply with any of the provisions of this Indenture or the
Notes, or to give notice thereof to a Subsidiary Guarantor;

(d) the taking or enforcing or exercising or the refusal or neglect
to take or enforce or exercise any right or remedy from or against the Company
or any other Person or their respective assets or the release or discharge of
any such right or remedy;

(e) the granting of time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences to the Company
or any other Person;

(f) any change in the time, manner or place of payment of, or in any
other term of, any of the Notes, or any other amendment, variation, supplement,
replacement or waiver of, or any consent to departure from, any of the Notes or
this Indenture, including, without limitation, any increase or decrease in the
principal amount of or premium, if any, or interest on any of the Notes;

(g) any change in the ownership, control, name, objects,
businesses, assets, capital structure or constitution of the Company or a
Subsidiary Guarantor;

(h) any merger or amalgamation of the Company or a Subsidiary
Guarantor with any Person or Persons other than the Company;

(i) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action of any
governmental authority or court amending, varying, reducing or otherwise affect,
any of the Obligations of the Company under this Indenture or the Notes or the
Obligations of a Subsidiary Guarantor under its Subsidiary Guarantee; and

(j) any other circumstance, including release of the Subsidiary
Guarantor pursuant to Section 10.5 hereof (other than by complete, irrevocable
payment) that might otherwise constitute a legal or equitable discharge or
defense of the Company under this Indenture or the Notes or of a Subsidiary
Guarantor in respect of its Subsidiary Guarantee.

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SECTION 10.14 WAIVER.

Without in any way limiting the provisions of Section 10.1 hereof,
each Subsidiary Guarantor hereby waives notice of acceptance hereof, notice of
any liability of any Subsidiary Guarantor under its Subsidiary Guarantee, notice
or proof of reliance by the Holders upon the Obligations of any Subsidiary
Guarantor under its Subsidiary Guarantee, and diligence, presentment, demand for
payment on the Company, protest, notice of dishonor or non-payment of any of the
Company's Obligations under this Indenture or the Notes, or other notice or
formalities to the Company or any Subsidiary Guarantor of any kind whatsoever.

SECTION 10.15 NO OBLIGATION TO TAKE ACTION AGAINST THE
COMPANY.

Neither the Trustee nor any other Person shall have any obligation
to enforce or exhaust any rights or remedies under this Indenture or the Notes,
or against the Company or any other Person or any assets or properties of the
Company or any other Person before the Trustee is entitled to demand payment and
performance by any or all Subsidiary Guarantors of their liabilities and
obligations under any Subsidiary Guarantees or under this Indenture.

SECTION 10.16 DEALING WITH THE COMPANY AND OTHERS.

The Holders or the Trustee, without releasing, discharging, limiting
or otherwise affecting in whole or in part the Obligations of any Subsidiary
Guarantor and without the consent of or notice to any Subsidiary Guarantor, may:

(a) grant time, renewals, extensions, compromises, concessions,
waivers, releases and discharges to the Company or any other Person;

(b) take or abstain from taking security or collateral from the
Company or from perfecting security interests in any collateral;

(c) release, discharge, compromise, realize, enforce or otherwise
deal with or do any act or thing in respect of (with or without consideration)
any and all collateral, mortgages or other security, including, without
limitation, any collateral, given by the Company or any third party with respect
to the Obligations of the Company under, or matters contemplated by, this
Indenture or the Notes;

(d) accept compromises or arrangements from the Company;

(e) apply all monies at any time received from the Company as the
Holders may see fit or change any such application in whole or in part from time
to time as the Holders may see fit; and

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(f) otherwise deal with, or waive or modify their right to deal
with, the Company and all other Persons and any collateral as the Holders or the
Trustee may see fit.

SECTION 10.17 DEFAULT AND ENFORCEMENT.

If any Subsidiary Guarantor fails to comply with Section 10.17
hereof, the Trustee may proceed in its name as trustee hereunder in the
enforcement of the Subsidiary Guarantee of any such Subsidiary Guarantor and
such Subsidiary Guarantor's Obligations hereunder by any remedy provided by law,
whether by legal proceedings or otherwise, and to recover from such Subsidiary
Guarantor the Company's Obligations under this Indenture and the Notes.

SECTION 10.18 CERTAIN BANKRUPTCY EVENTS.

Each Subsidiary Guarantor hereby covenants and agrees, to the
fullest extent that it may do so (i) under applicable law and (ii) consistent
with its fiduciary obligations, that in the event of the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Company, such Subsidiary
Guarantor shall not file (or join in any filing of), or otherwise seek to
participate in the filing of, any motion or request seeking to stay or to
prohibit (even temporarily) execution on the Subsidiary Guarantee and hereby
waives and agrees not to take the benefit of any such stay of execution, whether
under Section 362 or 105 of the United States Bankruptcy Code or otherwise.

SECTION 10.19 ACKNOWLEDGMENT.

Each Subsidiary Guarantor hereby acknowledges communication of the
terms of this Indenture and the Notes and consents to and approves of the same.

SECTION 10.20 COSTS AND EXPENSES.

Each Subsidiary Guarantor shall pay on demand by the Trustee any and
all costs, fees and expenses (including, without limitation, legal fees)
incurred by the Trustee, its agents, advisors and counsel or any of the Holders
in enforcing any of their rights under any Subsidiary Guarantee.

SECTION 10.21 NO MERGER OR WAIVER; CUMULATIVE REMEDIES.

No Subsidiary Guarantee shall operate by way of merger of any of the
obligations of a Subsidiary Guarantor under any other agreement, including,
without limitation, this Indenture. No failure to exercise and no delay in
exercising, on the part of the Trustee or the Holders, any right, remedy, power
or privilege under this Indenture or the

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Notes, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege under this Indenture or the
Notes preclude any other or further exercise thereof or the exercise of any
other right, remedy power or privilege. The rights, remedies, powers and
privileges in each Subsidiary Guarantee and under this Indenture, the Notes and
any other document or instrument between a Subsidiary Guarantor and/or the
Company and the Trustee are cumulative and not exclusive of any rights,
remedies, powers and privilege provided by law.

SECTION 10.22 SURVIVAL OF OBLIGATIONS.

To the extent the Trustee receives any payment by or on behalf of
the Company, which payment or any part thereof is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
the Company, or its estate, trustee, receiver, custodian or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then to the extent of such payment or repayment, the obligation or part thereof
which has been paid, reduced or satisfied, by the amount so repaid shall be
reinstated by the amount so repaid and shall be included within the liabilities
of the Company to the Trustee as of the date such initial payment, reduction or
satisfaction occurred.

SECTION 10.23 SUBSIDIARY GUARANTEE IN ADDITION TO OTHER
OBLIGATIONS.

The obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee and this Indenture are in addition to and not in substitution for any
other obligations to the Trustee or to any of the Holders in relation to this
Indenture or the Notes and any guarantees or security at any time held by or for
the benefit of any of them.

SECTION 10.24 SEVERABILITY.

Any provision of this Article Ten which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any jurisdiction.

SECTION 10.25 SUCCESSORS AND ASSIGNS.

Each Subsidiary Guarantee shall be binding upon and inure to the
benefit of each Subsidiary Guarantor and the Trustee and the other Holders and
their respective successors and permitted assigns, except that no Subsidiary
Guarantor may assign any of its obligations hereunder or thereunder.

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ARTICLE ELEVEN

SECURITY ACCOUNT

(a) On the Issue Date, the Company shall execute and deliver the
Security and Disbursement Agreement and comply with the terms and provisions
thereof, including, without limitation, depositing or causing to be deposited
the Disbursement Funds in the Security Account or any related account pursuant
to the terms of the Security and Disbursement Agreement. The Trustee shall
establish and maintain the Security Account in accordance with the terms and
provisions of the Security and Disbursement Agreement, and the Trustee shall
hold the Disbursement Funds and Pledged Securities for the equal and ratable
benefit of the Holders without preference, priority or distinction of any
thereof over any other by reason of difference in time of issuance, sale or
otherwise, as security for the Company's obligations to (i) provide for payment
in full of the scheduled interest payments due on the Notes through and
including May 1, 1999 and (ii) secure repayment of the principal, premium, if
any, and interest on the Notes in the event that the Notes become due and
payable prior to the payment in full of all and any scheduled interest payments
due and payable under this Indenture and the Notes through and including May 1,
1999.

(b) Subject to certain limitations set forth in the Security and
Disbursement Agreement, the Company may direct the Trustee to release from the
Security Account certain Disbursement Funds or Pledged Securities upon an
optional redemption of the Notes with the net proceeds of a Primary Offering.
Additionally, after disbursing all the interest payments on the Notes due
through and including May 1, 1999 and compliance with the provisions of Section
11(e), any remaining Disbursement Funds and Pledged Securities will be released
and disbursed from the Security Account and paid to the Company to such accounts
as may be designated by the Company in written instructions delivered to the
Trustee, all as provided for in the Security and Disbursement Agreement.

(c) As provided in the Security and Disbursement Agreement, the
Disbursement Funds shall be invested by the Trustee in Pledged Securities,
pursuant to specific, written directions of the Company, as soon as practicable
after the Issue Date. Interest and other earnings on the Pledged Securities will
be added to the Security Account and will secure the repayment of the principal,
premium, if any, and interest on the Notes.

(d) Each Holder, by its acceptance of a Note, consents and agrees to
the terms of the Security and Disbursement Agreement (including, without
limitation, the provisions providing for foreclosure and release of the Pledged
Securities and other assets held in connection therewith) as the same may be in
effect or may be amended from time to time in accordance with its terms, and
authorizes and directs the Trustee to enter into the Security and Disbursement
Agreement and to perform its respective obligations and exercise its respective
rights thereunder in accordance therewith. The Company shall take, or shall
cause to be taken, any and all actions as may be necessary or proper, or as may
be required hereunder or under the Security and Disbursement Agreement (and any
action requested by the Trustee) to cause the Security and Disbursement
Agreement, subject to the provisions

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therein and of this Indenture, (A) to create and maintain, as security for
certain of the Obligations of the Company under this Indenture and the Notes,
valid and enforceable first priority Liens in and on the Security Account, the
Disbursement Funds and the Pledged Securities, in favor of the Trustee, superior
to and prior to the rights of third Persons and subject to no other Liens, and
(B) to assure and confirm to the Trustee such Liens in the Security Account, the
Disbursement Funds and the Pledged Securities so as to render the same available
for the security and benefit of this Indenture and of the Notes secured hereby,
according to the intent and purposes herein expressed.

(e) The Trustee shall release from the Security Account any
Disbursement Funds or Pledged Securities held in the Security Account upon the
delivery by the Company to the Trustee of the following:

(i) a notice from the Company requesting the release of such
Disbursement Funds or Pledged Securities and certifying that release
of such Disbursement Funds or Pledged Securities complies with the
terms and conditions of the Security and Disbursement Agreement with
respect thereto; and

(ii) an Officers' Certificate of the Company stating that (A)
there is Event of Default in effect or continuing on the date
thereof, (B) the release of such Disbursement Funds or Pledged
Securities will not result in a Default or Event of Default under
this Indenture, (C) all payments contemplated by and under the
Security and Disbursement Agreement, including, without limitation,
each of the scheduled interest payments and all payments due and
payable hereunder and in accordance with the Notes through and
including May 1, 1999 have been paid in full without any claim,
setoff, or defense, and (D) all conditions precedent in the Security
and Disbursement Agreement relating to the release of the
Disbursement Funds or Pledged Securities in question have been
complied with.

(f) The Trustee, in its sole discretion and without the consent of
the Holders, may, and at the request of the Holders of at least 25% in aggregate
principal amount of Notes then outstanding shall, on behalf of the Holders, take
all actions it deems necessary or appropriate in order to (i) enforce any of the
terms of the Security and Disbursement Agreement and (ii) collect and receive
any and all amounts payable in respect of the obligations of the Company
thereunder (subject, in each case, to Article Seven hereof). The Trustee shall
have power to institute and to maintain such suits and proceedings as the
Trustee may deem expedient to preserve or protect its interests and the
interests of the Holders in the Security Account, the Disbursement Funds and the
Pledged Securities (including power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative or
other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interests thereunder or be prejudicial
to the interests of the Holders or of the Trustee).

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ARTICLE TWELVE

MISCELLANEOUS

SECTION 12.1 TIA CONTROLS.

If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the provision required to be included by the TIA shall control; PROVIDED,
HOWEVER, that this Section 12.1 shall not of itself require that this Indenture
or the Trustee be qualified under the TIA or constitute any admission or
acknowledgement by any party hereto that any such qualification is required
prior to the time this Indenture and the Trustee are required by the TIA to be
so qualified.

SECTION 12.2 NOTICES.

Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:

if to the Company:

County Seat Stores, Inc.
6585 City West Parkway
Eden Prairie, Minnesota 55344
Attn: General Counsel
Telephone Number: (612) 829-2124
Telecopy Number: (612) 829-2188

if to the Trustee:

First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attn: Corporate Finance Department
Telephone Number:(612) 244-0719
Telecopy Number: (612) 244-0711

Each of the Company and the Trustee by written notice to each other
such Person may designate additional or different addresses for notices to such
Person. Any notice or communication to the Company or the Trustee shall be
deemed to have been given or made as of the date so delivered if personally
delivered; when answered back, if telexed; when receipt is acknowledged, if
faxed; and five (5) calendar days after mailing if sent by

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registered or certified mail, postage prepaid (except that a notice of change of
address shall not be deemed to have been given until actually received by the
addressee).

Any notice or communication mailed to a Holder shall be mailed to
such Holder by first class mail or other equivalent means at such Holder's
address as it appears on the registration books of the Registrar and shall be
sufficiently given to such Holder if so mailed within the time prescribed.

Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.

SECTION 12.3 COMMUNICATIONS BY HOLDERS WITH OTHER
HOLDERS.

Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and any other Person shall have the
protection of TIA Section 312(c).

SECTION 12.4 CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT.

Upon any request or application by the Company or any Subsidiary
Guarantor to the Trustee to take any action under this Indenture, the Company
shall furnish to the Trustee upon request:

(1) an Officers' Certificate, in form and substance reasonably
satisfactory to the Trustee, stating that, in the opinion of the signers,
all conditions precedent to be performed by the Company and any Subsidiary
Guarantor, if any, provided for in this Indenture relating to the proposed
action have been complied with; and

(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Company and
any Subsidiary Guarantor, if any, PROVIDED for in this Indenture relating
to the proposed action have been complied with (which counsel, as to
factual matters, may rely on an Officers' Certificate).

SECTION 12.5 STATEMENTS REQUIRED IN CERTIFICATE OR
OPINION.

Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.6, shall include:

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

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

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

(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with; provided,
HOWEVER, that with respect to matters of fact, an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.

SECTION 12.6 RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.

The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.

SECTION 12.7 LEGAL HOLIDAYS.

A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York, Eden Prairie, Minnesota or at such place of payment are not required to be
open. If a payment date is a Legal Holiday at such place, payment may be made at
such place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.

SECTION 12.8 GOVERNING LAW; JURISDICTION; SUBMISSION TO
VENUE.

THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO
AGREES TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COMPETENT COURTS OF
THE STATE OF NEW YORK SITTING IN THE CITY OF NEW YORK OR THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES. EACH OF THE COMPANY
AND THE SUBSIDIARY GUARANTORS HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY NEW YORK STATE COURT SITTING IN

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THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH OF THE TRUSTEE, ON
BEHALF OF THE HOLDERS, THE COMPANY AND THE SUBSIDIARY GUARANTORS IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW,
TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE COMPANY AND THE
SUBSIDIARY GUARANTORS IRREVOCABLY CONSENTS TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE COMPANY AND THE
GUARANTORS AT THE ADDRESS SET FORTH HEREIN, SUCH SERVICE TO BECOME EFFECTIVE 30
DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT ANY RIGHT OF ANY HOLDER TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY OR THE SUBSIDIARY
GUARANTORS IN ANY OTHER JURISDICTION.

SECTION 12.9 NO ADVERSE INTERPRETATION OF OTHER
AGREEMENTS.

This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or those of any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.

SECTION 12.10 NO RECOURSE AGAINST OTHERS.

No past, present or future director, officer, employee, incorporator
or stockholder of the Company or any Subsidiary Guarantor, as such, shall have
any liability for any Obligations of the Company or any Subsidiary Guarantor
under the Units or this Indenture, any Subsidiary Guarantee, the Warrant
Agreement, the Registration Rights Agreement or for any claim based on, in
respect of, or by reason of such obligations or their creations. Each Holder by
accepting a Unit waives and releases all such liability. Such waiver and release
are part of the consideration for the issuance of the Units.

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SECTION 12.11 SUCCESSORS.

All agreements of the Company and any Subsidiary Guarantor in this
Indenture and the Notes and under any Subsidiary Guarantee, as the case may be,
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.

SECTION 12.12 DUPLICATE ORIGINALS.

All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.

SECTION 12.13 SEVERABILITY.

In case any one or more of the provisions in this Indenture or in
the Notes shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby, it
being intended that all of the provisions hereof shall be enforceable to the
full extent permitted by law.

SECTION 12.14 INDEPENDENCE OF COVENANTS.

All covenants and agreements in this Indenture and the Notes shall
be given independent effect so that if any particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or otherwise be within the limitations of, another covenant shall
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.

SECTION 12.15 TABLE OF CONTENTS, HEADINGS, ETC.

The Table of Contents, Cross-Reference Table and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms and provisions hereof.

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SIGNATURES

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

COUNTY SEAT STORES, INC.

By: /s/ Sam Forman
--------------------------
Name: Sam Forman
Title: President

Attest: /s/ Paul J. Kittner
---------------------------
Name: Paul J. Kittner
Title: SVP & CFO

FIRST TRUST NATIONAL
ASSOCIATION, as Trustee

By: /s/ Mark E. Lemay
----------------------------
Name: Mark E. Lemay
Title: V.P.

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EXHIBIT A

FORM OF NOTE

THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT. THE ISSUE PRICE, AMOUNT
OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND YIELD TO MATURITY OF THIS NOTE ARE
AVAILABLE UPON REQUEST BY CONTACTING MATTHEW KNOPF, GENERAL COUNSEL TO THE
COMPANY, AT 6585 CITY WEST PARKWAY, EDEN PRAIRIE, MINNESOTA 55344, TELEPHONE
(612) 829-2124, TELECOPY (612) 829-2188, WHO, BEGINNING TEN DAYS AFTER THE
ISSUANCE OF THIS NOTE, WILL BE AVAILABLE TO PROVIDE SUCH INFORMATION TO THE
HOLDER OF THIS NOTE.

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.

THE HOLDER OF THIS NOTE, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH NOTE PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE
LATER OF THE ORIGINAL ISSUE DATE OF THIS NOTE AND THE LAST DATE ON WHICH COUNTY
SEAT STORES, INC. ("THE COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER
OF THIS NOTE (OR ANY PREDECESSOR OF SUCH NOTE)(THE "RESALE RESTRICTION
TERMINATION DATE"), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) or (7) OF RULE 501
UNDER THE SECURITIES ACT THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, OR FOR
THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO

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<PAGE>

ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S, OR TRANSFER AGENT'S, AS
APPLICABLE, RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE
(D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE
FOREGOING CASES, AN ASSIGNMENT IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE OR TRANSFER
AGENT. THIS LEGEND SHALL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.

THIS NOTE IS SUBJECT TO A REGISTRATION RIGHTS AGREEMENT, DATED AS OF EVEN
DATE HEREWITH, BETWEEN THE COMPANY AND JEFFERIES & COMPANY, INC., A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

THIS NOTE IS INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS (THE
"UNITS"), EACH OF WHICH CONSISTS OF $1,000 PRINCIPAL AMOUNT OF 12 3/4% SENIOR
NOTES DUE 2004 (THE "NOTES") OF THE COMPANY AND A SERIES A WARRANT
(COLLECTIVELY, THE "WARRANTS") ENTITLING THE HOLDER THEREOF TO PURCHASE SHARES
OF COMMON STOCK, $.01 PAR VALUE PER SHARE, OF THE COMPANY. PRIOR TO THE CLOSE OF
BUSINESS ON SUCH DATE AS THE INITIAL PURCHASER MAY, IN ITS DISCRETION DEEM
APPROPRIATE, THIS NOTE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT
MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE SERIES A WARRANTS.

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<PAGE>

CUSIP No.:

COUNTY SEAT STORES, INC.

12 3/4% SENIOR NOTE DUE 2004

No. $

County Seat Stores, Inc., a Minnesota corporation (the "Company,"
which term includes any successor entity), for value received promises to pay to
____________________ or registered assigns, the principal sum of ________
Dollars, on _____, __, 2004.

Interest Payment Dates: November 1 and May 1

Record Dates: October 15 and April 15

Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.

IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers its corporate seal to
be affixed hereto or imprinted hereon.

COUNTY SEAT STORES, INC.

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

Dated: _____________, 199__

Certificate of Authentication

This is one of the 12 3/4% Senior Notes due 2004 referred to in thE
within-mentioned Indenture.

FIRST TRUST NATIONAL ASSOCIATION,
as Trustee

Dated: ______________, 199__ By:
------------------------------------
Name:
Title:

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<PAGE>

{REVERSE OF NOTE}

COUNTY SEAT STORES, INC.

12 3/4% Senior Note due 2004

1. INTEREST. County Seat Stores, Inc., a Minnesota corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate and in the manner specified below. Interest on the Securities will accrue
at 12 3/4% per annum and will be payable semiannually iN cash on November 1 and
May 1 of each year, or if any such day is not a Business Day on the next
succeeding Business Day (each an "INTEREST PAYMENT DATE"). Interest on the
Securities will accrue from the most recent date on which interest has been paid
or, if no interest has been paid, from the date of issuance; PROVIDED that the
first Interest Payment Date shall be May 1, 1998. The Company shall pay interest
on overdue principal and premium, if any, from time to time on demand at the
rate of interest then borne by the Notes and shall pay interest on overdue
installments of interest (without regard to any applicable grace periods) from
time to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. The Company
will pay Additional Interest (as defined in the Registration Rights Agreement)
pursuant to Section 4 of the Registration Rights Agreement.

2. METHOD OF PAYMENT. The Company shall pay interest on the Notes to
the Persons who are the registered Holders as of the close of business on the
Record Date immediately preceding the applicable Interest Payment Date even if
the Notes are cancelled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender Notes to a Paying Agent to
collect principal payments. The Company shall pay principal, premium, if any,
and interest and Additional Interest in money of the United States that at the
time of payment is legal tender for payment of public and private debts ("U.S.
Legal Tender"). The Notes will be payable both as to principal and to interest
at the office or agency of the Company, or, at the option of the Company,
payment of interest may be made by its check payable in such U.S. Legal Tender
and mailed to the Holders at their respective registered addresses as set forth
in the register of Holders. If the Company defaults in a payment of interest on
the Notes, it shall pay the defaulted interest plus any interest payable on the
defaulted interest in accordance with Section 2.16 of the Indenture.

3. PAYING AGENT AND REGISTRAR. Until otherwise designated by the
Company, the Registrar and Paying Agent for the Notes shall be First Trust
National Association, the trustee (the "Trustee") under the Indenture (as
defined below), having an address as 180 East Fifth Street, St. Paul, Minnesota
55101, Attention: Corporate Finance Department. In addition, until otherwise
designated by the Company, the Company's office or agency maintained in the
Borough of Manhattan, in the City of New York at which the Notes may be
presented for payment or for transfer or exchange will be the office of the
Trustee, at 100 Wall Street, New York, NY. The Company may change any Paying
Agent, Registrar or co-Registrar without notice to the Holders.

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<PAGE>

4. INDENTURE. The Company issued the Notes under an Indenture, dated
as of October 29, 1997 (the "Indenture"), among the Company, the Subsidiary
Guarantors and the Trustee. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) (the "TIA"), as
in effect on the date of the Indenture unTIl such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders are referred to the
Indenture and the TIA for a statement of them. The Notes are senior unsecured
general obligations of the Company limited in aggregate principal amount to
$85,000,000. Payment on the Notes will be guaranteed on a senior basis, jointly
and severally, by the Subsidiary Guarantors pursuant to Article Ten of the
Indenture and upon the execution of a supplemental indenture by each Subsidiary
Guarantor. Each Holder, by accepting a Note, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time.

5. REDEMPTION.

(a) OPTIONAL REDEMPTION. Except as described in paragraph (b) of
this Section 5, the Notes are not redeemable at the Company's option, at any
time prior to November 1, 2001. Thereafter, the Notes will be subject to
redemption at the option of the Company, in whole or in part, upon not less than
30 nor more than 60 days' notice, at the following redemption prices (expressed
as percentages of principal amount), if redeemed during the twelve-month period
commencing on November 1, of the years set forth below, through but not
including the Maturity Date, plus, in each case, accrued and unpaid interest
thereon to the applicable date of redemption:

YEAR PERCENTAGE

2001 106.3750%
2002 103.1875%
2003 and thereafter 100 %

(b) OPTIONAL REDEMPTION UPON PRIMARY OFFERING. Notwithstanding
paragraph (a) of this Section 5, at any time, prior to November 1, 2001, the
Company may, at its option, use the net cash proceeds of a Primary Offering to
redeem up to one-third of the original principal amount of the Notes at a
redemption price equal to 112.75% of the principal amount thereof outstanding on
the redemption date, plus accrued and unpaid interest thereon, if any, to the
date of redemption; PROVIDED that (i) at least 66 2/3% of original principal
amount of the Notes are outstanding immediately following such redemption and
(ii) such redemption shall occur within 60 days of the date of the closing of
such Primary Offering.

6. NOTICE OF REDEMPTION. Notice of redemption will be mailed by
first class mail at least 15 days but not more than 60 days before the
redemption date to each Holder, at each of such Holder's registered address,
whose Notes are to be redeemed. If

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<PAGE>

fewer than all of the Notes are to be redeemed at any time, selection of Notes
for redemption will be made by the Trustee in compliance with the requirements
of the national securities exchange, if any, on which the Notes are listed, or,
if the Notes are not so listed, on a pro rata basis, by lot or by such method as
the Trustee deems to be fair and appropriate; PROVIDED that Notes of $1,000 or
less may not be redeemed in part.

Except as set forth in the Indenture, if monies for the redemption
of the Notes called for redemption shall have been deposited with the Paying
Agent for redemption on such redemption date, then, unless the Company defaults
in the payment of such redemption price plus accrued interest, if any, the Notes
called for redemption will cease to bear interest from and after such redemption
date, and the only remaining right of the Holders of such Notes will be to
receive payment of the redemption price plus accrued interest, if any, as of the
redemption date upon surrender to the Paying Agent of the Notes redeemed.

7. OFFERS TO PURCHASE. Sections 4.14 and 4.15 of the Indenture
provide that, after certain Asset Sales and upon the occurrence of a Change of
Control, and subject to further limitations contained therein, the Company will
make an offer to purchase certain amounts of the Notes in accordance with the
procedures set forth in the Indenture.

8. REGISTRATION RIGHTS. Pursuant to the Registration Rights
Agreement dated the date of the Indenture among the Company and the Holders of
the Initial Notes, the Company will use its best efforts to prepare and file
with the SEC on or prior to 120 days after the Issue Date a registration
statement (the "Exchange Registration Statement") with respect to an offer to
the Holders to exchange this Note for the Company's 12 3/4% Senior Notes due
2004, Series B (the "Exchange Notes"), which have been registered under the
Securities Act, in like principal amount and having terms identical in all
material respects as the Initial Notes. The Company will also use its best
efforts to cause the Exchange Registration Statement to become effective as
promptly as practicable after the filing thereof but in no event later than 180
days after the Issue Date and to consummate the exchange offer within 30 days
after the date on which the Exchange Registration Statement is declared
effective. The Holders of the Initial Notes shall be entitled to receive certain
additional interest payments in the event such exchange offer is not consummated
and upon certain other conditions, all pursuant to and in accordance with the
terms of the Registration Rights Agreement.

9. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange of Notes in
accordance with the Indenture. The Registrar or co-Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay certain transfer taxes or similar governmental charges
payable in connection therewith as permitted by the Indenture. Subject to
certain provisions in the Indenture, the Registrar or co-Registrar need not
register the transfer of or exchange of any Notes or portions thereof selected
for redemption. Also the Registrar or co-Registrar need not register the
transfer or exchange of any Note during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of notes and
ending at the close of business on the day of such mailing.

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<PAGE>

10. PERSONS DEEMED OWNERS. The registered Holder of a Note
shall be treated as the owner of such Note for all purposes.

11. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years (or such sooner period as may be
required by applicable abandoned property laws), the Trustee and the Paying
Agent will pay the money back to the Company. After that, all liability of the
Trustee and such Paying Agent with respect to such money shall cease.

12. MATURITY DATE. All outstanding principal, all premiums if
any, and all accrued and unpaid interest shall be due and payable on the

Maturity Date.

13. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company at any
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).

14. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented by the Company, the
Trustee and with the written consent of the Holders of at least a majority in
aggregate principal amount of the Notes then outstanding, and, subject to
Section 6.7 of the Indenture, noncompliance with any provision of the Indenture
or this Note may be waived with the written consent of the Holders of at least a
majority in aggregate principal amount of the Notes then outstanding. Without
the consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Notes to cure any ambiguity, defect or inconsistency; to
provide for uncertificated Notes in addition to or in place of certificated
Notes; to provide for the assumption of the Company's obligations to Holders or
any Subsidiary Guarantor's obligation under its Subsidiary Guarantee in the case
of a merger or consolidation where such assumption is required under the
Indenture; to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the legal right under
the Indenture of any such Holder; to provide for issuance of the Exchange Notes;
or to comply with the requirements of the U.S. Securities and Exchange
Commission (the "SEC") in order to effect or maintain the qualification of the
Indenture under the TIA. As provided in the Indenture, there shall be no
amendment, supplement or waiver without the consent of each Holder of each Note
affected thereby with respect to the circumstances enumerated in Section 9.2
therein.

15. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations
on the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness or Liens, issue or sell its Capital Stock,
enter into transactions with Affiliates, cause to be effective restrictions
affecting Restricted Subsidiaries' abilities to pay certain dividends or make
certain loans, merge or consolidate with any other Person, sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets or adopt a plan of liquidation. Such limitations are subject to a number
of important

A-7
<PAGE>

qualifications and exceptions. The Company must annually report to the Trustee
on compliance with such limitations.

16. SUCCESSORS. When a successor assumes, in accordance with
the Indenture, all the Obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those Obligations.

17. DEFAULTS AND REMEDIES. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders may not enforce the Indenture or the Notes except as provided in the
Indenture. The Trustee is not obligated to exercise any of the rights or powers
vested in it by the Indenture or the Notes and at the order or direction of any
Holders, unless it has received indemnity reasonably satisfactory to it. Subject
to certain limitations set forth in the Indenture, Holders of a majority in
aggregate principal amount of the Notes then outstanding may direct the Trustee
in its exercise of any trust or power; PROVIDED that, as provided in the
Indenture, Events of Default set forth in Section 6.1 (f) and (g) of the
Indenture shall result in such acceleration occurring without such declaration.
The Trustee may withhold from Holders notice of any continuing Default or Event
of Default (except in the case of a Default or Event of Default in payment of
principal or interest or a failure to comply with Article Five of the Indenture)
if it determines that withholding notice is in their interest.

18. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates, as such, with the same rights it would have as if it were
not the Trustee.

19. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator or stockholder of the Company or any Subsidiary
Guarantor, as such, shall have any liability for any Obligations of the Company
or any Subsidiary Guarantor under the Notes or the Indenture, any Subsidiary
Guarantee, the Warrant Agreement or the Registration Rights Agreement or for any
claim based on, in respect of, or by reason of such obligations or their
creations. Each Holder by accepting a Note waives and releases all such
liability. Such waiver and release are part of the consideration for the
issuance of the Units.

20. AUTHENTICATION. This Note shall not be valid until the
Trustee or Authenticating Agent manually signs the certificate of

authentication on this Note.

21. GOVERNING LAW. The laws of the State of New York shall
govern this Note and the Indenture.

22. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations may be
used in the name of a Holder or an assignee, such as: TEN COM (=
tenants-in-common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship

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and not as tenants-in-common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).

23. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.

The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture.

Requests may be made to: County Seat Stores, Inc., 6585 City West
Parkway, Eden Prairie, Minnesota 55344, Attn: General Counsel.

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<PAGE>

FORM OF ASSIGNMENT

If you, the Holder, want to assign this Note, fill in the form below
and have your signature guaranteed:

I or we assign and transfer this Note to:

______________________________________________________________________________

______________________________________________________________________________
(Print or type name, address and zip code and social
security or tax ID number of assignee)

and irrevocably appoint________________________________________________________,
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.

Date:________________ Signed:__________________________________________
(Sign exactly as your name appears on the
other side of this Note. This signature must be
guaranteed by the signatory's bank or broker.)

Signature Guarantee: _____________________________
Medallion Signature Guarantee

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<PAGE>

In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) ________________, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Note is being transferred:

(Check One)

(1) ___ to the Company or a subsidiary thereof; or

(2) ___ pursuant to and in compliance with Rule 144A under
the Securities Act; or

(3) ___ to an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) that has furnished to the Trustee a
signed letter containing certain representations and
agreements (the form of which letter can be obtained
from the Trustee); or

(4) ___ outside the United states to a "foreign person" in
compliance with Rule 904 of Regulation S under the
Securities Act; or

(5) ___ pursuant to the exemption from registration provided
by Rule 144 under the Securities Act; or

(6) ___ pursuant to an effective registration statement under
the Securities Act; or

(7) ___ pursuant to another available exemption from the
registration requirements of the Securities Act.

Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; PROVIDED that if box (3), (4), (5) or (7) is checked,
the Company or the Trustee may require, prior to registering any such transfer
of the Notes, in its sole discretion, such legal opinions, certifications
(including an investment letter in the case of box (3) or (4)) and other
information as the Trustee or the Company has reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.

A-11
<PAGE>

If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.15 of the Indenture shall have been satisfied.

Dated: _______________________ Signed: _____________________________
(Sign exactly as name appears on
the other side of this Security)

Signature Guarantee:___________________________________________________________
Medallion Signature Guarantee

TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED

The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration requirements of the Securities Act provided by Rule 144A
thereunder.

Dated: ________________________ ______________________________
Executive Officer

Name: _______________________
Title: _______________________

A-12
<PAGE>

FORM OF OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Company
pursuant to Section 4.14 or Section 4.15 of the Indenture, check the appropriate
box:

Section 4.14 [ ]
Section 4.15 [ ]

If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.14 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:

$_____________________

Dated:___________________________ Signature: _____________________
Tax Identification No. ___________

Signature Guarantee: ______________________________________________
Medallion Signature Guarantee

NOTICE: THE SIGNATURE ON THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS IT
APPEARS UPON THE FACE OF THE WITHIN NOTE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND BE ACKNOWLEDGED AS GENUINE BY THE
ENDORSER'S BANK OR BROKER.

A-13
<PAGE>

EXHIBIT B

FORM OF NOTE

________________________
* To be deleted if the Separation Date has occurred.

B-1
<PAGE>

CUSIP No.:

COUNTY SEAT STORES, INC.

12 3/4% SENIOR NOTE DUE 2004, SERIES B

No. $

Interest Payment Dates: November 1 and May 1

Record Dates: October 15 and April 15

Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.

IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers its corporate seal to
be affixed hereto or imprinted hereon.

COUNTY SEAT STORES, INC.

By: _________________________________
Name:
Title:

By: _________________________________
Name:
Dated: _______________, 199__ Title:

Certificate of Authentication

This is one of the 12 3/4% Senior Notes due 2004, Series B referred
to in the within-mentioned Indenture.

FIRST TRUST NATIONAL ASSOCIATION,
as Trustee

Dated: _______________, 199__ By: _________________________________
Name:
Title:

B-2
<PAGE>

{REVERSE OF NOTE}

COUNTY SEAT STORES, INC.

12 3/4% Senior Note due 2004, Series B

1. INTEREST. County Seat Stores, Inc., a Minnesota corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate and in the manner specified below. Interest on the Securities will accrue
at 12 3/4% per annum and will be payable semiannually in cash on November 1 and
May 1 of each year, or if any such day is not a Business Day on the next
succeeding Business Day (each an "INTEREST PAYMENT DATE"). Interest on the
Securities will accrue from the most recent date on which interest has been paid
or, if no interest has been paid, from the date of issuance; PROVIDED that the
first Interest Payment Date shall be May 1, 1998. The Company shall pay interest
on overdue principal and premium, if any, from time to time on demand at the
rate of interest then borne by the Notes and shall pay interest on overdue
installments of interest (without regard to any applicable grace periods) from
time to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. The Company
will pay Additional Interest (as defined in the Registration Rights Agreement)
pursuant to Section 4 of the Registration Rights Agreement.

B-3
<PAGE>

4. INDENTURE. The Company issued the Notes under an Indenture, dated
as of October 29, 1997 (the "Indenture"), among the Company, the Subsidiary
Guarantors and the Trustee. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) (the "TIA"), as
in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders are referred to the
Indenture and the TIA for a statement of them. The Notes are senior unsecured
general obligations of the Company limited in aggregate principal amount to
$85,000,000. Payment on the Notes will be guaranteed on a senior basis, jointly
and severally, by the Subsidiary Guarantors pursuant to Article Ten of the
Indenture and upon the execution of a supplemental indenture by each Subsidiary
Guarantor. Each Holder, by accepting a Note, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time.

5. REDEMPTION.

YEAR PERCENTAGE

2001 106.3750%
2002 103.1875%
2003 and thereafter 100 %

B-4
<PAGE>

will be made by the Trustee in compliance with the requirements of the national
securities exchange, if any, on which the Notes are listed, or, if the Notes are
not so listed, on a pro rata basis, by lot or by such method as the Trustee
deems to be fair and appropriate; PROVIDED that Notes of $1,000 or less may not
be redeemed in part.

8. REGISTRATION RIGHTS. Pursuant to the Registration Rights
Agreement dated the date of the Indenture among the Company and the Holders of
the Initial Notes, the Company will use its best efforts to prepare and file
with the SEC on or prior to 120 days after the Issue Date a registration
statement (the "Exchange Registration Statement") with respect to an offer to
the Holders to exchange this Note for the Company's 12 3/4% Senior Notes due
2004, Series B (the "Exchange Notes"), which have been registered under the
Securities Act, in like principal amount and having terms identical in all
material respects as the Initial Notes. The Company will also use its best
efforts to cause the Exchange Registration Statement to become effective as
promptly as practicable after the filing thereof but in no event later than 180
days after the Issue Date and to consummater the exchange offer within 30 days
after the date on which the Exchange Registration Statement is declared
effective. The Holders of the Initial Notes shall be entitled to receive certain
additional interest payments in the event such exchange offer is not consummated
and upon certain other conditions, all pursuant to and in accordance with the
terms of the Registration Rights Agreement.

B-5
<PAGE>

10. PERSONS DEEMED OWNERS. The registered Holder of a Note
shall be treated as the owner of such Note for all purposes.

12. MATURITY DATE. All outstanding principal, all premiums if
any, and all accrued and unpaid interest shall be due and payable on the

Maturity Date.

B-6
<PAGE>

qualifications and exceptions. The Company must annually report to the Trustee
on compliance with such limitations.

20. AUTHENTICATION. This Note shall not be valid until the
Trustee or Authenticating Agent manually signs the certificate of

authentication on this Note.

21. GOVERNING LAW. The laws of the State of New York shall
govern this Note and the Indenture.

B-7
<PAGE>

and not as tenants-in-common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).

The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture.

Requests may be made to: County Seat Stores, Inc., 6585 City West
Parkway, Eden Prairie, Minnesota 55344, Attn: General Counsel.

B-8
<PAGE>

FORM OF ASSIGNMENT

If you, the Holder, want to assign this; Note, fill in the form
below and have your signature guaranteed:

I or we assign and transfer this Note to:

______________________________________________________________________________

______________________________________________________________________________
(Print or type name, address and zip code and social
security or tax ID number of assignee)

and irrevocably appoint______________________________________________________,
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.

Dated:________________ Signed:__________________________________________
(Sign exactly as your name appears on the
other side of this Note. This signature
must be guaranteed by the signatory's
bank or broker.)

Signature Guarantee:__________________________
Medallion Signature Guarantee

B-9
<PAGE>

In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) _______________, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Note is being transferred:

(Check One)

(1) ___ to the Company or a subsidiary thereof; or

(2) ___ pursuant to and in compliance with Rule 144A under
the Securities Act; or

(4) ___ outside the United states to a "foreign person" in
compliance with Rule 904 of Regulation S under the
Securities Act; or

(5) ___ pursuant to the exemption from registration provided
by Rule 144 under the Securities Act; or

(6) ___ pursuant to an effective registration statement under
the Securities Act; or

(7) ___ pursuant to another available exemption from the
registration requirements of the Securities Act.

B-10

<PAGE>

Dated:_______________________ Signed:_____________________________________
(Sign exactly as name appears on
the other side of this Security)

Signature Guarantee:__________________________________________________________
Medallion Signature Guarantee

TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED

Dated:________________________ __________________________________
Executive Officer

Name: ________________________
Title: ________________________

B-11

<PAGE>

FORM OF OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Company
pursuant to Section 4.14 or Section 4.15 of the Indenture, check the appropriate
box:

Section 4.14 [ ]
Section 4.15 [ ]

If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.14 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:

$___________________

Dated:_____________________ Signature: ______________________

Tax Identification No. ___________

Signature Guarantee:____________________________________________
Medallion Signature Guarantee

B-12
<PAGE>

EXHIBIT C

FORM OF LEGEND FOR GLOBAL NOTES

Any Global Note authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:

THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS NOTE IS NOT
EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS
NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY) MAY BE REGISTERED
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

C-1
<PAGE>

EXHIBIT D

FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS TO NON-QIB ACCREDITED INVESTORS

----------, ----

First Trust National Association
100 Wall Street
New York, New York 10005
Attention: Corporate Trust Office

Re: County Seat Stores, Inc. (the "Company")
12 3/4% Senior Notes due
2004 (THE "NOTES")

Ladies and Gentlemen:

In connection with our proposed purchase of $85,000,000 aggregate
principal amount of the Notes, we confirm that:

1. We have received a copy of the Offering Circular (the "Offering
Circular"), dated October 23, 1997, as amended or supplemented, relating to the
Notes and such other information as we have deemed necessary in order to make
our investment decision. We acknowledge that we have read and agreed to the
matters stated in the section entitled "Notice to Investors" of the Offering
Circular.

2. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture dated
as of October 29, 1997 relating to the Notes (the "Indenture"), and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Notes except in compliance with such restrictions and conditions
and the U.S. Securities Act of 1933, as amended (the "Securities Act").

3. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered or
sold within the United States or to, or for the account or benefit of, U.S.
Persons except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell or otherwise transfer any Notes prior to the date
which is two years after the later of the date of (x) original issue of the Note
and (y) the last date on which the Note is owned by the Company or an affiliate
of the Company, we will do so only (i) to the Company, (ii) pursuant to a
registration statement which has been declared effective under the Securities
Act, (iii) for so long as the Notes are eligible for resale pursuant to Rule
144A, to a person it reasonably believes is a Qualified Institutional Buyer
("QIB") (within the meaning of Rule 144A) that purchases for its own account or
for the account of a QIB to whom notice is given that the transfer is being made
in reliance on Rule 144A, (iv) inside the United States to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company, a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Notes, substantially in the form
of this letter, (v) pursuant to offers and sales to non-U.S. persons that occur
outside of the United States in compliance with Rule 904 of Regulation S under
the Securities Act or (vi) pursuant to any other available exemption from the
registration requirements of the Securities Act, and we further agree to provide
to any person purchasing any of the Notes from us a notice advising such
purchaser that resales of the Notes are restricted as stated herein.

4. We are not acquiring the Notes for or on behalf of, and will not
transfer the Notes to, any pension or welfare plan (as defined in Section 3 of
the Employee Retirement Income Security Act of 1974) except as permitted in the
section entitled "Notice to Investors" of the Offering Circular.

5. We understand that, on any proposed resale of any Notes, we will
be required to furnish to you and the Company such certifications, legal
opinions and other information as you and the Company reasonably may require to
confirm that the proposed sale complies with the foregoing restrictions. We
further understand that the Notes purchased by us will bear a legend to the
foregoing effect.

6. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
each of the accounts for which we are acting are and is able to bear the
economic risk of our or its entire investment, as the case may be, for an
indefinite period.

7. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion, for
investment purposes and not with a view to, or for offer or sale in connection
with, any distribution in violation of the Securities Act.

You, the Company and your and their respective counsel are entitled
to rely upon this letter and are irrevocably authorized to produce this letter
or a copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered hereby, and
we agree to notify you promptly if any of our representations or warranties
herein cease to be accurate and complete.

D-1

<PAGE>

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

Very truly yours,

[Name of Transferee]

By:
---------------------------------
Authorized Signature

D-2

<PAGE>

EXHIBIT E

FORM OF CERTIFICATE TO BE DELIVERED IN
CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S

----------, ----

First Trust National Association
100 Wall Street
New York, New York 10005
Attention: Corporate Trust Department

Re: County Seat Stores, Inc. (the "Company")
12 3/4% Senior Notes due
2004 (THE "NOTES")

Ladies and Gentlemen:

In connection with our proposed sale of $85,000,000 aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S promulgated under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we
represent that:

(1) the offer of the Notes was not made to a person in the
United States;

(2) either: (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United States; or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting on
our behalf had knowledge that the transaction had been pre-arranged with a buyer
in the United States;

(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S, as applicable;

(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and

(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.

You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby. Defined terms used herein without definition have
the respective meanings provided in Regulation S.

Very truly yours,

[Name of Transferor]

By:
-------------------------------
Authorized Signature

E-1

<PAGE>

EXHIBIT F

FORM OF NOTATION ON NOTE RELATING TO SUBSIDIARY GUARANTEE

For value received, _________________, a _______________ corporation,
hereby unconditionally guarantees to the Holder of the Note upon which this
Subsidiary Guarantee is endorsed, subject in all respects to the provisions of
Article 10 of the Indenture which shall govern and control the terms of this
Subsidiary Guarantee: (a) the due and punctual payment of the principal of,
premium, if any, and interest on the Note, whether at maturity acceleration,
redemption or otherwise, (b) the due and punctual payment of interest on the
overdue principal of, premium, if any, and interest on the Note, if any, to the
extent lawful, and (c) in case of any extension of time of payment or renewal of
any Note or any of such other obligations, the same will be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise. Capitalized
terms used herein have the meanings assigned to them in the Indenture unless
otherwise indicated.

This Subsidiary Guarantee shall be binding upon each Subsidiary Guarantor
and its successors and assigns and shall inure to the benefit of the successors
and assigns of the Trustee and the Holder and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof and
in the Indenture.

This Subsidiary Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Note upon which this Subsidiary
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized signatories.

[ ]

By: ________________________
Name:
Title:

Attest: _____________________

F-1

<PAGE>

Exhibit 4.4

COUNTY SEAT STORES, INC.

WARRANT AGREEMENT

Dated as of October 29, 1997

Series A Warrants to Purchase Shares of Common Stock

Par Value $0.01 Per Share

<PAGE>

WARRANT AGREEMENT

THIS WARRANT AGREEMENT ("Warrant Agreement"), dated as of October 29,
1997, is executed and delivered by County Seat Stores, Inc., a Minnesota
corporation (together with any successor thereto, the "Company") and First
Trust National Association, as warrant agent (together with any successor
warrant agent, the "Warrant Agent"), for the benefit of the holders (the
"Holders") from time to time of the Warrant Certificates (as hereinafter
defined).

WHEREAS, the Company has entered into a Purchase Agreement dated as of
October 23, 1997 (the "Purchase Agreement") with Jefferies & Company, Inc.
(the "Initial Purchaser"), pursuant to which the Company has agreed, among
other things, (i) to sell to the Initial Purchaser 85,000 units (the
"Units"), each consisting of (A) $1,000 principal amount of 12 3/4% Senior
Notes due 2004 (each a "Note" and, collectively, the "Notes") to be issued
under an indenture dated as of even date herewith (the "Indenture"), between
the Company and First Trust National Association, as trustee (the "Trustee"),
and (B) one Series A warrant (each a "Warrant" and, collectively with the
Series A warrants to be issued to the Initial Purchaser as described in (ii)
below, the "Warrants" and the certificates evidencing the Warrants being
hereinafter referred to as the "Warrant Certificates") to initially purchase
26.8908 shares of the Company's common stock, $.01 par value per share (the
"Common Stock"), at an initial exercise price of $.01 per share, subject to
adjustment in accordance with the terms hereof and (iii) to issue to the
Initial Purchaser Warrants to initially purchase 571,429 shares of Common
Stock at an initial exercise price of $.01 per share, subject to adjustment
in accordance with the terms hereof; and

WHEREAS, the Warrants and the Notes shall be separately transferable on
and after the Separation Date (as hereinafter defined); and

NOW, THEREFORE, in consideration of the purchase of the Units by the
Initial Purchaser and other valuable consideration, the adequacy and receipt
of which is hereby acknowledged, and for the purpose of defining the
respective rights and obligations of the Company, the Warrant Agent and the
Holders, the parties hereto agree as follows:

ARTICLE I

ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES

SECTION 1.1. Issuance of Warrants. Each Warrant Certificate shall,
when countersigned by the Warrant Agent, evidence the number of Warrants
specified therein, and each Warrant evidenced thereby shall represent the
right, subject to the provisions contained herein and therein, to purchase
from the Company (and the Company shall issue and sell to such Holder)
26.8908 fully paid and non-assessable shares of Common Stock (the shares of

<PAGE>

Common Stock purchasable upon exercise of a Warrant being hereinafter
referred to as the "Warrant Shares" and, where appropriate, such term shall
also mean the other securities or property purchasable and deliverable upon
exercise of a Warrant as provided in Article v) at the price specified herein
and therein, in each case subject to adjustment as provided herein and
therein.

SECTION 1.2. Form of Warrant Certificates. The Warrant Certificates
will initially be issued either in global form (the "Global Warrants") or in
registered form as definitive Warrant certificates (the "Definitive
Warrants"). The Warrant Certificates evidencing the Global Warrants or the
Definitive Warrants to be delivered pursuant to this Warrant Agreement shall
be substantially in the form set forth in Exhibit A attached hereto, dated
the date on which countersigned. Such Global Warrants shall represent such of
the outstanding Warrants as shall be specified therein and each shall provide
that it shall represent the aggregate amount of outstanding Warrants from
time to time endorsed thereon and that the aggregate mount of outstanding
Warrants represented thereby may from time to time be reduced or increased,
as appropriate. Any endorsement of a Global Warrant to reflect the amount of
any increase or decrease in the amount of outstanding Warrants represented
thereby shall be made by the Warrant Agent and Depositary (as defined) in
accordance with instructions given by the Holder thereof. The Depository
Trust Company ("DTC"), a New York corporation, shall act as the depository
with respect to the Global Warrants (the "Depositary") until a successor
shall be appointed by the Company. Upon written request, a Holder may receive
from the Warrant Agent Definitive Warrants as set forth in Section 1.9 hereof.

SECTION 1.3. Execution of Warrant Certificates. The Warrant
Certificates shall be executed on behalf of the Company by its President or
any Vice President and attested to by its Secretary or Assistant Secretary,
under its corporate seal. Such signatures may be the manual or facsimile
signatures of the present or any future such officers. The seal of the
Company may be in the form of a facsimile hereof and may be impressed,
affixed, imprinted or otherwise reproduced on the Warrant Certificates.
Typographical and other minor errors or defects in any such reproduction of
the seal or any such signature shall not affect the validity or
enforceability of any Warrant Certificate that has been duly countersigned
and delivered by the Warrant Agent.

In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificate so signed shall be countersigned and delivered by the Warrant
Agent or disposed of by the Company, such Warrant Certificate nevertheless
may be countersigned and delivered or disposed of as though the person who
signed such Warrant Certificate had not ceased to be such officer of the
Company; and any Warrant Certificate may be signed on behalf of the Company
by such persons as, at the actual date of the execution of such Warrant
Certificate, shall be the proper officers of the Company, although at the
date of the execution and delivery of this Warrant Agreement any such person
was not such an officer.

3
<PAGE>

SECTION 1.4. Appointment of Warrant Agent. The Company hereby
appoints the Warrant Agent to act as agent for the Company in accordance with
the terms and conditions set forth in this Agreement, and the Warrant Agent
hereby accepts such appointment.

SECTION 1.5. Authentications and Delivery. Subject to the immediately
following paragraph of this Section 1.5, Warrant Certificates shall be
authenticated by manual signature and dated the date of authentication by the
Warrant Agent and shall not be valid for any purpose unless so authenticated
and dated. The Warrant Certificates shall be numbered and shall be registered
in the Warrant Register (as defined in Section 1.8 hereof).

Upon the receipt by the Warrant Agent of a written order of the Company,
which order shall be signed by its President or any Vice President and
attested to by its Secretary or Assistant Secretary and shall specify the
amount of Warrants to be authenticated, whether the Warrants are to be Global
Warrants or Definitive Warrants, the date of such Warrants and such other
information as the Warrant Agent may reasonably request, without any further
action by the Company, the Warrant Agent is authorized, upon receipt from the
Company at any time and from time to time of the Warrant Certificates, duly
executed as provided in Section 1.3 hereof, to authenticate the Warrant
Certificates and deliver them. Such authentication shall be by a duly
authorized signatory of the Warrant Agent (although it shall not be necessary
for the same signatory to sign all Warrant Certificates).

In case any authorized signatory of the Warrant Agent who shall have
authenticated any of the Warrant Certificates shall cease to be such
authorized signatory before the Warrant Certificate shall be disposed of by
the Company, such Warrant Certificate nevertheless may be delivered or
disposed of as though the person who authenticated such Warrant Certificate
had not ceased to be such authorized signatory of the Warrant Agent; and any
Warrant Certificate may be authenticated on behalf of the Warrant Agent by
such persons as, at the actual time of authentication of such Warrant
Certificates, shall be the duly authorized signatories of the Warrant Agent,
although at the time of the execution and delivery of this Warrant Agreement
any such person is not an authorized signatory.

The Warrant Agent's authentication on all Warrant Certificates shall be
in substantially the form set forth in Exhibit A hereto.

SECTION 1.6. Temporary Warrant Certificates. Pending the preparation
of the definitive Warrant Certificates, the Company may execute, and the
Warrant Agent shall authenticate and deliver, temporary Warrant Certificates,
which are printed, lithographed, typewritten or otherwise produced,
substantially of the tenor of the definitive Warrant Certificates in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Warrant
Certificates may determine, as evidenced by their execution of such Warrant
Certificates.

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<PAGE>

If temporary Warrant Certificates are issued, the Company will cause
definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of definitive Warrant Certificates, the temporary
Warrant Certificates shall be exchangeable for definitive Warrant
Certificates upon surrender of the temporary Warrant Certificates at any
office or agency maintained by the Company for the purpose pursuant to
Section 1.11 hereof. Subject to the provisions of Section 4.1 hereof, such
exchange shall be without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Warrant Certificates, the Company
shall execute, and the Warrant Agent shall authenticate and deliver in
exchange therefor, one or more definitive Warrant Certificates representing
in the aggregate a like number of Warrants. Until so exchanged, the Holder of
a temporary Warrant Certificate shall in all respects be entitled to the same
benefits under this Warrant Agreement as a Holder of a definitive Warrant
Certificate.

SECTION 1.7. Separation of Warrants and Notes. The Notes and Warrants
will not be separately transferable until the date (the "Separation Date")
that the Initial Purchaser shall designate and specify to the Company and the
Warrant Agent in writing. Prior to the Separation Date, no Warrant may be
sold, assigned or otherwise transferred to any Person unless simultaneously
with such transfer, the Warrant Agent receives confirmation from the Trustee
that the Holder thereof has requested a transfer of the related Notes to the
same transferee. On and after the Separation Date, the Holder of a Warrant
Certificate containing the Separability Legend (as defined in Section 1.9(g)
hereof) may surrender such Warrant Certificate accompanied by a written
application to the Warrant Agent, duly executed by the Holder thereof, for a
new Warrant Certificate not containing the Separability Legend.

SECTION 1.8. Registrar and Warrant Register. The Company will keep, at
the office or agency maintained by the Company for such purpose, a register
or registers in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of, and
registration of transfer and exchange of, Warrants as provided in this
Article. Each Person designated by the Company from time to time as a Person
authorized to register the transfer and exchange of the Warrants is
hereinafter called, individually and collectively, the "Registrar".
Initially, the Warrant Agent shall act as Registrar. Upon written notice to
the Warrant Agent and any acting Registrar, the Company may appoint a
successor Registrar for such purposes.

The Company will at all times designate one Person (who may be the
Company and who need not be a Registrar) to act as repository of a master
list of names and addresses of the Holders (the 'Warrant Register"). The
Company will act as such repository unless and until some other Person is, by
written notice from the Company to the Warrant Agent and the Registrar,
designated by the Company to act as such. The Company shall cause each
Registrar to furnish to such repository, on a current basis, such information
as to all registrations of transfer and exchanges effected by such Registrar,
as may be necessary to enable such repository to maintain the Warrant
Register on as current a basis as is practicable.

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<PAGE>

SECTION 1.9. Registration of Transfers and Exchanges.

(a) Transfer and Exchange of Definitive Warrants. When Definitive
Warrants are presented to the Warrant Agent with a request:

(i) to register the transfer of the Definitive Warrants; or

(ii) to exchange such Definitive Warrants for an equal number
of Definitive Warrants, the Warrant Agent shall register the
transfer or make the exchange as requested if the requirements
under this Warrant Agreement as set forth in this Section 1.9 for
such transactions are met; provided, however, that the Definitive
Warrants presented or surrendered for registration of transfer or
exchange:

(x) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the
Company and the Warrant Agent, duly executed by the
Holder thereof or by its attorney, duly authorized
in writing and

(y) in the case of Warrants the offer and sale of which
has not been registered under the Securities Act,
and are presented for transfer or exchange prior to
(x) the date which is one year after the later of
the date of original issue (the "Issue Date") and
the last date on which the Company or any affiliate
of the Company was the owner of such Warrant, or any
predecessor thereto and (y) such later date, if any,
as may be required by any subsequent change in
applicable law (the "Resale Restriction Termination
Date'), such Warrants shall be accompanied, in the
sole discretion of the Company, by the following
additional information and documents, as applicable:

(A) if such Warrant is being delivered to the
Warrant Agent by a Holder for registration in
the name of such Holder, without transfer, a
certification from such Holder to that effect
(in substantially the form of Exhibit B
hereto); or

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<PAGE>

(B) if such Warrant is being transferred to a
qualified institutional buyer (as defined in
Rule 144A under the Securities Act) in
accordance with Rule IaAA under the Securities
Act or pursuant to an exemption from
registration in accordance with Rule 144 or
Regulation S under the Securities Act, a
certification to that effect (in substantially
the form of Exhibit B hereto); or

(C) if such Warrant is being transferred to an
institutional "accredited investor" within the
meaning of subparagraph (a)(1), (a)(2), (a)(3)
or (a)(7) of Rule 501 under the Securities Act,
delivery of a certification to that effect (in
substantially the form of Exhibit B hereto) and
a letter of representation from the transferee
in substantially the form of Exhibit C hereto
and, if requested by the Company, an opinion of
counsel reasonably acceptable to the Company
that such transfer is in compliance with the
Securities Act; or

(D) if such Warrant is being transferred in
reliance on another exemption from the
registration requirements of the Securities
Act, a certification to that effect (in
substantially the form of Exhibit B hereto) and
an opinion of counsel reasonably acceptable to
the Company to the effect that such transfer is
in compliance with the Securities Act.

(b) Restrictions on Transfer of a Definitive Warrant for a
Beneficial Interest in a Global Warrant. A Definitive Warrant may not be
transferred for a beneficial interest in a Global Warrant except upon
satisfaction of the requirements set forth below. Upon receipt by the Warrant
Agent of a Definitive Warrant, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Warrant Agent, together
with:

(i) certification, substantially in the form of Exhibit B
hereto, that such Definite Warrant is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities
Act; and

(ii) written instructions directing the Warrant Agent to make,
or to direct the Depositary to make, an endorsement on the Global
Warrant to reflect an

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<PAGE>

increase in the aggregate amount of the Warrants represented by the
Global Warrant;

then the Warrant Agent shall cancel such Definitive Warrant and cause, or
direct the Depositary to cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Warrant Agent, the
number of Warrants represented by the Global Warrant to be increased
accordingly. If no Global Warrant is then outstanding, the Company shall
issue and the Warrant Agent shall authenticate a new Global Warrant in the
appropriate amount.

(c) Transfer and Exchange of Global Warrants. The transfer and exchange
of Global Warrants or beneficial interests therein shall be effected through
the Depositary, in accordance with this Section 1.9 and the procedures of the
Depositary therefor.

(d) Transfer of a Beneficial Interest in a Global Warrant for a
Definitive Warrant.

(i) Any Person having a beneficial interest in a Global
Warrant may upon request transfer such beneficial interest for a
Definitive Warrant. Upon receipt by the Warrant Agent of written
instructions or such other form of instructions as is customary for
the Depositary from the Depositary or its nominee on behalf of any
Person having a beneficial interest in a Global Warrant and upon
receipt by the Warrant Agent of a written order or such other form
of instructions as is customary for the Depositary or the Person
designated by the Depositary as having such a beneficial interest
containing registration instructions and, in the case of any such
transfer or exchange prior to the Resale Restriction Termination
Date, the following additional information and documents:

(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the
beneficial owner, a certificate from such Person to that
effect (in substantially the form of Exhibit B hereto); or

(B) if such beneficial interest is being transferred to a
qualified institutional buyer (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A
under the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 or Regulation S
under the Securities Act, a certification to that effect
from the transferee or transferor (in substantially the
form of Exhibit B hereto); or

(C) if such beneficial interest is being transferred to an
institutional "accredited investor" within the meaning of
subparagraph (a)(1),

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<PAGE>

(a)(2), (a)(3) or (a)(7) of Rule 501 under the Securities
Act, delivery of a certification to that effect (in
substantially the form of Exhibit B hereto), a letter of
representation from the transferee in substantially the
form of Exhibit C hereto and an opinion of counsel
reasonably acceptable to the Company to the effect that
such transfer is in compliance with the Securities Act; or

(D) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to
that effect (in substantially the form of Exhibit B
hereto) and an opinion of counsel reasonably acceptable
to the Company to the effect that such transfer is in
compliance with the Securities Act,

then the aggregate amount of the Global Warrant will be reduced by
the Depositary or its custodian and, following such reduction, the
Company will execute and, upon receipt of an authentication order
in the form of an Officers' Certificate (as hereinafter defined),
the Warrant Agent will authenticate and deliver to the transferee a
Definitive Warrant.

(ii) Definitive Warrants issued in exchange for a beneficial
interest in a Global Warrant pursuant to Section 1.8(d) shall be
registered in such names and in such authorized denominations as
the Depositary, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Warrant
Agent in writing. The Warrant Agent shall deliver such Definitive
Warrant to the Persons in whose names such Warrants are so
registered.

(e) Restrictions on Transfer and Exchange of Global Warrants.
Notwithstanding any other provisions of this Warrant Agreement (other than
the provisions set forth in Section 1.9(f)), a Global Warrant may not be
transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.

(f) Authentication of Definitive Warrants in Absence of Depositary. If
at any time:

(i) the Depositary for the Warrants notifies the Company that
the Depositary is unwilling or unable to continue as Depositary for
the Global Warrant and a successor Depositary for the Global
Warrant is not appointed by the Company within 90 days after
delivery of such notice or

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<PAGE>

(ii) the Company, at its sole discretion, notifies the Warrant
Agent in writing that it elects to cause the issuance of Definitive
Warrants under this Warrant Agreement,

then the Company will execute, and the Warrant Agent, upon receipt of an
officers' certificate signed by two duly authorized officers of the Company
(one of whom must be the principal executive officer, principal financial
officer or principal accounting officer) (an "Officers' Certificate")
requesting the authentication and delivery of Definitive Warrants, will
authenticate and deliver Definitive Warrants, in an aggregate number equal to
the aggregate number of warrants represented by the Global Warrant, in
exchange for such Global Warrant.

(g) Legends.

Each Warrant Certificate evidencing the Global Warrants and
the Definitive Warrants (and all Warrants issued in exchange
therefor or substitution thereof) issued prior to the second
anniversary of the original issuance of the Units, unless otherwise
agreed by the Company and the Holder thereof shall bear the
following legends:

"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NEITHER THESE SECURITIES NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS
OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER."

"THE HOLDER OF THESE SECURITIES, BY ITS ACCEPTANCE HEREOF, AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER THESE SECURITIES PRIOR TO THE
DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
OF THESE SECURITIES AND THE LAST DATE ON WHICH COUNTY SEAT STORES,
INC. ("THE COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER
OF THESE SECURITIES (OR ANY PREDECESSOR OF THESE SECURITIES) (THE
"RESALE RESTRICTION TERMINATION DATE"), ONLY (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED

10
<PAGE>

EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THESE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S.
PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1),
(2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THESE SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE

ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
COMPANY'S AND THE WARRANT AGENT'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE
FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON
THE OTHER SIDE OF THESE SECURITIES IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE WARRANT AGENT. THIS LEGEND SHALL BE REMOVED
UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.'

"THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS AGREEMENT DATED
OCTOBER 29, 1997 BETWEEN THE COMPANY AND JEFFERIES & COMPANY, INC.
(THE "INITIAL PURCHASER"), A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY."

Each Warrant Certificate issued in definitive form will also bear the
following additional legends:

"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH

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<PAGE>

CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY
REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS."

"BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR' (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT) OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
REGULATION S."

To the extent a Warrant Certificate evidences a Global Warrant, such
Warrant Certificate shall also bear the following legends:

"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.'

"TRANSFERS OF THIS GLOBAL WARRANT SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND THE TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE
IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE WARRANT
AGREEMENT REFERRED TO HEREIN. "

Each Warrant Certificate issued prior to the Separation Date shall also
bear the following legends on the face thereof:

"THE WARRANTS EVIDENCED BY THIS WARRANT CERTIFICATE ARE INITIALLY
ISSUED AS PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF
$1,000 PRINCIPAL AMOUNT OF 12 3/4%

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<PAGE>

SENIOR NOTES DUE 2004 (THE "NOTES") OF THE COMPANY AND ONE WARRANT
INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 26.8908 SHARES
OF THE COMPANY'S COMMON STOCK, PAR VALUE $.01 PER SHARE. PRIOR TO
THE CLOSE OF BUSINESS ON SUCH DATE AS THE INITIAL PURCHASER SHALL
DESIGNATE AND SPECIFY TO THE COMPANY AND THE WARRANT AGENT IN
WRITING, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR
EXCHANGED ONLY TOGETHER WITH, THE NOTES. "

(h) Cancellation and/or Adjustment of a Global Warrant. At such time as
all beneficial interests in a Global Warrant have either been exchanged for
Definitive Warrants, redeemed, repurchased or canceled, such Global Warrant
shall be returned to or retained and canceled by the Warrant Agent. At any
time prior to such cancellation, if any beneficial interest in a Global
Warrant is exchanged for Definitive Warrants, redeemed, repurchased or
canceled, the number of Warrants represented by such Global Warrant shall be
reduced and an endorsement shall be made on such Global Warrant by the
Warrant Agent or the Depositary to reflect such reduction.

(i) Obligations with Respect to Transfers and Exchanges of Definitive
Warrants.

(i) To permit registrations of transfers and exchanges, the
Company shall execute, at the Warrant Agent's request, and the
Warrant Agent shall authenticate Definitive Warrants and Global
Warrants.

(ii) All Definitive Warrants and Global Warrants issued upon
any registration of transfer or exchange of Definitive Warrants or
Global Warrants shall be the valid obligations of the Company,
entitled to the same benefits under this Warrant Agreement as the
Definitive Warrants or Global Warrants surrendered upon the
registration of transfer or exchange.

(iii) Prior to due presentment for registration of transfer of
any Warrant, the Warrant Agent and the Company may deem and treat
the Person in whose name any Warrant is registered as the absolute
owner of such Warrant, and neither the Warrant Agent nor the
Company shall be affected by notice to the contrary.

(j) Payment of Taxes. The Company or the Warrant Agent may require
payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any exchange or transfer pursuant to
this Section 1.9.

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<PAGE>

SECTION 1.10. Lost, Stolen, Destroyed, Defaced or Mutilated Warrant
Certificates. Upon receipt by the Company and the Warrant Agent (or any agent
of the Company or the Warrant Agent, if requested by the Company) of evidence
satisfactory to them of the loss, theft, destruction, defacement, or
mutilation of any Warrant Certificate and of indemnity reasonably
satisfactory to them and, in the case of mutilation or defacement, upon
surrender thereof to the Warrant Agent for cancellation, then, in the absence
of notice to the Company or the Warrant Agent that such Warrant Certificate
has been acquired by a bona fide purchaser or holder in due course, the
Company shall execute, and an authorized signatory of the Warrant Agent shall
manually authenticate and deliver, in exchange for or in lieu of the lost,
stolen, destroyed, defaced or mutilated Warrant Certificate, a new Warrant
Certificate representing a like number of Warrants, bearing a number or other
distinguishing symbol not contemporaneously outstanding. Upon the issuance of
any new Warrant Certificate under this Section 1.10, the Company may require
the payment from the Holder of such Warrant Certificate of a sum sufficient
to cover any tax, stamp tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees and expenses
of the Warrant Agent and the Registrar) in connection therewith. Every
substitute Warrant Certificate executed and delivered pursuant to this
Section 1.10 in lieu of any lost, stolen or destroyed Warrant Certificate
shall constitute an additional contractual obligation of the Company, whether
or not the lost, stolen or destroyed Warrant Certificate shall be at any time
enforceable by anyone, and shall be entitled to the benefits of (but shall be
subject to all the limitations of rights set forth in) this Warrant Agreement
equally and proportionately with any and all other Warrant Certificates duly
executed and delivered hereunder. The provisions of this Section 1.10 are
exclusive with respect to the replacement of lost, stolen, destroyed, defaced
or mutilated Warrant Certificates and shall preclude (to the extent lawful)
any and all other rights or remedies notwithstanding any law or statute
existing or hereafter enacted to the contrary with respect to the replacement
of lost, stolen, destroyed, defaced.or mutilated Warrant Certificates.

The Warrant Agent is hereby authorized to authenticate and deliver the
new Warrant Certificates required pursuant to the provisions of this Section
1.10.

SECTION 1.11. Offices for Exercise, etc. So long as any of the Warrants
remain outstanding, the Company will designate and maintain in the
continental United States: (a) an office or agency where the Warrant
Certificates may be presented for exercise, (b) an office or agency where the
Warrant Certificates may be presented for registration of transfer and for
exchange (including the exchange of temporary Warrant Certificates for
definitive Warrant Certificates pursuant to Section 1.6 hereof), and (c) an
office or agency where notices and demands to or upon the Company in respect
of the Warrants or of this Warrant Agreement may be served. The Company may
from time to time change or rescind such designation, as it may deem
desirable or expedient. The Company will give to the Warrant Agent written
notice of the location of any such office or agency and of any change of
location thereof. The Company hereby designates the corporate trust office of
the Warrant Agent in New York,

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<PAGE>

New York (the "Warrant Agent Office"), as the initial agency maintained for
each such purpose.

ARTICLE II

DURATION, EXERCISE OF WARRANTS AND EXERCISE PRICE

SECTION 2.1. Duration of Warrants. Subject to the terms and
conditions established herein, the Warrants shall expire at 5:00 p.m., New
York City time on November 1, 2007 (the "Expiration Date"). Each Warrant may
be exercised on any Business Day (as hereinafter defined) on or after the
Exercisability Date (as hereinafter defined) and on or prior to the
Expiration Date.

Any Warrant not exercised before the close of business on the Expiration
Date relating to such Warrant shall become void, and all rights of the Holder
under the Warrant Certificate evidencing such Warrant and under this Warrant
Agreement shall cease.

SECTION 2.2. Exercise, Exercise Price, Settlement and Delivery.

(a) Subject to the provisions of this Warrant Agreement, each Holder
shall have the right to purchase from the Company, on or after the date
hereof (the "Exercisability Date") and on or prior to the Expiration Date,
26.8908 fully paid and non-assessable Warrant Shares per each Warrant such
Holder owns, subject to adjustment in accordance with Article V hereof, at
the initial purchase price of $0.01 for each Warrant Share purchased, subject
to adjustment in accordance with Article V hereof (the "Exercise Price").

(b) Warrants may be exercised, in whole or in part, on or after the
Exercisability Date by (i) surrendering at any Warrant Agent office the
Warrant Certificate evidencing such Warrants with the form of election to
purchase Warrant Shares set forth on the reverse side of the Warrant
Certificate (the "Election to Exercise") duly completed and signed by the
registered Holder or Holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney, and (ii) paying in
full the Exercise Price for each such Warrant Share purchased and any other
amounts required to be paid pursuant to Section 4.1 hereof.

(c) Simultaneously with the exercise of each Warrant, payment in full of
the Exercise Price shall be made (i) in cash or by certified or official bank
check payable to the order of the Company, delivered to the office or agency
where the Warfare Certificate is being surrendered; or (ii) by delivery of
Warrant Certificates pursuant to Section 2.2(d).

(d) In the event that any Holder of Warrant Certificates delivers such
Warrant Certificates to the Company and indicates on the Election to Exercise
that such Holder intends to exercise all, or any portion of, the Warrants
represented by such Warrant Certificate and to satisfy its obligation to pay
the Exercise Price in respect thereof by virtue of the provisions of

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<PAGE>

this Section 2.2(d), such Holder shall become entitled to receive, instead of
the number of Warfare Shares such Holder would have received had the Exercise
Price been paid in cash pursuant to Section 2.2(c), a number of Warrant
Shares in respect of the exercises of such Warrants equal to the product of:

(A) the number of Warrant Shares issuable upon such exercise
of such Warrant Certificates (or, if only a portion of such Warrant
Certificates are being exercised, issuable upon the exercise of
such portion) multiplied by

(B) the quotient of:

(i) the difference of:

(X) the per share Fair Market Value of the Common
Stock at the time of such exercise; minus

(Y) the Exercise Price at the time of such exercise;
divided by

(ii) the per share Fair Market Value of the Common Stock
at the time of such exercise.

For purposes of Rule 144 and Rule 144A under the Securities Act, the
Company and the Warrant Agent, on behalf of the Holders, hereby agree that
the exercise of any Warrants in accordance with this Section 2.2(d) shall be
deemed to be a conversion of such Warrants, pursuant to the terms of this
Warrant Agreement and the Warrants, into Warrant Shares.

(e) Upon such surrender of a Warrant Certificate and payment and
collection of the Exercise Price at any Warrant Agent Office, such Warrant
Certificate and payment shall be promptly delivered to the Warrant Agent. The
"Exercise Date" for a Warrant shall be the date when all of the items
referred to in the first sentence of paragraphs (b) and (c) of this Section
2.2 are received by the Warrant Agent at or prior to 2:00 p.m., New York City
time, on a Business Day and the exercise of the Warrants will be effective as
of such Exercise Date. If any items referred to in the first sentence of
paragraphs (b) and (c) of this Section 2.2 are received after 2:00 p.m., New
York City time, on a Business Day, the exercise of the Warrants to which such
item relates will be effective on the next succeeding Business Day.
Notwithstanding the foregoing, in the case of an exercise of Warrants on the
Expiration Date, if all of the items referred to in the first sentence of
paragraphs (b) and (c) of this Section 2.2 are received by the Warrant Agent
at or prior to 5:00 p.m., New York City time, on such Expiration Date, the
exercise of the Warrants to which such items relate will be effective on the
Expiration Date.

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(f) Upon the exercise of a Warrant in accordance with the terms hereof,
the receipt of a Warrant Certificate and payment of the Exercise Price, the
Warrant Agent shall: (i) cause an amount equal to the Exercise Price, whether
in cash or Warrant Certificates, to be delivered or paid to the Company by
crediting the same to the account designated by the Company in writing to the
Warrant Agent for that purpose; (ii) in the case of a payment of the Exercise
Price in cash, advise the Company immediately by telephone of the amount so
deposited to the Company's account and promptly confirm such telephonic
advice in writing; and (iii) as soon as practicable, advise the Company in
writing of the number of Warrants exercised in accordance with the terms and
conditions of this Warrant Agreement and the Warrant Certificates, the
instructions of each exercising Holder with respect to delivery of the
Warrant Shares to which such Holder is entitled upon such exercise, and such
other information as the Company shall reasonably request.

(g) Subject to Section 5.2 hereof, as soon as practicable after the
exercise of any Warrant or Warrants in accordance with the terms hereof, the
Company shall issue or cause to be issued to or upon the written order of the
registered Holder evidencing such exercised Warrant or Warrants, a
certificate or certificates evidencing the Warrant Shares to which such
Holder is entitled, in fully registered form, registered in such name or
names as may be directed by such Holder pursuant to the Election to Exercise,
as set forth on the reverse of the Warrant Certificate. The Warrant Agent
shall have no obligation to ascertain the number of Warrant Shares to be
issued with respect to the exercised Warrant or Warrants. Such certificate or
certificates evidencing the Warrant Shares shall be deemed to have been
issued and any Persons who are designated to be named therein shall be deemed
to have become the Holder of record of such Warrant Shares as of the close of
business on the Exercise Date. After such exercise of any Warrant or
Warrants, the Company shall also issue or cause to be issued to or upon the
written order of the registered holder of such Warrant Certificate, a new
Warrant Certificate, countersigned by the Warrant Agent pursuant to the
Company's written instruction, evidencing the number of Warrants, if any,
remaining unexercised (unless such Warrants shall have expired).

SECTION 2.3. Cancellation of Warrant Certificates. In the event the
Company shall purchase or otherwise acquire Warrants, the Warrant
Certificates evidencing such Warrants may thereupon be delivered to the
Warrant Agent, and if so delivered, shall be canceled by it and retired. The
Warrant Agent shall cancel all Warrant Certificates properly surrendered for
exchange, substitution, transfer or exercise. The Warrant Agent shall destroy
canceled Warrant Certificates held by it and deliver a certificate of
destruction to the Company. The Warrant Agent shall account promptly to the
Company with respect to Warrants exercised and concurrently pay to the
Company all money received by the Warrant Agent for the purchase of Warrant
Shares through the exercise of such Warrants.

ARTICLE III

OTHER PROVISIONS RELATING TO

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RIGHTS OF HOLDERS OF WARRANTS

SECTION 3.1. Enforcement of Rights.

(a) Notwithstanding any of the other provisions of this Warrant
Agreement, any Holder of Warrant Certificates or holder of Warrant Shares,
without the consent of the Warrant Agent, may, in and for its own behalf,
enforce, and may institute and maintain any suit, action or proceeding
against the Company suitable to enforce, its right to exercise the Warrant or
Warrants evidenced by its Warrant Certificate as provided in such Warrant
Certificate and in this Warrant Agreement.

(b) Neither the Warrants nor any Warrant Certificate shall entitle the
Holders thereof to any of the rights of a holder of Common Stock, including,
without limitation, the right to vote or to receive any dividends or other
payments or to consent or to receive notice as stockholders in respect of the
meetings of stockholders or for the election of directors of the Company or
to share in the assets of the Company in the event of the liquidation,
dissolution or winding up of the Company's affairs or any other matter, or
any rights whatsoever as stockholders of the Company.

SECTION 3.2. Repurchase Right.

(a) If (A) the Company, in a single transaction or series of related
transactions, (i) sells, assigns, transfers, leases, conveys or otherwise
disposes of all or substantially all of the assets of the Company to any
Person that does not have publicly traded common equity for which the
Warrants will become exercisable; or (ii) consolidates or merges with or into
another Person that does not have publicly traded common equity for which the
Warrants will become exercisable and the Company is not the surviving entity;
and (B) the consideration payable in respect of any event described in the
immediately preceding clauses (i) or (ii) does not consist solely of cash
(any such event, hereinafter, a "Repurchase Event"), then the Company shall
offer to repurchase (a "Repurchase Offer"), in accordance with the procedures
set forth in this Section 3.2, all Warrants at the per share Fair Market
Value of the Common Stock issuable upon exercise thereof, less the Exercise
Price (the "Repurchase Price"). The Company shall, subject to the provisions
described in this Section 3.2, be required to purchase all Warrants properly
tendered pursuant to a Repurchase Offer and not withdrawn.

(b) The Repurchase Offer shall remain open for at least 20 Business Days
and until the close of business on the fifth Business Day prior to the
Repurchase Date (as hereinafter defined).

(c) Not later than the 30th day following the occurrence of the
Repurchase Event, the Company shall mail to the Warrant Agent and to each
Holder a notice (the "Repurchase Notice") stating, among other things:

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<PAGE>

(1) that a Repurchase Event has occurred and that such Holder has
the right to require the Company to repurchase such holder's Warrants,
or portion thereof, at the Repurchase Price;

(2) any information regarding such Repurchase Event required to be
furnished under applicable federal and State securities laws, rules and
regulations;

(3) a purchase date (the "Repurchase Date"), which shall be on a
Business Day and no earlier than 45 days nor later than 60 days after
the occurrence of a Repurchase Event;

(4) that any Warrant, or portion thereof, not tendered or accepted
for payment shall be subject to appropriate adjustment as required by
Section 5 of this Warrant Agreement, and continue in full force and
effect in accordance with this Warrant Agreement; and

(5) the instructions a Holder must follow in order to have Warrants
repurchased in accordance with this Section 3.2.

No failure of the Company to give the foregoing notice shall limit any
right to any Holder right to exercise a repurchase right hereunder.

(d) To exercise the repurchase right, the Holder must deliver, on or
before the Repurchase Date, written notice to the Company (or an agent
designated by the Company for such purpose) of the exercise of such
repurchase right, together with the Warrant Certificates with respect to
which the right is being exercised, duly endorsed for transfer; provided,
however, that with respect to Warrants held of record by DTC, the Company or
its designated agent may accept as tendered for repurchase pursuant to this
Section 3.2 Warrants tendered by means of a book entry in accordance with the
normal procedures of DTC.

(e) On the Repurchase Date, the Company shall (i) accept for payment
Warrants or portions thereof tendered pursuant to the Repurchase Notice, (ii)
if the Company appoints a depository or Paying Agent, deposit with such
depository or Paying Agent money sufficient to pay the Repurchase Price of
all Warrants or portions thereof so tendered and (iii) deliver to the Warrant
Agent Warrants so accepted together with an Officers' Certificate stating the
Warrants or portions thereof tendered to the Company. DTC, the Company or the
Paying Agent, as the case may be, shall promptly mail to the Holders whose
Warrants are so accepted payment in an amount equal to the Repurchase Price,
and the Warrant Agent shall promptly authenticate and mail to Holders of
Definitive Warrants new Definitive Warrants equal in principal amount to any
unpurchased portion of the Definitive Warrant surrendered. The Company will
notify the Holders of the results of the Repurchase Offer on or as soon as
practicable after the Repurchase Date. For purposes of this Section 3.2, the
Warrant Agent shall act as the Paying Agent.

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<PAGE>

(f) The Company, to the extent applicable and if required by law, will
comply with the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and any other federal and state securities laws, rules and regulations
that may then be applicable to any offer by the Company to purchase the
Warrants pursuant to the provisions of this Section 3.2.

(g) Notwithstanding anything set forth in this Section 3.2, no
incurrence by the Company of a Permitted Lien (as defined in the Indenture)
shall be deemed to be a Repurchase Event.

ARTICLE IV

CERTAIN COVENANTS OF THE COMPANY

SECTION 4.1. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrants and of the
Warrant Shares upon the exercise of Warrants or to the separation of the
Warrants and the Notes on the Separability Date; provided, however, that the
Company shall not be required to pay any tax or other governmental charge
which may be payable in respect of any transfer involved in the issue of any
Warrant Certificates or any certificates for Warrant Shares in a name other
than the registered Holder surrendered upon the exercise of a Warrant. In any
such case, the Company shall not be required to issue or deliver such Warrant
Certificate or certificate for Warrant Shares unless or until the Person or
Persons requesting issuance thereof shall have paid to the Company the amount
of such tax or other governmental charge or shall have established to the
satisfaction of the Company that such tax or other governmental charge has
been paid or an exemption is available therefrom.

SECTION 4.2. Notice of Expiration Date. The Company will give notice
of the Expiration Date to all Holders of the then outstanding Warrants, not
less than 90 and not more than 120 days prior to the Expiration Date.

SECTION 4.3. Reservation of Common Stock. The Company covenants and
agrees that it will at all times cause to be reserved and kept available out
of its authorized and unissued shares of Common Stock such number of shares
of Common Stock as will be sufficient to permit the exercise in full of all
Warrants issued hereunder and all other rights, warrants or options
exercisable into, and the conversion of all securities convertible into,
Common Stock.

SECTION 4.4. Warrant Shares to be Duly Authorized and Issued,
Fully Paid and Nonassessable. The Company covenants and agrees that it will
take all such action as may be necessary to ensure that all Warrant Shares
delivered upon the exercise in full of any Warrants, at the time of delivery
of the certificates representing such shares, shall be duly and validly
authorized and issued and fully paid and nonassessable, free of any
preemptive rights in favor of any Person in respect of such issuance and free
of any security interest, lien or

20
<PAGE>

other encumbrance of any kind or nature created by, arising out of actions
of, the Company, any subsidiary or any affiliate of the Company.

SECTION 4.5. Reports.

(a) For so long as any Warrants are outstanding, the Company shall
deliver to the Warrant Agent and the Warrant Agent shall mail to each Holder,
within 15 days after the filing of the same with the Securities and Exchange
Commission ("SEC"), copies of its quarterly and annual reports and of the
information, documents and other reports, if any, which the Company is
required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act.

(b) For so long as any Warrants are outstanding, whether or not the
Company is required to file any financial information with the SEC, the
Company shall file with the Warrant Agent and the Warrant Agent shall mail to
each Holder and to prospective purchasers of Warrants, upon their request,
the information required to be delivered pursuant to Rule 144A(d)(4) under
the Securities Act for so long as is required for an offer or sale of the
Warrants or the Warrant Shares under Rule 144A. The financial and other
information to be distributed to Holders shall be filed with the Warrant
Agent and mailed to the Holders at their respective addresses appearing in
the Warrant Register maintained by the Warrant Agent, within 120 days after
the end of the Company's fiscal year and within 60 days after the end of each
of the first three quarters of each such fiscal year.

SECTION 4.6. Private Placement Numbers. The Company covenants and
agrees to obtain, and thereafter maintain, a private placement number in
respect of the Warrants and a private placement number or CUSIP number, as
appropriate, in respect of the Warrant Shares from the CUSIP Service Bureau
of Standard & Poor's, a division of McGraw-Hill, Inc.

SECTION 4.7. Right of Action. All rights of action in respect of the
Warrants are vested in the respective registered Holders of the Warrant
Certificates, and any registered Holder of any Warrant Certificate, without
the consent of the Holder of any other Warrant Certificate, may, on its own
behalf and for its own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act
in respect of, its right to exercise the Warrants evidenced by such Warrant
Certificate in the manner provided in such Warrant Certificate and in this
Warrant Agreement.

SECTION 4.8. Survival. The agreements of the Company contained in
Section 4. l and Section 4.7 shall survive the exercise of and the expiration
of the Warrants.

ARTICLE V

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<PAGE>

SECTION 5.1. Adjustment of Exercise Price and Number of Warrant
Shares Issuable. The Exercise Price and the number and kind of Warrant Shares
purchasable upon the exercise of each Warrant shall be subject to adjustment
from time to time as follows:

(a) Stock Dividends, Subdivisions and Combinations. In case the Company
shall hereafter (A) pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock to all holders of its Common Stock,
(B) subdivide its outstanding shares of Common Stock into a greater number of
shares or (C) combine its outstanding shares of Common Stock into a smaller
number of shares, (i) the number of Warrant Shares purchasable upon exercise
of each Warfare immediately prior thereto shall be adjusted so that the
Holder of any Warrant Certificate thereafter exercised shall be entitled to
receive the number of Warrant Shares which such Holder would have owned
immediately following such action had such Warrant been exercised immediately
prior thereto, and (ii) the Exercise Price shall be adjusted by multiplying
such Exercise Price immediately prior to such adjustment by a fraction, the
numerator of which shall be the number of Warrant Shares purchasable upon the
exercise of each Warrant immediately prior to such adjustment, and the
denominator of which shall be the number of Warrant Shares purchasable
immediately thereafter. An adjustment made pursuant to this Section 5. l(a)
shall become effective immediately after the record date, in the case of a
dividend or distribution, and shall become effective immediately after the
effective date, in the case of a subdivision, combination or
reclassification. If, as a result of an adjustment made pursuant to this
Section 5. 1(a), the Holder of any Warrant Certificate thereafter exercised
shall become entitled to receive shares of two or more classes of capital
stock of the Company, the Board of Directors of the Company shall determine,
in its reasonable discretion, the allocation of the adjusted Exercise Price
between or among shares of such classes of capital stock.

(b) Reclassification, Combinations, Mergers, etc. Subject to Section
3.2, if (A) any capital reorganization, reclassification or change of
outstanding shares of Common Stock (other than as set forth in Section 5.
l(a) and other than a change in par value, or from par value to no par value,
or from no par value to par value), or (B) in case of any consolidation or
merger of the Company with or into another corporation or other entity (other
than a merger in which the Company is the continuing corporation and which
does not result in any reclassification or change of the then outstanding
shares of Common Stock or other capital stock of the Company (other than a
change in par value, or from par value to no par value, or from no par value
to par value or as a result of a subdivision or combination)) or (C) in case
of any sale or other conveyance of all or substantially all of the assets of
the Company shall be effected in such a way that the holders of Common Stock
shall be entitled to receive shares of common stock, other securities or
assets (whether such stock, other securities or assets are issued or
distributed by the Company or another Person) with respect to or in exchange
for Common Stock, then, as a condition of such reclassification,
reorganization, change, consolidation, merger, sale or conveyance, the
Company or such a successor or purchasing Person or entity, as the case may
be, shall forthwith make lawful and adequate provision whereby the Holder of
such Warrant Certificate then outstanding shall have the right thereafter

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<PAGE>

to receive on exercise of such Warrant the kind and amount of shares of stock
and other securities and assets receivable upon such reclassification,
reorganization, change, consolidation, merger, sale or conveyance by a holder
of the number of shares of Common Stock that such holders would have been
entitled to receive upon exercise of such Warrant had such Warrant been
exercised immediately before such reclassification, reorganization, change,
consolidation, merger, sale or conveyance that shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Article V and
enter into a supplemental warrant agreement so providing.

For purposes of this Section 5. l(b), "shares of common stock, other
securities or assets" receivable upon a reclassification, reorganization,
change, consolidation, merger, sale or conveyance shall include securities of
any successor or acquiring Person or entity of any class which is not subject
to redemption and shall also include any evidence of indebtedness, shares of
stock or other securities which are convertible into or exchangeable for any
such securities, either immediately or upon the arrival of a specified date
or the happening of a specified event or any warrants or other rights to
subscribe for or purchase any such stock. If the issuer of securities
deliverable upon exercise of Warrants under the supplemental warrant
agreement is an affiliate of the formed, surviving or transferee corporation
or other entity, such issuer shall join in the supplemental warrant agreement.

In case of any such reclassification, reorganization, change, merger,
consolidation or sale or other conveyance of assets, any successor or
acquiring corporation or other entity shall expressly assume the due and
punctual observance and performance of each and every covenant and condition
of this Warrant Agreement to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as
may be deemed appropriate (as determined in good faith by resolution of the
Board of Directors of the Company) in order to provide for adjustments of
Warrant Shares into which each Warrant is exercisable, which shall be as
nearly equivalent as practicable to the adjustments provided for in this
Article V.

(c) Issuances of Common Stock or Rights. In the event that the Company
shall, at any time or from time to time after the date hereof, issue, sell,
grant or otherwise distribute (in any such case, a "Distribution") shares of
Common Stock or Rights, whether or not such Rights are immediately
exercisable, convertible or exchangeable, at a Consideration Per Share lower
than the per share Fair Market Value of the Common Stock on the date of such
issuance, sale, grant or distribution, or if the Company shall amend any of
the provisions of any Rights, including, without limitation, a change in the
purchase, conversion, exchange or exercise price per share of underlying
Common Stock, as the case may be, of each such Right, or the Aggregate
Consideration Receivable applicable to any such Right (other than under or by
reason of provisions designed to protect against dilution upon an event which
results in a related adjustment pursuant to this Article v), then,
immediately after the date of such issuance or sale,

<PAGE>

(A) the number of Warrant Shares purchasable upon exercise of each
Warrant shall be increased so that the Holders thereafter will be entitled
to receive the number of Warrant Shares determined by multiplying:

(i) the number of shares of Common Stock such Holders
would have been entitled to receive immediately before the
date of such issuance or sale had such Holders exercised their
Warrants immediately prior thereto; by

(ii) a fraction, the numerator of which shall be the sum
of: (X) the number of shares of Common Stock outstanding on
such date plus (Y) the number of additional shares of Common
Stock offered for subscription or purchase (or into which the
Rights so offered are initially convertible or exchangeable or
exercisable, as the case may be), and the denominator of which
shall be the sum of: (x) the number of shares of Common Stock
outstanding on such date plus (Y) the number of shares of
Common Stock that the Aggregate Consideration Receivable would
purchase at a price per share equal to the Fair Market Value
of the Common Stock on the date of such issuance or sale, and

(B) the Exercise Price in effect immediately after such Distribution
shall be adjusted by multiplying the Exercise Price in effect immediately
prior to such Distribution by the quotient of:

(i) the sum of: (A) the number of shares of Common Stock
outstanding immediately prior to such Distribution; plus (B)
the quotient of: (X) the Aggregate Consideration Receivable;
divided by (Y) the per share Fair Market Value of the Common
Stock; in each case immediately prior to such Distribution;
divided by

(ii) the sum of: (A) the number of shares of Common Stock
outstanding immediately prior to such Distribution; plus (B)
the number of shares of Common Stock so issued or sold (or
initially issuable pursuant to any Rights).

For purposes of the foregoing calculation, the total maximum number of
shares of Common Stock issuable upon exercise, conversion or exchange, as
applicable, of all Rights shall be deemed to have been issued as of the date
of such Distribution and thereafter shall be deemed to be outstanding and the
Company shall be deemed to have received as consideration therefor the
Aggregate Consideration Receivable applicable thereto after giving effect to
such exercise, conversion or exchange. Except as provided in Section 5. 1(g),
no additional adjustments of the Exercise Price shall be made upon the actual
exercise, exchange or conversion, as applicable, of such Rights.

(d) Dividends and Distributions. In the event the Company shall, at any
time or from time to time after the date hereof, make or pay any dividend of,
or distribute to holders of

<PAGE>

Common Stock (in any such case, a "Dividend'), shares of capital stock, any
of its property or assets, including, without limitation, cash, evidences of
its indebtedness, Rights or other securities (in each case, other than
dividends payable in Common Stock) (collectively, 'Dividend Property'), then,
the Company shall make the same distribution of Dividend Property to the
Holders as the Holders would have received if the Holders had, immediately
prior to the record date for the distribution of the Dividend Property,
exercised the Warrants provided, however, that at the option of the Company,
in lieu of distributing any Dividend Property to Holders, the following
adjustments shall be made:

(A) the Exercise Price in effect after the record date in respect
of which Dividend Property is distributed or issued shall be adjusted by
multiplying the Exercise Price in effect immediately prior to such record
date by the quotient of:

(i) the difference of (A) the per share Fair Market Value
of the Common Stock on such record date; minus (B) the quotient
of:

(X) in the case of a Dividend made in cash, the
aggregate amount of cash so dividend or distributed and,
in the case of a Dividend made other than in cash, the
then Fair Market Value of the Dividend Property so
distributed or issued; divided by

(Y) the number of shares of Common Stock outstanding
on the record date; divided by

(ii) the per share Fair Market Value of the Common Stock
on such record date, and

(B) the number of Warrant Shares purchasable upon the exercise of
each Warrant shall be increased to a number determined by multiplying
the number of Warrant Shares such Holders would have been entitled to
receive immediately before the record date for such Dividend, had the
Holders exercised their Warrants immediately prior thereto, by a
fraction, the numerator of which shall be the Exercise Price in effect
immediately prior to the adjustment required by clause (A) of this
sentence, and the denominator of which shall be the Exercise Price in
effect immediately after such adjustment.

The adjustments required by this Section 5. l(d) shall be made whenever any
such Dividend is made retroactive to the record date for the determination of
stockholders entitled to receive such Dividend and shall be effective on the
date of such Dividend.

(e) Self-Tenders. If, at any time or from time to time after the date
hereof, the Company or any subsidiary of the Company shall repurchase, by
self-tender offer or otherwise, any shares of Common Stock of the Company or
any Right at a weighted average

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<PAGE>

purchase price in excess of the per share Fair. Market Value of the Common
Stock on the Business Day immediately prior to the earliest of (i) the date
of such repurchase, (ii) the commencement of an offer to repurchase or (iii)
the public announcement of either (such date being referred to as the
".Determination ]Date"), the number of Warrant Shares purchasable upon
exercise of the Warrants shall be increased so that the Holders thereafter
will be entitled to receive the number of Warrant Shares determined by
multiplying the number of Warrant Shares such Holders would have been
entitled to receive before the Determination Date, had the Holders exercised
their Warrant Shares immediately prior thereto, by a fraction, the numerator
of which shall be the product of:

(A) the difference between (X) the number of shares of Common Stock
outstanding immediately prior to such Determination Date minus (Y) the
number of shares of Common Stock (or shares of Common Stock into which
the Rights are convertible or exchangeable or exercisable, as the case
may be) represented by the Common Stock or Rights repurchased or to be
purchased by the Company or any subsidiary of the Company in such
repurchase, multiplied by

(B) the per share Fair Market Value of the Common Stock immediately
prior to such Determination Date, and

the denominator of which shall be the difference between:

(A) the product of (X) the number of shares of Common Stock
outstanding immediately prior to the Determination Date multiplied by
(Y) the per share Fair Market Value of the Common Stock immediately
prior to such Determination Date minus

(B) the sum of (X) the aggregate consideration paid by the Company
or any of subsidiary of the Company in connection with such repurchase
plus (Y) in the case of Rights, the additional consideration required to
be received by the Company or any subsidiary of the Company upon the
conversion, exchange or exercise of such Rights, and

the Exercise Price shall be adjusted by multiplying such Exercise Price
immediately prior to such repurchase by a fraction, the numerator of which
shall be the number of Warrant Shares purchasable upon exercise of the
Warrants prior to such repurchase, and the denominator of which shall be the
number of Warrant Shares purchasable upon exercise of the Warrants
immediately thereafter.

(f) Exercise of Series B Warrants and Series C Warrants. The
following adjustments will be made on the date on which any Series B Warrants
or Series C Warrants are exercised (each, a "Series Exercise"):

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<PAGE>

(A) The number of Warrant Shares purchasable upon exercise of each
Warrant immediately prior to a Series Exercise shall be increased so
that the Holders thereafter will be entitled to receive the number of
Warrant Shares determined by multiplying: (i) the number of shares of
Common Stock such Holders would have been entitled to receive
immediately before the date of such Series Exercise had such Holders
exercised their Warrants immediately prior thereto by (ii) the number of
shares of Common Stock outstanding on the date of the Series Exercise
after giving effect to the Series Exercise and by dividing the product
of (i) and (ii) by the number of shares of Common Stock outstanding on
the date of the Series Exercise without giving effect to the Series
Exercise, and

(B) The Exercise Price in effect immediately after a Series
Exercise shall be adjusted by multiplying (i) the Exercise Price in
effect immediately prior to such Series Exercise by (ii) the number of
shares of Common Stock outstanding on the date of the Series Exercise
after giving effect to the Series Exercise and by dividing the product
of (i) and (ii) by the number of shares of Common Stock outstanding on
the date of the Series Exercise without giving effect to the Series
Exercise.

(g) Fair Market Value of Consideration Received. Notwithstanding any
provision to the contrary herein, for purposes of this Article V, if any
Rights shall be issued in connection with the issuance and sale of other
securities of the Company, together comprising one integral transaction in
which no specific consideration is allocated to such Rights by the parties
thereto, such Rights shall be deemed to have been issued without
consideration, provided, however, that if any such Rights have an exercise
price (to the extent applicable) equal to or greater than the per share Fair
Market Value of the Common Stock on the date of issuance of such Rights, then
such Rights shall be deemed to have been issued for consideration equal to
such exercise price.

(h) Deferral of Certain Adjustments. No adjustment to the Exercise Price
or the number of Warrant Shares purchasable upon the exercise of each Warrant
that would otherwise be required shall be made unless such adjustment,
together with other adjustments carried forward as provided below, would
result in an increase or decrease of at least one percent (1%) of the
Exercise Price or the number of Warrant Shares purchasable upon the exercise
of each Warrant immediately prior to the making of such adjustment; provided,
however, that any adjustments which by reason of this 5. 1(g) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. No adjustment need be made for a change in the par
value of the Common Stock; provided, however, the Company shall not increase
the par value of the Common Stock to exceed the Exercise Price. All
calculations under this Section 5. I shall be made to the nearest 1/1,000 of
one cent or to the nearest 1/1,000th of a Warrant Share, as the case may be.

(i) Statement of Warrant Certificates. Irrespective of any adjustment
in the number of Warrant Shares issuable upon the exercise of each Warrant or
the Exercise Price, Warrant

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<PAGE>

Certificates theretofore or thereafter issued shall continue to express the
same number and kind of Warrant Shares and Exercise Price as are stated in
the Warrant Certificates initially issuable pursuant to this Warrant
Agreement.

(j) Increased Warrant Shares. From time to time, the Company may, for a
period of not less than 20 Business Days, in its discretion, increase the
number of Warrant Shares purchasable upon the exercise of each Warrant,
without making any adjustment to the Exercise Price.

(k) No Adjustments for Certain Incentive Compensation or Issuance of
Warrant Shares. Notwithstanding any other provision hereof, it is expressly
understood that the Warrants shall not be adjusted with respect to (i) the
issuance at any time of such number of shares of Common Stock or Rights
entitling holders thereof to purchase Common Stock constituting in the
aggregate no more than 5 % of the outstanding Common Stock on a fully diluted
basis that may be issued to any of the Company's or its Subsidiaries'
officers or employees whether pursuant to any stock option, stock incentive
or other employee benefit plan or similar plans of the Company (collectively,
the "Plans"), or otherwise to the extent that shares of Common Stock or other
securities issued or granted under such Plans or otherwise are issued or
granted at a price, or with an exercise price, that is no less than the per
share Fair Market Value of the Common Stock at the date of grant or issuance
or (ii) the issuance of any Warrant Shares.

(l) No Impairment. The Company will not, by amendment of its
certificate of incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, liquidation, 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 Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 5.1 and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the Holders against impairment.

(m) Further Equitable Adjustments. If, after one or more adjustments to
the Exercise Price pursuant to this Section 5.1, the Exercise Price cannot be
reduced further without falling below the greater of (i) $0.01 or (ii) the
lowest positive exercise price legally permissible for warrants to acquire
shares of common stock, the Company shall make further adjustments in the
number of Warrant Shares issuable upon exercise of outstanding Warrants to
compensate the Holders. Notwithstanding the preceding sentence, nothing set
forth in this Section 5. 1(m) shall prevent the making of any adjustments to
the Exercise Price pursuant to Section 5. 1(d)(A) for the purpose of
calculating adjustments in the number of Warrant Shares issuable upon
exercise of a Warrant pursuant to Section 5. 1(d)(B).

(n) Other Adjustments.

(i) In the event that at any time, as a result of an
adjustment made pursuant to this Article V, Holders shall become
entitled to receive any

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securities of the Company other than shares of Common Stock,
thereafter the number of such other securities so receivable
upon exercise of each Warrant and the Exercise Price
applicable to such exercise shall be subject to adjustment
from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to
the Warrant Shares and the Exercise Price contained in this
Article V, and all other relevant provisions of this Article V
that are applicable to shares of Common Stock shall be
applicable to such other securities. In case at any time or
from time to time the Company shall take any action in respect
of its outstanding shares of Common Stock, other than any
action described in this Article V, or any event occurs as to
which the provisions of this Article V are not strictly
applicable, then the number of Warrant Shares for which each
Warrant is exercisable shall be adjusted in such manner as may
be equitable in the circumstances and on terms as nearly
equivalent as practicable to the provisions with respect to
the Warrant Shares and the Exercise Price contained in this
Article V and as shall be reasonably necessary, in the good
faith opinion of the Board of Directors of the Company, to
protect the exercise rights of the Holders, but in no event
shall any such adjustment have the effect of increasing the
Exercise Price or decreasing the number of Warrant Shares
issuable upon the exercise of any Warrant.

(ii) Adjustments shall be made pursuant to this Section
5.1 successively whenever any of the events referred to in
Section 5.1 (a) through Section 5.1(e), inclusive, shall occur.

(iii) If any Warrant shall be exercised subsequent to the
record date for any of the events referred to in this Section
5.1, but prior to the effective date thereof, appropriate
adjustments shall be made immediately after such effective
date so that the Holder of such Warrant on such record date
shall have received, in the aggregate, the kind and number of
shares of Common Stock or other securities or property or
assets that it would have owned or been entitled to receive on
such effective date had such Warrant been exercised prior to
such record date.

(iv) Shares of Common Stock owned by or held for the
account of the Company shall not, for purposes of the
adjustments set forth in this Section 5.1 be deemed
outstanding.

SECTION 5.2. Fractional Interest. The Company shall not be required
to issue fractional shares of Common Stock on the exercise of Warrants. If
more than one Warrant shall be presented for exercise in full at the same
time by the same Holder, the number of full shares of Common Stock which
shall be issuable upon such exercise shall be computed on the basis of the
aggregate number of shares of Common Stock acquirable on exercise of the
Warrants so presented. If any fraction of a share of Common Stock would,
except for the

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<PAGE>

provisions of this Section 5.2, be issuable on the exercise of any Warrant,
the Company shall either (i) pay an amount in cash calculated by the Company
to equal the per share Fair Market Value of the Common Stock multiplied by
such fraction of a share of Common Stock computed to the nearest whole cent
or (ii) aggregate all such fractional shares of Common Stock into a whole
number of shares and sell such aggregated fractional shares on behalf of the
Holders entitled thereto in a public or private sale and distribute, on a pro
rata basis, the net cash proceeds therefrom to such Holders. While the
Company will use its reasonable efforts to secure the best available sale
price for such aggregated fractional shares, such price shall not necessarily
be the highest price obtainable for such shares. By their acceptances of the
Warrant Certificates, Holders expressly waive any and all rights to receive
any fraction of a share of Common Stock or a stock certificate or scrip
representing a fraction of a share of Common Stock.

SECTION 5.3. When Adjustment Not Required. 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 distribution or subscription or purchase rights and
shall, thereafter and before the distribution to stockholders thereof,
legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.

SECTION 5.4. Treasury_ Stock. The sale or other disposition of any
issued shares of Common Stock owned or held by or for the account of the
Company shall be deemed an issuance thereof and, except for a voluntary
tender or exchange offer made by the Company or any subsidiary of the Company
subject to Section 13(e) of the Exchange Act, a repurchase thereof and
designation of such shares as treasury stock shall not be deemed to be a
redemption thereof for the purposes of this Warrant Agreement.

SECTION 5.5. Notices to Warrant Agent and Holders. Whenever the
number of Warrant Shares is adjusted or the Exercise Price in respect thereof
is adjusted, as herein provided, the Company shall promptly or, if notice of
such adjustment is required to be given to DTC, at least five (5) days prior
to the date on which notice of such adjustment is given to DTC, give to the
Warrant Agent and the Warrant Agent shall give to each Holder notice of such
adjustment or adjustments and shall promptly deliver to the Warrant Agent an
Officer's Certificate (confirmed by a certificate from the Company's
independent certified public accountants) setting forth: (i) the number of
Warrant Shares issuable upon the exercise of each Warrant and the Exercise
Price for each Warrant Share purchased after such adjustment; (ii) a brief
statement of the facts requiring such adjustment; and (iii) the computation
by which such adjustment was made.

ARTICLE VI

CONCERNING THE WARRANT AGENT

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SECTION 6.1. Warrant Agent. At no time when the Company may be acting
as its own Warrant Agent shall any of its obligations to the Holders be in
any respect reduced as a result thereof. The Warrant Agent shall have the
powers and authority specifically granted to and conferred upon it in the
Warrant Certificates and this Warrant Agreement and such further powers and
authority to act on behalf of the Company as the Company may hereafter grant
to or confer upon it and it shall accept in writing. All of the terms and
provisions with respect to such powers and authority contained in the Warrant
Certificates are subject to and governed by the terms and provisions hereof.

SECTION 6.2. Conditions of Warrant Agent's Obligations. The Warrant
Agent accepts its obligations herein set forth upon the terms and conditions
hereof and in the Warrant Certificates, including the following, to all of
which the Company agrees and to all of which the rights hereunder of the
Holders from time to time of the Warrant Certificates shall be subject:

(a) The Warrant Agent shall be entitled to compensation to be agreed
upon with the Company in writing for all services rendered by it and the
Company agrees promptly to pay such compensation and to reimburse the Warrant
Agent for its reasonable out-of-pocket expenses (including reasonable fees
and expenses of counsel) incurred without negligence, bad faith or willful
misconduct on its part in connection with the services rendered by it
hereunder. The Company also agrees to indemnify the Warrant Agent, each
predecessor Warrant Agent, and their respective directors, officers,
affiliates, agents and employees for, and to hold it and its directors,
officers, affiliates, agents and employees harmless against, any loss,
liability or expense of any nature whatsoever (including, without limitation,
fees and expenses of counsel) incurred without negligence, bad faith or
willful misconduct on the part of the Warrant Agent or predecessor Warrant
Agent, arising out of or in connection with its acting as such Warrant Agent
hereunder and its exercise or failure to exercise of its rights and
performance of its obligations hereunder. The obligations of the Company
under this Section 6.2 shall survive the exercise and the expiration of the
Warrant Certificates and the resignation and removal of the Warrant Agent.

(b) In acting under this Warrant Agreement and in connection with the
Warrant Certificates, the Warrant Agent is acting solely as agent of the
Company and does not assume any obligation or relationship of agency or trust
for or with any of the owners or Holders of the Warrant Certificates.

(c) The Warrant Agent may consult with counsel and any advice or written
opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with such advice or opinion.

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<PAGE>

(d) The Warrant Agent shall be fully protected and shall incur no
liability for or in respect of any action taken or omitted to be taken or
thing suffered by it in reliance upon any Warrant Certificate, notice,
direction, consent, certificate, affidavit, opinion of counsel, instruction,
statement or other paper or document reasonably believed by it to be genuine
and to have been presented or signed by the proper parties.

(e) The Warrant Agent and its Related Parties may become the owners of,
or acquire any interest in, Warrant Certificates, shares or other obligations
of the Company with the same rights that it or they would have it if were not
the Warrant Agent hereunder and, to the extent permitted by applicable law,
it or they may engage or be interested in any financial or other transaction
with the Company and may act on, or as depositary, trustee or agent for, any
committee or body of holders of shares or other obligations of the Company,
including, without limitation, the Notes, as freely as if it were not the
Warrant Agent hereunder. Nothing in this Warrant Agreement shall be deemed to
prevent the Warrant Agent or such Related Parties from acting in any other
capacity for the Company.

(f) The Warrant Agent shall not be under any liability for interest on,
and shall not be required to invest, any money at any time received by it
pursuant to any of the provisions of this Warrant Agreement or of the Warrant
Certificates.

(g) The Warrant Agent shall not be under any responsibility in respect
of the validity of this Warrant Agreement (or any term or provision hereof)
or the execution and delivery hereof or in respect of the validity or
execution of any Warrant Certificate (except its authentication thereof).

(h) The recitals and other statements contained herein and in the
Warrant Certificates (except as to the Warrant Agent's authentication
thereon) shall be taken as the statements of the Company, and the Warrant
Agent assumes no responsibility for the correctness of such recitals or other
statements. The Warrant Agent does not make any representation as to the
validity or sufficiency of this Warrant Agreement or the Warrant
Certificates; provided, however, that the Warrant Agent shall not be relieved
of its duty to authenticate the Warrant Certificates as authorized by this
Warrant Agreement. The Warrant Agent shall not be accountable for the use or
application by the Company of the proceeds of the exercise of any Warrant.

(i) Before the Warrant Agent acts or refrain from acting with respect
to any matter contemplated by this Warrant Agreement, it may require:

(A) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Warrant Agreement relating to the proposed action have been
complied with; and

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<PAGE>

(B) if reasonably necessary in the sole judgment of the
Warrant Agent, an opinion of counsel for the Company stating that,
in the opinion of such counsel, all such conditions precedent have
been complied with.

Each Officers' Certificate or, if requested, an opinion of counsel (with
respect to which such counsel may rely, as to matters of fact, on a certificate
or certificates of Officers of the Company) with respect to compliance with a
condition or covenant provided for in this Warrant Agreement shall include:

(1) a statement that the Person making such certificate
or opinion has read such covenant or condition;

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

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

(4) a statement as to whether or not, in the opinion of
such Person, such condition or covenant has been complied with.

(j) The Warrant Agent shall be obligated to perform such duties as are
herein and in the Warrant Certificates specifically set forth and no implied
duties or obligations shall be read into this Warrant Agreement or the
Warrant Certificates against the Warrant Agent. The Warrant Agent shall not
be accountable or under any duty or responsibility for the use by the Company
of any of the Warrant Certificates authenticated by the Warrant Agent and
delivered by it to the Company pursuant to this Warrant Agreement. The
Warrant Agent shall have no duty or responsibility in case of any default by
the Company in the performance of its covenants or agreements contained in
the Warrant Certificates or in the case of the receipt of any written demand
from a Holder with respect to such default, including, without limiting the
generality of the foregoing, any duty or responsibility to initiate or
attempt to initiate any proceedings at law or otherwise or, except as
provided in Section 7.2 hereof, to make any demand upon the Company. The
Warrant Agent shall not be obligated to perform any duty to the extent
prohibited by law.

(k) Unless otherwise specifically provided herein, any order,
certificate, notice, request, direction or other communication from the
Company made or given under any provision of this Warrant Agreement shall be
sufficient if signed by its President or Vice President and attested by its
Treasurer, Controller, Secretary or any Assistant Secretary.

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<PAGE>

(l) The Warrant Agent shall have no responsibility in respect of any
adjustment pursuant to Article V hereof.

(m) The Company agrees that it will perform, execute, acknowledge and
deliver, or cause to be performed, executed, acknowledged and delivered, all
such further and other acts, instruments and assurances as may reasonably be
required by the Warrant Agent for the carrying out or performing by the
Warrant Agent of the provisions of this Warrant Agreement.

(n) The Warrant Agent is hereby authorized and directed to accept
written instructions with respect to the performance of its duties hereunder
from any one of the President, the Treasurer, the Controller, any Vice
President or the Secretary of the Company or any other officer or official of
the Company reasonably believed to be authorized to give such instructions
and to apply to such officers or officials for advice or instructions in
connection with its duties, and it shall not be liable for any action taken
or suffered to be taken by it in good faith in accordance with instructions
with respect to any matter arising in connection with the Warrant Agent's
duties and obligations arising under this Warrant Agreement. Such application
by the Warrant Agent for written instructions from the Company may, at the
option of the Warrant Agent, set forth in writing any action proposed to be
taken or omitted by the Warrant Agent with respect to its duties or
obligations under this Warrant Agreement and the date on or after which such
action shall be taken, and the Warrant Agent shall not be liable for any
action taken or omitted to be taken in accordance with a proposal included in
any such application on or after the date specified therein (which date shall
be not less than 10 Business Days after the Company receives such application
unless the Company consents to a shorter period), provided that (i) such
application includes a statement to the effect that it is being made pursuant
to this Section 6.2(n) and that unless objected to prior to such date
specified in the application, the Warrant Agent will not be liable for any
such action or omission to the extent set forth in such application and (ii)
prior to taking or omitting any such action, the Warrant Agent has not
received written instructions objecting to such proposed action or omission.

(o) Whenever in the performance of its duties under this Warrant
Agreement the Warrant Agent shall deem it necessary or desirable that any
fact or matter be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by any one of the
President, the Treasurer, the Controller, any Vice President or the Secretary
of the Company or any other officer or official of the Company reasonably
believed by the Warrant Agent to be authorized to give such instructions and
delivered to the Warrant Agent and such certificate shall grant full
authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Warrant Agreement in reliance upon
such certificate.

(p) The Warrant Agent shall not be required to risk or expend its own
funds in the performance of its obligations and duties hereunder.

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<PAGE>

SECTION 6.3. Resignation and Appointment of Successor.

(a) The Company agrees, for the benefit of the Holders, that there
shall at all times be a Warrant Agent hereunder.

(b) The Warrant Agent may at any time resign as Warrant Agent by giving
written notice to the Company of such intention on its part, specifying the
date on which its desired resignation shall become effective, provided that
such date shall be at least 30 days after the date on which such notice is
given unless the Company agrees to accept less notice. Upon receiving such
notice of resignation, or in the event the Company shall determine not to
continue to act as its own Warrant Agent, the Company shall promptly appoint
a successor Warrant Agent, qualified as provided in Section 6.3(d) hereof, by
written instrument in duplicate signed on behalf of the Company, one copy of
which shall be delivered to the resigning Warrant Agent and one copy to the
successor Warrant Agent. As provided in Section 6.3(d) hereof, such
resignation shall become effective upon the earlier of (x) the acceptance of
the appointment by the successor Warrant Agent or (y) 30 days after receipt
by the Company of notice of such resignation. The Company may, at any time
and for any reason, and shall, upon any event set forth in the next
succeeding sentence, remove the Warrant Agent and appoint a successor Warrant
Agent by written instrument in duplicate, specifying such removal and the
date on which it is intended to become effective, signed on behalf of the
Company, one copy of which shall be delivered to the Warrant Agent being
removed and one copy to the successor Warrant Agent. The Warrant Agent shall
be removed as aforesaid if it shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Warrant Agent or of
its property shall be appointed, or any public officer shall take charge or
control of it or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation. Any removal of the Warrant Agent
and any appointment of a successor Warrant Agent shall become effective upon
acceptance of appointment by the successor Warrant Agent as provided in
Section 6.3(d). As soon as practicable after appointment of the successor
Warrant Agent, the Company shall cause written notice of the change in the
Warrant Agent to be given to each of the registered Holders in the manner
provided for in Section ?.4 hereof.

(c) Upon resignation or removal of the Warrant Agent, if the Company
shall fail to appoint a successor Warrant Agent within a period of 30 days
after receipt of such notice of resignation or removal, then the Holders or
the Warrant Agent may apply to a court of competent jurisdiction for the
appointment of a successor to the Warrant Agent. Pending appointment of a
successor to the Warrant Agent, either by the Company or by such a court, the
duties of the Warrant Agent shall be carried out by the Company.

(d) Any successor Warrant Agent, whether appointed by the Company or by
a court, shall be a bank or trust company in good standing, incorporated
under the laws of the United States of America or any State thereof and
having, at the time of its appointment, a combined capital surplus of at
least $150 million. Such successor Warrant Agent shall execute and

35
<PAGE>

deliver to its predecessor and to the Company an instrument accepting such
appointment hereunder and all the provisions of this Warfare Agreement, and
thereupon such successor Warrant Agent, without any further act, deed or
conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Warrant Agent hereunder, and such predecessor shall thereupon become
obligated to (i) transfer and deliver, and such successor Warrant Agent shall
be entitled to receive, all securities, records or other property on deposit
with or held by such predecessor as Warrant Agent hereunder and (ii) upon
payment of the amounts then due it pursuant to Section 6.2(a) hereof, pay
over, and such successor Warrant Agent shall be entitled to receive, all
money deposited with or held by any predecessor Warrant Agent hereunder.

(e) Any corporation or bank into which the Warrant Agent hereunder may
be merged or converted, or any corporation or bank with which the Warrant
Agent may be consolidated, or any corporation or bank resulting from any
merger, conversion or consolidation to which the Warrant Agent shall be a
party, or any corporation or bank to which the Warrant Agent shall sell or
otherwise transfer all or substantially all of its corporate trust business
or assets, shall be the successor to the Warrant Agent under this Warrant
Agreement (provided that such corporation or bank shall be qualified as
aforesaid) without the execution or filing of any document or any further act
on the part of any of the parties hereto.

(f) No Warrant Agent under this Warrant Agreement shall be personally
liable for any action or omission of any successor Warrant Agent or of the
Company.

ARTICLE VII

MISCELLANEOUS

SECTION 7.1. Defined Terms. Unless otherwise defined in this Warrant
Agreement, the capitalized terms set forth below and used in this Warrant
Agreement shall have the meanings given to such terms below:

"Aggregate Consideration Receivable" means, in the case of a sale,
issuance or other distribution of shares of Common Stock, the aggregate
amount paid to the Company in connection therewith and, in the case of an
issuance, sale or other distribution of Rights, or any amendment thereto, the
sum of: (a) the aggregate amount paid to the Company for such Rights; plus
(b) the aggregate consideration or premium stated in such Rights to be
payable for the shares of Common Stock covered thereby, in each case, without
deduction for any fees, expenses or underwriters discounts; provided,
further, that if all or any portion of the aggregate amount paid to the
Company for such Rights was not paid in cash, the amount of such
consideration other than cash received by the Company shall be deemed to be
the then Fair Market Value of such consideration.

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<PAGE>

"Business Day" means any Monday, Tuesday, Wednesday, Thursday and Friday
on which (i) banks in New York City or the city in which the principal
corporate trust office of the Warrant Agent is located, (ii) the principal
national securities exchange or market, if any, on which the Common Stock or
the Warrants are listed or admitted to trading, in each case, are not
obligated or permitted by law or executive order to be closed.

"Closing Prices" means, per share of Common Stock or any other security,
on any date specified herein:

(i) the last sale price, regular way, on such date or, if no such
sale takes place on such date, the average of the closing bid
and asked prices on such date, in each case as officially
reported on the principal national securities exchange on
which the Common Stock or other security is then listed or
admitted to trading; and

(ii) if the Common Stock or other security is not then listed or
admitted to trading on any national securities exchange, but
is designated as a national market system security by the
National Association of Securities Dealers, Inc. ("NASD"), the
last trading price of the Common Stock or such other security
on such date, or if there shall have been no trading on such
date or if the Common Stock or such other security is not so
designated, the average of the reported closing bid and asked
prices on such date as shown by the National Association of
Securities Dealers Annotated Quotation System ("NASDAQ").

"Consideration Per Share" means, with respect to shares of Common Stock
or Rights, the quotient of: (a) the Aggregate Consideration Receivable in
respect of such shares of Common Stock or such Rights, divided by (b) the
total number of such shares of Common Stock or, in the case of Rights, the
total number of shares of Common Stock into which such Rights are exercisable
or convertible.

"Fair Market Value" means, per share of Common Stock or any other
security, as of any date of determination, the arithmetic mean of the daily
Closing Prices for the 30 consecutive trading days before such date of
determination; provided, however, that if the Common Stock or such other
security is then neither listed or admitted to trading on any national
securities exchange, designated as a national market system security by the
NASD or quoted by NASDAQ, then "Fair Market Value" means the fair market
value of one share of Common Stock or such other security as determined by an
Independent Financial Advisor as of the date of determination.

"Independent Financial Advisor" means a nationally recognized
independent public accounting firm or investment banking firm (i) which does
not, and whose directors, officers and employees or affiliates do not have a
direct or indirect financial interest in the Company

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<PAGE>

and (ii) which, in the judgment of the Board of Directors of the Company, is
otherwise independent and qualified to perform the task for which it is to be
engaged.

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

"Related Party" means, with respect to any Person: (A) any other Person
directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person, (B) any spouse or immediate family
member of such Person or (C) a trust, corporation, partnership or other
entity, the beneficiaries, stockholders, partners, owners or Persons holding
a 75% or more controlling interest of which consist of such Person and/or
such other Persons or entities referred to in the immediately preceding
clause (A). A Person shall be deemed to control another Person if such Person
possesses, directly or indirectly, the power to direct or cause the direction
of the management and policies of such other Person, whether through the
ownership of voting securities, by contract or otherwise.

"Right" means and includes:

(a) any warrant (including, without limitation, any Warrant)
other than the Series B Warrants and the Series C Warrants or any
option (including, without limitation, employee stock options) to
acquire Common Stock or other securities convertible into or
exchangeable for shares of Common Stock;

(b) any right permitting the holder thereof to subscribe for
shares of Common Stock or other securities convertible into or
exchangeable for shares of Common Stock pursuant to a rights
offering or otherwise;

(c) any right to acquire Common Stock pursuant to the
provisions of any security convertible into or exchangeable for
Common Stock; and

(d) any similar right permitting the holder thereof to
subscribe for or purchase shares of Common Stock.

"Securities Act' means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

"Series B Warrants" means those warrants issued or issuable pursuant to
the Company's Plan of Reorganization which was confirmed by the United States
Bankruptcy Court for the District of Delaware on October 1, 1997, to certain
holden of preferred stock interests in the Company.

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<PAGE>

"Series C Warrants' means those warrants issued or issuable to Sam
Forman ("Mr. Forman") pursuant to a Warrant Agreement dated October 29, 1997
between Mr. Forman and the Company.

SECTION 7.2. Amendment. This Warrant Agreement and the terms of the
Warrants may be amended by the Company and the Warrant Agent, without the
consent of any Holder, for the purpose of curing any ambiguity, or for
curing, correcting or supplementing any defective or inconsistent provision
contained herein or therein or in any other manner which the Company may deem
necessary or desirable and which shall not adversely affect in any respect
the interests of the Holden.

Any amendment or supplement to this Warrant Agreement that has an
adverse effect on the interests of the Holden shall require the written
consent of the Holders of a majority of the then outstanding Warrants. The
consent of each Holder affected shall be required for any amendment pursuant
to which the Exercise Price would be increased or the number of Warrant
Shares issuable upon exercise of Warrants would be decreased (other than
pursuant to adjustments provided herein). In determining whether the Holders
of the required number of Warrants have concurred in any direction, waiver or
consent, Warrants owned by the Company or by any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Warrant
Agent shall be protected in relying on any such direction, waiver or consent,
only Warrants which the Warrant Agent knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Warrants outstanding at the
time shall be considered in any such determination.

Any modification or amendment made in accordance with this Warrant
Agreement will be conclusive and binding on all present and future Holders
whether or not they have consented to such modification or amendment or
waiver and whether or not notation of such modification or amendment is made
upon such Warrant Certificates. Any instrument given by or on behalf of any
Holder in connection with any consent to any modification or amendment will
be conclusive and binding on all subsequent Holders.

SECTION 7.3. Notices and Demand,4 to the Company and Warrant Agent.
If the Warrant Agent shall receive any notice or demand addressed to the
Company by the Holder of a Warrant Certificate pursuant to the provisions
hereof or of the Warrant Certificates, the Warrant Agent shall promptly
forward such notice or demand to the Company.

SECTION 7.4. Address for Notices to the Company and for Transmission
of Documents. All notices hereunder to the Company and the Warrant Agent
shall be deemed to have been given when sent by certified or registered mail,
postage prepaid, or by telecopy, confirmed by first class mail, postage
prepaid, addressed as follows:

39
<PAGE>

To the Company:

County Seat Stores, Inc.
6585 City West Parkway
Eden Prairie, Minnesota 55344
Telecopy: 612-829-2188
Telephone: 612-829-2124
Attention: General Counsel

To the Warrant Agent:

First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Telecopy: (612) 244-0711
Telephone: (612) 244-0719
Attention: Corporate Finance Department

The Company or the Warrant Agent by notice to the other may designate
additional or different addresses for subsequent notices or communications.

Any notice or communication mailed to a Holder shall be mailed to the
Holder at the Holder's address as it appears in the Warrant Register and
shall be sufficiently given if so mailed within the time prescribed.

Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.

SECTION 7.5. Notices to Holders. Notices to Holders shall be mailed
to such Holders at the addresses of such Holders as they appear in the
Warrant Register. Any such notice shall be sufficiently given if sent by
first-class mail, postage prepaid.

SECTION 7.6. Applicable Law. THE VALIDITY, INTERPRETATION AND
PERFORMANCE OF THIS WARRANT AGREEMENT AND EACH WARRANT ISSUED HEREUNDER AND
OF THE RESPECTIVE TERMS AND PROVISIONS THEREOF SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK.

SECTION 7.7. Obtaining of Governmental Approvals. The Company will
from time to time take all action required to be taken by it which may be
necessary to obtain and keep effective any and all permits, consents and
approvals of governmental agencies and authorities and securities laws
filings under United States Federal and State laws, and the rules and
regulations of all stock exchanges or markets on which the Warrants may be
listed, which

40
<PAGE>

may be or become requisite in connection with the issuance, sale, transfer,
and delivery of the Warrant Certificates, the exercise of the Warrants or the
issuance, sale, transfer and delivery of the Warrant Shares, it being
understood, however, that the only contractual registration rights of the
Holders are those set forth in the Registration Rights Agreement, dated of
even date herewith (the 'Registration Rights Agreement"), between the Company
and the Initial Purchaser.

SECTION 7.8. Persons Having Rights Under Agreement. Nothing in this
Warrant Agreement expressed or implied and nothing that may be inferred from
any of the provisions hereof is intended, or shall be construed, to confer
upon, or give to, any Person other than the Company, the Warrant Agent and
the Holders from time to time of the Warrant Certificates any right, remedy
or claim under or by reason of this Warrant Agreement or of any covenant,
condition, stipulation, promise or agreement hereof and all covenants,
conditions, stipulations, promises and agreements in this Warrant Agreement
contained shall be for the sole and exclusive benefit of the Company and the
Warrant Agent and their successors and of the Holders from time to time of
the Warrant Certificates.

SECTION 7.9. Headings. The descriptive headings of the several
Articles and Sections of this Warrant Agreement are inserted for convenience
of reference only and shall not control or affect the meaning or construction
of any of the provisions hereof.

SECTION 7.10. Counterparts. This Warrant Agreement may be executed in
any number of counterparts, each of which so executed shall be deemed to be
an original; but such Counterparts shall together constitute but one and the
same instrument.

SECTION 7.11. Inspection of Warrant Agreement. A copy of this Warrant
Agreement shall be available at all reasonable times at the Warrant Agent
Office, for inspection by the Holder of any Warrant Certificate. The Warrant
Agent may require such Holder to submit his Warrant Certificate for
inspection by it.

SECTION 7.12. Successors. All the covenants and provisions of this
Warrant Agreement by or for the benefit of the Company or the Warrant Agent
shall bind and inure to the benefit of their respective successors and
assigns hereunder.

IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by the
Company and the Warrant Agent as of the day and year first above written.

COUNTY SEAT STORES, INC.

By: /s/ Sam Forman
--------------------------------
Name: Sam Forman
Title: President

<PAGE>

FIRST TRUST NATIONAL ASSOCIATION, as
Warrant Agent

By: /s/ Mark E. LeMay
---------------------------------
Name: Mark E. LeMay
Title: Vice President

<PAGE>

EXHIBIT 4.5

{FORM OF WARRANT CERTIFICATE}

{FACE}

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.(1)

TRANSFERS OF THIS GLOBAL WARRANT SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND THE TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
THE WARRANT AGREEMENT REFERRED TO HEREIN.

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THESE
SECURITIES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. EACH PURCHASER
OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER.

THE HOLDER OF THESE SECURITIES, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER THESE SECURITIES PRIOR

- ------------------------
(1) 1. These paragraphs are to be included only if the Warrant
Certificate is in global form.

<PAGE>

TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE OF
THESE SECURITIES AND THE LAST DATE ON WHICH COUNTY SEAT STORES, INC. ("THE
COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THESE SECURITIES
(OR ANY PREDECESSOR OF THESE SECURITIES) (THE "RESALE RESTRICTION TERMINATION
DATE"), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG
AS THESE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THESE SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT
TO THE COMPANY'S AND THE WARRANT AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER (i) PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THESE SECURITIES IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE WARRANT AGENT. THIS LEGEND
SHALL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.

THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS AGREEMENT DATED
OCTOBER 29, 1997 BETWEEN THE COMPANY AND JEFFERIES & COMPANY, INC. (THE "INITIAL
PURCHASER"), A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

THE WARRANTS EVIDENCED BY THIS WARRANT CERTIFICATE ARE INITIALLY ISSUED AS
PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000 PRINCIPAL AMOUNT
OF 12 3/4% SENIOR NOTES DUE 2004 (THE "NOTES") OF THE COMPANY AND ONE WARRANT
INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 26.8908 SHARES OF THE
COMPANY'S COMMON STOCK, PAR VALUE $.01 PER SHARE. PRIOR TO THE CLOSE OF BUSINESS
ON THE DATE THAT THE INITIAL PURCHASER SHALL DESIGNATE

<PAGE>

AND SPECIFY TO THE COMPANY AND TO THE WARRANT AGENT, THE WARRANTS EVIDENCED BY
THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE
TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE NOTES.

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR
AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER
AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.(2)

BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS A
'QUALIFIED INSTITUTIONAL BUYER' (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) OR (c) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH REGULATION S.2

- ------------------------
(2) 2. These paragraphs are to be included only if the Warrant
Certificate is in definitive form.

<PAGE>

EXHIBIT 4.6

NOTATION RELATING TO SUBSIDIARY GUARANTEE

For value received, CSS Trade Names, Inc., a Minnesota corporation ("CSS"),
hereby unconditionally guarantees to the Holder of the Note upon which this
Subsidiary Guarantee is endorsed, subject in all respects to the provisions of
Article 10 of the Indenture dated as of October 29, 1997 between County Seat
Stores, Inc. (the "Company") and First Trust National Association, as trustee
(the "Trustee") as supplemented by First Supplemental Indenture dated as of
November 25, 1997 among the Company, the Trustee and CSS (such Indenture, as
supplemented and as may be further amended and supplemented from time to time,
the "Indenture") which shall govern and control the terms of this Subsidiary
Guarantee: (a) the due and punctual payment of the principal of, premium, if
any, and interest on the Note, whether at maturity, acceleration, redemption or
otherwise, (b) the due and punctual payment of interest on the overdue principal
of, premium, if any, and interest on the Note, if any, to the extent lawful, and
(c) in case of any extension of time of payment or renewal of any Note or any
extension of time of payment or renewal of any Note or any of such other
obligations, the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Capitalized terms used herein without
definition have the meanings ascribed to such terms in the Indenture unless
otherwise indicated.

This Subsidiary Guarantee shall be binding upon CSS and its successors and
assigns and shall inure to the benefit of the successors and assigns of the
Trustee and the Holder and, in the event of any transfer or assignment of rights
by any Holder or the Trustee, the rights and privileges herein conferred upon
that party shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions hereof and in the Indenture.

CSS TRADE NAMES, INC.

By: /s/ Paul Kittner
----------------------------------
Name: Paul Kittner
Title: Sr. Vice President & CFO

By: /s/ Matthew J. Knopf
----------------------------------
Name: Matthew J. Knopf
Title: Sr. Vice President & General Counsel

<PAGE>

EXHIBIT 4.7

COUNTY SEAT STORES, INC.

$85,000,000 123/4% SENIOR NOTES DUE 2004

SERIES A WARRANTS TO PURCHASE
26.8908 SHARES OF COMMON STOCK

REGISTRATION RIGHTS AGREEMENT

October 29, 1997

JEFFERIES & COMPANY, INC.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, CA 90025

Ladies and Gentlemen:

County Seat Stores, Inc., a Minnesota corporation (the "Issuer"), is
issuing and selling to Jefferies & Company, Inc. (the "Initial Purchaser"), upon
the terms set forth in the Purchase Agreement, dated October 23, 1997 between
the Issuer and the Initial Purchaser (the "Purchase Agreement"), (i) 85,000
units (each, a "Unit" and, collectively, the "Units"), each Unit consisting of
$1,000 principal amount of the Issuer's 123/4% Senior Notes due 2004 (each, a
"Note," collectively, the "Notes") and one Series A warrant (each, a "Warrant,"
and collectively with the Series A warrants issued to the Initial Purchaser as
provided in (ii), the "Warrants") to purchase 26.8908 shares of common stock,
par value $.01 per share, of the Issuer (the "Common Stock") and (ii) Warrants
to purchase an additional 571,429 shares of Common Stock of the Issuer. As an
inducement to the Initial Purchaser to enter into the Purchase Agreement, the
Issuer agrees with the Initial Purchaser, for the benefit of the Holders (as
defined below) of the Securities (as defined below), as follows:

1. DEFINITIONS

Capitalized terms not otherwise defined herein shall have the respective
meanings ascribed to them in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:

ADDITIONAL INTEREST: See Section 4(a).

<PAGE>

ADVICE: See last paragraph of Section 6.

AGREEMENT: This Registration Rights Agreement dated as of the Closing
Date, among the Issuer, the existing Subsidiary Guarantor and the Initial
Purchaser.

APPLICABLE PERIOD: See Section 2(e).

BUSINESS DAY: A day that is not a Saturday, a Sunday or a day on which
banking institutions in the City of New York or the State of Minnesota are
authorized or required by law or executive order to be closed.

CLOSING DATE: October 29, 1997.

COMMON STOCK: See the first introductory paragraph to this Agreement.

DAY: Unless otherwise expressly provided, a calendar day.

EFFECTIVENESS DATE: The 180th day after the Closing Date.

EFFECTIVENESS PERIOD: See Section 3(a)

ELIGIBLE SHELF NOTES: See Section 3.

EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.

EXCHANGE NOTE: 123/4% Senior Notes due 2004, Series B, of the Issuer,
including the guarantees endorsed thereon, identical in all material respects to
the Notes, except for any reference to series and the transfer restrictions
relating to the Notes.

EXCHANGE OFFER: See Section 2(a).

EXCHANGE REGISTRATION STATEMENT: See Section 2(a).

EXERCISE DATE: The date on which the Warrants are first exercisable.

FILING DATE: The 120th day after the Closing Date.

HOLDER: Any registered holder of Registrable Notes.

INDEMNIFIED PARTY: See Section 8(c).

INDEMNIFYING PARTY: See Section 8(c).

- 2 -
<PAGE>

INDENTURE: The Indenture, dated as of the Closing Date, among the Issuer,
the Subsidiary Guarantor and First Trust National Association, as Trustee,
pursuant to which the Notes are being issued, as amended or supplemented from
time to time.

INITIAL PURCHASER: See the first introductory paragraph to this Agreement.

INITIAL SHELF REGISTRATION STATEMENT: See Section 3(a).

INSPECTORS: See Section 6(o).

ISSUER: See the first introductory paragraph to this Agreement.

NASD: National Association of Securities Dealers, Inc.

NOTES: See the first introductory paragraph to this Agreement.

NOTES PROSPECTUS: The Prospectus included in any Notes Registration
Statement (including, without limitation, any prospectus subject to completion
and a 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), as amended or supplemented,
including, without limitation, as such Prospectus may be amended pursuant to
Rule 424(b) promulgated under the Securities Act.

NOTES REGISTRATION STATEMENT: Any registration statement of the Issuer
that covers any of the Registrable Notes that is filed with the SEC under the
Securities Act (including, but not limited to, the Exchange Registration
Statement, the Initial Shelf Registration Statement and any Subsequent Shelf
Registration Statement) in accordance with the provisions of this Agreement,
including any amendments to such registration statement, including post-
effective amendments, all supplements to the Prospectus contained therein and
all exhibits thereto.

PARTICIPATING BROKER-DEALER: See Section 2(e).

PERSON: An individual, trustee, corporation, partnership, limited
liability company, joint stock company, trust, unincorporated association,
union, business association, firm, government or agency or political subdivision
thereof, or other legal entity.

PIGGY-BACK REGISTRATION: See Section 11(b).

PRIVATE EXCHANGE: See Section 2(f).

PRIVATE EXCHANGE NOTES: See Section 2(f).

- 3 -

<PAGE>

PROSPECTUS: The prospectus included in any Registration Statement with
respect to the terms of the offering of any portion of the Securities covered by
such Registration Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated under
the Securities Act), as such prospectus may be amended or supplemented,
including, without limitation, as such prospectus may be amended pursuant to
Rule 424(b) promulgated under the Securities Act.

PURCHASE AGREEMENT: See the first introductory paragraph to this
Agreement.

RECORDS: See Section 6(o).

REGISTRABLE NOTES: (i) Notes, (ii) Private Exchange Notes and (iii) any
Exchange Notes received in the Exchange Offer, in each case, that may not be
sold without restriction under federal or state securities laws.

REGISTRABLE WARRANT SHARES: Any of (i) the Warrant Shares (whether or not
the related Warrants have been exercised) and (ii) any other securities issued
or issuable with respect to any Warrant Shares by way of stock dividends or
stock splits or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any
particular Registrable Warrant Shares, such securities shall cease to be
Registrable Warrant Shares when (i) such securities shall have been disposed of
by the Holder thereof pursuant to a Warrant Shares Registration Statement that
has been declared effective under the Securities Act, (ii) such securities are
eligible for sale to the public pursuant to Rule 144(k) or otherwise under Rule
144 by the Holder thereof, or (iii) such securities shall have otherwise been
transferred by the Holder thereof in compliance with the Securities Act and any
applicable state securities laws and new certificates for such securities not
bearing a legend restricting further transfer shall have been delivered by the
Issuer or its transfer agent.

REGISTRATION STATEMENT: Any Notes Registration Statement or Warrant Shares
Registration Statement.

RULE 144: Rule 144 promulgated under the Securities Act, as such Rule may
be amended from time to time.

RULE 144A: Rule 144A promulgated under the Securities Act, as such Rule
may be amended from time to time.

RULE 415: Rule 415 promulgated under the Securities Act, as such Rule may
be amended from time to time.

SEC: The Securities and Exchange Commission.

- 4 -
<PAGE>

SECURITIES: The Notes, the Private Exchange Notes, the Exchange Notes, the
Warrants and the Warrant Shares.

SECURITIES ACT: The Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.

SELLING HOLDER: A Warrant Holder who is selling Registrable Warrant Shares
in accordance with Section 11 hereof.

SHELF NOTICE: See Section 2(j).

SHELF REGISTRATION STATEMENT: See Section 3(c).

SUBSEQUENT SHELF REGISTRATION STATEMENT: See Section 3(c).

SUBSIDIARY GUARANTOR: Each subsidiary of the Issuer that guarantees the
obligations of the Issuer under the Notes, the Exchange Notes or the Private
Exchange Notes and Indenture.

TIA: The Trust Indenture Act of 1939, as such act may be amended from time
to time.

TRUSTEE: The trustee under the Indenture.

UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in
which securities of the Issuer are sold to an underwriter for reoffering to the
public.

UNITS: See the first introductory paragraph to this Agreement.

WARRANT AGREEMENT: The Warrant Agreement dated as of the Closing Date
between the Issuer and First Trust National Association, as Warrant Agent.

WARRANT HOLDER: Any registered holder of Warrants.

WARRANT SHARES: The shares of Common Stock issuable upon exercise of the
Warrants.

WARRANT SHARES REGISTRATION EXPENSES: All expenses incident to the
Issuer's performance of or compliance with Section 11 of this Agreement,
including, without limitation, all SEC and stock exchange or NASD registration
and filing fees and expenses, fees and expenses of compliance with securities or
blue sky laws (including, without limitation, reasonable fees and disbursements
of counsel for any underwriters in connection with blue sky qualifications of
the Registrable Warrants), preparing, printing, filing, duplicating and
distributing a Warrant Shares Registration Statement and the related

- 5 -
<PAGE>

Prospectus, the cost of printing stock certificates, the cost and charges of any
transfer agent, rating agency fees, printing expenses, messenger, telephone and
delivery expenses, fees and disbursements of any counsel for the Issuer and all
independent certified public accountants, the fees and disbursements of
underwriters customarily paid by issuers or sellers of securities (but not
including any underwriting discounts or commissions or transfer taxes, if any,
attributable to the sale of Registrable Warrant Shares by Selling Holders), fees
and expenses of one counsel for the Selling Holders and other reasonable
out-of-pocket expenses of the Selling Holders.

WARRANT SHARES REGISTRATION FILING DATE: A date on or before the date
occurring 90 days after the effective date of a registration statement filed
with the SEC in connection with an initial public offering of the Common Stock;
provided, however, that, upon the written request of the managing underwriter of
such initial public offering, such date may be extended to the date occurring
180 days following the effective date of such initial public offering.

WARRANT SHARES REGISTRATION STATEMENT: Any registration statement of the
Issuer that covers resales of any of the Warrant Shares that is filed with the
SEC under the Securities Act in accordance with the provisions of this
Agreement, including any amendments to such registration statement, any
post-effective amendments, all supplements to the Prospectus contained therein
and all exhibits thereto.

WARRANTS: See the first introductory paragraph to this Agreement.

WARRANTS PROSPECTUS: The Prospectus included in any Warrant Shares
Registration Statement (including, without limitation, any prospectus subject to
completion and a 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), as amended or
supplemented, including, without limitation, as such Prospectus may be amended
pursuant to Rule 424(b) promulgated under the Securities Act.

2. EXCHANGE OFFER

(a) The Issuer shall (and shall cause each Subsidiary Guarantor to)
use its best efforts to (i) prepare and file with the SEC on or prior to the
Filing Date, a registration statement (the "Exchange Registration Statement") on
an appropriate form under the Securities Act with respect to an offer (the
"Exchange Offer") to the Holders of Notes to issue and deliver to such Holders,
in exchange for the Notes, a like aggregate principal amount of Exchange Notes,
(ii) cause the Exchange Registration Statement to become effective as promptly
as practicable after the filing thereof but in no event later than the
Effectiveness Date, (iii) commence the Exchange Offer promptly following the
declaration of effectiveness of the Exchange Registration Statement, (iv) issue,
within 30 days after the date on which the Exchange Offer is commenced, Exchange
Notes in exchange for all Notes tendered prior thereto in the Exchange Offer,
and (v) keep the Exchange Registration

- 6 -
<PAGE>

Statement effective until the consummation of the Exchange Offer in accordance
with its terms and for the Applicable Period. The Exchange Offer shall not be
subject to any conditions, other than the Exchange Offer does not in the
Issuer's good faith judgment violate applicable law or any applicable
interpretation of the staff of the SEC.

(b) The Exchange Notes shall be issued under, and entitled to the
benefits of the Indenture.

(c) Interest on each Exchange Note and Private Exchange Note will
accrue from the last interest payment due date on which interest was paid on the
Notes surrendered in exchange therefor or, if no interest have been paid on the
Notes, from the date of original issuance of the Notes. Each Exchange Note and
Private Exchange Note shall bear interest at the rate set forth thereon.

(d) The Issuer may require each Holder who participates in the
Exchange Offer to represent that (i) any Exchange Notes received by it will be
acquired in the ordinary course of its business, (ii) at the time of the
consummation of the Exchange Offer such Holder has not entered into any
arrangement or understanding with any Person to participate in the distribution
(within the meaning of the Securities Act) of the Exchange Notes in violation of
the provisions of the Securities Act, (iii) if such Holder is an affiliate of
the Issuer within the meaning of the Securities Act, that it will comply with
the registration and prospectus delivery requirements of the Securities Act to
the extent applicable to it, (iv) if such Holder is not a broker-dealer, it is
not engaged in the distribution of the Notes and that it does not intend to
engage in the distribution of the Exchange Notes, and (v) if such Holder is a
Participating Broker-Dealer, it will deliver a Prospectus in connection with any
resale of the Exchange Notes.

(e) The Issuer shall include within the Notes Prospectus contained in
the Exchange Registration Statement a section entitled "Plan of Distribution,"
in form and substance acceptable to the Initial Purchaser, which shall contain a
summary statement of the positions taken or policies made by the staff of the
SEC with respect to the potential "underwriter" status of any broker-dealer that
is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of
Exchange Notes received by such broker-dealer in the Exchange Offer for its own
account in exchange for Notes that were acquired by it as a result of
market-making or other trading activity (a "Participating Broker-Dealer"),
whether such positions or policies have been publicly disseminated by the staff
of the SEC or such positions or policies, in the judgment of the Initial
Purchaser, represent the prevailing views of the staff of the SEC. Such "Plan
of Distribution" section shall also allow, to the extent permitted by applicable
policies and regulations of the SEC, the use of the Notes Prospectus by all
Persons subject to the prospectus delivery requirements of the Securities Act,
including, to the extent so permitted, all Participating Broker Dealers, and
shall include a statement describing the manner in which Participating
Broker-Dealers may resell the Exchange Notes. The Issuer shall use its best
efforts to keep the Exchange Registration Statement effective and to amend and
supplement the Notes Prospectus contained therein, in

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<PAGE>

order to permit such Notes Prospectus to be lawfully delivered by all Persons
subject to the prospectus delivery requirements of the Securities Act for such
period of time as such Persons must comply with such requirements in order to
resell the Exchange Notes (the "Applicable Period").

(f) If, upon consummation of the Exchange Offer, the Initial
Purchaser holds any Notes acquired by it and having the status of an unsold
allotment in the initial distribution, the Issuer (upon the written request from
such Initial Purchaser) shall, simultaneously with the delivery of the Exchange
Notes in the Exchange Offer, issue pursuant to the Indenture and deliver to the
Initial Purchaser, in exchange (the "Private Exchange") for the Notes held by
the Initial Purchaser, a like principal amount of debt securities of the Issuer,
guaranteed by any then existing Subsidiary Guarantors, that are identical in all
material respects to the Exchange Notes except for the existence of restrictions
on transfer thereof under the Securities Act and all applicable federal and
state securities laws of the several states of the U.S. (the "Private Exchange
Notes"). The Private Exchange Notes shall bear the same CUSIP number as the
Exchange Notes.

(g) In connection with the Exchange Offer, the Issuer shall:

(1) mail to each Holder a copy of the Notes Prospectus forming
part of the Exchange Registration Statement, together with an appropriate
letter of transmittal (as an exhibit thereto) and related documents;

(2) utilize the services of a depository for the Exchange Offer
with an address in the Borough of Manhattan, the City of New York, which
may be the Trustee or an affiliate thereof;

(3) permit Holders to withdraw tendered Notes at any time prior
to the close of business, New York time, on the last Business Day on which
the Exchange Offer shall remain open; and

(4) otherwise comply with all applicable laws.

(h) As soon as practicable after the close of the Exchange Offer or
the Private Exchange, as the case may be, the Issuer shall:

(1) accept for exchange all Notes validly tendered pursuant to
the Exchange Offer or the Private Exchange, as the case may be, and not
validly withdrawn;

(2) deliver to the Trustee for cancellation all Notes so
accepted for exchange; and

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<PAGE>

(3) cause the Trustee to authenticate and deliver promptly to
each Holder tendering such Notes, Exchange Notes or Private Exchange Notes,
as the case may be, equal in principal amount to the Notes of such Holder
so accepted for exchange.

(i) The Exchange Notes and the Private Exchange Notes shall be issued
under the Indenture which will provide that the Exchange Notes will not be
subject to the transfer restrictions set forth in the Indenture and that the
Exchange Notes, the Private Exchange Notes and the Notes, if any, will be deemed
one class of security (subject to the provisions of the Indenture) and entitled
to the benefits of any Subsidiary Guarantee on an equal and ratable basis.

(j) If, (i) prior to the consummation of the Exchange Offer, the
Issuer determines in its reasonable judgment that the Exchange Notes would not,
upon receipt, be tradeable by the Holders thereof without restriction under the
Securities Act (other than applicable prospectus delivery requirements), the
Exchange Act or applicable Blue Sky or state securities laws, (ii) because of
any change in law or applicable interpretations of the staff of the SEC, the
consummation of the Exchange Offer by the Issuer would not be permitted prior to
the Effectiveness Date, (iii) the Exchange Offer is not consummated by the
Effectiveness Date for any reason, (iv) any Holder of Private Exchange Notes so
requests in writing to the Issuer within 120 days after the consummation of the
Exchange Offer or (v) in the case of any Holder not permitted to participate in
the Exchange Offer or any Holder that participates in the Exchange Offer but
does not receive Exchange Notes on the date of the exchange that may be sold
without restriction under state and federal securities laws (other than due
solely to the status of such Holder as an affiliate of the Issuer within the
meaning of the Securities Act) and so notifies the Issuer within six months of
consummation of the Exchange Offer, then the Issuer (and any then existing
Subsidiary Guarantor) shall promptly deliver to the Holders and the Trustee
written notice thereof (the "Shelf Notice") and shall file an Initial Shelf
Registration Statement pursuant to Section 3.

(k) No registration effected under this Section 2, and no failure to
effect a registration under this Section 2, shall relieve the Issuer of its
obligations to effect a registration upon the request of Warrant Holders or
holders of Registrable Warrant Shares pursuant to Section 11 hereof.

3. SHELF REGISTRATION

If a Shelf Notice is delivered pursuant to Section 2(j)(i), (ii) or
(iii), then this Section 3 shall apply to all Registrable Notes. Otherwise,
upon consummation of the Exchange Offer in accordance with Section 2, the
provisions of this Section 3 shall apply solely with respect to (A)(i) Notes
held by any Holder thereof not permitted to participate in the Exchange Offer
and (ii) Exchange Notes that are not freely tradeable as contemplated by Section
2(j)(v) hereof, provided that the relevant Holder has duly notified the Issuer
within six months of the consummation of the Exchange Offer as required by
Section 2(j)(v) and

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<PAGE>

(B) Private Exchange Notes, provided that the relevant Holder has duly notified
the Issuer within 120 days of the consummation of the Exchange Offer as required
by Section 2(j)(iv). The Registrable Notes to which this Section 3 shall apply
shall be hereinafter referred to as ("Eligible Shelf Notes").

(a) INITIAL SHELF REGISTRATION. Within the time periods set forth in
this Section 3(a), the Issuer shall (and shall cause any Subsidiary Guarantor
to) file with the SEC a Notes Registration Statement for an offering to be made
on a continuous basis pursuant to Rule 415 covering all of the Eligible Shelf
Notes (the "Initial Shelf Registration Statement"). If the Issuer (and any then
existing Subsidiary Guarantor) has not filed an Exchange Registration Statement,
the Issuer shall (and shall cause any Subsidiary Guarantor to) file with the SEC
the Initial Shelf Registration Statement on or prior to the Filing Date and
shall use its best efforts to cause such Initial Shelf Registration Statement to
be declared effective under the Securities Act on or prior to the Effectiveness
Date. Otherwise, the Issuer shall use its best efforts to (and shall cause any
Subsidiary Guarantor to) file with the SEC the Initial Shelf Registration
Statement within 20 days of the delivery of the Shelf Notice and shall use its
best efforts to cause such Shelf Registration Statement to be declared effective
under the Securities Act as promptly as practicable thereafter. The Initial
Shelf Registration Statement shall be on an appropriate form permitting
registration of such Registrable Notes for resale by Holders in the manner or
manners designated by them (including, without limitation, one or more
underwritten offerings). The Issuer (and any Subsidiary Guarantors) shall not
permit any securities other than the Eligible Shelf Notes to be included in any
Shelf Registration Statement if the inclusion of such securities in the Shelf
Registration Statement would result in the inability of any Holder of Eligible
Shelf Notes to include all Eligible Shelf Notes held by such Holder in the Shelf
Registration Statement. No Holder of Eligible Shelf Notes shall be entitled to
include any of its Eligible Shelf Notes in any Shelf Registration Statement
pursuant to this Agreement unless such Holder furnishes to the Issuer and the
Trustee in writing, such information, representations and warranties as the
Issuer may reasonably request for inclusion in any Shelf Registration Statement
or Prospectus included therein. No Holder shall be entitled to any Additional
Interest pursuant to Section 4 hereof if such Holder's Registrable Notes are
excluded from a Shelf Registration Statement because such Holder failed to
furnish the Issuer in writing such information, representations and warranties
reasonably requested by the Issuer for use in connection with the Shelf
Registration Statement or any Prospectus contained therein, and such Holder
shall not be entitled to Additional Interest pursuant to Section 4 with respect
to any period during which such information was not provided. The Issuer shall
use its best efforts to keep the Initial Shelf Registration Statement
continuously effective under the Securities Act until the date which is 36
months from the Closing Date (the "Effectiveness Period"), or such shorter
period ending when (i) all Eligible Shelf Notes covered by the Initial Shelf
Registration Statement have been sold in the manner set forth and as
contemplated in the Initial Shelf Registration Statement or (ii) a Subsequent
Shelf Registration Statement covering all of the Eligible Shelf Notes has been
declared effective under the Securities Act.

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<PAGE>

(b) Notwithstanding any other provision of this Agreement, the Issuer
may postpone or suspend the filing or effectiveness of a Notes Registration
Statement (or any amendments or supplements thereto) if (i) such action is
required by applicable law or (ii) such action is taken by the Issuer in good
faith and for valid business reasons (not including avoidance of the Issuer's
obligations hereunder), including the acquisition or divestiture of assets,
other pending corporate developments, public filings with the SEC, or other
similar events, so long as the Issuer promptly thereafter complies with the
requirements of Section 6(c) hereof, if applicable. Notwithstanding the
occurrence of any event referred to in the preceding sentence (a "Suspension"),
such event shall not suspend, postpone, or in any other manner affect the
running of the time period after which a Registration Default shall be deemed to
occur and, if the filing or effectiveness of a Notes Registration Statement is
postponed or suspended as a result of the Suspension, a Registration Default
shall nonetheless exist if all other requirements set forth for the occurrence
of a Registration Default shall be satisfied, and the provisions of Section 4
requiring the payment of Additional Interest, as set forth in such Section,
shall be applicable.

(c) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf
Registration Statement or any Subsequent Shelf Registration Statement ceases to
be effective for any reason at any time during the Effectiveness Period (other
than because of the sale of all of the Registrable Notes registered thereunder),
the Issuer shall use its best efforts to obtain the prompt withdrawal of any
order suspending the effectiveness thereof, and if required, shall promptly
amend such Shelf Registration Statement in a manner to obtain the withdrawal of
the order suspending the effectiveness thereof, or file (and cause any
Subsidiary Guarantor to file) an additional "shelf" Notes Registration Statement
pursuant to Rule 415 covering all of the Eligible Shelf Notes (a "Subsequent
Shelf Registration Statement"). If a Subsequent Shelf Registration Statement is
filed, the Issuer shall use its best efforts to cause the Subsequent Shelf
Registration Statement to be declared effective as soon as practicable after
such filing and to keep such Subsequent Shelf Registration Statement
continuously effective for a period equal to the number of days in the
Effectiveness Period less the aggregate number of days during which the Initial
Shelf Registration Statement or any Subsequent Shelf Registration Statement were
previously continuously effective. As used herein, the term "Shelf Registration
Statement" means the Initial Shelf Registration Statement and any Subsequent
Shelf Registration Statements.

(d) SUPPLEMENTS AND AMENDMENTS. The Issuer shall promptly supplement
and amend any Shelf Registration Statement if required by the rules, regulations
or instructions applicable to the registration form used for such Shelf
Registration Statement, if required by the Securities Act, or if requested by
the Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Shelf Registration Statement or by any underwriter of such
Eligible Shelf Notes.

(e) No registration effected under this Section 3, and no failure to
effect a registration under this Section 3, shall relieve the Issuer of its
obligations to effect a

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<PAGE>

registration upon the request of Warrant Holders or holders of Registrable
Warrant Shares pursuant to Section 11 hereof.

4. ADDITIONAL INTEREST

(a) Additional cash interest (the "Additional Interest") with respect
to the Registrable Notes or the Eligible Shelf Notes, as indicated below, shall
be assessed as follows if any of the following events occurs (each such event in
clauses (i) through (iii) below, a "Registration Default"):

(i) if neither the Exchange Registration Statement nor the Initial
Shelf Registration Statement has been filed on or prior to the Filing Date,
then commencing on the day after the Filing Date, Additional Interest shall
accrue on the Registrable Notes over and above the stated interest rate at
a rate of 0.50% per annum for the first 90 days commencing on the Filing
Date, such Additional Interest rate increasing by an additional 0.50% per
annum at the beginning of each subsequent 90-day period;

(ii) if neither the Exchange Registration Statement nor the Initial
Shelf Registration Statement is declared effective on or prior to the
Effectiveness Date, then commencing on the Effectiveness Date, Additional
Interest shall accrue on the Registrable Notes over and above the stated
interest rate at a rate of 0.50% per annum for the first 90 days commencing
on the Effectiveness Date, such Additional Interest rate increasing by an
additional 0.50% per annum at the beginning of each subsequent 90-day
period;

(iii) if (A) the Issuer has not exchanged Exchange Notes for all Notes
validly tendered in accordance with the terms of the Exchange Offer on or
prior to the 210th day after the date hereof, (B) the Exchange Offer
Registration Statement ceases to be effective at any time prior to the time
that the Exchange Offer is consummated or at any time during the Applicable
Period, (C) a Shelf Registration Statement has been declared effective and
such Shelf Registration Statement ceases to be effective at any time during
the Effectiveness Period and is not declared effective again within five
Business Days, or (D) pending the announcement of a material corporate
transaction, the Issuer issues a written notice pursuant to Section 6(e)(v)
or (vi) that a Shelf Registration Statement or Exchange Registration
Statement is unusable and the aggregate number of days in any 365-day
period for which all such notices issued or required to be issued, have
been, or were required to be, in effect exceeds 120 days in the aggregate
or 30 days consecutively, in the case of a Shelf Registration Statement, or
15 days in the aggregate in the case of an Exchange Registration Statement,
then Additional Interest shall accrue on the Registrable Notes in the case
of (A), (B) and (D) (but in the case of (D) only to the extent the
Registration Default relates to an Exchange Registration Statement) or on
the Eligible Shelf Notes in the case of (C) or (D) (but in the case of (D)
only to the extent the Registration Default relates to a Shelf Registration
Statement) over and above the stated interest rate at a

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<PAGE>

rate of 0.50% per annum commencing on (w) the 210th day after the date
hereof, in the case of (A) above, (x) the date on which such Exchange
Registration Statement ceases to be effective without being declared
effective again within five Business Days in the case of (B) above, (y) the
date on which such Shelf Registration Statement ceases to be effective
without being declared effective again within five Business Days in the
case of (C) above or (z) the date on which such Exchange Registration
Statement or Shelf Registration Statement ceases to be usable in case of
clause (D) above, the rate of such Additional Interest increasing by an
additional 0.50% per annum at the beginning of each such subsequent 90-day
period;

provided, however, that the Additional Interest shall only accrue with respect
to one Registration Default at a time and the maximum increase in the interest
rate on the Registrable Notes may not exceed 1.50% per annum in the aggregate;
and provided further, Additional Interest on such Registrable Notes or Eligible
Shelf Notes shall cease to accrue upon the earlier of (x) the date on which all
applicable Registration Defaults have been cured with respect to Registrable
Notes or Eligible Shelf Notes, or (y) the date on which all such Registrable
Notes or Eligible Shelf Notes become freely transferable by Holders other than
affiliates of the Issuer without further registration under the Securities Act.

(b) Notwithstanding Section 4(a) of this Agreement, the Issuer shall
not be required to pay Additional Interest to a Holder with respect to the
Eligible Shelf Notes held by such Holder if the Registration Default arises by
reason of the failure of the Holder to provide information that (i) the Issuer
may reasonably request, with reasonable prior notice, for use in the Shelf
Registration Statement or any prospectus included therein to the extent the
Issuer reasonably determines that such information is required to be included
therein by applicable law, (ii) the Commission may request in connection with
such Shelf Registration Statement, or (iii) is required to comply with the
agreement of the Holder contained in Section 3(a) of this Agreement (but only to
the extent that such compliance is necessary for the Shelf Registration
Statement to be declared effective).

(c) The Issuer shall notify the Trustee within two Business Days
after each and every date on which Registration Default occurs. Any Additional
Interest accruing on the Registrable Notes or the Eligible Shelf Notes pursuant
to this Section 4 will be payable in cash on the regular interest payment dates
with respect to the Registrable Notes or the Eligible Shelf Notes to the Holders
of record on the applicable record date. The amount of Additional Interest will
be determined by multiplying the applicable Additional Interest rate by the
aggregate principal amount (as defined in the Indenture) of the Registrable
Notes or Eligible Shelf Notes, multiplied by a fraction, the numerator of which
is the number of days such Additional Interest rate was applicable during such
period (determined on the basis of a 360-day year comprised of twelve 30-day
months and, in the case of a partial month, the actual number of days elapsed),
and the denominator of which is 360.

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<PAGE>

5. HOLD-BACK AGREEMENTS

The Issuer agrees that it will not effect any public or private sale
or distribution (including a sale pursuant to Regulation D under the Securities
Act) of any securities that are the same as or similar to those covered by a
Notes Registration Statement filed pursuant to Section 2 or 3 hereof, or any
securities convertible into or exchangeable or exercisable for such securities,
during the 10 days prior to, and during the 90-day period beginning on, (A) the
effective date of any Notes Registration Statement filed pursuant to Sections 2
and 3 hereof, unless the Holders of a majority in aggregate principal amount of
the Registrable Notes to be included in such Notes Registration Statement
consent or (B) the commencement of an underwritten public distribution of
Registrable Warrant Shares, if the managing underwriter thereof so requests.

6. NOTES REGISTRATION PROCEDURES

In connection with the filing of any Notes Registration Statement
pursuant to Section 2 or 3 hereof, the Issuer shall effect such registrations to
permit the sale of such securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Notes Registration Statement filed by the Issuer hereunder,
the Issuer shall:

(a) prepare and file with the SEC within the time periods set forth
herein the Exchange Registration Statement and/or a Shelf Registration Statement
and use its best efforts to cause each such Notes Registration Statement to
become effective and remain effective as provided herein; provided that, if
(1) a Shelf Registration Statement is filed pursuant to Section 3, or (2) a
Notes Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, before filing any Notes Registration Statement or Notes
Prospectus or any amendments or supplements thereto, the Issuer shall, if
requested, furnish to and afford the Holders of the Registrable Notes to be
registered pursuant to such Shelf Registration Statement, each Participating
Broker-Dealer, their respective counsel and the managing underwriters, if any, a
reasonable opportunity to review copies of all such documents (including copies
of any documents to be incorporated by reference therein and all exhibits
thereto) proposed to be filed (in each case at least five business days prior to
such filing). The Issuer shall not file any such Notes Registration Statement
or Notes Prospectus or any amendments or supplements thereto if the holders of a
majority in aggregate principal amount of the Registrable Notes covered by such
Notes Registration Statement, or any such Participating Broker-Dealer, as the
case may be, their counsel, or the managing underwriters, if any, shall
reasonably object;

(b) cause the Indenture to be qualified under the TIA not later than
the effective date of the first Notes Registration Statement; and in connection
therewith, to effect

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<PAGE>

any changes to the Indenture as may be required for the Indenture to be so
qualified in accordance with the terms of the TIA; and execute, and cause the
Trustee to execute, all documents as may be required to effect such changes, and
all other forms and documents required to be filed with the SEC to enable the
Indenture to be so qualified in a timely manner;

(c) prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Registration
Statement, as the case may be, as may be necessary to keep such Notes
Registration Statement continuously effective for the Effectiveness Period or
the Applicable Period, as the case may be; cause the related Notes Prospectus to
be supplemented by any Prospectus supplement required by applicable law, and as
so supplemented to be filed pursuant to Rule 424, or any similar provisions then
in effect, in each case as promulgated under the Securities Act; and comply with
the provisions of the Securities Act and the Exchange Act applicable to it with
respect to the disposition of all securities covered by such Notes Registration
Statement as so amended or in such Notes Prospectus as so supplemented and with
respect to the subsequent resale of any securities being sold by a Participating
Broker-Dealer covered by any such Prospectus. The Issuer shall not, during the
Applicable Period, take any action that would result in selling Holders of the
Registrable Notes covered by a Notes Registration Statement or Participating
Broker-Dealers seeking to sell Exchange Notes not being able to sell such
Registrable Notes or such Exchange Notes during that period;

(d) furnish to such selling Holders and Participating Broker-Dealers
who so request (i) a copy of the order of the SEC declaring such Registration
Statement and any post-effective amendment thereto effective and (ii) such
number of copies of such Registration Statement and of each amendment and
supplement thereto (in each case, if requested, including any documents
incorporated therein by reference and any exhibits thereto), (iii) such number
of copies of any Prospectus included in such Registration Statement and
(iv) such other documents, (including any amendments required to be filed
pursuant to clause (c) of this Section), as any such Person may reasonably
request. The Issuer hereby consents to the use of the Prospectus by each of the
selling Holders of Registrable Notes or each such Participating Broker-Dealer,
as the case may be, and the underwriters or agents, if any, and dealers (if
any), in connection with the offering and sale of the Registrable Notes covered
by, or the sale by Participating Broker-Dealers of the Exchange Notes pursuant
to, such Prospectus and any amendment or supplement thereto;

(e) if (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Notes Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, notify in writing the selling Holders of
Registrable Notes, or each such Participating Broker-Dealer, as the case may be,
their counsel and the managing underwriters, if any, promptly (but in any event
within two Business Days) (i) when a Notes Prospectus or any Notes Prospectus
supplement or post-effective amendment has been filed, and, with respect to a
Notes Registration

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<PAGE>

Statement or any post-effective amendment, when the same has become effective
(including in such notice a written statement that any Holder may, upon request,
obtain, without charge, one conformed copy of such Notes Registration Statement
or post-effective amendment), (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Notes Registration Statement or of any order
preventing or suspending the use of any Notes Prospectus or the initiation of
any proceedings for that purpose, (iii) if at any time when a Prospectus is
required by the Securities Act to be delivered in connection with sales of the
Registrable Notes the representations and warranties of the Issuer contained in
any agreement (including any underwriting agreement) contemplated by Section
6(n) hereof cease to be true and correct, (iv) of the receipt by the Issuer of
any notification with respect to the suspension of the qualification or
exemption from qualification of a Notes Registration Statement or any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, (v) of the happening of any
event, the existence of any condition or any information becoming known that
makes any statement made in such Notes Registration Statement or related Notes
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in, or amendments or supplements to, such Notes Registration Statement,
Notes Prospectus or documents so that, in the case of the Notes Registration
Statement and the Notes Prospectus, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (vi) of any determination by the
Issuer that a post-effective amendment to a Notes Registration Statement would
be appropriate;

(f) use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Notes Registration Statement or of any order
preventing or suspending the use of a Notes Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable Notes
or the Exchange Notes to be sold by any Participating Broker-Dealer, for sale in
any jurisdiction, and, if any such order is issued, to use its best efforts to
obtain the withdrawal of any such order at the earliest possible date;

(g) if (A) a Shelf Registration Statement is filed pursuant to
Section 3 or (B) a Notes Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period or (C) requested by the managing
underwriters, if any, or the Holders of a majority in aggregate principal amount
of the Registrable Notes being sold in connection with an underwritten offering,
(i) promptly incorporate in a prospectus supplement or post-effective amendment
such information or revisions to information therein relating to such
underwriters or selling Holders as the managing underwriters, if any, or such
Holders or any of their respective counsel reasonably request to be included or
made therein and (ii) make all required filings of such prospectus supplement or
such post-effective amendment as soon as practicable after the Issuer has
received notification from the managing underwriters, if any, or from the

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<PAGE>

Holders of a majority in aggregate principal amount of the Registrable Notes
being sold of the matters to be incorporated in such prospectus supplements or
post-effective amendment;

(h) prior to any public offering of Registrable Notes or any delivery
of a Notes Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use its best efforts to register or qualify, and to cooperate
with all selling Holders of Registrable Notes or each such Participating
Broker-Dealer, as the case may be, the underwriters, if any, and their
respective counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable Notes or
Exchange Notes, as the case may be, for offer and sale under the securities or
Blue Sky laws of such jurisdictions within the United States as any selling
Holder, Participating Broker-Dealer, or any managing underwriter or
underwriters, if any, request in writing; provided that where Exchange Notes
held by Participating Broker-Dealers or Registrable Notes are offered other than
through an underwritten offering, the Issuer agrees to cause its counsel to
perform Blue Sky investigations and file any registrations and qualifications
required to be filed pursuant to this Section 6(h); keep each such registration
or qualification (or exemption therefrom) effective during the period such Notes
Registration Statement is required to be kept effective and do any and all other
acts or things best necessary or advisable to enable the disposition in such
jurisdictions of the Exchange Notes held by Participating Broker-Dealers or the
Registrable Notes covered by the applicable Registration Statement; provided
that neither the Issuer nor any Subsidiary Guarantor shall be required to (A)
qualify generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or (C) subject
itself to taxation in excess of a nominal dollar amount in any such jurisdiction
where it is not then so subject;

(i) if (A) a Shelf Registration Statement is filed pursuant to
Section 3 or (B) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is requested to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, cooperate with the selling Holders of Registrable Notes
and the managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Notes to be
sold, which certificates shall not bear any restrictive legends and shall be in
a form eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations and registered in such names as
the managing underwriter or underwriters, if any, or such Holders may request;

(j) use its best efforts to cause the Registrable Notes covered by
any Notes Registration Statement to be registered with or approved by such
governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof or the underwriter, if any, to consummate the disposition of
such Registrable Notes;

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<PAGE>

(k) if (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Notes Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 6(e)(v) or 6(e)(vi) hereof, as promptly as practicable
prepare and file with the SEC, at the expense of the Issuer, a supplement or
post-effective amendment to the Notes Registration Statement or a supplement to
the related Notes Prospectus or any document incorporated or deemed to be
incorporated therein by reference, or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Notes being sold
thereunder or to the purchasers of the Exchange Notes to whom such Notes
Prospectus will be delivered by a Participating Broker-Dealer, such Notes
Prospectus will not contain 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 light of the circumstances under which they were made,
not misleading;

(l) use its reasonable efforts to cause the Registrable Notes covered
by a Notes Registration Statement to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority in aggregate principal
amount of Registrable Notes covered by such Notes Registration Statement or the
managing underwriter or underwriters, if any;

(m) prior to the initial issuance of the Exchange Notes, (i) provide
the Trustee with one or more certificates for the Registrable Notes in a form
eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP
number for the Exchange Notes;

(n) if a Shelf Registration Statement is filed pursuant to Section 3,
enter into such agreements (including an underwriting agreement in form, scope
and substance as is customary in underwritten offerings of debt securities
similar to the Notes, as may be appropriate in the circumstances) and take all
such other actions in connection therewith (including those reasonably requested
by the managing underwriters, if any, or the Holders of a majority in aggregate
principal amount of the Registrable Notes being sold) in order to expedite or
facilitate the registration or the disposition of such Registrable Notes, and in
such connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten registration, (i) make such
representations and warranties to the Holders and the underwriters, if any, with
respect to the business of the Issuer and its subsidiaries, and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, in form, substance and scope as
are customarily made by issuers to underwriters in underwritten offerings of
debt securities similar to the Notes, as may be appropriate in the
circumstances, and confirm the same if and when required; (ii) obtain opinions
of counsel to the Issuer and updates thereof (which counsel and opinions, in
form, scope and substance shall be reasonably satisfactory to the managing
underwriters, if any, and the Holders of a majority in aggregate principal
amount of the Registrable Notes being sold), addressed to each selling Holder
and each of the underwriters, if any, covering the matters customarily covered
in opinions of counsel to

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<PAGE>

the Issuer requested in underwritten offerings of debt securities similar to the
Notes, as may be appropriate in the circumstances; (iii) obtain "cold comfort"
letters and updates thereof (which letters and updates, in form, scope and
substance shall be reasonably satisfactory to the managing underwriters and
their counsel) from the independent certified public accountants of the Issuer
(and, if necessary, any other independent certified public accountants of any
subsidiary of the Issuer or of any business acquired by the Issuer for which
financial statements and financial data are, or are required to be, included in
the Registration Statement), addressed to each of the underwriters and each
selling Holder, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt securities similar to the Notes, as may be
appropriate in the circumstances, and such other matters as reasonably requested
by underwriters or the Holders of a majority in aggregate principal amount of
the Registrable Notes being sold; and (iv) deliver such documents and
certificates as may be reasonably requested by the Holders of a majority in
aggregate principal amount of the Registrable Notes being sold and the managing
underwriters, if any, to evidence the continued validity of the representations
and warranties of the Issuer and its subsidiaries made pursuant to clause (i)
above and to evidence compliance with any conditions contained in the
underwriting agreement or other similar agreement entered into by the Issuer;

(o) if (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Notes Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, make available for inspection by any selling
Holder of such Registrable Notes being sold, or each such Participating
Broker-Dealer, as the case may be, any underwriter participating in any such
disposition of Registrable Notes, if any, and any attorney, accountant or other
agent retained by any such selling Holder or each such Participating
Broker-Dealer, as the case may be, or underwriter (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable business
hours, all financial and other records and pertinent corporate documents of the
Issuer and its subsidiaries (collectively, the "Records") as shall be reasonably
necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors and employees of the Issuer
and its subsidiaries to supply all information reasonably requested by any such
Inspector in connection with such Notes Registration Statement. Such Records
shall be kept confidential by each Inspector and shall not be disclosed by the
Inspector unless (i) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in such Notes Registration Statement, (ii)
the release of such Records is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction or (iii) the information in such Records
is public or has been made generally available to the public other than as a
result of a disclosure or failure to safeguard by such Inspector. Each selling
Holder of such Registrable Notes and each such Participating Broker-Dealer will
be required to agree that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Issuer unless and
until such is made generally available to the public. Each selling Holder of
such Registrable Notes and each

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<PAGE>

such Participating Broker-Dealer will be required to further agree that, except
as otherwise required by law or legal process, it will, as promptly as
practicable upon learning that disclosure of such Records is sought in a court
of competent jurisdiction, give notice to the Issuer and, to the extent
practicable, use its best efforts to allow the Issuer, at its expense, to
undertake appropriate action to prevent disclosure of the Records deemed
confidential at their expense;

(p) comply with all applicable rules and regulations of the SEC and
make generally available to the security holders of the Issuer earnings
statements satisfying the provisions of section 11(a) of the Securities Act and
Rules 158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 3-month period (or 90 days after the
end of any 12-month period if such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which Registrable Notes are sold to
underwriters in a firm commitment or best efforts underwritten offering and (ii)
if not sold to underwriters in such an offering, commencing on the first day of
the first fiscal quarter of the Issuer after the effective date of a Notes
Registration Statement, which statements shall cover said periods;

(q) upon consummation of an Exchange Offer or Private Exchange,
obtain an opinion of counsel to the Issuer (in form, scope and substance
reasonably satisfactory to the Initial Purchaser and its counsel which opinion
shall be subject to customary qualifications), addressed to the Trustee for the
benefit of all Holders participating in the Exchange Offer or Private Exchange,
as the case may be, to the effect that (i) the Issuer and any Subsidiary
Guarantors have duly authorized, executed and delivered the Exchange Notes or
the Private Exchange Notes, as the case may be, and the Indenture, (ii) the
Exchange Notes or the Private Exchange Notes, as the case may be, and the
Indenture constitute legal, valid and binding obligations of the Issuer and the
existing Subsidiary Guarantors, enforceable against the Issuer and the existing
Subsidiary Guarantors in accordance with their respective terms, except as such
enforcement may be subject to customary exceptions;

(r) if the Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by the Holders to the Issuer (or to such
other Person as directed by the Issuer) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Issuer shall mark, or caused
to be marked, on such Registrable Notes that such Registrable Notes are being
cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as
the case may be; provided that in no event shall such Registrable Notes be
marked as paid or otherwise satisfied;

(s) cooperate with each seller of Registrable Notes covered by any
Notes Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in connection
with any filings required to be made with the NASD; and

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<PAGE>

(t) use its best efforts to take all other steps reasonably necessary
to effect the registration of the Registrable Notes covered by a Notes
Registration Statement contemplated hereby.

The Issuer may require each seller of Registrable Notes or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Issuer such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Notes as the Issuer may,
from time to time, reasonably request and to covenant and agree to notify the
Issuer promptly if any such information so provided ceases to be true and
correct and to furnish the Issuer with corrected information. The Issuer may
exclude from such registration the Registrable Notes of any seller who fails to
furnish such information within a reasonable time (which time in no event shall
exceed 60 days) after receiving such request from the Issuer.

Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon receipt of any
notice from the Issuer of the happening of any event of the kind described in
Section 6(e)(ii), (iv), (v), or (vi), such Holder will forthwith discontinue
disposition of such Registrable Notes covered by a Notes Registration Statement
and such Participating Broker-Dealer will forthwith discontinue disposition of
such Exchange Notes pursuant to any Notes Prospectus and, in each case,
forthwith discontinue dissemination of such Prospectus until such Holder's or
Participating Broker-Dealer's receipt of the copies of the supplemented or
amended Notes Prospectus contemplated by Section 6(k), or until it is advised in
writing (the "Advice") by the Issuer that the use of the applicable Prospectus
may be resumed, and has received copies of any amendments or supplements thereto
and, if so directed by the Issuer, such Holder or Participating Broker-Dealer,
as the case may be, will deliver to the Issuer all copies, other than permanent
file copies, then in such Holder's or Participating Broker-Dealer's possession,
of the Notes Prospectus covering such Registrable Notes current at the time of
the receipt of such notice. In the event the Issuer shall give any such notice,
the Applicable Period shall be extended by the number of days during such
periods from and including the date of the giving of such notice to and
including the Business Day when each Participating Broker-Dealer shall have
received (x) the copies of the supplemented or amended Notes Prospectus
contemplated by Section 6(k) or (y) the Advice.

7. REGISTRATION EXPENSES

(a) Except as set forth in Section 11, all fees and expenses incident
to the performance of or compliance with this Agreement shall be borne by the
Issuer, whether or not the Exchange Offer or a Shelf Registration Statement is
filed or becomes effective, including, without limitation, (i) all registration
and filing fees, including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with any underwritten offering
and (B) fees and expenses of compliance with state securities or Blue Sky laws
as provided in Section 6(h) hereof, (ii) printing expenses, including, without

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<PAGE>

limitation, expenses of printing Prospectuses if the printing of Prospectuses is
requested by the managing underwriter or underwriters, if any, or by the Holders
of a majority in aggregate principal amount of the Registrable Notes included in
any Notes Registration Statement or by any Participating Broker-Dealer during
the Applicable Period, as the case may be, (iii) messenger, telephone and
delivery expenses incurred in connection with the performance of its obligations
hereunder, (iv) fees and disbursements of counsel for the Issuer, (v) fees and
disbursements of all independent certified public accountants referred to in
Section 6(o)(iii) (including, without limitation, the expenses of any special
audit and "cold comfort" letters required by or incident to such performance),
(vi) rating agency fees, (vii) Securities Act liability insurance, if the Issuer
desires such insurance, (viii) fees and expenses of all other Persons retained
by the Issuers, (ix) internal expenses of the Issuer (including, without
limitation, all salaries and expenses of officers and employees of the Issuer
performing legal or accounting duties), (x) the expense of any annual audit,
(xi) the fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange and (ii) the expenses
relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements, indentures and
any other documents necessary in order to comply with this Agreement; provided,
however, that in the case of any underwritten offering, in no event shall the
Issuer be responsible for any fees and expenses of any underwriter including any
underwriting discounts and commissions or any legal fees and expenses of counsel
to any underwriter.

(b) The Issuer shall reimburse the Holders for the reasonable fees
and disbursements of not more than one counsel (in addition to appropriate local
counsel) chosen by the Holders of a majority in aggregate principal amount of
the Registrable Notes to be included in any Registration Statement. The Issuer
shall pay all documentary, stamp, transfers or other transactional taxes
attributable to the issuance or delivery of the Exchange Notes or Private
Exchange Notes in exchange for the Notes; provided that the Issuer shall not be
required to pay taxes payable in respect of any transfer involved in the
issuance or delivery of any Exchange Note or Private Exchange Note in a name
other than that of the Holder of the Note in respect of which such Exchange Note
or Private Exchange Note is being issued.

8. INDEMNIFICATION

(a) INDEMNIFICATION BY THE ISSUER. The Issuer shall (and shall cause
each Subsidiary Guarantor, jointly and severally, to) without limitation as to
time, indemnify and hold harmless each Holder of Registrable Notes, Exchange
Notes, Private Exchange Notes or Registrable Warrant Shares and each
Participating Broker-Dealer selling Exchange Notes during the Applicable Period,
each Person, if any, who controls each such Holder (within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act) and the
officers, directors and partners of each such Holder, Participating
Broker-Dealer and controlling person, to the fullest extent lawful, from and
against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable costs of preparation and reasonable attorneys'
fees and disbursements as provided in this Section 8) and expenses

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<PAGE>

(including, without limitation, costs and expenses incurred in connection with
investigating, preparing, pursuing or defending against any of the
foregoing)(collectively, "Losses"), as incurred, directly or indirectly caused
by, related to, based upon, arising out of or in connection with any untrue or
alleged untrue statement of a material fact contained in any Registration
Statement, Prospectus or form of prospectus, or in any amendment or supplement
thereto, or in any preliminary prospectus, or any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except insofar as such Losses are solely based upon
information relating to such Holder or Participating Broker-Dealer and furnished
in writing to the Issuer by such Holder or Participating Broker-Dealer or its
counsel expressly for use therein; provided, however, that the Issuer will not
be liable to any Indemnified Party under this Section 8 to the extent Losses
were solely caused by an untrue statement or omission or alleged untrue
statement or omission that was contained or made in any preliminary prospectus
and corrected in the Prospectus or any amendment or supplement thereto if (i)
the Prospectus does not contain any other untrue statement or omission or
alleged untrue statement or omission of a material fact that was the subject
matter of the related proceeding, (ii) any such Losses resulted from an action,
claim or suit by any Person who purchased Registrable Warrant Shares,
Registrable Notes or Exchange Notes which are the subject thereof from such
Indemnified Party and (iii) it is established in the related proceeding that
such Indemnified Party failed to deliver or provide a copy of the Prospectus (as
amended or supplemented) to such Person with or prior to the confirmation of the
sale of such Registrable Warrant Shares, Registrable Notes or Exchange Notes
sold to such Person if required by applicable law, unless such failure to
deliver or provide a copy of the Prospectus (as amended or supplemented) was a
result of noncompliance by the Issuer with Section 6 of this Agreement. The
Issuer shall also indemnify underwriters, selling brokers, dealer managers and
similar securities industry professionals participating in the distribution,
their officers, directors, agents and employees and each Person who controls
such Persons (within the meaning of Section 5 of the Securities Act or Section
20(a) of the Exchange Act) to the same extent as provided above with respect to
the indemnification of the Holders or the Participating Broker-Dealer.

(b) INDEMNIFICATION BY HOLDERS. In connection with any Registration
Statement, Prospectus or form of prospectus, any amendment or supplement
thereto, or any preliminary prospectus in which a Holder is participating, such
Holder shall furnish to the Issuer in writing such information as the Issuer
reasonably requests for use in connection with any Registration Statement,
Prospectus or form of prospectus, any amendment or supplement thereto, or any
preliminary prospectus and shall, without limitation as to time, indemnify and
hold harmless the Issuer, its directors and each Person, if any, who controls
the Issuer (within the meaning of Section 15 of the Securities Act and Section
20(a) of the Exchange Act), and the directors, officers, employees, agents, and
partners of such controlling persons, to the fullest extent lawful, from and
against all Losses arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, Prospectus
or form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or any omission or alleged omission to state therein

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<PAGE>

a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading to the extent (but only to the extent) that such Losses are
finally judicially determined by a court of competent jurisdiction (which
determination is not subject to appeal) to have resulted solely from an untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission of a material fact contained in or omitted from any information so
furnished in writing by such Holder to the Issuer expressly for use therein.
Notwithstanding the foregoing, in no event shall the liability of any selling
Holder be greater in amount than the dollar amount of the proceeds (net of
payment of all expenses) received by such Holder upon the sale of the
Registrable Notes or Registrable Warrant Shares giving rise to such
indemnification obligation.

(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the party or
parties from which such indemnity is sought (the "Indemnifying Parties") in
writing; provided, that the failure to so notify the Indemnifying Parties shall
not relieve the Indemnifying Parties from any obligation or liability except to
the extent (but only to the extent) that it shall be finally determined by a
court of competent jurisdiction (which determination is not subject to appeal)
that the Indemnifying Parties have been prejudiced materially by such failure.

The Indemnifying Party shall have the right, exercisable by giving
written notice to an Indemnified Party, within 20 Business Days after receipt of
written notice from such Indemnified Party of such Proceeding, to assume, at its
expense, the defense of any such Proceeding, provided, that an Indemnified Party
shall have the right to employ separate counsel in any such Proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party or parties unless: (1) the
Indemnifying Party has agreed to pay such fees and expenses; or (2) the
Indemnifying Party shall have failed promptly to assume the defense of such
Proceeding or shall have failed to employ counsel satisfactory to such
Indemnified Party; or (3) the named parties to any such Proceeding (including
any impleaded parties) include both such Indemnified Party and the Indemnifying
Party or any of its affiliates or controlling persons, and such Indemnified
Party shall have been advised by counsel that there may be one or more defenses
available to such Indemnified Party that are in addition to, or in conflict
with, those defenses available to the Indemnifying Party or such affiliate or
controlling person (in which case, if such Indemnified Party notifies the
Indemnifying Parties in writing that it elects to employ separate counsel at the
expense of the Indemnifying Parties, the Indemnifying Parties shall not have the
right to assume the defense and the reasonable fees and expenses of such counsel
shall be at the expense of the Indemnifying Party; it being understood, however,
that, the Indemnifying Party shall not, in connection with any one such
Proceeding or separate but substantially similar or related Proceedings in the
same jurisdiction, arising out of the same general allegations or circumstances,
be liable for the fees and expenses or more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such Indemnified
Party).

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<PAGE>

No Indemnifying Party shall be liable for any settlement of any such
Proceeding effected without its written consent, which shall not be unreasonably
withheld, but if settled with its written consent, or if there be a final
judgment for the plaintiff in any such Proceeding, each Indemnifying Party
jointly and severally agrees, subject to the exceptions and limitations set
forth above, to indemnify and hold harmless each Indemnified Party from and
against any and all Losses by reason of such settlement or judgment. The
Indemnifying Party shall not consent to the entry of any judgment or enter into
any settlement that does not include as an unconditional term thereof the giving
by the claimant or plaintiff to each Indemnified Party of a release, in form and
substance satisfactory to the Indemnified Party, from all liability in respect
of such Proceeding for which such Indemnified Party would be entitled to
indemnification hereunder (whether or not any Indemnified Party is a party
thereto).

(d) CONTRIBUTION. If the indemnification provided for in this
Section 8 is unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this Section 8
would otherwise apply by its terms (other than by reason of exceptions provided
in this Section 8), then each applicable Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall have a joint and several obligation
to contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party, on the one hand, and such Indemnified
Party, on the other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party, on the one hand,
and Indemnified Party, on the other hand, shall be determined by reference to,
among other things, whether any untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact 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 any such statement or omission. The amount paid or payable
by an Indemnified Party as a result of any Losses shall be deemed to include any
legal or other fees or expenses incurred by such party in connection with any
Proceeding, to the extent such party would have been indemnified for such fees
or expenses if the indemnification provided for in Section 8(a) or 8(b) was
available to such party.

The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 8(d), a selling Holder shall not
be required to contribute, in the aggregate, any amount in excess of such
Holder's Maximum Contribution Amount. A selling Holder's "Maximum Contribution
Amount" shall equal the excess of (i) the aggregate proceeds received by such
Holder pursuant to the sale of such Registrable Notes, Exchange Notes or
Registrable Warrant Shares over (ii) the aggregate amount of damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section

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<PAGE>

11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.

The indemnity and contribution agreements contained in this Section 8
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

9. RULES 144 AND 144A

The Issuer covenants that it shall (a) file the reports required to be
filed by it (if so required) under the Securities Act and the Exchange Act in a
timely manner and, if at any time the Issuer is not required to file such
reports, it will, upon the request of any Holder of Registrable Notes, make
publicly available other information necessary to permit sales pursuant to Rule
144 and Rule 144A and (b) take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Notes without registration under the Securities Act pursuant to
the exemptions provided by Rule 144 and Rule 144A. Upon the request of any
Holder, the Issuer shall deliver to such Holder a written statement as to
whether it has complied with such informational and other requirements.

10. UNDERWRITTEN REGISTRATIONS OF REGISTRABLE NOTES

If any of the Registrable Notes covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will manage the offering will be
selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering; provided, however, that such
investment banker or investment bankers and manager or managers must be
reasonably acceptable to the Issuer.

No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.

11. REGISTRATION OF REGISTRABLE WARRANT SHARES

(a) SHELF REGISTRATION OF REGISTRABLE WARRANT SHARES. The Issuer
shall, on or prior to the Warrant Shares Registration Filing Date, (i) use its
best efforts to file a registration statement covering resales of the Warrant
Shares (the "Warrant Shares Registration Statement"), (ii) use its best efforts
to cause the Warrant Shares Registration Statement to be declared effective
under the Securities Act and (iii) use its best efforts to keep effective the
Warrant Shares Registration Statement until the earlier of the Expiration Date
(as defined in the Warrant Agreement) or such time as all of the Warrants have
been

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<PAGE>

exercised. The Issuer shall provide to each Warrant Holder and each holder of
Registrable Warrant Shares copies of the Prospectus that is a part of the
Warrant Shares Registration Statement, notify each such Warrant Holder or holder
of Registrable Warrant Shares when the Warrant Shares Registration Statement has
become effective and take such other actions as are required to permit
unrestricted resales of the Warrant Shares. The Issuer shall require a Selling
Holder that sells Warrant Shares pursuant to the Warrant Shares Registration
Statement to be named as a selling securityholder in the related prospectus and
to deliver a prospectus to purchasers, and any such Selling Holder shall be
bound by the provisions of this Agreement that are applicable to such Selling
Holder (including certain indemnification rights and obligations). Each Selling
Holder shall deliver information to be used in connection with the Warrant
Shares Registration Statement within the time period set forth in this Agreement
in order to have its Warrant Shares included in the Warrant Shares Registration
Statement.

(b) PIGGY-BACK REGISTRATION OF REGISTRABLE WARRANT SHARES. If at any
time after the Closing Date and prior to the Warrant Shares Registration Filing
Date the Issuer proposes to file a registration statement under the Securities
Act with respect to an offering by the Issuer for its own account or for the
account of any holders of its Common Stock (other than (i) a registration
statement on Form S-4 or S-8 (or any substitute form that may be adopted by the
SEC), (ii) a registration statement filed in connection with an exchange offer
or offering of securities solely to the Issuer's existing security holders or
(iii) any Notes Registration Statement), then the Issuer shall give written
notice of such proposed filing to the Holders of Registrable Warrant Shares as
soon as practicable (but in no event fewer than 30 days before the anticipated
filing date), and such notice shall offer such Holders the opportunity to
register such number of Registrable Warrant Shares as each Warrant Holder or
holder of Registrable Warrant Shares may request in writing within 20 days after
receipt of such written notice from the Issuer (which request shall specify the
Registrable Warrant Shares intended to be disposed of by such Selling Holder and
the intended method of distribution thereof) (a "Piggy-Back Registration"). The
Issuer shall use its best efforts to keep such Piggy-Back Registration
continuously effective under the Securities Act until at least the earlier of a)
the Expiration Date or b) the consummation of the distribution by the Selling
Holders of all of the Registrable Warrant Shares covered thereby. The Issuer
shall use its reasonable efforts to cause the managing underwriter or
underwriters, if any, of such proposed offering to permit the Registrable
Warrant Shares requested to be included in a Piggy-Back Registration to be
included on the same terms and conditions as any similar securities of the
Issuer or any other security holder included therein and to permit the sale or
other disposition of such Registrable Warrant Shares in accordance with the
intended method of distribution thereof. Any Selling Holder shall have the
right to withdraw its request for inclusion of its Registrable Warrant Shares in
any Registration Statement pursuant to this Section 11 by giving written notice
to the Issuer of its request to withdraw at any time prior to the filing of such
Registration Statement with the SEC. The Issuer will pay all Warrant Shares
Registration Expenses in connection with each registration of Registrable
Warrant Shares requested pursuant to this Section 11, and each Warrant Holder or
holder of Registrable Warrant Shares shall pay all underwriting discounts and
commissions and transfer

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<PAGE>

taxes, if any, relating to the sale or disposition of the Registrable Warrant
Shares of such Warrant Holder or holder of Registrable Warrant Shares pursuant
to a Piggy-Back Registration effected pursuant to this Section 11.

No registration effected under this Section 11, and no failure to
effect a registration under this Section 11, shall relieve the Issuer of its
obligations to effect a registration upon the request of Holders of Registrable
Notes pursuant to Sections 2 and 3 hereof, and no failure to effect a
registration under this Section 11 and to complete the sale of securities
registered thereunder in connection therewith shall relieve the Issuer of any
other obligation under this Agreement.

(c) PRIORITY IN PIGGY-BACK REGISTRATION. In a registration pursuant
to this Section 11 involving an underwritten offering, if the managing
underwriter or underwriters of such underwritten offering have informed, in
writing, the Issuer and the Selling Holders requesting inclusion in such
offering that in such underwriter's or underwriter's opinion the total number of
securities which the Issuer, the Selling Holders and any other Persons desiring
to participate in such registration intend to include in such offering is such
as to adversely affect the success of such offering, including the price at
which such securities can be sold, then the Issuer will be required to include
in such registration only the amount of securities which it is so advised should
be included in such registration. In such event: (x) in cases initially
involving the registration for sale of securities for the Issuer's own account,
securities shall be registered in such offering in the following order of
priority: (i)first, the securities which the Issuer proposes to register,
(ii)second, provided that no securities proposed to be registered by the Issuer
have been excluded from such registration, the securities that have been
requested to be included in such registration by the Selling Holders, and
(iii)third, provided that no securities sought to be included by the Selling
Holders have been excluded from such registration, the securities of other
Persons entitled to exercise "piggy-back" registration rights pursuant to
contractual commitments of the Issuer (pro rata based on the amount of
securities sought to be registered by such Persons); and (y) in cases not
initially involving the registration for sale of securities for the Issuer's own
account, securities shall be registered in such offering in the following order
of priority: (i) first, the securities of any Person whose exercise of a
"demand" registration right pursuant to a contractual commitment of the Issuer
is the basis for the registration, (ii) second, provided that no securities of
any Person whose exercise of a "demand" registration right pursuant to a
contractual commitment of the Issuer is the basis for such registration have
been excluded from such registration, the securities requested to be included in
such registration by the Selling Holders pursuant to this Agreement, (iii)
third, provided that no securities sought to be included by the Selling Holders
or such Persons have been excluded from such registration, securities of other
Persons entitled to exercise "piggy-back" registration rights pursuant to
contractual commitments of the Issuer (pro rata based on the amount of
securities sought be registered by such Persons) and (iv) fourth, provided that
no securities sought to be included by other Persons entitled to exercise
"piggy-back" registration rights pursuant to such contractual commitments have
been excluded from such registration, any securities which the Issuer proposes
to register.

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<PAGE>

(d) SUSPENSION OF SALES, ETC. During any consecutive 365-day period,
the Issuer shall be entitled to suspend the availability of the Warrant Shares
Registration Statement for up to two 45 consecutive day periods (except during
the 45 consecutive-day period immediately prior to the Expiration Date) if the
Board of Directors of the Issuer determines in good faith that the effectiveness
of, or sales pursuant to, such Warrant Shares Registration Statement would
materially impede, delay or interfere with any significant financing, offer or
sale of securities, acquisition, corporate reorganization or other significant
transaction involving the Issuer or any of its affiliates. If the Issuer shall
so postpone the effectiveness of, or suspend the rights of any Selling Holders
to make sales pursuant to, a Warrant Shares Registration Statement, it shall, as
promptly as possible, notify any Selling Holders of such determination, and the
Selling Holders shall (y) have the right, in the case of a postponement of the
effectiveness of a Warrant Shares Registration Statement, upon the affirmative
vote of Selling Holders of not less than a majority of the Registrable Warrant
Shares to be included in such Warrant Shares Registration Statement, to withdraw
the request for registration by giving written notice to the Issuer within 20
days after receipt of such notice or (z) in the case of a suspension of the
right to make sales, receive an extension of the registration period referred to
in Section 11(a) hereof equal to the number of days of the suspension.

(e) EXCLUSION OF REGISTRABLE WARRANT SHARES. The Issuer shall not be
required by this Section 11 to include Registrable Warrant Shares in a
Piggy-Back Registration if (i) in the written opinion of outside counsel to the
Issuer, addressed to the Holders of Registrable Warrant Shares and delivered to
them, the Holders of such Registrable Warrant Shares seeking registration would
be free to sell all such Registrable Warrant Shares within the current calendar
quarter without registration under Rule 144, which opinion may be based in part
upon the representation by the Holders of such Registrable Warrant Shares
seeking registration, which representation shall not be unreasonably withheld,
that each such Holder is not an affiliate of the Issuer within the meaning of
the Securities Act, and (ii) all requirements under the Securities Act for
effecting such sales are satisfied at such time.

(f) OBLIGATIONS OF SELLING HOLDERS. The Issuer's obligations under
this Section 11 shall be subject to the obligations of the Selling Holders,
which the Selling Holders acknowledge, to furnish all information and materials
and to take any and all actions as may be required under applicable requirements
of the SEC and to obtain an acceleration of the effective date of a Warrant
Shares Registration Statement.

(g) NO SPECIAL AUDIT. The Issuer shall not be obligated to cause any
special audit to be undertaken in connection with any Piggy-Back Registration
unless such audit is requested by the underwriters with respect to such
Piggy-Back Registration or, if such Piggy-Back Registration does not involve an
underwritten offering, by the Selling Holders of not less than a majority of the
Registrable Warrant Shares to be included in such Piggy Back Registration.

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<PAGE>

12. MISCELLANEOUS

(a) NO INCONSISTENT AGREEMENTS. The Issuer has not entered, as of
the date hereof, and the Issuer shall not enter, after the date of this
Agreement, into any agreement with respect to any of its securities that is
inconsistent with the rights granted to the Holders of Securities in this
Agreement or otherwise conflicts with the provisions hereof. The Issuer has not
entered and will not enter into any agreement with respect to any of its
securities which will grant to any Person piggy-back rights with respect to a
Notes Registration Statement or a Warrant Shares Registration Statement.

(b) ADJUSTMENTS AFFECTING REGISTRABLE WARRANT SHARES OR REGISTRABLE
NOTES. The Issuer shall not, directly or indirectly, take any action with
respect to the Registrable Warrant Shares or Registrable Notes that would
adversely affect the ability of the Warrant Holders or the Holders, as the case
may be, to include such Registrable Warrant Shares or Registrable Notes in a
registration undertaken pursuant to this Agreement.

(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (A) in circumstances that would adversely affect any Holders of
Registrable Warrant Shares or Holders of Registrable Notes, the holders of a
majority of the Registrable Warrant Shares (treating as outstanding for this
purpose Warrant Shares issuable on exercise of unexercised Warrants) or the
Holders of not less than a majority in aggregate principal amount of the then
outstanding Registrable Notes, as the case may be, and (B) in circumstances that
would adversely affect Participating Broker-Dealers, the Participating
Broker-Dealers holding not less than a majority in aggregate principal amount of
the Exchange Notes held by all Participating Broker-Dealers; provided, however,
that Section 8 and this Section 12(c) may not be amended, modified or
supplemented without the prior written consent of each Holder and each
Participating Broker-Dealer (including any Person who was a Participating
Broker-Dealer, Holder of Registrable Warrant Shares or Registrable Notes or
Exchange Notes, as the case may be, disposed of pursuant to any Registration
Statement). Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Registrable Notes whose securities are being tendered
pursuant to the Exchange Offer or sold pursuant to a Notes Registration
Statement and that does not directly or indirectly affect, impair, limit or
compromise the rights of other Holders of Registrable Notes may be given by
Holders of at least a majority in aggregate principal amount of the Registrable
Notes being tendered or being sold by such Holders pursuant to such Notes
Registration Statement.

(d) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:

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<PAGE>

(1) if to a Holder of Securities or to any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar of the Warrants or the Notes, with a copy in like manner to the
Initial Purchaser as follows:

JEFFERIES & COMPANY, INC.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Facsimile No.: (310) 575-5166
Attention: Andrew Whittaker

(2) if to the Initial Purchaser, at the address specified in
Section 12(d)(1);

(3) if to the Issuer, as follows:

COUNTY SEAT STORES, INC.
6585 City West Parkway
Eden Prairie, Minnesota 55344
Facsimile No.: (612) 829-2188
Attention: General Counsel

All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five Business Days
after being deposited in the United States mail, postage prepaid, if mailed, one
Business Day after being timely delivered to a next-day air courier guaranteeing
overnight delivery, and when receipt is acknowledged by the addressee, if
telecopied.

Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in the Indenture and to the Warrant Agent
under the Warrant Agreement at the address specified in the Warrant Agreement.

(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto, including, without limitation and without the need for an express
assignment, subsequent Holders of Securities.

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

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<PAGE>

(g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAW. THE ISSUER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS. THE ISSUER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY TO DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
THE ISSUER IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE ISSUER AT ITS SAID
ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE ISSUER IN ANY OTHER JURISDICTION.

(i) SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.

(j) SECURITIES HELD BY THE ISSUER OR ITS AFFILIATES. Whenever the
consent or approval of holders of a specified percentage of Securities is
required hereunder, Securities held by the Issuer or its affiliates (as such
term is defined in Rule 405 under the Securities

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<PAGE>

Act) shall not be counted in determining whether such consent or approval was
given by the Holders of such required percentage.

(k) THIRD PARTY BENEFICIARIES. Holders of Securities and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement, and this Agreement may be enforced by such Persons.

(l) ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement, the Indenture and the Warrant Agreement is intended by the parties as
a final and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein and
any and all prior oral or written agreements, representations, or warranties,
contracts, understanding, correspondence, conversations and memoranda between
the Initial Purchaser on the one hand and the Issuer on the other, or between or
among any agents, representatives, parents, subsidiaries, affiliates,
predecessors in interest or successors in interest with respect to the subject
matter hereof and thereof are merged herein and replaced hereby.

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<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

COUNTY SEAT STORES, INC.

By: /s/ Sam Forman
-----------------------
Name: Sam Forman
Title: President

ACCEPTED AND AGREED TO:
JEFFERIES & COMPANIES, INC.

By: [ILLEGIBLE SIGNATORY]
Name: [ILLEGIBLE]
Title: Managing Director

- 34 -

<PAGE>

Exhibit 4.8

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

SECURITY AND DISBURSEMENT AGREEMENT

Dated as of October 29, 1997

From

COUNTY SEAT STORES, INC.

as Pledgor

FIRST TRUST NATIONAL ASSOCIATION

as Trustee and Security Agent

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

<PAGE>

SECURITY AND DISBURSEMENT AGREEMENT

This SECURITY AND DISBURSEMENT AGREEMENT (as amended, restated,
supplemented or modified from time to time, this "Security and Disbursement
Agreement") is made and entered into as of October 29, 1997 by and among
COUNTY SEAT STORES, INC., a Minnesota corporation (the "Pledgor"), having its
principal office at 6585 City West Parkway, Eden Prairie, Minnesota 55344 and
FIRST TRUST NATIONAL ASSOCIATION, as trustee under the Indenture (as defined
below), having an office at 180 East Fifth Street, St. Paul, Minnesota 55101,
(in such capacity, the "Trustee") for the holders (the "Holders") of the
Notes (as defined herein) issued by the Pledgor under the Indenture referred
to below and as securities intermediary (in such capacity, the "Security
Agent").

WITNESSETH:

WHEREAS, the Pledgor and Jefferies & Company, Inc. as Initial Purchaser
(the "Initial Purchaser") are parties to a Purchase Agreement, dated October
23, 1997 (the "Purchase Agreement"), pursuant to which the Pledgor will issue
and sell to the Initial Purchaser 85,000 Units, each consisting of $1,000
principal amount of its 12 3/4% Senior Notes due 2004 (collectively, as
replaced or exchanged, the "Notes"), and one Series A Warrant to purchase
shares of the Pledgor's common stock, par value $.01 per share;

WHEREAS, the Pledgor, and the Trustee, have entered into that certain
Indenture dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the "Indenture"), pursuant to which the
Pledgor is issuing the Initial Notes on the date hereof;

WHEREAS, pursuant to the Purchase Agreement and the Indenture, the
Pledgor is required to deposit on the Issue Date cash in a disbursement
account/733-36039-1 established by the Trustee and the Security Agent (such
account, together with any successor account, the "Security Account") to be
held by the Trustee for its benefit and the ratable benefit of the Holders to
secure the Pledgor's obligation (i) to provide for payment in full of any and
all scheduled payments of interest due on the Notes from the Issue Date
through May 1, 1999 and (ii) in the event that the Notes are required to be
redeemed or prepaid or otherwise become due and payable prior to May 1, 1999,
to secure the partial repayment of the principal, premium, if any, and
interest on the Notes that are redeemed, prepaid or otherwise due and payable
(collectively, the "Obligations");

WHEREAS, pursuant to the terms and conditions of this Security and
Disbursement Agreement, the Pledgor shall instruct the Security Agent to
purchase or caused to be purchased with all or a portion of the Disbursement
Funds (as hereinafter defined) certain Pledged Securities (as hereinafter
defined) to be maintained in the Security Account in the

<PAGE>

name of the Trustee (or as otherwise required in accordance with applicable
law), and under the sole dominion and control of the Trustee, as set forth
herein; and

WHEREAS, to secure the Obligations of the Pledgor, the Pledgor has agreed
to (i) pledge to the Trustee for its benefit and the ratable benefit of the
Holders, a security interest in the Disbursement Funds, the Pledged Securities
and the other Collateral (as hereinafter defined) and (ii) execute and deliver
this Security and Disbursement Agreement in order to secure the payment and
performance by the Pledgor of all the Obligations.

AGREEMENT

NOW, THEREFORE, in consideration of the premises herein contained, and in
order to induce the Holders to purchase the Notes, the Pledgor, the Initial
Purchaser and the Security Agent hereby agree, for the benefit of the Security
Agent and for the ratable benefit of the Holders, as follows:

SECTION 1. Definitions; Appointment; Deposit and Investment.

1.1 Definitions. All defined terms used herein without definition
shall have the respective meanings ascribed to them in the Indenture. Unless
otherwise defined herein or in the Indenture, terms used in Articles 8 or 9 of
the Uniform Commercial Code as in effect in the State of New York (the "U.C.C.")
are used herein as therein defined.

1.2 Pledge and Grant of Security Interest. The Pledgor hereby pledges
to the Trustee for its benefit and for the ratable benefit of the Holders, and
hereby grants to the Trustee for its benefit and for the ratable benefit of the
Holders, a continuing first priority perfected security interest in and to all
of the Pledgor's right, title and interest in, to and under the following
(hereinafter collectively referred to as the "Collateral"), whether
characterized as investment property, general intangibles or otherwise: (a) the
Security Account, all funds and securities or other investment property held
therein and all certificates and instruments, if any, from time to time
representing or evidencing the Security Account, including, without limitation,
the Disbursement Funds and the Pledged Securities, and any and all securities
entitlements to the Disbursement Funds and the Pledged Securities, and any and
all related securities accounts in which security entitlements to the
Disbursement Funds and the Pledged Securities are carried, (b) all notes,
certificates of deposit, deposit accounts, checks and other instruments from
time to time hereafter delivered to or otherwise possessed by the Security Agent
for or on behalf of the Pledgor in substitution for or in addition to any or all
then existing Collateral, (c) all interest, dividends, cash, instruments and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of the then existing Collateral, and
(d) all proceeds of any and all of the foregoing Collateral (including, without
limitation, proceeds that constitute property of the types described in clauses
(a) - (c) above) and, to the extent not otherwise included, all cash.

2
<PAGE>

1.3. Deposit of Disbursement Funds. Concurrently, with the execution
and delivery of this Security and Disbursement Agreement, the Pledgor has
deposited, or caused the Initial Purchaser to deposit $ in cash
(collectively, the "Disbursement Funds") into the Security Account. Such amount
as invested in Pledged Securities and interest earned thereon will be sufficient
to provide for payment in full of the first three scheduled interest payments
due on the outstanding Notes.

1.4. Purchase of Pledged Securities. At the direction of the Pledgor,
as set forth in a written notice (the "Pledged Securities Notice"), the first of
which will be delivered to the Security Agent no later than two business days
after the date of this Security and Disbursement Agreement, the form of which is
acceptable to the Security Agent, the Security Agent shall invest the
Disbursement Funds in U.S. Government Obligations in the manner as directed in
the Pledged Securities Notice (such U.S. Government Obligations, hereinafter,
the "Pledged Securities"), which Pledged Securities shall be deposited in the
Security Account and shall be maintained by the Security Agent for the benefit
of the Trustee and the ratable benefit of the Holders in accordance with the
terms and conditions of this Security and Disbursement Agreement. Each Pledged
Securities Notice shall specify the amount and nature of the Pledged Securities
required to be purchased by the Security Agent with the Disbursement Funds and
contain all necessary directions or authorizations necessary or reasonably
required by the Security Agent to make such investment. The initial Pledged
Securities Notice shall be accompanied by a written opinion of a nationally
recognized firm of independent public accountants or a recognized financial
advisor, selected by the Pledgor and approved by the Initial Purchaser (the
"Independent Financial Advisor"), in form and substance reasonably acceptable to
the Security Agent and the Trustee, confirming that the aggregate amount of the
Pledged Securities and Disbursement Funds, after giving effect to the investment
in the Pledged Securities referred to in such Pledged Securities Notice, will be
sufficient upon receipt of scheduled interest and principal payments of all
Pledged Securities to provide for payment in full of all scheduled interest
payments due on the outstanding Notes during the period commencing on the Issue
Date and ending on May 1, 1999.

SECTION 2. Security for Obligation. This Security and Disbursement
Agreement secures the prompt and complete payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of all the
Obligations.

SECTION 3. Perfection of Security Interest in Collateral. The Securities
Agent hereby agrees that each item of property (whether investment property,
financial asset, security, instrument or cash) credited to the Security Account
shall be treated as a "financial asset" within the meaning of Section
8-102(a)(9) of the UCC. Notwithstanding any other provision of this Agreement,
if at any time the Security Agent shall receive any order from the Trustee
directing transfer or redemption of any financial asset relating to the Security
Account, the Security Agent shall comply with such entitlement order without
further consent by the Pledgor or any other person. The Trustee agrees with the
Pledgor not to issue any such entitlement order except as contemplated by this
Security and Disbursement Agreement;

3
<PAGE>

however, the Security Agent shall comply with all entitlement orders issued by
the Trustee regardless of whether such entitlement orders are issued in
accordance with this Security and Disbursement Agreement.

SECTION 4. Maintaining the Security Account.

(a) So long as any Obligation shall remain unpaid, the Pledgor
will maintain the Escrow Interest Account with the Security Agent.

(b) It shall be a term and condition of the Security Account,
notwithstanding any term or condition to the contrary in any other agreement
relating to the Security Account, and except as otherwise provided by the
provisions of Section 7 and Section 14, that no amount (including interest on
Disbursement Funds or Pledged Securities) shall be paid or released to or for
the account of, or withdrawn by or for the account of, the Pledgor or any other
Person (other than the Trustee for the benefit of the Holders), from the
Security Account.

(c) The Security Account shall be subject to such applicable
laws, and such applicable regulations of the Board of Governors of the Federal
Reserve System and of any other appropriate banking or governmental authority,
as may now or hereafter be in effect.

SECTION 5. Investments. If requested in writing by the Pledgor, the
Security Agent will, subject to the provisions of Section 7 and Section 14, from
time to time (a) invest Disbursement Funds and other amounts on deposit in the
Security Account (other than Pledged Securities) in accordance with Section 1.4
in the name of the Security Agent, as the Pledgor may select in writing, and (b)
invest interest paid on the Pledged Securities referred to in clause (a) above,
and so reinvest other proceeds of such Pledged Securities that may mature or be
sold, in each case in accordance with Section 1.4 in the name of the Security
Agent, as the Pledgor may select in writing, all of which Pledged Securities
shall be maintained in the Security Account. Interest and proceeds that are not
invested or reinvested in Pledged Securities as provided above shall at the
option of Pledgor, either be deposited or remain on deposit in, as the case may
be, and held in the Security Account or be invested in the Security Agent's
First American Treasury Obligations Fund. In no event shall the Security Agent
be liable for any loss in the investment or reinvestment of amounts held in the
Security Account. All such investments selected by the Pledgor shall be subject
to availability to the Security Agent. The Security Agent and the Trustee shall
be under no duty to invest (or otherwise pay interest on) any amounts held by it
hereunder, absent specific written investment instructions from the Pledgor in
accordance with the terms hereof.

SECTION 6. Delivery of Collateral Investments; Filing.

4
<PAGE>

(a) The Security Agent hereby confirms that (i) the Security
Agent has established account #33-36039-1 in the name "First Trust National
Association, as Trustee" and that such account is the "Security Account"
pursuant to this Security and Disbursement Agreement, (ii) the Security Account
is an account to which financial assets are or may be credited and the Security
Agent shall, subject to the terms of this Security and Disbursement Agreement,
treat the Trustee as entitled to exercise the rights with respect to any
financial asset credited to the account, (iii) all property delivered to the
Security Agent pursuant to this Security and Disbursement Agreement will be
promptly credited to the Security Account, and (iv) all securities or other
property underlying any financial assets credited to the Security Account shall
be registered in the name of the Security Agent, endorsed to the Security Agent
or in blank or credited to another securities account maintained in the name of
the Security Agent and in no case will any financial asset credited to the
Security Agent Account be registered in the name of the Pledgor, payable to the
order of the Pledgor or specially indorsed to the Pledgor except to the extent
the foregoing have been specially indorsed to the Security Agent or in blank.

(b) In the event that the Security Agent has or subsequently
obtains by agreement, operation of law or otherwise a security interest in the
Security Account or any security entitlement credited thereto, the Security
Agent hereby agrees that such security interest shall be subordinate to the
security interest of the Trustee. The financial assets and other items deposited
to the Security Account will not be subject to deduction, set-off, banker's
lien, or any other right in favor of any person other than the Trustee.

(c) The Security Agent represents that: (i) there are no other
agreements entered into between the Security Agent and the Pledgor with respect
to the Security Account and (ii) except for the claims and interest of the
Trustee and of the Pledgor in the Security Account, the Security Agent does not
know of any claim to, or interest in, the Security Account or in any "financial
asset" (as defined in Section 8-102(a) of the UCC) credited thereto. In the
event of any conflict between this Security and Disbursement Agreement (or any
portion thereof) and any other agreement now existing or hereafter entered into,
the terms of this Security and Disbursement Agreement shall prevail.

(d) Concurrently with the execution and delivery of this Security
and Disbursement Agreement, the Security Agent is delivering to the Pledgor and
the Initial Purchaser a duly executed certificate, in the form of Exhibit A
hereto, of an officer of the Security Agent confirming the Security Agent's
establishment and maintenance of the Security Account and its receipt and
holding of the Disbursement Funds and the crediting of the Disbursement Funds to
the Security Account, all in accordance with this Security and Disbursement
Agreement.

SECTION 7. Disbursements. The Security Agent shall hold the Collateral in
the Security Account and release the same, or a portion thereof, only as
directed by the Trustee. The Trustee agrees to direct the Security Agent as
follows:

5
<PAGE>

(a) At least five Business Days prior to the due date of any of
the first three scheduled interest payments on the Notes from the Issue Date
through May 1, 1999, the Pledgor may, pursuant to written instructions executed
by the Pledgor (an "Issuer Order"), direct the Trustee to cause the Security
Agent to release from the Security Account and pay to the Holders proceeds
sufficient to provide for payment in full of the scheduled interest then due on
the Notes. Upon receipt of an Issuer Order, the Trustee will take any action
necessary to provide for the payment of the scheduled interest on the Notes in
accordance with the payment provisions of the Indenture to the Holders from (and
to the extent of) the Pledged Securities, Disbursement Funds and proceeds
thereof in the Security Account. Nothing in this Section 7 shall affect the
Trustee's rights to apply the Collateral to the payments of amounts due on the
Notes upon acceleration thereof.

(b) At least five Business Days prior to the due date of any of
the first three scheduled interest payments on the Notes, the Pledgor covenants
to give the Trustee (by Issuer Order) notice as to the amount of interest that
will be paid pursuant to Section 7(a). If no such notice is given by such fifth
Business Day prior to the respective first three scheduled interest payments on
the Notes, the Trustee will act pursuant to Section 7(a) as if it had received
an Issuer Order pursuant thereto for the payment in full of the scheduled
interest then due.

(c) If Pledgor has optionally redeemed Notes with the net
proceeds of a Primary Offering, the Pledgor may, pursuant to an Issuer Order,
direct the Trustee to release to Pledgor proceeds from the Security Account in
an amount which bears the same proportion to the aggregate value of the Security
Account immediately prior to the release of such proceeds as the aggregate
principal amount of the Notes so redeemed by Pledgor bears to the aggregate
principal amount of the Notes outstanding immediately prior to such redemption,
net of any costs, fees or expenses (such as breakage fees) incurred to permit
such release, so that there remains in the Security Account an amount sufficient
to pay in full, after receipt of scheduled interest and principal payments on
Pledged Securities, in the written opinion of an Independent Financial Advisor
(which written opinion shall accompany any Issuer Order) the remaining of the
first three interest payments due on the Notes. Immediately prior to any release
of funds to the Pledgor pursuant to this Section 7(c), the Pledgor shall deliver
any and all certificates described in and pursuant to Section 7(c).

(d) Upon the occurrence and after the continuation of an Event of
Default, the Trustee in its sole and absolute discretion may apply any or all
Collateral, including the Disbursement Funds and the Pledged Securities, to the
payment of all Obligations and any and all principal of and interest and
expenses on the Notes, in accordance with the terms and provisions of Section
14.

(e) Upon payment in full of the first three scheduled interest
payments on the Notes in a timely manner, and if no Event of Default has
occurred and is continuing, the security interest in the Collateral evidenced by
this Security and

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Disbursement Agreement will automatically terminate and be of no further force
and effect and upon receipt of an Issuer Order in accordance with Section
17.9(b) hereof, the Collateral remaining, if any, shall promptly be paid over
and transferred to the Pledgor.

(f) The Trustee may, but shall not be required to, liquidate any
Disbursement Funds or Pledged Securities, in whole or in part, in order to make
any scheduled payment of interest or any release or other required payment
hereunder and shall not be responsible for any loss, cost or expense, including
any breakage fee, diminution in principal or penalty in connection therewith,
all of which loss, cost or expense shall be borne solely by the Pledgor.

(g) Nothing contained in Section 1, Section 5, this Section 7 or
any other provision of this Security and Disbursement Agreement shall (i) afford
the Pledgor any right to issue entitlement orders with respect to any security
entitlement to the Disbursement Funds, the Pledged Securities or any securities
account in which any such security entitlement may be carried, or otherwise
afford the Pledgor control of any such security entitlement or (ii) otherwise
give rise to any rights of Pledgor with respect to the Disbursement Funds, the
Pledged Securities, any security entitlement thereto or any securities account
in which any such security entitlement may be carried, other than the Pledgor's
rights under this Security and Disbursement Agreement as the beneficial owner of
Collateral pledged to and subject to the exclusive dominion and control (except
as expressly provided in Sections 7(a) - (e) hereof) of the Trustee in its
capacity as such (and not as a securities intermediary). The Pledgor
acknowledges, confirms and agrees that the Trustee holds a security entitlement
to the Disbursement Funds and the Pledged Securities, as applicable, solely as
escrow agent for the Holders and not as a securities intermediary.

SECTION 8. Representations and Warranties. The Pledgor hereby represents
and warrants that:

(a) The execution and delivery by the Pledgor of, and the
performance by the Pledgor of its obligations under, this Security and
Disbursement Agreement does not contravene any provision of applicable law or
the Certificate of Incorporation of the Pledgor or any material agreement or
other material instrument binding upon the Pledgor or any of its subsidiaries or
any judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Pledgor or any of its subsidiaries, or result in the
creation or imposition of any security interest on any assets of the Pledgor,
except for the security interest granted under this Security and Disbursement
Agreement; no consent, approval, authorization or order of, or qualification
with, any governmental body or agency that have not been obtained is required
(i) for the performance by the Pledgor of its obligations under this Security
and Disbursement Agreement, (ii) for the pledge by the Pledgor of the Collateral
pursuant to this Security and Disbursement Agreement or (iii) except for any
such consents, approvals, authorizations or orders required to be obtained by
the Trustee (or the Holders) for reasons other than the consummation of this
transaction, for the exercise by the

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<PAGE>

Trustee of the rights provided for in this Security and Disbursement Agreement
or the remedies in respect of the Collateral pursuant to this Security and
Disbursement Agreement.

(b) The Pledgor is the beneficial owner of the Collateral, free
and clear of any security interest or any Lien or claims of any person or entity
(except for the security interests granted under this Security and Disbursement
Agreement). No financing statement covering the Pledgor's interest in the
Collateral is on file in any public office other than the financing statements,
if any, filed pursuant to this Security and Disbursement Agreement and no notice
to or arrangement with any financial institution (other than the Security Agent)
has been made regarding any security interest in or Lien on or nominee
arrangement for any Collateral.

(c) This Security and Disbursement Agreement has been duly
authorized, validly executed and delivered by the Pledgor and (assuming the due
authorization and valid execution and delivery of this Security and Disbursement
Agreement by the Trustee and the Security Agent and enforceability of the
Security and Disbursement Agreement against the Trustee and the Security Agent
in accordance with its terms) constitutes the valid and binding agreement of the
Pledgor, enforceable against the Pledgor in accordance with its terms, except as
(i) the enforceability hereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, preference, reorganization, moratorium or similar laws
now or hereafter in effect relating to or affecting creditors' rights or
remedies generally, (ii) equitable remedies may be limited by equitable
principles of general applicability and the discretion of the court before which
any proceeding therefor may be brought, (iii) the exculpation provisions and
rights to indemnification hereunder may be limited by U.S. federal and state
securities laws and public policy considerations and (iv) the waiver of rights
and defenses contained in Section 14(b), Section 17.11 and Section 17.16 hereof
may be limited by applicable law.

(d) Upon execution and delivery of this Security and Disbursement
Agreement, the pledge of and grant of a security interest in the Collateral
securing the payment of the Obligations for the benefit of the Security Agent
and the Holders constitute a first priority perfected security interest in such
Collateral, enforceable as such against all creditors of the Pledgor (and any
persons purporting to purchase any of the Collateral from the Pledgor).

(e) There are no legal or governmental proceedings pending or, to
the best of the Pledgor's knowledge, threatened to which the Pledgor or any of
its subsidiaries is a party or to which any of the properties of the Pledgor or
any such subsidiary will be subject that would materially adversely affect the
power or ability of the Pledgor to perform its obligations under this Security
and Disbursement Agreement or to consummate the transactions contemplated
hereby.

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<PAGE>

(f) The pledge of the Collateral pursuant to this Security and
Disbursement Agreement is not prohibited by law or governmental regulation
(including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System) applicable to the Pledgor.

(g) No Event of Default, or event which with notice or passage of
time or both would be an Event of Default, exists.

SECTION 9. Further Assurances. The Pledgor will, promptly upon request by
the Trustee (which request the Trustee may submit at the direction of the
Holders of at least a majority in principal amount of the Notes then
outstanding), execute and deliver or cause to be executed and delivered, or use
its reasonable best efforts to procure, all assignments, instruments and other
documents, deliver any instruments to the Trustee and take any other actions
that are necessary or desirable to perfect, continue the perfection of or
protect the first priority of the Trustee's security interest in and to the
Collateral, to protect the Collateral against the rights, claims, or interests
of third persons (other than any such rights, claims or interests created by or
arising through the Trustee) or to effect the purposes of this Security and
Disbursement Agreement. The Pledgor also hereby authorizes the Trustee to file
any financing or continuation statements in the United States with respect to
the Collateral without the signature of the Pledgor (to the extent permitted by
applicable law). The Pledgor will promptly pay all costs incurred in connection
with any of the foregoing within 30 days of receipt of an invoice therefor. The
Pledgor also agrees, whether or not requested by the Security Agent, to take all
actions that are necessary to perfect or continue the perfection of, or to
protect the first priority of, the Trustee's security interest in and to the
Collateral, including the filing of all necessary financing and continuation
statements, and to protect the Collateral against the rights, claims or
interests of third persons (other than any such rights, claims or interests
created by or arising through the Security Agent).

SECTION I0. Covenants. The Pledgor covenants and agrees with the Trustee
and the Holders that from and after the date of this Security and Disbursement
Agreement until the earlier of payment in full in cash of (x) each of the first
three scheduled interest payments due on the Notes under the terms of the
Indenture or (y) all obligations due and owing under the Indenture and the Notes
in the event such obligations become due and payable prior to the payment of the
first three scheduled interest payments on the Notes:

(a) that (i) it will not (and will not purport to) sell or
otherwise dispose of, or grant any option or warrant with respect to, any of the
Collateral or (ii) it will not create or permit to exist any Lien upon or with
respect to any of the Collateral (except for the security interests granted
under this Security and Disbursement Agreement and any Lien created by or
arising through the Security Agent) and at all times will be the sole beneficial
owner of the Collateral; or

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<PAGE>

(b) that it will not (i) enter into any agreement or
understanding that restricts or inhibits or purports to restrict or inhibit the
Security Agent's rights or remedies hereunder, including, without limitation,
the Security Agent's right to sell or otherwise dispose of the Collateral
pursuant to the terms hereof or (ii) fail to pay or discharge any tax,
assessment or levy of any nature with respect to the Collateral not later than
five days prior to the date of any proposed sale under any judgment, writ or
warrant of attachment with respect to the Collateral.

SECTION 11. Power of Attorney. In addition to all of the powers granted to
the Trustee pursuant to the Indenture, the Pledgor hereby appoints and
constitutes the Trustee as the Pledgor's attorney-in-fact (with full power of
substitution) to exercise to the fullest extent permitted by law all of the
following powers upon and at any time after the occurrence and during the
continuance of an Event of Default: (a) collection of proceeds of any
Collateral; (b) conveyance of any item of Collateral to any purchaser thereof;
(c) giving of any notices or recording of any Liens under Section 6 hereof; and
(d) paying or discharging taxes or Liens levied or placed upon the Collateral,
the legality or validity thereof and the amounts necessary to discharge the same
to be determined by the Security Agent in its sole reasonable discretion, and
such payments made by the Security Agent to become part of the Obligations, due
and payable immediately upon demand. The Security Agent's authority under this
Section 11 shall include, without limitation, the authority to endorse and
negotiate any checks, certificates or instruments representing proceeds of
Collateral in the name of the Security Agent, execute and give receipt for any
certificate of ownership or any document constituting Collateral, transfer title
to any item of Collateral, sign the Pledgor's name on all financing statements
(to the extent permitted by applicable law) or any other documents deemed
necessary or appropriate by the Trustee to preserve, protect or perfect the
security interest in the Collateral and to file the same, prepare, file and sign
the Pledgor's name on any notice of Lien, and to take any other actions arising
from or incident to the powers granted to the Trustee in this Security and
Disbursement Agreement. This power of attorney is coupled with an interest and
is irrevocable by the Pledgor.

SECTION 12. No Assumption of Duties; Reasonable Care. The rights and powers
granted to the Trustee hereunder are being granted in order to preserve and
protect the security interest of the Trustee and the Holders in and to the
Collateral granted hereby and shall not be interpreted to, and shall not impose
any duties on the Trustee in connection therewith other than those expressly
provided herein or imposed under applicable law and no implied covenants,
functions, responsibilities, duties, obligations, or liabilities shall be read
into this Security and Disbursement Agreement or otherwise exist against the
Trustee. Except as provided by applicable law or by the Indenture, the Security
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Security Agent accords similar
property held by the Security Agent for similar accounts, it being understood
that the Security Agent in its capacity as such shall not have any
responsibility for (a) ascertaining or taking action with respect to calls,
conversions,

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<PAGE>

exchanges, maturities or other matters relative to any Collateral, whether or
not the Security Agent has or is deemed to have knowledge of such matters, (b)
taking any necessary steps to preserve rights against any parties with respect
to any Collateral or (c) investing or reinvesting any of the Collateral,
provided, however, that nothing contained in this Security and Disbursement
Agreement shall relieve the Security Agent of any responsibilities as a
securities intermediary under applicable law.

SECTION 13. Indemnity. The Pledgor shall indemnify, hold harmless and
defend the Trustee and the Security Agent and their respective directors,
officers, agents and employees, from and against any and all claims, actions,
obligations, liabilities and expenses, including reasonable defense costs and
expenses, reasonable investigative fees and costs, and reasonable legal fees and
damages arising from the Trustee's and Security Agent's performance under this
Security and Disbursement Agreement, except to the extent that such claim,
action, obligation, liability or expense is directly attributable to the bad
faith, gross negligence or wilful misconduct of such indemnified person.

SECTION 14. Remedies Upon Event of Default. If any Event of Default under
the Indenture (any such Event of Default being referred to in this Security and
Disbursement Agreement as an "Event of Default") shall have occurred and be
continuing:

(a) The Trustee and the Holders shall have, in addition to all
other rights given by law or by this Security and Disbursement Agreement or the
Indenture or any other Collateral Agreement, all of the rights and remedies with
respect to the Collateral of a secured party under the UCC in effect in the
State of New York at that time. In addition, with respect to any Collateral, the
Trustee may and, at the direction of the Holders of a majority in principal
amount of the Notes then outstanding, shall, sell or cause the same to be sold
at any broker's board or at public or private sale, in one or more sales or
lots, at such price or prices as the Trustee may deem best, for cash or on
credit or for future delivery, without assumption of any credit risk. The
purchaser of any or all Collateral so sold shall thereafter hold the same
absolutely, free from any claim, encumbrance or right of any kind whatsoever
created by or through the Pledgor. Unless any of the Collateral threatens, in
the reasonable judgment of the Trustee, to decline speedily in value or is or
becomes of a type sold on a recognized market, the Trustee will give the Pledgor
reasonable notice of the time and place of any public sale thereof, or of the
time after which any private sale or other intended disposition is to be made.
Any sale of the Collateral conducted in conformity with reasonable commercial
practices of banks, insurance companies, commercial finance companies, or other
financial institutions disposing of property similar to the Collateral shall be
deemed to be commercially reasonable. Any requirements of reasonable notice
shall be met if such notice is delivered to the address of the recipient in and
in accordance with Section 17.1 hereof at least ten days before the time of the
sale or disposition. The Trustee or any Holder of Notes may, in its own name or
in the name of a designee or nominee, buy any of the Collateral at any public
sale and, if permitted by applicable law, at any private sale. All expenses
(including court costs and reasonable

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<PAGE>

attorneys' fees, expenses and disbursements) of, or incident to, the enforcement
of any of the provisions hereof shall be recoverable from the proceeds of the
sale or other disposition of the Collateral.

(b) The Pledgor further agrees to do or cause to be done all such
other acts as may be necessary to make such sale or sales of all or any portion
of the Collateral pursuant to this Section 14 valid and binding and in
compliance with the Indenture and any and all other applicable requirements of
law. The Pledgor further agrees that a breach of any of the covenants contained
in this Section 14 will cause irreparable injury to the Trustee and the Holders,
that the Trustee and the Holders have no adequate remedy at law in respect of
such breach and, as a consequence, that each and every covenant contained in
this Section 14 shall be specifically enforceable against the Pledgor, and the
Pledgor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no Event of
Default has occurred.

SECTION 15. Expenses. The Pledgor will upon demand pay to each of the
Trustee and the Security Agent the amount of any and all reasonable expenses,
including, without limitation, the reasonable fees, expenses and disbursements
of its counsel, experts and agents retained by each of the Trustee and the
Security Agent, that each of the Trustee and the Security Agent may incur in
connection with (a) the review, negotiation and administration of this Security
and Disbursement Agreement, (b) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (c) the
exercise or enforcement of any of the rights of the Trustee and the Holders
hereunder or (d) the hilum by the Pledgor to perform or observe any of the
provisions hereof.

SECTION 16. Security Interest Absolute. All rights of the Trustee and the
Holders and security interests and Liens hereunder, and all obligations of the
Pledgor hereunder, shall be absolute and unconditional irrespective of:

(a) any lack of validity or enforceability of the Indenture or
any other 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 Obligations or other obligations under the
Indenture, or any other amendment or waiver of or any consent to any departure
from the Indenture;

(c) any exchange, surrender, release or non-perfection of any
Liens on any other collateral for all or any of the Obligations; or

(d) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Pledgor in respect of the Obligations or of this Security and
Disbursement Agreement.

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<PAGE>

SECTION 17. Miscellaneous Provisions.

17.1 Notices. Except as otherwise expressly provided herein, all
notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by telecopy, telex, or cable
communication), and shall be deemed to have been duly given or made when
delivered by hand, or five days after being deposited in the United States mail,
postage prepaid, or, in the case of telex notice, when sent, answer-back
received, or in the case of telecopy notice, when sent, or in the case of a
nationally recognized overnight courier service, one business day after delivery
to such courier service, addressed, in the case of each party hereto to the
following address, or to such other address as may be designated by any party in
a written notice to the other party hereto:

if to the Pledgor:

County Seat Stores, Inc.
6585 City West Parkway
Eden Prairie, Minnesota 55344
Attention: General Counsel

with a copy to:

Skadden, Arps, Slate, Meagher & Flora, LLP
919 Third Avenue
New York, New York 10022
Attention: David Reamer, Esq.

if to the Security Agent:

First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Finance Department

17.2. No Adverse Interpretation of Other Agreements. This Security and
Disbursement Agreement may not be used to interpret another pledge, security or
debt agreement of the Pledgor or any subsidiary thereof. No such pledge,
security or debt agreement (other than the Indenture) may be used to interpret
this Security and Disbursement Agreement.

17.3. Severability. The provisions of this Security and Disbursement
Agreement are. severable, and if any clause or provision shall be held invalid,
illegal or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect in that jurisdiction only such
clause or provision, or part thereof, and shall not in

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<PAGE>

any manner affect such clause or provision in any other jurisdiction or any
other clause or provision of this Security and Disbursement Agreement in any
jurisdiction.

17.4. Headings. The headings in this Security and Disbursement
Agreement have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
or provisions hereof.

17.5. Counterpart Originals. This Security and Disbursement Agreement
may be signed in two or more counterparts, each of which shall be deemed an
original, but all of which shall together constitute one and the same agreement.

17.6. Benefits of Security and Disbursement Agreement. Nothing in this
Security and Disbursement Agreement, express or implied, shall give to any
person, other than the parties hereto and their successors hereunder, and the
Holders, any benefit or any legal or equitable right, remedy or claim under this
Security and Disbursement Agreement.

17.7. Amendments, Waivers and Consents. Any amendment or waiver of any
provision of this Security and Disbursement Agreement and any consent to any
departure by the Pledgor from any provision of this Security and Disbursement
Agreement shall be effective only if made or duly given in compliance with all
of the terms and provisions of the Indenture, and neither the Security Agent nor
any Holder of Notes shall be deemed, by any act, delay, indulgence, omission or
otherwise, to have waived any right or remedy hereunder or to have acquiesced in
any Default or Event of Default or in any breach of any of the terms and
conditions hereof. Failure of the Security Agent or any Holder of Notes to
exercise, or delay in exercising, any right, power or privilege hereunder shall
not preclude. any other or further exercise thereof or the exercise of any other
fight, power or privilege. A waiver by the Security Agent or any Holder of Notes
of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy that the Security Agent or such Holder of Notes would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any rights or remedies provided by law.

17.8. Interpretation of Agreement. All terms not defined herein or in
the Indenture shall have the meaning set forth in the UCC, except where the
context otherwise requires. To the extent a term or provision of this Security
and Disbursement Agreement conflicts with the Indenture, the Indenture shall
control with respect to the subject matter of such term or provision. Acceptance
of or acquiescence in a course of performance rendered under this Security and
Disbursement Agreement shall not be relevant to determine the meaning of this
Security and Disbursement Agreement even though the accepting or acquiescing
party had knowledge of the nature of the performance and opportunity for
objection.

17.9. Continuing Security Interest; Termination.

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<PAGE>

(a) This Security and Disbursement Agreement shall create a
continuing security interest in and to and Lien on the Collateral and shall,
unless otherwise provided in the Indenture or in this Security and Disbursement
Agreement, remain in full force and effect until the payment in full in cash of
the Obligations. This Security and Disbursement Agreement shall be binding upon
the Pledgor, its transferees, successors and assigns, and shall inure, together
with the rights and remedies of the Security Agent hereunder, to the benefit of
the Trustee, the Holders and their respective successors, transferees and
assigns.

(b) This Security and Disbursement Agreement shall terminate upon
the payment in full in cash of the Obligations. At such time, the Trustee shall
cause the Security Agent, pursuant to an Issuer Order, and subject to and in
accordance with the applicable terms of the Indenture, if any, to reassign and
redeliver to the Pledgor all of the Collateral hereunder that has not been sold,
disposed of, retained or applied by the Trustee in accordance with the terms of
this Security and Disbursement Agreement and the Indenture.

Such reassignment and redelivery shall be without warranty by or recourse to the
Security Agent in its capacity as such, except as to the absence of any Liens on
the Collateral created by or arising through the Trustee, and shall be at the
cost and expense of the Pledgor.

17.10. Survival Provisions. All representations, warranties and
covenants of the Pledgor contained herein shall survive the execution and
delivery of this Security and Disbursement Agreement, and shall terminate only
upon the termination of this Security and Disbursement Agreement. The
obligations of the Pledgor under Sections 13 and 15 hereof shall survive the
termination of this Security and Disbursement Agreement.

17.11. Waivers. The Pledgor waives presentment and demand for payment
of any of the Obligations, protest and notice of dishonor or default with
respect to any of the Obligations, and all other notices to which the Pledgor
might otherwise be entitled, except as otherwise expressly provided herein or in
the Indenture.

17.12. Authority of the Security Agent.

(a) The Security Agent shall have and be entitled to exercise all
powers hereunder that are specifically granted to the Security Agent by the
terms hereof, together with such powers as are reasonably incident thereto. The
Security Agent may perform any of its duties hereunder or in connection with the
Collateral by or through agents or employees and shall be entitled to retain
counsel and to act in reliance upon the advice of counsel concerning all such
matters. Except as otherwise expressly provided in this Security and
Disbursement Agreement or the Indenture, neither the Security Agent nor any
director, officer, employee, attorney or agent of the Security Agent shall be
liable to the Pledgor for any action taken or omitted to be taken by the
Security Agent, in its capacity as Security

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<PAGE>

Agent, hereunder, except for its own bad faith, gross negligence or willful
misconduct, and the Security Agent shall not be responsible for the validity,
effectiveness or sufficiency hereof or of any document or security furnished
pursuant hereto. The Security Agent and its directors, officers, employees,
attorneys and agents shall be entitled to rely on any communication, instrument
or document believed by it or them to be genuine and correct and to have been
signed or sent by the proper person or persons. The Security Agent shall have no
duty to cause any financing statement or continuation statement to be filed in
respect of the Collateral.

(b) The Pledgor acknowledges that the rights and responsibilities
of the Security Agent under this Security and Disbursement Agreement with
respect to any action taken by the Security Agent or the exercise or
non-exercise by the Security Agent of any option, right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Security and Disbursement Agreement shall, as between the Security Agent and the
Holders, be governed by the Indenture and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the Security
Agent and the Pledgor, the Security Agent shall be conclusively presumed to be
acting as agent for the Holders with full and valid authority so to act or
refrain from acting, and the Pledgor shall not be obligated or entitled to make
any inquiry respecting such authority.

(c) The Security Agent shall maintain appropriate books and
records with respect to the Collateral in which shall be recorded all deposits
and transactions in and disbursements from the Security Account and regarding
the Pledged Securities and shall permit the Pledgor to inspect and to make
copies of such books and records at the Pledgor's sole cost and expense.

17.13. Successor Security Agent. The term Security Agent shall mean
the Person named as the "Security Agent' in the first paragraph of the Security
and Disbursement Agreement until a successor Security Agent shall have become
such, and thereafter "Security Agent" shall mean the Person who is then the
Security Agent hereunder. If the Security Agent consolidates with, merges or
converts into, or transfers all or substantially all of its corporate trust
business to another entity, the resulting, surviving or transferee entity,
without any further act, shall be the successor Security Agent.

17.14. Final Expression. This Security and Disbursement Agreement,
together with the Indenture and any other agreement executed in connection
herewith, is intended by the parties as a final expression of this Security and
Disbursement Agreement and is intended as a complete and exclusive statement of
the terms and conditions thereof.

17.15. Rights of Holders. No Holder of Notes shall have any rights
granted to individual Holders pursuant to Section 6.7 of the Indenture; provided
that nothing in this subsection shall limit any rights granted to the Security
Agent under the Notes or the Indenture.

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<PAGE>

17.16. GOVERNING LAW, SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; WAIVER OF DAMAGES.

(a) THIS SECURITY AND DISBURSEMENT AGREEMENT SHALL BE GOVERNED BY
AND INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THE PLEDGOR, THE SECURITY AGENT AND THE HOLDERS IN
CONNECTION WITH THIS SECURITY AND DISBURSEMENT AGREEMENT, AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. THE SECURITY ACCOUNT SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK. REGARDLESS OF ANY PROVISION IN ANY OTHER
AGREEMENT, FOR PURPOSES OF THE UCC, NEW YORK SHALL BE DEEMED TO BE THE SECURITY
AGENT'S LOCATION AND THE SECURITY ACCOUNT (AS WELL AS THE SECURITIES
ENTITLEMENTS RELATED THERETO) SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.

(b) THE PLEDGOR AGREES THAT THE SECURITY AGENT SHALL, IN ITS
CAPACITY AS SECURITY AGENT OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES,
HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST
THE PLEDGOR OR THE COLLATERAL IN A COURT IN ANY LOCATION REASONABLY SELECTED IN
GOOD FAITH (AND HAVING PERSONAL OR IN REM JURISDICTION OVER THE PLEDGOR OR THE
COLLATERAL, AS THE CASE MAY BE) TO ENABLE THE SECURITY AGENT TO REALIZE ON SUCH
COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
THE SECURITY AGENT. THE PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY
COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS IN ANY PROCEEDING BROUGHT BY THE SECURITY
AGENT TO REALIZE ON SUCH COLLATERAL OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE SECURITY AGENT, WITH RESPECT TO SUCH COLLATERAL, EXCEPT
FOR SUCH COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF NOT ASSERTED IN ANY
SUCH PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED.

(c) THE RIGHTS AND POWERS GRANTED TO THE SECURITY AGENT
HEREUNDER ARE BEING GRANTED IN ORDER TO PRESERVE AND PROTECT THE SECURITY
INTEREST OF THE SECURITY AGENT AND THE HOLDERS IN AND TO THE COLLATERAL GRANTED
HEREBY AND SHALL NOT BE INTERPRETED TO, AND SHALL NOT IMPOSE ANY DUTIES ON THE
SECURITY AGENT IN CONNECTION THEREWITH OTHER THAN THOSE EXPRESSLY PROVIDED
HEREIN OR IMPOSED UNDER APPLICABLE LAW AND NO IMPLIED

17
<PAGE>

COVENANTS, FUNCTIONS, RESPONSIBILITIES, DUTIES, OBLIGATIONS, OR LIABILITIES
SHALL BE READ INTO THIS SECURITY AND DISBURSEMENT AGREEMENT OR OTHERWISE EXIST
AGAINST THE SECURITY AGENT. EXCEPT AS PROVIDED BY APPLICABLE LAW OR BY THE
INDENTURE THE SECURITY AGENT SHALL BE DEEMED TO HAVE EXERCISED REASONABLE CARE
IN THE CUSTODY AND PRESERVATION OF THE COLLATERAL IN ITS POSSESSION IF THE
COLLATERAL IS ACCORDED TREATMENT SUBSTANTIALLY EQUAL TO THAT WHICH THE SECURITY
AGENT ACCORDS SIMILAR PROPERTY HELD BY THE SECURITY AGENT FOR SIMILAR ACCOUNTS,
IT BEING UNDERSTOOD THAT THE SECURITY AGENT IN ITS CAPACITY AS SUCH SHALL NOT
HAVE ANY RESPONSIBILITY FOR (A) ASCERTAINING OR TAKING ACTION WITH RESPECT TO
CALLS, CONVERSIONS, EXCHANGES, MATURITIES OR OTHER MATTERS RELATIVE TO ANY
COLLATERAL, WHETHER OR NOT THE SECURITY AGENT HAS OR IS DEEMED TO HAVE KNOWLEDGE
OF SUCH MATTERS, (B) TAKING ANY NECESSARY STEPS TO PRESERVE RIGHTS AGAINST ANY
PARTIES WITH RESPECT TO ANY COLLATERAL OR (C) INVESTING OR REINVESTING ANY OF
THE COLLATERAL, PROVIDED, HOWEVER, THAT NOTHING CONTAINED IN THIS SECURITY AND
DISBURSEMENT AGREEMENT SHALL RELIEVE THE SECURITY AGENT OF ANY RESPONSIBILITIES
AS A SECURITIES INTERMEDIARY UNDER APPLICABLE LAW.

18
<PAGE>

EXHIBIT A

FIRST TRUST NATIONAL ASSOCIATION
OFFICER'S CERTIFICATE

Pursuant to Section 6(d) of the Security and Disbursement Agreement (the
"Security and Disbursement Agreement") dated as of October 29, 1997 by and among
County Seat Stores, Inc. (the "Pledgor"), and First Trust National Association,
as trustee (the "Trustee") and as securities intermediary (the "Security
Agent"), for the holders of the Pledgor's 12 3/4% Senior Notes Due 2004, the
undersigned officer of the Security Agent, on behalf of the Security Agent,
makes the following certifications to the Pledgor and the Initial Purchaser.
Capitalized terms used and not defined in this Officer's Certificate have the
meanings set forth or referred to in the Security and Disbursement Agreement.

1. Substantially contemporaneously with the execution and delivery of
this Officer's Certificate, the Security Agent has established at its offices,
as securities intermediary a securities account in the name of "First Trust
National Association Security Account Re: County Seat Stores" (the "Security
Account") with respect to which the Trustee is the entitlement holder and
through which the Trustee has acquired a security entitlement to certain
Collateral. The Security Agent has sole dominion and control and has made
appropriate book entries in its records establishing that such Collateral and
the Trustee's security entitlement thereto have been credited to and are held in
the Security Account.

2. The Security Agent has established and maintained and will maintain
the Security Account and all securities entitlements and other positions carried
in the Security Account solely in its capacity as Security Agent and has not
asserted and will not assert any claim to or interest in the Security Account or
any such securities entitlements or other positions except in such capacity.

3. The Trustee has acquired its security entitlement to the Collateral
for value and without notice of any adverse claim thereto. Without limiting the
generality of the foregoing, the Collateral is not and the Trustee's security
entitlement to such Collateral is not, to the Trustee's knowledge, subject to
any Lien granted by or to or arising through or in favor of any securities
intermediary.

4. The Security Agent has not caused or permitted the Collateral or its
security entitlement thereto to become subject to any Lien created by or arising
through the Security Agent.

19
<PAGE>

IN WITNESS WHEREOF, the undersigned officer has executed this Officer's
Certificate on behalf of First Trust National Association, as Security Agent
this 29th day of October, 1997.

FIRST TRUST NATIONAL ASSOCIATION
as Trustee and Security Agent

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

20
<PAGE>

IN WITNESS WHEREOF, the Pledgor, the Initial Purchaser and the Security
Agent have each caused this Security and Disbursement Agreement to be duly
executed and delivered as of the date first above written.

Pledgor:

COUNTY SEAT STORES, INC.

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

Trustee:

FIRST TRUST NATIONAL ASSOCIATION

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

Security Agent:

FIRST TRUST NATIONAL ASSOCIATION

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

<PAGE>

Exhibit 10.1

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

LOAN AND SECURITY AGREEMENT

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

BANKBOSTON RETAIL FINANCE INC.
Agent for
The Lenders Referenced Herein

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

COUNTY SEAT STORES, INC.

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

............

255904.8

/October 28, 1997/

<PAGE>

TABLE OF CONTENTS

ARTICLE 1 - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE 2 - THE REVOLVING CREDIT . . . . . . . . . . . . . . . . . . . . . . .24

2-1. Establishment of Revolving Credit. . . . . . . . . . . . . . . .24
2-2. Advances in Excess of Maximum Loan Exposure. . . . . . . . . . .25
2-3. Risks of Value of Collateral . . . . . . . . . . . . . . . . . .26
2-4. Reserves. Changes to Reserves. . . . . . . . . . . . . . . . . .26
2-5. Loan Requests. . . . . . . . . . . . . . . . . . . . . . . . . .27
2-6. Making of Loans Under Revolving Credit . . . . . . . . . . . . .28
2-7. The Loan Account . . . . . . . . . . . . . . . . . . . . . . . .29
2-8. The Revolving Credit Notes . . . . . . . . . . . . . . . . . . .30
2-9. Voluntary Reduction of Commitment and Loan Ceiling . . . . . . .30
2-10. Payment of The Loan Account. . . . . . . . . . . . . . . . . . .30
2-11. Interest Rates. . . . . . . . . . . . . . . . . . . . . . . . .32
2-12. Certain Fees . . . . . . . . . . . . . . . . . . . . . . . . . .32
2-13. Agent's and Lenders' Discretion. . . . . . . . . . . . . . . . .33
2-14. Procedures For Issuance of L/C's . . . . . . . . . . . . . . . .34
2-15. Fees For L/C's and B/A's . . . . . . . . . . . . . . . . . . . .35
2-16. Concerning L/C's . . . . . . . . . . . . . . . . . . . . . . . .36
2-17. Changed Circumstances. . . . . . . . . . . . . . . . . . . . . .38
2-18. Increased Costs. . . . . . . . . . . . . . . . . . . . . . . . .39
2-19 Lenders' Commitments . . . . . . . . . . . . . . . . . . . . . .40
2-20. Replacement of Certain Lenders . . . . . . . . . . . . . . . . .41

ARTICLE 3 - CONDITIONS PRECEDENT.. . . . . . . . . . . . . . . . . . . . . . .42

3-1. Corporate Due Diligence. . . . . . . . . . . . . . . . . . . . .42
3-2. Emergence From Chapter 11. . . . . . . . . . . . . . . . . . . .43
3-3. Issuance of New Notes. . . . . . . . . . . . . . . . . . . . . .43
3-4. Opinions.. . . . . . . . . . . . . . . . . . . . . . . . . . . .43
3-5. Additional Documents.. . . . . . . . . . . . . . . . . . . . . .43
3-6. Officers' Certificates.. . . . . . . . . . . . . . . . . . . . .43
3-7. Representations and Warranties.. . . . . . . . . . . . . . . . .44
3-8. Minimum Excess Availability. . . . . . . . . . . . . . . . . . .44
3-9. No Adverse Actions.. . . . . . . . . . . . . . . . . . . . . . .44
3-10. Consents and Approvals . . . . . . . . . . . . . . . . . . . . .44
3-11. No Suspension Event. . . . . . . . . . . . . . . . . . . . . . .44
3-12. No Adverse Change. . . . . . . . . . . . . . . . . . . . . . . .44
3-13. All Fees and Expenses Paid. . . . . . . . . . . . . . . . . .45

ARTICLE 4 - GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS. . . . . . . . .45

4-1. Payment and Performance of Liabilities.. . . . . . . . . . . . .45
4-2. Due Organization - Corporate Authorization - No Conflicts. . . .45
4-3 Guaranties.. . . . . . . . . . . . . . . . . . . . . . . . . . .46
4-4. Trade Names. . . . . . . . . . . . . . . . . . . . . . . . . . .47
4-5. Locations. . . . . . . . . . . . . . . . . . . . . . . . . . . .47
4-6. Title to Assets. . . . . . . . . . . . . . . . . . . . . . . . .49

ii
/October 28, 1997/

<PAGE>

4-7. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . .50
4-8. Insurance Policies.. . . . . . . . . . . . . . . . . . . . . . .51
4-9. Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
4-10. Leases.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
4-11. Requirements of Law. . . . . . . . . . . . . . . . . . . . . . .53
4-12. Maintain Properties. . . . . . . . . . . . . . . . . . . . . . .53
4-13. Pay Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .54
4-14. No Margin Stock. . . . . . . . . . . . . . . . . . . . . . . . .55
4-15. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
4-16. Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . .56
4-17. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . .57
4-18. Dividends or Investments . . . . . . . . . . . . . . . . . . . .57
4-19. Permitted Acquisitions . . . . . . . . . . . . . . . . . . . . .58
4-20. Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
4-21. Protection of Assets . . . . . . . . . . . . . . . . . . . . . .59
4-22. Line of Business . . . . . . . . . . . . . . . . . . . . . . . .59
4-23. Affiliate Transactions . . . . . . . . . . . . . . . . . . . . .59
4-24. Additional Assurances. . . . . . . . . . . . . . . . . . . . . .60
4-25. Adequacy of Disclosure . . . . . . . . . . . . . . . . . . . . .60
4-26. Other Covenants. . . . . . . . . . . . . . . . . . . . . . . . .61

ARTICLE 5 - REPORTING REQUIREMENTS / FINANCIAL COVENANTS . . . . . . . . . . .61

5-1. Maintain Records . . . . . . . . . . . . . . . . . . . . . . . .61
5-2. Access to Records. . . . . . . . . . . . . . . . . . . . . . . .62
5-3. Immediate Notice to Agent . . . . . . . . . . . . . . . . . . .63
5-4. Borrowing Base Certificate . . . . . . . . . . . . . . . . . . .64
5-5. Monthly Reports. . . . . . . . . . . . . . . . . . . . . . . . .64
5-6. Quarterly Reports. . . . . . . . . . . . . . . . . . . . . . . .65
5-7. Annual Reports . . . . . . . . . . . . . . . . . . . . . . . . .65
5-8. Officers' Compliance Certificates. . . . . . . . . . . . . . . .66
5-9. Inventories, Appraisals, and Audits. . . . . . . . . . . . . . .67
5-10. Additional Financial Information . . . . . . . . . . . . . . . .68
5-11. Fixed Charge Coverage Ratio. . . . . . . . . . . . . . . . . . .68

ARTICLE 6 - USE AND COLLECTION OF COLLATERAL.. . . . . . . . . . . . . . . . .69

6-1. Use of Inventory Collateral. . . . . . . . . . . . . . . . . . .69
6-2. Inventory Quality. . . . . . . . . . . . . . . . . . . . . . . .69
6-3. Adjustments and Allowances . . . . . . . . . . . . . . . . . . .69
6-4. Validity of Accounts . . . . . . . . . . . . . . . . . . . . . .69
6-5. Notification to Account Debtors. . . . . . . . . . . . . . . . .70

ARTICLE 7 - CASH MANAGEMENT. PAYMENT OF LIABILITIES. . . . . . . . . . . . . .70

7-1 Depository Accounts. . . . . . . . . . . . . . . . . . . . . . .70
7-2. Credit Card Receipts . . . . . . . . . . . . . . . . . . . . . .70
7-3. The Concentration and the Funding Accounts . . . . . . . . . . .71
7-4. Proceeds and Collection of Accounts. . . . . . . . . . . . . . .72
7-5. Payment of Liabilities . . . . . . . . . . . . . . . . . . . . .72
7-6. The Funding Account. . . . . . . . . . . . . . . . . . . . . . .73

ARTICLE 8 - GRANT OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . .73

iii
/October 28, 1997/

<PAGE>

8-1. Grant of Security Interest . . . . . . . . . . . . . . . . . . .73
8-2. Extent and Duration of Security Interest . . . . . . . . . . . .74

ARTICLE 9 - AGENT AS BORROWER'S ATTORNEY-IN-FACT.. . . . . . . . . . . . . . .74

9-1. Appointment as Attorney-In-Fact. . . . . . . . . . . . . . . . .74
9-2. No Obligation to Act . . . . . . . . . . . . . . . . . . . . . .76

ARTICLE 10 - EVENTS OF DEFAULT.. . . . . . . . . . . . . . . . . . . . . . . .76

10-1. Failure to Pay Principal . . . . . . . . . . . . . . . . . . . .76
10-2. Failure To Make Other Payments . . . . . . . . . . . . . . . . .76
10-3. Failure to Perform Covenant or Liability (No Grace Period) . . .76
10-4. Failure to Perform Covenant or Liability (Limited Grace) . . . .77
10-5. Failure to Perform Covenant or Liability (Grace Period). . . . .78
10-6. Misrepresentation. . . . . . . . . . . . . . . . . . . . . . . .78
10-7. Default in Other Indebtedness. . . . . . . . . . . . . . . . . .78
10-8. Payment Default Under Any Lease. . . . . . . . . . . . . . . . .78
10-9. Default Under Other Agreements . . . . . . . . . . . . . . . . .78
10-10. Events with Respect To New Notes. . . . . . . . . . . . . . . .78
10-11. Casualty Loss. Non-Ordinary Course Sales . . . . . . . . . . . .78
10-12. Judgment. Restraint of Business . . . . . . . . . . . . . . . .79
10-13. Business Failure . . . . . . . . . . . . . . . . . . . . . . . .79
10-14. Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . .79
10-15. Default by Guarantor or Related Entity . . . . . . . . . . . . .80
10-16. Indictment - Forfeiture. . . . . . . . . . . . . . . . . . . . .80
10-17. Challenge to Loan Documents. . . . . . . . . . . . . . . . . . .80
10-18. Executive Management.. . . . . . . . . . . . . . . . . . . . . .80
10-19. Change in Control. . . . . . . . . . . . . . . . . . . . . . . .81

ARTICLE 11 - RIGHTS AND REMEDIES UPON DEFAULT. . . . . . . . . . . . . . . . .81

11-1. Rights of Enforcement. . . . . . . . . . . . . . . . . . . . . .81
11-2. Sale of Collateral . . . . . . . . . . . . . . . . . . . . . . .82
11-3. Occupation of Business Location. . . . . . . . . . . . . . . . .83
11-4. Grant of Nonexclusive License. . . . . . . . . . . . . . . . . .83
11-5. Assembly of Collateral . . . . . . . . . . . . . . . . . . . . .83
11-6. Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . .83

ARTICLE 12 - NOTICES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .84

12-1. Notice Addresses . . . . . . . . . . . . . . . . . . . . . . . .84
12-2. Notice Given . . . . . . . . . . . . . . . . . . . . . . . . . .85

ARTICLE 13 - TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86

13-1. Termination of Revolving Credit. . . . . . . . . . . . . . . . .86
13-2. Effect of Termination. . . . . . . . . . . . . . . . . . . . . .86

ARTICLE 14 - GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . .86

14-1. Protection of Collateral . . . . . . . . . . . . . . . . . . . .86

iv
/October 28, 1997/

<PAGE>

14-2. Successors and Assigns.. . . . . . . . . . . . . . . . . . . . .87
14-3. Severability . . . . . . . . . . . . . . . . . . . . . . . . . .87
14-4. Amendments. Course of Dealing . . . . . . . . . . . . . . . . .87
14-5. Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . .88
14-6. Application of Proceeds. . . . . . . . . . . . . . . . . . . . .88
14-7. Costs and Expenses of Agent and Of Lenders . . . . . . . . . . .88
14-8. Copies and Facsimiles. . . . . . . . . . . . . . . . . . . . . .88
14-9. Massachusetts Law. . . . . . . . . . . . . . . . . . . . . . . .89
14-10. Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . . .89
14-11. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . .90
14-12. Rules of Construction. . . . . . . . . . . . . . . . . . . . . .90
14-13. Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . .91
14-14. Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . .91
14-15. Maximum Interest Rate. . . . . . . . . . . . . . . . . . . . . .92
14-16. Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . .92
14-17. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . .93

EXHIBITS

2-5 : Form of Loan Request.
2-8 : Revolving Credit Note
2-15 : Acceptable Voting Rights
3-4 : Form Of Opinions
4-2 : Related Entities
4-3 : Form of Guaranty
4-4 : Trade Names
4-5 : Locations.
4-5(b)(ii)(C) : Specific Store Closings
4-6(a) : Encumbrances.
4-6(b) : Consignments
4-7 : Indebtedness.
4-8 : Insurance Policies.
4-10 : Leases.
4-13 : Taxes
4-17 : Litigation
4-23 : Affiliate Transactions
5-4 : Borrowing Base Certificate
7-1 : DDA's.
7-2 : Credit Card Arrangements

v
/October 28, 1997/

<PAGE>

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

LOAN AND SECURITY AGREEMENT BankBoston
Retail Finance Inc.

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

October 29, 1997

THIS AGREEMENT is made among

BankBoston Retail Finance Inc. (in such capacity, the "Agent"),
a Delaware corporation with offices at 40 Broad Street Boston,
Massachusetts 02109, as agent for the ratable benefit of the "Lenders", who
are, at present, those financial institutions identified on the signature
pages of the within Agreement and who in the future are those Persons (if
any) who become "Lenders" in accordance with the provisions of Section 219,
below,

the Lenders

and

County Seat Stores, Inc. (hereinafter, the "Borrower"), a
Minnesota corporation with its principal executive offices at 469 Seventh
Avenue, New York, New York 10018

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

WITNESSETH:
ARTICLE 1 - DEFINITIONS.

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

"Acceptable Inventory": All inventory of the Borrower (excluding any
supplies, goods returned or rejected by customers, goods to be
returned to suppliers and goods in transit to third persons
(other than the Borrower's agents or warehouses)) of a nature,
kind, and character comparable to that which existed on October
1, 1997, less any reserves to the extent permitted by Section 24,
as to which inventory the Lender has a perfected security
interest which is prior and superior to all security interests,
claims, and encumbrances (other than Permitted Encumbrances).

"Accounts" and "Accounts Receivable" include, without limitation,
"accounts" as defined in the UCC, and also all: accounts,
accounts receivable, credit card receivables, notes, drafts,
acceptances, and other forms of obligations and receivables and
rights to payment for credit extended and for goods sold or
leased, or services rendered, whether or not yet earned by
performance.

"ACH": Automated clearing house.

"Account Debtor": Has the meaning given that term in the UCC.

1
/October 28, 1997/

<PAGE>

"Acquisition": The purchase or other acquisition, by the Borrower or by any
Subsidiary (no matter how structured in one transaction or in a
series of transactions) , of: (a) equity interests in any other
Person which would constitute or which results in a Change in
Control of such other Person, or (b) such of the assets of any
Person as would permit the Borrower or such Subsidiary to operate
one or more retail locations of such Person or to conduct other
business operations with such assets (provided, however, none of
the following shall constitute an "Acquisition": purchases of
inventory in the ordinary course of the Borrower's business;
purchases, leases or other acquisitions of Equipment in the
ordinary course of the Borrower's business; capital expenditures
permitted hereunder; and the acquisition of investments otherwise
permitted by the terms of this Agreement).

"Affected Lender": Is defined in Section 2-20.

"Affiliate": With respect to any two Persons, a relationship in which (a)
one holds, directly or indirectly, not less than Twenty Five
Percent (25%) of the Voting Stock of the other; or (b) one has,
directly or indirectly, Control of the other; or (c) not less
than Twenty Five Percent (25%) of their respective Voting Stock
is directly or indirectly held by the same third Person.

"Agency Agreement": That certain Agency Agreement among the Agent and the
Lenders regarding the loan arrangement contemplated by the Loan
Documents, as amended and in effect from time to time.

"Agent": Is defined in the Preamble.

"Agent's Fee": As defined in the Commitment Letter.

"Agent's Rights and Remedies": Is defined in Section 116.

"Applicable Advance Rate": The following percentage during the period
indicated:

From To Percentage

Execution of the within Agreement December 15, 1997 75%

December 16, 1997 January 31, 1998 65%

Each February 1 after closing Each June 30 after closing 70%

Each July 1 after closing Each December 15 after
closing, other than
December 15, 1997 73%

Each December 16 after closing, Each January 31 after
other than December 16, 1997 closing, other than
January 31, 1998 65%

"Availability": Is defined in Section 2-1(b).

/October 28, 1997/
2
<PAGE>

"Availability Reserves: Such reserves, for the following, as the Agent
from time to time determines in the Agent's reasonable discretion
(subject to the maxima set forth in Section 2-4) as being
appropriate to reflect the impediments to the Agent's ability to
realize upon the Collateral or which constitutes contingent
obligations of the Borrower on account of which the Agent and
Lenders may have responsibility subsequent to acceleration: gift
certificates; merchandise credits; L/C Landing Costs; taxes for
which a lien has been filed, recorded, or otherwise arisen, which
lien has priority over the Encumbrances granted to the Agent
hereunder; and rent which is past due for more than Twenty -
Five (25) days after the expiration of any applicable grace
period in the subject lease (See Section 2-4, which deals with
certain maximum Reserves, initial Reserves and the basis under
which Reserves may be changed or supplemented from the initial
Reserves).

"Average Usage": For the period in respect of which Average Usage is
being determined: (a) the aggregate of the unpaid principal
balance of the Loan Account and the Stated Amounts of all
outstanding L/C's and B/A's on each day of such period divided by
(b) the number of days in such period.

"B/A": Banker's Acceptances.

"Backup L/C": The L/C which the Agent shall cause to be issued to support
the Borrower's obligations, at the execution of the within
Agreement, to Banker's Trust Company on account of letters of
credit and banker's acceptances issued, prior to the execution of
the within Agreement, by Banker's Trust Company for the account
of the Borrower.

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

"Base": The greater, from time to time, of (a) the prime commercial rate
announced from time to time by BankBoston, N.A. or (b) the
aggregate of the Federal Funds Effective Rate plus 0.5% per
annum. Any change in "Base" shall be effective, for purposes of
the calculation of interest due hereunder, when such change is
made effective generally by the bank on whose rate or index
"Base" is being set.

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

"Base Margin Rate": The aggregate of Base plus the Base Margin.

"Base Margin": 75 basis points, provided, however,

(a) In the event that the Borrower's actual EBITDA for the
Borrower's Fiscal 1998 is not less than $24,889,600.00, as such
actual EBITDA is determined from the Borrower's annual financial
statement for that Fiscal year and provided to the Agent
pursuant to Section 5-7(a), the Base Margin, commencing no later
than Three (3) Business Days after the delivery of such annual
financial statement, shall be 50 basis points and shall continue
to be 50 basis points until the anniversary of the date on which
the Base Margin so became 50 basis points, on which anniversary
date, unless the provisions of Clause (b) are then effective, the
Base Margin shall revert to 75 basis points.

/October 28, 1997/

3
<PAGE>

be 50 basis points until the Maturity Date, provided, however,
in the event that on the date on which the Borrower's annual
financial statement for its Fiscal 1999 is so delivered, the Base
Margin is 50 basis points, then Base Margin shall remain at 50
basis points until the Maturity Date.

"Borrower": Is defined in the Preamble.

"Business Day": Any day other than (a) a Saturday or Sunday; (b) any day
on which banks in Boston, Massachusetts or New York, New York, or
Minneapolis, Minnesota generally are not open to the general
public for the purpose of conducting commercial banking business;
or (c) a day on which the Agent is not open to the general public
to conduct business, and with respect to LIBOR Loans any day
which is also a day on which commercial banks are open for
international business (including dealings in dollar deposits) in
the London interbank market.

"Business Plan": The Borrower's business plan, dated October 28, 1997.

"Capital Expenditures": Gross Capital Expenditures which are required to
be included in, or reflected by, the property, plant and
equipment or similar fixed asset accounts on the balance sheet
prepared in accordance with GAAP, less Net Proceeds from the sale
or sale-leaseback of fixed assets.

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

"Capital Stock": means (I) with respect to any Person that is a corporation,
any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock including,
without limitation, partnership interests and other indicia of
ownership and (ii) with respect to any other Person, any and all
partnership or other equity interests of such Person.

"Cash Equivalents" shall mean, as to any Person, (I) securities issued or
directly and fully guaranteed or insured by the United States or
any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support
thereof) having maturities of not more than six (6) months from
the date of acquisition by such Person, (ii) time deposits and
certificates of deposit of any commercial bank incorporated in
the United States of recognized standing having capital and
surplus in excess of $100,000,000 with maturities of not more
than six (6) months from the date of acquisition by such Person,
(iii) repurchase obligations with a term of not more than seven
(7) days for underlying securities of the types described in
clause (I) above, provided that there shall be no restriction on
the maturities of such underlying securities pursuant to this
clause (iii) entered into with a bank meeting the qualifications
specified in clause (ii) above, (iv) commercial paper issued by
the parent corporation of any commercial bank (provided that the
parent corporation and the bank are both incorporated in the
United States) of recognized standing having capital and surplus
in excess of $500,000,000 and commercial paper issued by any
Person incorporated in the United States rated at least A-1 or
the equivalent thereof by Standard & Poor's Ratings Group or at
least P-1 or the equivalent thereof by Moody's Investors Service,
Inc. and in each case maturing not more than six (6) months after
the date of acquisition by such Person, and (v) investments in
money market funds substantially all of whose assets are
comprised of securities of the types described in clauses (I)
through (v) above.

/October 28, 1997/

4
<PAGE>

"Central Account": Defined in Section 7-3.

"Change in Control": The occurrence of any of the following (in one
transaction or a series of transactions): (I) the sale, lease,
transfer, conveyance or other disposition of all or substantially
all of the Borrower's assets to any "person" or "group" (as such
terms are used in Section 13(d) and 14(d) of the Exchange Act);
(ii) the liquidation or dissolution of the Borrower or the
adoption of a plan by the stockholders of the Borrower relating
to the dissolution or liquidation of the Borrower; (iii) at any
time, following the first anniversary of the date of this
Agreement, any "person" or "group" (as such terms are used in
Section 13(d) and 14(d) of the Exchange Act), except for one or
more Existing Holders, is or becomes the "beneficial owner" (as
such term is defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than
50% of the aggregate ordinary voting power of the total
outstanding Voting Stock of the Borrower; or (iv) at any time,
following the first anniversary of the date of this Agreement,
with respect to the Borrower's Board of Directors, as such board
is constituted on and after the date of this Agreement, during
any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of
the Borrower (together with any new directors who are approved by
a vote of at least 66 2/3% of the directors then still in office
who were either directors at the beginning of such period or
whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the
Board of Directors of the Borrower then still in office.

"Chattel Paper": Has the meaning given that term in the UCC.

"Collateral": Is defined in Section 8-1.

"Commitment": Subject to 2-19, as follows:

LENDER Dollar Commitment Percentage Commitment

BankBoston Retail Finance Inc. $115,000,000.00 100%

"Commitment Letter": The letter agreement dated October 14, 1997
between the Borrower, on the one hand, and BankBoston Retail
Finance Inc. and BankBoston Securities Inc., on the other,
including the Term Sheet annexed to that Letter as EXHIBIT A.

"Control": As to any Person, means the possession of the power, directly or
indirectly, to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.

"Concentration Account": Is defined in Section 7-3.

"Cost": The calculated cost of purchases, as determined from invoices
received by the Borrower, the Borrower's purchase journal or
stock ledger, based upon the Borrower's accounting practices
maintained in accordance with Section 5-1(a). "Cost" does not
include inventory capitalization costs or other non-purchase
price charges used in the Borrower's calculation of cost of goods
sold (but includes freight, duties and other landed costs (only
to the extent those costs were capitalized as of the date of this
Agreement).

/October 28, 1997/

5
<PAGE>

"Costs of Collection" includes, without limitation, all attorneys'
reasonable fees and reasonable out-of-pocket expenses incurred by
the Agent's attorneys, and all reasonable costs incurred by the
Agent 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 Agent, which
costs and expenses are directly or indirectly related to or in
respect of the Agent's: administration and management of the
Liabilities; negotiation, documentation, and amendment of any
Loan Document; or efforts to preserve, protect, collect, or
enforce the Collateral, the Liabilities, and/or the Agent's
Rights and Remedies and/or any of the Agent's rights and remedies
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). The Costs of Collection are
Liabilities, and at the Agent's option may bear interest, if not
paid when due, at the highest post-default rate which the Agent
may charge the Borrower hereunder as if such had been lent,
advanced, and credited by the Agent to, or for the benefit of,
the Borrower.

"DDA": Any checking or other demand daily depository account maintained by
the Borrower.

"Deposit Account": Has the meaning given that term in the UCC.

"Distribution Facility": The Borrower's distribution facility located in
Brooklyn, Minnesota.

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

"Documents of Title": Has the meaning given that term in the UCC.

"Dollar Commitment": As provided in the Definition of "Commitment",
above as reduced from time to time as the Loan Ceiling is reduced
pursuant to Section 2-10(c).

"EBITDA": The following, determined in accordance with GAAP: Net Income
before taxes plus (a) interest expense, whether paid or accrued,
plus/minus, (b) amortization, depreciation, and other non-cash
charges and credits (including, amortization of goodwill,
deferred financing fees, LIFO reserve adjustments and other
intangibles), plus (c) extraordinary charges deducted in
computing Net Income to the extent related to and incurred in
respect of the Proceedings, the Original New Notes and the New
Notes, paid after the date hereof, in an amount not to exceed
$200,000.00 for the period ending on the first anniversary of the
date of this Agreement.

"Early Termination Fee": Is defined in Section 2-12(c).

"Employee Benefit Plan": As defined in ERISA.

"Encumbrance": Each of the following:

(a) security interest, mortgage, pledge, hypothecation,
lien, attachment, or charge of any kind (including any agreement
to give any

/October 28, 1997/

6
<PAGE>

of the foregoing); the interest of a lessor under a Capital
Lease; conditional sale or other title retention agreement; 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 or
which constitutes an interest in property to secure an
obligation; 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 both (a) all Liabilities have been paid
in full and (b) all obligations of any Lender to make loans and
advances and to provide other financial accommodations to the
Borrower hereunder shall have been irrevocably terminated.

"Environmental Laws": (a) Any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees or requirements which regulate or relate to, or
impose any standard of conduct or liability on account of or in
respect to environmental protection matters, including, without
limitation, Hazardous Materials, as are now or hereafter in
effect; and

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

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

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

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

"Events of Default": Is defined in Article 10. Each reference herein to an
Event of Default or its consequences constitutes reference to an
Event of Default not then duly waived by the Agent pursuant to
Section 14-4(b).

"Excluded L/C Inventory": So much of the L/C Inventory, the purchase of
which is supported by documentary L/C's with an initial term in
excess of 120 days, as then exceeds 30% of the Stated Amount of
all documentary L/C's.

"Excluded Inventory Value": The then aggregate Stated Amount of L/C's
which support the purchase of Excluded L/C Inventory.

"Existing Holders": Collectively, the record and beneficial holders of
Borrower's common stock that receive such common stock in
connection with the Plan.

"Fiscal": When used with reference to a fiscal year, the Borrower's fiscal
year ending in January of the year following that to which
reference is made. E.g., "Fiscal 1998" refers to the Borrower's
fiscal year ending in January 1999.

/October 28, 1997/
7
<PAGE>

Federal Funds Effective Rate: For any day, a fluctuating per annum interest
rate 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, as published on that
date (or on the then next succeeding Business Day, if not one) by
the Federal Reserve Bank of New York, provided that if such a
rate is not so published for a day which is a Business Day,
Federal Funds Effective Rate shall be the average of quotations
for such day on such transactions received by the Agent from
three federal funds brokers of recognized standing selected by
the Agent.

"Fixed Charge Coverage Ratio": The ratio of the following, each
determined for the period in respect of which compliance with
this ratio is being determined:

EBITDA less Fixed Charges
---------------------------------------------------------------
The sum of cash payments of interest and principal amortization.

"Fixed Charges": The sum of

(a) interest expense paid (except as provided below);
plus

(b) all cash dividend payments (which dividend
payments are subject, in any event, to limitations
included in Section 4-18(a)); plus

(d) principal payments on Capitalized Leases; plus

(e) the greater of Capital Expenditures or Zero (0);
plus

(f) cash payments of all taxes,

provided that, the following shall in no event be deemed to
constitute Fixed Charges: (I) the amount of fees and other debt
issuance costs related to the extension or amendment of this
Agreement, and (ii) amounts paid in the New Note Disbursement
Account on or about the date hereof, for the payment of interest
on the New Notes pursuant to the Indenture; and (iii) without
duplication, interest paid to the holders of the New Notes.

"Funding Account": Is defined in Section 7-3.

"GAAP": (a) For all purposes other than those specified in clause (b)
below, principles which are consistent with those promulgated or
adopted by the Financial Accounting Standards Board and its
predecessors (or successors) in effect as of the date of
determination and applicable to that accounting period in respect
of which reference to GAAP is being made, and (b) for purposes of
the financial covenant set forth in Section 5-11(a), principles
referred to in clause (a) above, which are applied in a manner
materially consistent with that used in preparing the Borrower's
financial statements for the fiscal year ending approximately as
of January 31, 1997, except for implementation of fresh start
accounting.

"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 the Borrower; credit memoranda
in favor of the 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 the 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

/October 28, 1997/
8
<PAGE>

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 the
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 similar 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 the Borrower or credit extended or services
performed, by the Borrower, whether intended for an individual
customer or the general business of the Borrower, or used or
useful in connection with research by the Borrower.

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

"Hazardous Materials:" Any (a) hazardous materials, hazardous waste,
hazardous or toxic substances, petroleum products, which (as to
any of the foregoing) are defined or regulated as a hazardous
material in or under any Environmental Law and (b) oil in any
physical state.

"Indebtedness": All indebtedness and obligations of or assumed by any
Person on account of or in respect to any of the following:

(a) 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) For the payment of the purchase price of goods or
services deferred for more than Thirty (30) days beyond then
current trade terms provided to such person by the supplier of
such goods or services.

(c) 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).

(d) On account of deposits or advances from such Person's
customers.

(e) As lessee under Capital Leases.
"Indebtedness" of any Person shall also include:

(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 pursuant to which that Person may be liable on
account of any obligation of the type described in (a) above
of any third party.

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

"Indemnified Person": Is defined in Section 14-11.

"Indenture": That certain Indenture dated as of October 29, 1997 between
the Borrower and First Trust, National Association, as Trustee
which relates to the New Notes, together with any amendment,
restatement or modification to such Indenture, prior written
approval of which amendment, restatement or

/October 28, 1997/
9
<PAGE>

modification is given by the Agent, provided that the following
amendments, supplements or modifications shall not require the
prior written consent of the Agent:

(i) which decrease the rate of interest payable on the New
Notes;

(ii) which provide for payment in kind in lieu of cash of
any portion of the interest on the New Notes;

(iii) which provide for the extension of the maturity date
with respect to any principal or interest payment to be made
under the New Notes;

(iv) which provide more flexibility to the Borrower in
connection with any financial covenants; and

(v) which waive any defaults existing in connection with the
New Notes.

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

"Interest Payment Date": With reference to:

(a) Each LIBOR Loan: The last day of the Interest Period
relating thereto; the Termination Date, and the End Date.

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

"Interest Period": (a) With respect to each LIBOR Loan: Subject to
Subsection (d), below, the period commencing on the date of the
making or continuation of, or conversion to, such LIBOR Loan and
ending (but excluding) the day which corresponds numerically to
such date, one, two, or three months thereafter, as the Borrower
may elect by notice (pursuant to Section 2-5(b)) to the 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 LIBOR Loan, as the Borrower may elect by
notice (pursuant to Section 2-5(b)) to the Agent, or (ii) on
which the subject Base Margin Loan is paid by the Borrower.

(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 LIBOR 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 (v), below, any
Interest Period applicable to a LIBOR 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) No Interest Period applicable to a LIBOR Loan may
be less than one (1) month.

(vi) The number of Interest Periods applicable to LIBOR
Loans in effect at any one time is subject to Section 2-11(d)
hereof.

/October 28, 1997/
10
<PAGE>

"Investment Property": Has the meaning given that term in the UCC.

"Inventory" includes, without limitation, "inventory" as defined in the UCC
and also all: packaging, advertising, and shipping materials
related to any of the foregoing, and all names or marks affixed
or to be affixed thereto for identifying or selling the same;
Goods held for sale or lease or furnished or to be furnished
under a contract or contracts of sale or service by the Borrower,
or used or consumed or to be used or consumed in the Borrower's
business; Goods of said description in transit: returned,
repossessed and rejected Goods of said description; and all
documents (whether or not negotiable) which represent any of the
foregoing.

Inventory Reserves": The following Reserves: shrinkage; return to
vendor; damaged inventory; seasonality; change in Inventory
character; change in Inventory mix; and markdowns, markons, and
markups which are out of the ordinary course of business and
inconsistent with prior practices (See Section 2-4, which deals
with initial Reserves and the basis under which Reserves may be
established, changed or supplemented from the initial Reserves).

"Issuer": The issuer of any L/C, which shall be BankBoston, N.A., or any
other bank approved by the Agent and the Borrower to issue L/Cs.

"L/C": Any letter of credit, the issuance of which is procured by the
Agent for the account of the Borrower.

"L/C Fee": Is defined in Section 2-15(a).

"L/C Inventory": Inventory, not yet delivered to the Borrower , the
purchase of which is supported by a documentary L/C or by a B/A
whether or not drawn or paid or by a letter of credit supported
by the Backup L/C whether or not drawn or paid, which Inventory,
at the drawing of the subject L/C, would constitute Acceptable
Inventory.

"L/C Inventory Value": The aggregate Stated Amount of L/C's and B/A's which
support the purchase of L/C Inventory.

"L/C Landing Costs": To the extent not included in the Stated Amount of an
L/C, customs, duty, freight, and other out-of-pocket costs and
expenses which will be expended to "land" the Inventory at the
Distribution Facility, the purchase of which is supported by such
L/C.

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

"Lenders": Defined in the Preamble to the within Agreement

"Liabilities" (in the singular, "Liability") includes, without limitation,
all and each of the following, whether now existing or hereafter
arising:

(a) Any and all direct and indirect liabilities, debts, and
obligations of the Borrower to the Agent or any Lender, each of
every kind, nature, and description under the Loan Documents.

(b) Each obligation to repay any loan, advance,
indebtedness, note, obligation, overdraft, or amount now or
hereafter owing by the Borrower to the Agent or any Lender under
the Loan Documents (including all future advances whether or not
made pursuant to a commitment by the Agent

/October 28, 1997/
11
<PAGE>

or any Lender under the Loan Documents, 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 the Agent or any Lender may hold against the
Borrower.

(c) All notes and other obligations of the Borrower under
the Loan Documents, now or hereafter assigned to or held by the
Agent or any Lender, each of every kind, nature, and
description.

(d) All interest, fees, and charges and other amounts under
the Loan Documents, which may be charged by the Agent or any
Lender to the Borrower and/or which may be due from the Borrower
to the Agent or any Lender under the Loan Documents.

(e) All costs and expenses incurred or paid by the Agent or
any Lender in respect of any Loan Document (including, without
limitation, Costs of Collection, attorneys' reasonable fees, and
all court and litigation costs and expenses).

(f) Any and all covenants of the Borrower to or with the
Agent or any Lender under the Loan Documents and any other
instruments, documents, agreements and facilities entered into in
connection with or relating to this Agreement, including, without
limitation, cash management agreements, depository/investment
account agreements, letter of credit reimbursement agreements
with the Issuer and interest rate protection agreements, and any
and all obligations of the Borrower under the Loan Documents to
act or to refrain from acting in accordance with any Loan
Document.

"LIBOR Loan": Any Revolving Credit Loan which bears interest at a LIBOR
Rate.

"LIBOR Margin": 175 basis points, provided, however,

(a) In the event that the Borrower's actual EBITDA for the
Borrower's Fiscal 1998 is not less than $24,889,600.00, as such
actual EBITDA is determined from the Borrower's annual financial
statement for that Fiscal year and provided to the Agent pursuant
to Section 57(a), the LIBOR Margin, commencing no later than
Three (3) Business Days after the delivery of such annual
financial statement, shall be 150 basis points and shall continue
to be 150 basis points until the anniversary of the date on which
the LIBOR Margin so became 150 basis points, on which anniversary
date, unless the provisions of Clause (b) are then effective, the
LIBOR Margin shall revert to 175 basis points.

(b) In the event that the Borrower's actual EBITDA for the
Borrower's Fiscal 1999 is not less than $27,395,200.00, as such
actual EBITDA is determined from the Borrower's annual financial
statement for that Fiscal year and provided to the Agent pursuant
to Section 57(a), the LIBOR Margin, commencing no later than
Three (3) Business Days after the delivery of such annual
financial statement, shall be 150 basis points and shall continue
to be 150 basis points until the Maturity Date, provided,
however, in the event that on the date on which the Borrower's
annual financial statement for its Fiscal 1999 is so delivered,
the LIBOR Margin is 150 basis points, then LIBOR Margin shall
remain at 150 basis points until the Maturity Date.

"LIBOR Offer Rate": That rate of interest (rounded upwards, if necessary,
to the next 1/100 of 1%) determined by the Agent to be the
highest prevailing rate per annum at which deposits in U.S.
Dollars are offered to BankBoston, N.A., by first-class banks
in the London interbank market in which BankBoston, N.A.
participates at 10:00 AM (Boston Time) not less Two (2) Business
Days before the first day of the Interest Period for the subject
LIBOR Loan, for a deposit approximately in the amount of the
subject loan to be made by BankBoston Retail Finance Inc., for a
period of time approximately equal to such Interest Period.

/October 28, 1997/
12
<PAGE>

"LIBOR Rate": That per annum rate determined as the aggregate of the LIBOR
Offer Rate plus the LIBOR Margin except that, in the event that
it is determined by the Agent that any Lender may be subject to
the Reserve Percentage, the "LIBOR Rate" shall mean, with respect
to any LIBOR Loans then outstanding (from the date on which that
Reserve Percentage first became applicable to such loans), and
with respect to all LIBOR Loans thereafter made until such
Reserve Percentage is determined to be no longer applicable, an
interest rate per annum equal to the sum of (a) plus (b), where:

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

LIBOR Offer Rate
-------------------
1 minus Reserve Percentage
and

(b) is the applicable LIBOR Margin.

"Line Fee": Is defined in Section 2-12(c).

"Loan Account": Is defined in Section 2-7.

"Loan Ceiling": $115,000,000.00, as reduced from time to time pursuant to
the provisions of Section 2-9 and Section 2-10(c) hereof..

"Loan Documents": The within Agreement, each instrument and document
executed and delivered as contemplated by Article 3, below, each
other instrument or document from time to time executed and
delivered by the Borrower or any Subsidiary in connection with
the arrangements contemplated hereby, and any other instruments,
documents, agreements and facilities entered into in connection
with or relating to this Agreement, including, without
limitation, cash management agreements, depository/investment
account agreements, letter of credit reimbursement agreements
with the Issuer and interest rate protection agreements with any
Lender, as each may be amended from time to time.

"Local DDA": A depository account maintained by the Borrower, the only
contents of which may be transfers from the Funding Account and
actually used solely (I) for petty cash purposes; or (ii) for
payroll.

"Margin Regulations": Is defined in Section 4-14 hereof.

"Material Adverse Effect": a material adverse effect on the business,
operations, financial condition or assets of the Borrower and its
Subsidiaries, taken as a whole.

"Maturity Date": October 31, 2000.

"Maximum Loan Exposure": The lesser, on any day, of

(a) the amount determined in accordance with Section 2-1(b)
(i); or

(b) the amount determined in accordance with Section 2-1(b)
(ii) hereof,

/October 28, 1997/
13
<PAGE>

in each instance ((a) or (b)) determined without deduction from
said amount of the unpaid principal balance of the Loan Account
on that day.

"Net Proceeds": Gross proceeds from the sale or sale-leaseback of fixed
assets, less applicable expenses, taxes, and debt retirement
payments made which are associated with the sale or
sale-leaseback transactions.

"New Notes": The Original New Notes and any of the Exchange Notes which
replace the Original New Notes as permitted by Section 4-7(b).

"New Note Disbursement Account": The account established by the Borrower
upon the execution hereof with First Trust National Association
into which shall be deposited such amount as may be necessary
(together with the income earned thereon) to pay interest on the
New Notes which shall accrue over the eighteen month period
immediately following the date hereof.

"Original New Notes": The Initial Notes which are the subject of the
Indenture and are issued substantially contemporaneously with
the execution of the within Agreement.

"Participant": Is defined in Section 141-4, hereof.

"Permitted Encumbrances": Those Encumbrances permitted as provided in
Section 4-6(a) hereof.

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

"Plan": The Borrower's plan of reorganization pursuant to Chapter 11 of
the Bankruptcy Code described in the Borrower's First Amended
Disclosure Statement approved, in the Proceedings, on August 22,
1997 together with the modifications thereto disclosed in the
confirmation order.

"Plan Payments:" All payments which, on the date on which the
"Plan Payments" are being determined, remain to be made under
or on account of the Plan.

"Proceedings": The case, pursuant to Chapter 11 of the Bankruptcy Code,
initiated on October 17, 1996 by the Debtor in the United States
Bankruptcy Court for the District of Delaware (Docket No. 96-1637
(HSB)).

"Proceeds": include, without limitation, "Proceeds" as defined in the
UCC (defined below), each type of property described in Section
81 hereof, and all Equipment.

"Projected EBITDA": EBITDA, calculated from the Business Plan, and without
regard to actual performance.

/October 28, 1997/
14
<PAGE>

"Receipts": All cash, cash equivalents, checks, and credit card slips and
receipts as arise out of the sale of the Collateral.

"Receivables Collateral": That portion of the Collateral which consists of
the Borrower's Accounts, Accounts Receivable, contract rights,
General Intangibles, Chattel Paper, Instruments, Documents of
Title, Documents, Investment Property, letters of credit for the
benefit of the Borrower, and bankers' acceptances held by the
Borrower, and any rights to payment.

"Replacement Lender": Is defined in Section 2-20.

"Requirement of Law": As to any Person:

(a)(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,
arbitrator, tribunal, panel, or other governmental body which has
or claims jurisdiction over such Person, or any property of such
Person.

(b) That Person's charter, certificate of incorporation,
articles of organization, and/or other organizational documents,
as applicable; and (c) that Person's by-laws and/or other
instruments which deal with corporate or similar governance, as
applicable.

"Reserve Percentage": The decimal equivalent of that rate applicable to
a Lender under regulations issued from time to time by the Board
of Governors of the Federal Reserve System for determining the
maximum reserve requirement of that Lender with respect to
"Eurocurrency liabilities" as defined in such regulations. The
Reserve Percentage applicable to a particular LIBOR Loan shall be
based upon that in effect during the subject Interest Period,
with changes in the Reserve Percentage which take effect during
such Interest Period to take effect (and to consequently change
any interest rate determined with reference to the Reserve
Percentage) if and when such change is applicable to such loans.

"Reserves": All (if any) Availability Reserves and Inventory Reserves.

"Revolving Credit": Is defined in Section 2-1.

"Revolving Credit Note": Is defined in Section 28.

"Revolving Credit Loan": A term of convenience which 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
2-11(c)).

"Senior Officers" means with respect to the Borrower, the president, the
chief executive officer, any executive vice president, any senior
vice president, the chief financial officer, the controller, the
general counsel, and the secretary.

"Stated Amount": The maximum amount for which an L/C or a B/A may be
honored.

/October 28, 1997/
15
<PAGE>

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

"Suspension Event": Any occurrence, circumstance, or state of facts 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 or waived within any applicable
grace period. Each reference herein to a Suspension Default or
its consequences constitutes reference to a Suspension Event then
extant and not duly waived by the Agent pursuant to Section
14-4(b).

"Termination Date": The earliest of (a) the Maturity Date; or (b) the
occurrence of any event described in Section 1014 hereof; or (c)
the Agent's notice to the Borrower accelerating the Liabilities
on account of the occurrence of any Event of Default other than
as described in Section 10-14 hereof; or (d) that date (which
shall be a Business Day) irrevocably set by the Borrower by
written notice to the Agent no more than Fifteen (15) nor less
than Seven (7) days prior to the date so set.

"UCC": The Uniform Commercial Code as presently in effect in
Massachusetts (Mass. Gen. Laws, Ch. 106).

"Up Front Closing Fee": As defined in the Commitment Letter.

"Voting Stock": With respect to any Person, (I) one or more classes of
the Capital Stock of such Person having general voting power
under ordinary circumstances (A) to elect at least a majority of
the Board of Directors, managers or trustees of such Person
(irrespective of whether or not at the time Capital Stock of any
other class or classes shall have or might have voting power by
reason of the happening of any contingency) or (B) to exercise
Control over such Person, and (ii) any Capital Stock of such
Person convertible or exchangeable without restriction at the
option of the holder thereof into Capital Stock of such Person
described in clause (I) above.

ARTICLE 2 - THE REVOLVING CREDIT

2-1. Establishment of Revolving Credit.

(a) The Lenders hereby establish a revolving line of credit (the
"Revolving Credit") in the Borrower's favor pursuant to which each Lender,
subject to, and in accordance with, the within Agreement, acting through the
Agent, shall make loans and advances and otherwise provide financial
accommodations to and for the account of the Borrower as provided herein, in
each instance equal to that Lender's Commitment Percentage of Availability, up
to the maximum amount of that Lender's Commitment. The amount of the Revolving
Credit shall be determined by the Agent by reference to Availability, as
determined by the Agent from time to time hereafter as provided herein. All
loans made by each Lender under this Agreement, and all of the Borrower's other
Liabilities to the Lenders under or pursuant to this Agreement, are payable as
provided herein.

(b) As used herein, the term "Availability" refers at any time
to the lesser of (i) or (ii), below, where:

(i) Is the result of:

(A) The Loan Ceiling.

/October 28, 1997/
16
<PAGE>

Minus

(B) The then unpaid principal balance of the Loan
Account.

Minus

(D) The then outstanding Stated Amount of all L/C's
and B/A's.

(ii) Is the result of:

(A) up to the then Applicable Advance Rate of:

(I) the Cost of Acceptable Inventory, Plus

(II) L/C Inventory Value, Minus

(III) Excluded L/C Inventory Value, Minus

(IV) the then aggregate of such Inventory Reserves
as may have been established by the Agent as
provided herein.

Minus

(B) The then unpaid principal balance of the Loan
Account.

Minus

(D) The then outstanding Stated Amount of all L/C's
and B/A's..

(d) The proceeds of borrowings under the Revolving Credit shall
be used solely to facilitate the Borrower's emergence from the Proceedings and
for working capital, general corporate purposes and letters of credit and
banker's acceptances in accordance with the Business Plan, and not otherwise
prohibited pursuant to any Loan Document.

2-2. Advances in Excess of Maximum Loan Exposure. No Lender has any
obligation to make any loan or advance, or otherwise to provide any credit for
the benefit of the Borrower such that the balance of the Loan Account exceeds
Maximum Loan Exposure. The making of loans, advances, and credits and the
providing of financial accommodations hereunder in excess of Maximum Loan
Exposure is for the benefit of the Borrower and does not affect the obligations
of the Borrower hereunder; such loans, advances, credits, and financial
accommodations constitute Liabilities. The making of any such loans, advances,
and credits and the providing of financial accommodations, on any one occasion
such that Maximum Loan Exposure is exceeded shall not obligate any Lender to
make any such loans, credits, or advances or to provide any financial
accommodation on any other occasion nor to permit such loans, credits, or
advances to remain outstanding.

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 the Agent or any Lender relative to

/October 28, 1997/
17
<PAGE>

the actual value of the asset in question. All risks concerning the saleability
of the Borrower's Inventory are and remain upon the Borrower. All Collateral
secures the prompt, punctual, and faithful performance of the Liabilities
whether or not relied upon by the Agent or by any Lender in connection with the
making of loans, credits, and advances and the providing of financial
accommodations under the Revolving Credit.

2-4. Reserves. Changes to Reserves. (a) The following are the
Availability Reserves and their maxima:

(i) Gift certificates: 30%.

(ii) Merchandise credits: 30%.

(iii) L/C Landing Costs: 40%.

(iv) Rent past due by more than Twenty-Five (25) days
afterthe expiration of any grace period in the subject
lease, provided, however, an Availability Reserve for
such past due rent shall not be imposed for any
location, at which is located Inventory which is
excluded from "Acceptable Inventory" on account of
liens which arise in connection with, or as a result
of, past due rent.

(v) Taxes: The amount of the taxes subject to a lien which
has priority over the Encumbrances granted to the Agent
hereunder.

(b) At the execution of the within Agreement, there are no
Inventory Reserves it being understood, however that

(i) The Agent may establish Inventory Reserves for the
following only in the exercise of the reasonable judgment of the Agent:
change in Inventory character; change in Inventory mix; and markons and
markups which are out of the ordinary course of business and inconsistent
with prior practices.

(ii) The Agent may establish Inventory Reserves for the
following only in exercise of the reasonable judgment of the Agent where the
reserves maintained on the Borrower's books for the following are not sufficient
in the reasonable judgment of the Agent to determine the value of acceptable
inventory for lending purposes: shrinkage; seasonality; return to vendor;
markdowns, markons and markups which are out of the ordinary course of business
and inconsistent with prior practices; and damaged Inventory.

2-5. Loan Requests.

(a) Subject to the provisions of the within Agreement, a loan or
advance under the Revolving Credit duly and timely requested by the Borrower
shall be made pursuant hereto and at the time set forth in Section 2-5(b)
hereof, provided that:

(i) Maximum Loan Exposure will not be exceeded; and

(ii) The Revolving Credit has not been suspended as provided
in Section 2-5(h).

(b) Subject to the provisions of the within Agreement, the
Borrower may request a Revolving Credit Loan and elect an interest rate and
Interest Period to be applicable to that Revolving Credit Loan by giving the
Agent written notice or telephonic notice confirmed in writing (in the form of
EXHIBIT 2-5 hereof) no later than the following:

(i) If such Loan is or is to be converted to a Base Margin
Loan: By 11:30 AM on the Business Day on which the subject Revolving Credit
Loan is to be made or is to be so converted.

(ii) If such Loan is or is to be continued as a LIBOR Loan:
By 1:00 PM Three (3) Business Days before the end of the then applicable
Interest Period or before the day on which such Loan is to be made.

(iii) If such Loan is to be converted to a LIBOR Loan:
By 1:00PM Three (3) Business Days before the day on which such conversion
is to take place.

/October 28, 1997/
18
<PAGE>

(ii) LIBOR Loans and conversions to LIBOR Loans shall each
be not less than $700,000.00 and $100,000.00 increments in excess of such
minimum.

(d) Any request for a Revolving Credit Loan or for the
conversion of 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. Each request for the
conversion or continuation of a Revolving Credit Loan shall be made in such
manner as may from time to time be acceptable to the Agent.

(e) The Borrower may request the Agent to cause the issuance of
L/C's or B/As for the account of the Borrower as provided in Section 2-14.

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

(g) A request by the Borrower for a loan or advance, or other
financial accommodation under the Revolving Credit shall be irrevocable and
shall constitute certification by the 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
Borrower's financial condition from the most recent financial information
furnished Agent or any Lender pursuant to this Agreement.

(ii) Each representation which is made herein or in any of
the Loan Documents (defined below) is then true and complete, in all
material respects as of and as if made on the date of such request except
for any representation which, when made, expressly indicates that it is
being made as of a specific date.

(iii) No Suspension Event is then extant.

(h) Upon the occurrence and during the continuance from time to
time of any Suspension Event:

(i) The Agent may suspend the Revolving Credit immediately.

(ii) Neither the Agent nor any Lender shall be obligated,
during the continuation of such suspension, to make any loans or advance,
or to provide any other new financial accommodation hereunder or to seek
the issuance of any L/C or B/A.

(iii) The Agent may suspend the right of the Borrower to
request LIBOR Loans or to convert Base Rate Loans to LIBOR Loans.

2-6. Making of Loans Under Revolving Credit.

(a) A loan or advance under the Revolving Credit shall be made
by the Agent by the transfer of the proceeds of such loan or advance to the
Funding Account or as otherwise instructed by the Borrower on or before 5:00
p.m. on the Business Day on which the subject Revolving Credit Loan is timely
requested in the case of a Base Margin Loan and three (3) Business Days after
the subject Revolving Credit Loan is timely requested in the case of a LIBOR
Loan.

(b) A loan or advance shall be deemed to have been made under
the Revolving Credit at (and the Borrower shall be indebted to the Lenders for
their respective pro rata portions of the amount thereof immediately upon):

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

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

(i) Any delay in the proceeds of any such loan or advance
constituting collected funds.

/October 28, 1997/
19
<PAGE>

(ii) 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 and in accordance with wire
instructions provided to the Agent by the Borrower.

2-7. The Loan Account.

(a) An account ("Loan Account") shall be opened on the books of
the Agent , in which Loan Account a record may be kept of all loans made under
or pursuant to this Agreement and of all payments thereon.

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

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

(d) Except as otherwise provided herein, all fees, service
charges, costs, and expenses for which the Borrower is obligated hereunder are
payable on demand. In the determination of Availability, the Agent may deem
fees, service charges, accrued interest, and other payments as having been
advanced under the Revolving Credit if such amounts were then due and payable
after giving effect to any applicable grace period.

(e) The Agent, without the request of the Borrower, may advance
under the Revolving Credit any interest, fee, service charge, or other payment
to which the Agent or any Lender is entitled from the Borrower pursuant hereto
which is due and unpaid after the expiration of the applicable grace period and
may charge the same to the Loan Account notwithstanding that such amount so
advanced may result in Availability's being exceeded. Such action on the part
of the Agent shall not constitute a waiver of the Lender's rights under Section
210(b), below. Any amount which is added to the principal balance of the Loan
Account as provided in this Section shall bear interest at the interest rate
applicable from time to time to the unpaid principal balance of the Loan
Account.

(f) Any statement rendered by the Agent or any Lender to the
Borrower concerning the Liabilities shall be considered correct and accepted by
the Borrower and shall be conclusively binding upon the Borrower unless the
Borrower provides the Agent with written objection thereto within twenty (20)
Business Days from the mailing of such statement, which written objection shall
indicate, with particularity, the reason for such objection. The Loan Account
and the 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.

2-8. The Revolving Credit Notes. The 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 2-8,
annexed hereto, executed by the Borrower, one payable to each Lender. Neither
the original nor a copy of any Revolving Credit Note shall be required, however,
to establish or prove any Liability.

2-9. Voluntary Reduction of Commitment and Loan Ceiling. The Borrower
may reduce, or terminate, the Lenders' Commitment, pro rata, and the Loan
Ceiling, in whole or in part from time to time, by furnishing three (3) Business
Days' written notice to the Agent. Upon the effective date of any such
reduction, the Borrower shall pay to the Agent (a) any amounts required by under
Section 2-10(b) hereof as a result of such reduction or termination together
with (b) a pro rata portion (as to the amount of the reduction) of the Early
Termination Fees under Section 2-12(c) hereof, and (c) the accrued Line Fee as
of the date of such reduction or termination. No reduction or termination of
the Commitment or the Loan Ceiling may be reinstated.

2-10. Payment of The Loan Account.

/October 28, 1997/
20
<PAGE>

(a) The Borrower may repay all or any portion of the principal
balance of the Loan Account from time to time until the Termination Date. Such
payments shall be applied first to Base Margin Loans and (subject to Section
2-10(e)) only then to LIBOR Loans.

(b) The Borrower, without notice or demand from the Agent or any
Lender, shall pay the Agent that amount, from time to time, which is necessary
so that the unpaid balance of the Loan Account does not exceed Maximum Loan
Exposure. Such payments shall be applied first to Base Margin Loans and (subject
to Section 2-10(e)) only then to LIBOR Loans.

(c) The Borrower, without notice or demand from the Agent or any
Lender, shall pay the Agent, for the ratable benefit of the Lenders, the
aggregate of Net Proceeds from the sale, by the Borrower, or by any Subsidiary,
of its assets (other than: sales or dispositions of Inventory in the ordinary
course; sales of fixed assets in connection with closing of stores permitted
hereunder; dispositions of worn out, damaged, or obsolete Equipment; and the Net
Proceeds of any sale of the Distribution Facility) immediately on receipt of
such Net Proceeds by the Borrower. Such payments shall be applied first to
Base Margin Loans and (subject to Section 2-10(e)) only then to LIBOR Loans.
The difference (if any) between the amount of such Net Proceeds and the amount
not reinvested in the Borrower's operations within Two Hundred Ten (210) days
following receipt of such Net Proceeds (such difference to be established by
one or more Certificates furnished to the Agent as contemplated by Section
5-3(b)(iii) of the within Agreement), shall constitute a permanent reduction to
the Loan Ceiling.

(d) Subject to Section 2-10(e), the Borrower shall repay the
then entire unpaid balance of the Loan Account and all other Liabilities on the
Termination Date.

(e) Upon the written request of any Lender showing its
calculations in reasonable detail, the Borrower shall indemnify each Lender and
hold each Lender harmless from and against any reasonable loss, cost or expense
(including loss of anticipated profits) which such Lender may sustain or incur
(including, without limitation, by virtue of acceleration after the occurrence
of any Event of Default) as a consequence of

(i) default by the Borrower in payment of the principal
amount of or any interest on any LIBOR Loans as and when due and payable,
including any such loss or expense arising from interest or fees payable by
such Lender to lenders of funds obtained by it in order to maintain its
LIBOR Loans;

(ii) default by the Borrower in making a borrowing or
conversion after the Borrower has given (or is deemed to have given) a
request for a LIBOR Loan or a request to convert a Revolving Credit Loan
from one applicable interest rate to another; or

(iii) the making of any payment of a LIBOR 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, including interest or fees payable by such Lender to lenders of
funds obtained by it in order to maintain any such Loans as "breakage fees"
(so-called).

2-11. Interest Rates.

(a) Each Revolving Credit Loan shall bear interest (determined
based on a 360 day year and actual days elapsed) at the Base Margin Rate unless
timely notice is given (as provided in Section 2-5(b)) that the subject
Revolving Credit Loan (or a portion thereof) is, or is to be converted to, a
LIBOR Loan.

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

(c) Subject to the provisions hereof, the Borrower, by notice to
the Agent, 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 LIBOR Rate as specified
from time to time by the Borrower. For ease of reference and administration,
each part of the Loan Account which bears interest at the same interest and for
the same Interest Period is referred to herein as if it were a separate
"Revolving Credit Loan".

(d) The Borrower shall not select, renew, or convert any
interest rate for a Revolving Credit Loan such that there are more than Eight
(8) interest rates applicable to the LIBOR Loans at any one time.

(e) The Borrower shall pay accrued and unpaid interest on each
Revolving Credit Loan in arrears

/October 28, 1997/
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<PAGE>

(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,
and during the continuance of any Event of Default, with such frequency as
may be determined by the Agent.

(f) Following the occurrence of any Event of Default, and during
the continuance of any Event of Default (and whether or not the Agent exercises
the Agent's rights on account thereof), all Revolving Credit Loans shall bear
interest, at the option of the Agent at the aggregate of the interest rate then
applicable to such loans plus Two Percent (2%) per annum.

2-12. Certain Fees.

(a) As compensation for the Lenders' respective commitments
included herein to make loans and advances to the Borrower and as compensation
for the Lenders' respective maintenance of sufficient funds available for such
purpose, the Lenders have earned the Upfront Closing Fee, which shall be paid as
provided in the Commitment Letter.

(b) In addition to any other fee or expense paid by the Borrower
on account of the Revolving Credit, the Borrower shall pay the Agent the Agent's
Fee at the times and subject to the provisions of the Commitment Letter.

(c) In the event that the Revolving Credit is voluntarily
terminated on a Termination Date set by the Borrower's written notice as
provided in the Definition of "Termination Date", which termination is not in
concert with the refinancing of the Revolving Credit with a credit facility
provided or led by BankBoston, N.A. or any unit thereof, then the Borrower shall
pay the Agent, for the account of the Lenders, an Early Termination Fee (so
referred to herein) equal to the following percentage of the then Loan Ceiling
on such Termination Date:

Termination Date Prior to October 30: Percentage of Loan Ceiling

1998 1.0%
1999 0.25%
2000 0.125%

(d) In addition to any other fee or expense paid by the Borrower
on account of the Revolving Credit, the Borrower shall pay the Agent for the
account of the Lenders, a Line Fee (so referred to herein) in arrears, on the
first day of each quarter (and on the Termination Date). The Line Fee shall be
equal to 0.375% per annum of the difference, during the quarter just ended (or
relevant period with respect to the payment being made on the Termination Date)
between the Loan Ceiling for such period and Average Usage.

(e) Except as provided in Section 2-12(b), the Borrower shall
not be entitled to any credit, rebate or repayment of any Commitment Fee, Line
Fee, or other fee previously earned by the Agent or any Lender pursuant to this
Section notwithstanding any termination of the within Agreement or suspension or
termination of the Agent's and any Lender's respective obligation to make loans
and advances hereunder.

2-13. Agent's and Lenders' Discretion.

(a) Except as otherwise provided hereunder and except in
determining the Availability Reserves and Inventory Reserves (where such
standards are already established), each reference in the Loan Documents to the
exercise of discretion or the like by the Agent or any Lender shall be to that
Person's exercise of its judgement, in good faith, based upon that Person's
consideration of any such factor as the Agent, or that Lender, taking into
account information of which that Person then has actual knowledge, believes:

/October 28, 1997/
22
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(i) Will or reasonably could be expected to affect the
value of the Collateral, the enforceability of the Agent's security and
collateral interests therein, or the amount which the Agent would likely
realize therefrom (taking into account delays which may possibly be
encountered in the Lender's realizing upon the Collateral and likely Costs
of Collection).

(ii) Indicates that any report or financial information
delivered to the Agent, or any Lender by or on behalf of the Borrower is
incomplete, inaccurate, or misleading in any material manner or was not
prepared in accordance with the requirements of the within Agreement.

(iii) Suggests an increase in the likelihood that the
Borrower will become the subject of a bankruptcy or insolvency proceeding.

(iv) Constitutes a Suspension Event.

(b) In the exercise of such judgement, the Agent and each Lender
also may take into account any of the following factors:

(i) Those included in, or tested by, the definitions of
"Acceptable Inventory" and "Cost".

(ii) The current financial and business climate of the
industry in which the Borrower competes (having regard for the Borrower's
position in that industry).

(iii) General macroeconomic conditions which have a
material effect on the Borrower's cost structure.

(iv) Material changes in or to the mix of the Borrower's
Inventory.

(v) Seasonality with respect to the Borrower's Inventory
and patterns of retail sales.

(vi) Such other factors as the Agent and each Lender
determines as having a material bearing on credit risks associated with the
providing of loans and financial accommodations to the Borrower.

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

2-14. Procedures For Issuance of L/C's.

(a) The Borrower may request that the Agent cause the issuance
of L/C's or B/A's for the account of the Borrower. Each such request shall be
in such manner as may from time to time be acceptable to the Agent and the
Issuer.

(b) The Agent will cause the issuance of any L/C or B/A so
requested by the Borrower, provided that, at the time that the request is made,
the Revolving Credit has not been suspended as provided in Section 2-5(h) and if
so issued:

(i) The aggregate Stated Amount of all L/C's and B/A's
then outstanding, does not exceed Ninety Million Dollars ($90,000,000.00).

(ii) The aggregate Stated Amount of all Standby L/C's then
outstanding does not exceed Twenty Millions Dollars ($20,000,000.00).

(iii) The expiry of the L/C is not later than the
Maturity Date (unless the Borrower provides cash collateralization
reasonably satisfactory to the Agent in an amount of one hundred three
percent (103%) of the maximum amount available to be drawn under each such
L/C) or the following:

(A) Standby's: One (1) year from initial issuance.

(B) Documentary's: 150 days from issuance.

(iv) Maximum Loan Exposure would not be exceeded.

(c) The Borrower shall execute such documentation to apply for
and support the issuance of an L/C as may be reasonably and customarily required
by the Issuer.

(d) There shall not be any recourse to, nor liability of, the
Agent or any Lender (other than a Lender in its capacity as Issuer) on account
of

(i) Any delay by an Issuer to issue an L/C;

/October 28, 1997/
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<PAGE>

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

(e) Immediately upon the drawing under any L/C, the Borrower
shall reimburse the Issuer, for the amount of such drawing. In the event the
Borrower does not so reimburse the Issuer, the Agent, without the request of the
Borrower, may cause the advance under the Revolving Credit of any amount which
the Borrower is so obligated to reimburse the Issuer or for which the Borrower,
the Issuer, or the Lenders become obligated on account of, or in respect to, any
L/C. Such advance shall be made whether or not a Suspension Event is then
extant or such advance would result in Maximum Loan Exposure's being exceeded.
Such action shall not constitute a waiver of the Agent's rights under Section
2-10(b) hereof.

2-15. Fees For L/C's and B/A's .

(a) The Borrower shall pay the Agent, for the account of the
Lenders, monthly in arrears, on the first day of the month then next following,
a (each, an "L/C Fee") fee equal to the following per annum percentage of the
average face amount of the following categories of L/C's outstanding during the
subject month:

(i) Standbys: 1.75%

(ii) Documentaries: 1.50%

(iii) BackUp L/C: 0.875%

(b) The Borrower shall pay the Agent, for the account of the
Lenders, monthly in arrears, on the first day of the month then next following,
a fee equal to 1.50% per annum on the average face amount of all B/A's
outstanding during the subject month.

(c) In addition to the fee to be paid as provided in Subsection
215(a), above, the Borrower shall pay to the Agent (or to the Issuer, if so
requested by Agent), on demand, all issuance, processing, negotiation,
amendment, and administrative fees and other amounts customarily charged by the
Issuer on account of, or in respect to, any L/C or B/A.

2-16. Concerning L/C's.

(a) None of the Issuer, the Issuer's correspondents, or any
advising, negotiating, or paying bank with respect to any L/C shall be
responsible (absent any gross negligence or willful misconduct of any of them)
in any way for:

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

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

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

(i) Select an advising bank, if any.

(ii) Select a paying bank, if any.

(iii) Select a negotiating bank.

(d) All directions, correspondence, and funds transfers relating
to any L/C are at the risk of the Borrower (absent gross negligence or willful
misconduct on the Issuer's, the Agent's or any Lender's part). The Issuer shall
have discharged the Issuer's obligations under any L/C which, or the drawing
under which, includes payment instructions, by the initiation of the method of
payment called for in, and in accordance with, such instructions (or by any
other commercially reasonable and comparable method (absent

/October 28, 1997/
24
<PAGE>

gross negligence or willful misconduct on its part). None of the Agent, any
Lender, nor 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 (absent
gross negligence or willful misconduct on its part).

(e) The Agent's, each Lender's, and the Issuer's rights, powers,
privileges and immunities specified in or arising under this Agreement are in
addition to any heretofore or at any time hereafter otherwise created or
arising, whether by statute or rule of law or contract.

(f) Except to the extent otherwise expressly provided hereunder
or agreed to in writing by the Issuer and the Borrower, the L/C will be governed
by the Uniform Customs and Practice for Documentary Credits, International
Chamber of Commerce, Publication No. 500, and any subsequent revisions thereof.

(g) If any change in any law, executive order or regulation, or
any directive of any administrative or governmental authority (whether or not
having the force of law), or in the interpretation thereof by any court or
administrative or governmental authority charged with the administration
thereof, 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 the Agent, or any
Issuer has an obligation to lend to fund drawings under any L/C; or

(ii) impose on any Issuer any other condition or
requirements relating to any such letters of credit; and the result of any
event referred to in Section 2-16(g)(i) or 2-16(g)(ii), above, shall be to
increase the cost to such Issuer of issuing or maintaining any L/C (which
increase in cost shall be the result of such Issuer's reasonable allocation
among that Issuer's letter of credit customers of the aggregate of such cost
increases resulting from such events), then, upon demand by the Agent and
delivery by the Agent to the Borrower of a certificate of an officer of the
subject Issuer describing such change in law, executive order, regulation,
directive, or interpretation thereof, its effect on such Issuer, and the
basis for determining such increased costs and their allocation, the Borrower
shall immediately pay to the Agent , from time to time as specified by the
Agent , such amounts as shall be sufficient to compensate such Issuer for
such increased cost. Any Issuer's determination of costs incurred under
Section 2-16(g)(i) or 2-16(g)(ii), above, and the allocation, if any, of such
costs among the Borrower and other letter of credit customers of such Issuer,
if done in good faith and made on an equitable basis and in accordance with
the officer's certificate, shall be conclusive and binding on the Borrower.

(h) The obligations of the Borrower under the within Agreement
with respect to L/C's 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 the within Agreement, any L/C, or
any other agreement or instrument relating thereto.

(ii) Any amendment or waiver of, or consent to the departure
from, any L/C.

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

(iv) Any honoring of a drawing under any L/C, which drawing
possibly could have been dishonored based upon a strict construction of the
terms of the L/C.

2-17. Changed Circumstances.

(a) The Agent may give the Borrower notice of the occurrence of
the following:

(i) The Agent shall have determined in good faith (which
determination shall be final and conclusive) on any day on which the rate
for a LIBOR Loan would otherwise be set, that, by reason of changes arising
after the date of this Agreement affecting the London interbank market,
adequate and fair means do not exist for ascertaining such rate on the
basis provided for in the definition of LIBOR Offer Rate.

(ii) The Agent shall have determined in good faith (which
determination shall be final and conclusive) that:

(A) The continuation of or conversion of any Revolving
Credit Loan to a LIBOR Loan has been made impracticable or

/October 28, 1997/

25
<PAGE>

unlawful by the occurrence of a change in law occurring after the
date of this Agreement that materially and adversely affects the
applicable market or compliance by the Agent or any Lender in
good faith with any applicable law or governmental regulation,
guideline or order or interpretation or change thereof by any
governmental authority charged with the interpretation or
administration thereof or with any request or directive of any
such governmental authority (whether or not having the force of
law).

(B) The indices on which the interest rates for LIBOR
Loans are determined shall no longer represent the effective cost
to the Agent or any Lender for U.S. dollar deposits in the
interbank market for deposits in which it regularly participates.

(b) In the event that the Agent gives the Borrower notice of an
occurrence described in Section 2-17(a), then, until the Agent notifies the
Borrower that the circumstances giving rise to such notice no longer apply:

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

(ii) Any notice which the Borrower had given the Agent with
respect to any LIBOR Loan, the time for action with respect to which has
not occurred prior to the Agent's having given notice pursuant to Section
2-17(a), shall be deemed at the option of the Agent to not having been
given and such loan shall be made or continued as, or converted into, as
appropriate, a Base Margin Loan.

(iii) Subject to the provisions of Section 2-10(e), the
Borrower may (and shall, with respect to the occurrence of any event described
in Section 2-17(a)(ii)), cancel the relevant borrowing or conversion notice on
the same date the Borrower was notified of such event, or if the LIBOR Loan is
then outstanding, prepay the affected LIBOR Loan.

2-18. Increased Costs. If, as a result of any change after the date
of this Agreement in any requirement of law, or of any change in the
interpretation or application thereof by any court or by any governmental or
other authority or entity charged with the administration thereof, whether or
not having the force of law, which:

(a) subjects any Lender to any taxes or changes the basis of
taxation, or increases any existing taxes, on payments of principal,
interest or other amounts payable by the Borrower to the Agent or any
Lender under this Agreement (except for taxes on or measured by the Agent
or any Lender's net or gross income or capital imposed by the United States
of America or by the jurisdiction in which the Agent or that Lender's
principal or lending offices are located or by the jurisdiction under which
the Agent or that Lender is organized);

(b) imposes, modifies or deems applicable any reserve, cash
margin, special deposit or similar requirements (but in all events
excluding reserves required under Regulation D to the extent included in
the calculation of LIBOR Rate) against assets held by, or deposits in or
for the account of or loans by or any other acquisition of funds by the
relevant funding office of any Lender with respect to LIBOR Loans;

(c). imposes on any Lender any other condition with respect to
LIBOR Loans; or

(d) with respect to any change in any law or regulation
regarding capital adequacy, imposes on any Lender a requirement to maintain
or allocate capital in relation to the Liabilities;

and the result of any of the foregoing, in the Agent's reasonable opinion, is
to increase the cost to any Lender of making or maintaining any loan, advance or
financial accommodation or to reduce the income receivable by any Lender in
respect of any loan, advance or financial accommodation by an amount which the
Agent deems to be material, then upon the Agent's giving written notice thereof,
from time to time, to the 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 Borrower shall forthwith pay to the Agent, for the benefit
of the subject Lender, , upon receipt of such notice, that amount which shall
compensate the subject Lender for such additional cost or reduction in income.

/October 28, 1997/
26
<PAGE>

2-19 Lenders' Commitments.

(a) The obligations of each Lender are several and not joint.
No Lender shall have any obligation to make any loan or advance under the
Revolving Credit (I) in excess of the lesser of that Lender's Commitment
Percentage (as defined in the Agency Agreement) of the subject loan or advance
or of Availability or (ii) in excess of that Lender's Commitment,

(b) No Lender shall have any liability to the Borrower on
account of the failure of any other 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.

(c) The Dollar Commitments, Commitment Percentages, and
identities of the Lenders (but not the overall Commitment) may be changed, from
time to time by the reallocation or assignment of Dollar Commitments and
Commitment Percentages amongst the Lenders or with other financial institutions
(or other entities customarily engaged in the business of making commercial
loans) who determine to become "Lenders", provided, however,

(i) No such assignment shall be of less than Ten Million
Dollars ($10,000,000.00).

(ii) Unless an Event of Default has occurred, and is
continuing (in which event, no consent of the Borrower is required), any
assignment to a Person not then a Lender shall be subject to the prior
consent of the Borrower (not to be unreasonably withheld), which consent
will be deemed given unless the Borrower provides the Agent with written
objection, not more than Seven (7) Business Days after the Agent shall have
given the Borrower written notice of a proposed assignment).

(iii) Any such assignment or reallocation shall be on a
pro-rata basis such that each reallocated or assigned Dollar Commitment to
any Person remains the same percentage of the overall Commitment (in terms
of dollars) as the reallocated Commitment Percentage is to such Person.

(iv) The Dollar Commitment of BankBoston Retail Finance Inc.
shall not be less than Twenty Five Million Dollars ($25,000,000.00).

(v) There will not be more than Six (6) "Lenders" at any
one time.

(vi) Notwithstanding the foregoing, no such assignment
and no participation shall increase the Borrower's payment obligation to the
subject assignee or Participant from such obligation had such assignment or
participation not been made.

(d) Upon written notice given the Borrower from time to time by
the Agent, of any assignment or allocation referenced in Section 219(c):

(i) The Borrower shall execute one or more replacement
Revolving Credit Notes to reflect such changed Dollar Commitments, Commitment
Percentages, and identities and shall deliver such replacement Revolving Credit
Notes to the Agent (which promptly thereafter shall deliver to the Borrower the
Revolving Credit Notes so replaced) provided however, in the event that a
Revolving Credit Note is to be exchanged following its

/October 28, 1997/

27
<PAGE>

acceleration or the entry of an order for relief under the Bankruptcy Code with
respect to the Borrower, the Agent, in lieu of causing the Borrower to execute
one or more new Revolving Credit Notes, may issue the Agent's Certificate
confirming the resulting Commitments and Commitment Percentages.

(Ii) Any such assignment shall be effective from the effective
date specified in such written notice and any Person added as a "Lender"
shall have all rights and privileges of a "Lender" hereunder thereafter as
if such Person had been a signatory to the within Agreement and any other
Loan Document to which a Lender is a signatory and any person removed as a
"Lender" shall be relieved of any obligations or responsibilities of a
"Lender" hereunder thereafter.

(e) The Borrower recognizes that the Agent's exercise of any
discretion accorded to the Agent herein and of its rights, remedies, powers,
privileges, and discretions with respect to the Borrower is subject to the
Agency Agreement amongst the Agent and the Lenders. The provisions of the
Agency Agreement relating to voting rights of the Lenders and Participants and
the replacement of the Agent shall be subject to the approval of the Borrower,
which approval shall not be unreasonably delayed or withheld. The Borrower
acknowledges that the Borrower's approval of the voting rights shall be deemed
furnished if the voting rights provision described in EXHIBIT 2-19 hereto are
incorporated in the Agency Agreement.

2-20. Replacement of Certain Lenders. If a Lender, other than the
Agent, as Lender (an "Affected Lender"), shall have requested compensation
from the Borrower under Sections 2-17 or 2-18 or other additional costs
incurred by such Lender which are not being incurred generally by the other
Lenders, or if the Agent shall have delivered a notice pursuant to Section
2-17 claiming that any Lender is unable to extend LIBOR Loans to the Borrower
for reasons not generally applicable to the other Lenders, then, in any such
case, so long as no Event of Default exists:

(a) The Borrower may make written demand on such Affected
Lender (with a copy to the Agent) no later than Thirty (30) days after such
request for the Affected Lender to assign, and such Affected Lender shall
assign in accordance with Section 2-19 within ten (10) Business Days after
the date of such demand, to one or more financial institutions which comply
with the provisions of Section 2-19(c) (and which institutions are reasonably
acceptable to the Agent) which the Borrower shall have engaged for such
purpose (a "Replacement Lender"), all of such Affected Lender's rights and
obligations under this Agreement and the other Loan Documents (including its
Dollar Commitment, all loans owing to it, all of its participation interests
in outstanding L/C's, and its obligation to participate in additional L/C's
hereunder) in accordance with Section 2-19(c). The Borrower shall be
responsible for the payment of all reasonable costs and expenses, including
reasonable attorney's fees and expenses, incurred by the Agent and the
successor Lender in connection with all matters relative to such assignment.

(b) The Affected Lender shall receive, concurrent with such
assignment, in cash, all amounts due and owing to such Affected Lender hereunder
or under any other Loan Document, including the aggregate outstanding principal
amount of the loans owed to such Lender, together with accrued interest thereon
through the date of such assignment from the Replacement Lender, amounts payable
under Section 218 with respect to such Affected Lender.

(c) Upon such Affected Lender's replacement, such Affected
Lender shall cease to be a party hereto and shall be released of all obligations
hereunder.

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 this Article 3 as
required to be delivered to the Agent or any Lender (each in form and substance
satisfactory to the Agent) shall have been so delivered and each of the
conditions respectively described in this Article 3 as required to be satisfied
shall have been satisfied (to the reasonable satisfaction of the Agent):

3-1. Corporate Due Diligence.

/October 28, 1997/
28
<PAGE>

(a) A Certificate of corporate good standing issued by the
Secretary of State of Minnesota.

(b) Certificates of due qualification, in good standing, issued
by the Secretary(ies) of State of each State in which the nature of the
Borrower's business conducted or assets owned could require such qualification,
except where the failure to be so qualified would not have a Material Adverse
Effect.

(c) A Certificate of the Borrower'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. Emergence From Chapter 11. The Plan shall be been confirmed in
the Proceedings and a certified copy of the Docket for the Proceedings as of no
sooner than Eleven (11) days following the entry of the Confirmation Order
provided to the Agent, with either (a) no order or process entered in the
Proceedings or otherwise, which process has the effect of staying, modifying,
reversing, vacating, or otherwise affecting the effectiveness of such Plan in
accordance with its terms and as so confirmed or (b) if such an order or process
is so entered, the Agent's being furnished with an unqualified opinion of the
Borrower's bankruptcy or general counsel which concludes that such order does
not adversely affect (i) the operation and enforceability of the within
Agreement and (ii) the availability, in accordance with their respective terms,
of the Agent's Rights and Remedies.

3-3. Issuance of New Notes. The New Notes shall have been issued,
with net cash proceeds of not less than Sixty Million Five Hundred Thousand
Dollars ($60,500,000.00) from and on account of such issuance immediately
available to the Borrower for utilization in accordance with the Business Plan.
The Borrower shall provide the Agent with such evidence as the Agent may require
of the receipt by the Borrower of the aforementioned proceeds.

3-4. Opinions. Opinions of counsel to the Borrower in form and
substance reasonably satisfactory to the Agent in the forms attached hereto as
EXHIBIT 3-4 .

3-5. Additional Documents. Such additional instruments and
documents as the Agent or its counsel reasonably may require or request, which
additional instruments and documents shall include a negative pledge (in
recordable form) for the Distribution Facility.

3-6. Officers' Certificates. Certificates executed by the Chief
Financial Officer of the Borrower and stating that the representations and
warranties made by the Borrower to the Agent and the Lenders in the Loan
Documents are true and complete in all material respects as of the date of such
Certificate, and that no event has occurred which is or which, solely with the
giving of notice or passage of time (or both) would be an Event of Default.

3-7. Representations and Warranties. Each of the representations
made by or on behalf of the Borrower in this Agreement or in any of the other
Loan Documents or in any other report, statement, document, or paper provided by
the Borrower shall be true and complete in all material respects as of the date
as of which such representation or warranty was made.

3-8. Minimum Excess Availability. Availability, after giving effect
to the first loans and advances to be made under the Revolving Credit; all then
held checks (if any); accounts payable which are beyond credit terms then
accorded the Borrower; overdrafts; any charges to the Loan Account made in
connection with the establishment of the credit facility contemplated hereby;
and L/C's to be issued at, or immediately subsequent to, the establishment of
such establishment, is not less than $4,000,000.00.

3-9. No Adverse Actions. No action, suit, investigation, litigation or
proceeding shall be pending or threatened in any court or before any arbitrator
or

/October 28, 1997/
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<PAGE>

governmental instrumentality that (i) reasonably could be expected to have a
material adverse effect on the business, condition (financial or otherwise),
operations, performance, properties or prospects of the Borrower and any of its
Subsidiaries, taken as a whole, other than that which has theretofore been
disclosed or (ii) would materially adversely affect the Revolving Credit. No
material adverse change shall have occurred to the status, or financial effect
on the Borrower, or any of its Subsidiaries, of such disclosed litigation from
that which has been theretofore disclosed.

3-10. Consents and Approvals. All governmental and third party
consents and approvals, if any, necessary in connection with the Revolving
Credit, shall have been obtained (without the imposition of any conditions that
are not reasonably acceptable to the Agent or any Lender) and shall remain in
effect; all applicable waiting periods with respect to such consents and
approvals shall have expired without any action being taken by any competent
authority; and, in the reasonable judgement of the Agent, no law or regulation
shall be applicable which restrains, prevents, or imposes materially adverse
conditions upon the Revolving Credit.

3-11. No Suspension Event. No Suspension Event shall then be
extant.

3-12. No Adverse Change. No material adverse change shall have
occurred in the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Borrower and its subsidiaries taken
as a whole from (i) the Borrower's unaudited financial statements at, and for
the period closing at the end of August, 1997, except for such changes as are
reflected on the Business Plan and (ii) the Borrower's operating results from
those reflected on the Business Plan. All information previously provided to
the Agent shall be true and correct in all material respects.

3-13. All Fees and Expenses Paid. All accrued fees and expenses of
the Agent in connection with the establishment of the Revolving Credit
(including the fees and expenses of counsel to the Agent) shall have been paid.

No document shall be deemed delivered to the Agent or any Lender until received
and accepted by the Agent at its head offices in Boston, Massachusetts. Under
no circumstances will the within Agreement take effect until executed and
accepted by the Agent at said head office.

ARTICLE 4 - GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS

To induce each Lender to establish the loan arrangement contemplated herein
and to make loans and advances and to provide financial accommodations under the
Revolving Credit (each of which loans shall be deemed to have been made in
reliance thereupon) the Borrower, in addition to all other representations,
warranties, and covenants made by the Borrower in any other Loan Document, makes
those representations, warranties, and covenants included in the within
Agreement.

4-1. Payment and Performance of Liabilities. The Borrower shall pay
each Liability when due (or when demanded if payable on demand) and shall
promptly, punctually, and faithfully perform each other Liability.

/October 28, 1997/
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<PAGE>

4-2. Due Organization - Corporate Authorization - No Conflicts.

(a) The Borrower presently is and shall hereafter remain in good
standing as a Minnesota corporation 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 the Borrower's assets or operation of the Borrower's
business, such qualification may be necessary except where the failure to be so
qualified is not reasonably likely to have a material adverse effect on the
business, operations, conditions (financial or otherwise) performance, or
properties of the Borrower and its Subsidiaries, taken as a whole.

(b) Each Subsidiary of the Borrower existing as of the date of
this Agreement is listed on EXHIBIT 4-2, annexed hereto. The Borrower shall
provide the Agent with prior written notice of any entity's becoming or ceasing
to be Subsidiary.

(c) The Borrower has all requisite corporate power and authority
to execute and deliver the Loan Documents to which the Borrower is a party and
has and will hereafter retain all requisite corporate power to perform all and
singular the Liabilities.

(d) The execution and delivery by the Borrower of each Loan
Document to which it is a party; the Borrower's consummation of the transactions
contemplated by such Loan Documents (including, without limitation, the creation
of security interests by the Borrower as contemplated hereby); the Borrower's
performance under those of the Loan Documents to which it is a party; the
borrowings hereunder; and the use of the proceeds thereof:

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

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

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

(e) The Loan Documents have been duly executed and delivered by
Borrower and are the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms.

4-3 Guaranties. On or before December 31, 1997, each Subsidiary of
the Borrower existing as of the date of this Agreement,

(a) Shall have caused its case pursuant to Chapter 11 of the
Bankruptcy Code to be dismissed, and

(b) Upon such dismissal, shall provide that Person's unlimited
guaranty of the Liabilities (in the form of EXHIBIT 4-3 hereto), which guaranty
is secured by substantially all assets of such Person, other than real estate.

In the event that any such Subsidiary is unable to obtain dismissal of its
bankruptcy case by December 31, 1997, no Event of Default shall be deemed to
have arisen hereunder if the said Subsidiary is diligently proceeding either
(I) to cause the dismissal of such proceeding or (ii) to obtain bankruptcy court
approval to undertake the actions described in subparagraph (b) above.

4-4. Trade Names.

(a) EXHIBIT 4-4, annexed hereto, is a listing as of the date of
this Agreement of:

(i) All names under which the Borrower ever conducted its
business.

(ii) All entities and/or persons with whom the Borrower ever
consolidated or merged, or from whom the Borrower ever acquired in a single
transaction or in a series of related transactions substantially all of
such entity's or person's assets.

(b) Except (i) upon not less than twenty-one (21) days prior
written notice given the Agent , and (ii) in compliance with all other
provisions of the within Agreement, the Borrower will not undertake or commit to
undertake any action such that the results of that action, if undertaken prior
to the date of this Agreement, would have

/October 28, 1997/
31
<PAGE>

been reflected on EXHIBIT 4-4.

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

(d) To the best of the Borrower's knowledge, the conduct by the
Borrower of the Borrower's business does not infringe in any material respect on
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 for such infringements as in the aggregate or individually will not have
a Material Adverse Effect.

4-5. Locations.

(a) The Collateral, and the books, records, and papers of
Borrower pertaining thereto, are kept and maintained at the Borrower's chief
executive offices at 469 Seventh Avenue, New York, New York 10018 and at 6585
City West Parkway, Eden Prairie, Minnesota 55344-7824 and at those locations
which are listed on EXHIBIT 4-5, annexed hereto, which EXHIBIT includes all
service bureaus with which any such records are maintained and the names and
addresses of each of the Borrower's landlords. Except (i) to accomplish
sales of Inventory in the ordinary course of business or other sales of
assets permitted hereunder or (ii) to utilize such of the Collateral as is
removed from such locations in the ordinary course of business (such as motor
vehicles), (iii) to move any of the Collateral among such locations, or (iv)
as long as the Agent's lien on the Collateral described in this clause (iv)
remains continuously perfected, to move the Collateral to temporary
warehouses for a period not to exceed 120 days, the Borrower shall not remove
any Collateral from said chief executive offices or those locations listed on
EXHIBIT 4-5 unless the Borrower gives the Agent 21 days prior notice of any
new location and complies with the requirements of Section 4-24 with respect
to such removal.

(b) The Borrower will not:

(i) Enter, alter, modify, amend, or terminate any Lease
other than

(A) in the ordinary course of the Borrower's business;
and

(B) as permitted pursuant to Section 4-5(b)(ii)

(ii) Commit to, or open or close any location at which the
Borrower maintains, offers for sales, or stores any of the Collateral other
than as follows:

(A) The Borrower may close up to Fifty (50) such
locations in any Fiscal year, net of store openings in such
Fiscal year (and may close a greater number of locations
upon the Agent's prior written consent, which consent shall
not be unreasonably withheld).

(B) The Borrower may open up to (I) Forty (40) such
locations in each of Fiscal years 1998 and 1999, and
(ii) Sixty (60) such locations in Fiscal year 2000, in each
case net of store closures in such Fiscal year, provided,
with respect to each such new location, the Borrower has
given the Lender not less than Thirty (30) days prior
written notice.

(C) In addition to those store closings permitted
pursuant to Section 4-5(b)(ii)(B), the Borrower may close
each of those retail locations listed on EXHIBIT
4-5(b)(ii)(C), annexed hereto.

(D) The limitations set forth in Section
4-5(b)(ii)(B) hereof shall not include, or apply to, (I) any
stores which the Borrower closed on or after May 1, 1997 and
which the Borrower decides to reopen, or (ii) to any new
locations acquired pursuant to an Acquisition permitted
hereunder.

(c) Except as otherwise disclosed pursuant to, or permitted by,
this Section 4-5, no tangible personal property of the Borrower 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.

/October 28, 1997/
32
<PAGE>

4-6. Title to Assets.

(a) The Borrower is, and shall hereafter remain, the owner of
the Collateral free and clear of all Encumbrances with the exceptions of the
following (the "Permitted Encumbrances"):

(i) The security interest created herein.

(ii) Those Encumbrances (if any) listed on EXHIBIT 4-6(a),
annexed hereto.

(iii) Subject to Section 4-6(b), purchase money security
interests in Equipment to secure Indebtedness otherwise permitted hereby.

(iv) Encumbrances for taxes, governmental assessments
or charges in the nature of taxes not yet due, or Encumbrances for taxes,
governmental assessments or charges in the nature of taxes being contested
in good faith and by appropriate proceedings for which adequate reserves
(in the good faith judgment of the management of the Borrower) have been
established.

(v) Encumbrances in respect of property or assets of
the Borrower imposed by law, which were incurred in the ordinary course of
business, such as carriers', warehousemen's, materialmen's, repairmen's,
landlords' and mechanics' liens and other similar Encumbrances arising in
the ordinary course of business, and (A) which do not, in the aggregate,
materially detract from the value of such property or assets or materially
impair the operation of the business of the Borrower or any such Subsidiary
or (B) which are being contested in good faith by appropriate proceedings,
which proceedings have the effect of preventing the forfeiture or sale of
the property or assets subject to any such Encumbrance or (c) with respect
to which adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP.

(vi) Utility deposits and pledges or deposits in
connection with worker's compensation, unemployment insurance and other
social security legislation.

(vii) Encumbrances arising under Capital Leases.

(viii) Other Encumbrances incidental to the conduct of
the business of the Borrower or the ownership of its property and assets
which were not incurred in connection with the borrowing of money or the
obtaining of advances or credit, and which do not in the aggregate
materially detract from the value of its property or assets, taken as a
whole, materially detract from the value of any material property or
materially impair the use of its property or assets in the operation of its
business.

/October 28, 1997/
33
<PAGE>

(ix) Any Encumbrance renewing or extending any
Encumbrance permitted by clause (ii) above, provided, that the principal
amount secured is not increased, and the Encumbrance is not extended to
other property and the Indebtedness.

(x) Protective filings under the Uniform Commercial Code
in connection with operating leases and consignments of goods to the
Borrower permitted hereunder.

(xi) Encumbrances with respect to the amounts paid into the
New Note Disbursement Account for the payment of interest on the New Notes
pursuant to the Indenture.

(xii) Encumbrances, if any, in favor of Bankers Trust
Company as Agent in the form of cash collateral received under the Backup
L/C to secure letters of credit and bankers acceptances outstanding on the
date hereof.

(b) Except as disclosed on EXHIBIT 4-6(b), annexed hereto, as of
the date of this Agreement, the Borrower does not have possession of any goods
on consignment to the Borrower. The Borrower shall not have possession of goods
on consignment to the Borrower and shall not permit to exist any circumstance
under which the consignor could claim an Encumbrance on or to any proceeds of
any such consigned goods at any time having an aggregate cost in excess of One
Million Dollars ($1,000,000.00).

4-7. Indebtedness.

(a) The Borrower does not and shall not hereafter have any
Indebtedness with the exceptions of:

(i) Any Indebtedness to the Lenders .

(ii) The Indebtedness (if any) listed on EXHIBIT 4-7,
annexed hereto.

(iii) The New Notes and any refinancings thereof in
accordance with Section 4-6(b).

(iv) Purchase money Indebtedness on account of the
acquisition of equipment.

(v) Indebtedness under the Plan (provided however, the
Borrower shall not alter, amend, or otherwise modify the Plan in
a manner to create any additional Indebtedness).

(vi) Indebtedness of the Borrower arising under Capital
Leases of the Borrower.

(vii) Indebtedness of the Borrower of the type described
in clause (b) of the definition of Indebtedness which is being contested in
good faith and for which adequate reserves are maintained on the Borrower's
books.

(viii) Indebtedness of the Borrower with respect to customer
deposits and customer advances received in the ordinary course of business.

(b) The Borrower shall not prepay, redeem, purchase, defease or
otherwise satisfy, prior to maturity, or make any payment in violation of any
subordination terms of, any Indebtedness (other than the Revolving Credit)
except that

(i)the Borrower may retire the Original New Notes, which
retirement is effected with proceeds of an offering of the Borrower's
notes which is subject to an effective registration statement with the
Securities and Exchange Commission, including the Exchange Notes (as
defined in the Indenture), provided that, such notes which retire the
Original New Notes are on substantially the same terms as the Original New
Notes; and

(ii)the Borrower may refinance or repay any such
Indebtedness, which refinancing or repayment is effected with the proceeds
of (A) an initial public offering of the Borrower's stock and/or (B) other
Indebtedness of the Borrower, provided that the terms of such refinanced
indebtedness are not materially less favorable to the Borrower or the Agent
and the Lenders than the terms of the indebtedness so refinanced and do not
relax any obligation undertaken by the Borrower pursuant to any Loan
Document, which obligation is stated by reference to the New Notes or the
documentation relating to the New Notes. Upon and after any such
retirement, the notes which are used to so

/October 28, 1997/
34
<PAGE>

retire the Original New

Notes shall be the "New Notes" for all purposes of this Agreement.

4-8. Insurance Policies.

(a) EXHIBIT 4-8, annexed hereto, is a schedule of all insurance
policies owned by the Borrower or under which the Borrower is the named insured
as of the date of this Agreement. Each of such policies is in full force and
effect. Neither the issuer of any such policy nor the Borrower is in default or
violation of any such policy.

(b) The Borrower shall have and maintain at all times insurance
covering such risks, in such amounts, containing such terms, in such form, for
such periods as are usually insured against by companies in the same or similar
business located in the same geographic area, and written by such companies as
may be reasonably satisfactory to the Agent . The coverage reflected on
EXHIBIT 4-8 presently satisfies the foregoing requirements, it being recognized
by the Borrower, however, that such requirements may change hereafter to reflect
changing circumstances. All insurance carried by the Borrower shall provide for
a minimum of thirty (30) days' written notice of cancellation to the Agent and
all such insurance which covers the Collateral shall include an endorsement in
favor of the Lender, which endorsement 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 the Borrower or by the
failure of the Borrower to comply with any warranty or condition of the policy.
In the event of the failure by the Borrower to maintain insurance as required
herein, the Agent , at its option, may obtain such insurance, provided, however,
the Agent's obtaining of such insurance shall not constitute a cure or waiver of
any Event of Default occasioned by the Borrower's failure to have maintained
such insurance. The Borrower shall furnish to the Agent certificates or other
evidence reasonably satisfactory to the Agent regarding compliance by the
Borrower with the foregoing insurance provisions as the Agent reasonably may
request.

(c) The Borrower shall advise the Agent of each claim in excess
of $1,000,000.00 made by the Borrower under any policy of insurance which covers
the Collateral and if an Event of Default shall have occurred, and is
continuing, will permit the Agent, at the Agent's option in each instance, to
the exclusion of the Borrower, to conduct the adjustment of each such claim.
The Borrower hereby appoints the Agent as the Borrower's attorney in fact to
obtain, adjust, settle, and cancel any insurance described in this section and
to endorse in favor of the Agent any and all drafts and other instruments with
respect to such insurance. The within appointment, being coupled with an
interest, is not exercisable unless an Event of Default shall have occurred and
is continuing and is irrevocable until this Agreement is terminated by a written
instrument executed by a duly authorized officer of the Agent. The Agent shall
not be liable on account of any exercise pursuant to said power except for any
exercise in willful misconduct and bad faith or pursuant to its gross
negligence. The Agent may apply any proceeds of such insurance against the
Liabilities then due and thereafter against the Liabilities, whether or not such
have matured, in such order of application as the Agent may determine provided
that if no Event of Default shall have occurred and is continuing, the Borrower
may, subject to the terms hereof, reborrow such proceeds to reinvest in the
business of the Borrower.

4-9. Licenses. Each license, distributorship, franchise, and similar
agreement issued to, or to which the Borrower is a party and which is material
to the business of the Borrower is in full force and effect, except as such
force and effect is affected by the Proceedings. Neither the Borrower nor any
Subsidiary of Borrower is in default or violation thereof, which default or
violation would reasonably be expected to result in a Material Adverse Effect
upon the Borrower. The Borrower has not received any notice or threat of
cancellation of any such license or agreement.

4-10. Leases. EXHIBIT 4-10, annexed hereto, is a schedule of all
Leases and Capital Leases effective as of the date of this Agreement. Each of
such Leases and Capital Leases is in full force and effect as of the date of
this Agreement. Neither the Borrower nor any Subsidiary of the Borrower is in
default or violation of any such Lease or Capital Lease and the Borrower has not
received any notice of cancellation of any such Lease or Capital Lease except
(a) as disclosed in connection with the Plan; and (b) as will be "Cured"
pursuant to the Plan; and (c) as is not likely to have a Material Adverse Effect
on the Borrower. The Borrower hereby authorizes the Agent, following the
occurrence, and during the

/October 28, 1997/
35
<PAGE>

continuance, of any Event of Default, to contact any of the Borrower's
landlords in order to confirm the Borrower's continued compliance with the terms
and conditions of the Lease(s) between the Borrower and that landlord and to
discuss such issues, concerning the Borrower's occupancy under such Lease(s), as
the Agent may determine.

4-11. Requirements of Law. The Borrower is in compliance with, and
shall hereafter comply with and use its assets in compliance with, all
Requirements of Law, except where the failure to so comply would not have a
Material Adverse Effect. The Borrower has not received any notice of any
violation of any such Requirement of Law (whether or not such violation is
material), which violation has not been cured or otherwise remedied or which the
Borrower is in the process of remedying except in connection with the
Proceedings.

4-12. Maintain Properties. The Borrower 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 uninsured destruction of
any material part of the Collateral.

(d) Not sell, lease, or otherwise dispose of any of the assets
of the Borrower or its Subsidiaries, other than the following:

(i) The sale or other disposition of Inventory in the
ordinary course of business, in connection with store closing sales
contemplated by the Plan and in connection with store closings after the
date hereof permitted under this Agreement.

(ii) The disposal of Equipment (A) which is obsolete, worn
out, damaged beyond repair, which Equipment is replaced to the extent
necessary to preserve or improve the operating efficiency of the Borrower,
or (B) which is no longer necessary for the operation of the Borrower's
business in the ordinary course.

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

(iv) Issuances of licenses and franchises in the ordinary
course.

(v) The sale of any real estate, including, without
limitation, the Distribution Facility.

(vi) The lease or sublease of Equipment in the ordinary
course of business.

(vii) The reinvestment of Cash Equivalents permitted
hereunder into other Cash Equivalents.

4-13. Pay Taxes.

(a) The Internal Revenue Service has completed its examination
of the Borrower's federal income tax returns for all tax years through and
including the Borrower's taxable year referenced on EXHIBIT 4-13, annexed
hereto, and that all deficiencies, assessments, and other amounts asserted as a
result of such examinations have been fully paid or settled or will be dealt
with in the Plan. No agreement is extant which waives or extends any statute of
limitations applicable to the right of the Internal Revenue Service to assert a
deficiency or make any other claim for or in respect to federal income taxes.
No issue has been raised as of the date of this Agreement in any such
examination which, by application of similar principles, reasonably could
reasonably be expected to result in the assertion of a material deficiency for
any fiscal year open for examination, assessment, or claim by the Internal
Revenue Service which has not been reserved for on the Borrower's books to the
extent, if any, required by GAAP.

(b) The respective state and local taxing authorities to which
the Borrower is subject have completed their respective examination of the
Borrower's returns for all state and local income, excise, sales, and other
taxes for which the Borrower is liable for the respective tax years referenced
on EXHIBIT 4-13, annexed hereto, and that all deficiencies, assessments, and
other amounts asserted as a result of such examinations have been fully paid or
settled or will be dealt with in the Plan. No agreement is extant which waives
or extends any statute of limitations applicable to the right of any state
taxing authority to assert a deficiency or make any other claim for or in
respect to any such state taxes. No issue has been raised as of the date of
this Agreement, in any such examination which, by application of similar
principles, reasonably could be expected to result in the assertion of a
material

/October 28, 1997/
36
<PAGE>

deficiency for any fiscal year open for examination, assessment, or claim by any
state or local taxing authority.

(c) Except as disclosed on said EXHIBIT 4-13, as of the date of
this Agreement, there are no examinations of or with respect to the Borrower
being conducted by the Internal Revenue Service or any other taxing authority.

(d) Except as otherwise provided in the Plan, the Borrower
hereafter shall: pay, as they become due and payable, all income, sales, ad
valorem, and other material taxes and unemployment contributions and other
material charges of any kind or nature levied, assessed or claimed against the
Borrower or the Collateral by any person or entity whose claim could result in
an Encumbrance upon any asset of the Borrower or by any governmental authority
other than those not yet delinquent and except for those contested in good faith
and for which adequate reserves (in the good faith judgment of the management of
the Borrower have been established; properly exercise any trust responsibilities
imposed upon the Borrower by reason of withholding from employees' pay or by
reason of the Borrower's receipt of sales tax or other funds for the account of
any third party; timely make all contributions and other payments as may be
required pursuant to any Employee Benefit Plan now or hereafter established by
the Borrower; and timely file all tax and other returns and other reports with
each governmental authority to whom the Borrower is obligated to so file.

(e) At its option, to the extent the Borrower has failed to pay
such items as required by Section 4-13(d), the Agent may, but shall not be
obligated to, pay any taxes, unemployment contributions, and any and all other
charges levied or assessed upon the Borrower or the Collateral by any person or
entity or governmental authority, and make any contributions or other payments
on account of the Borrower's Employee Benefit Plan as the Agent , in the Agent's
discretion, may deem necessary or desirable, to protect, maintain, preserve,
collect, or realize upon any or all of the Collateral or the value thereof or
any right or remedy pertaining thereto, provided, however, the Agent's making of
any such payment shall not constitute a cure or waiver of any Event of Default
occasioned by the Borrower's failure to have made such payment.

4-14. No Margin Stock. No part of the proceeds of any borrowing
hereunder will be used at any time to purchase or carry any margin stock (within
the meaning of Regulations G, U, T, and X of the Board of Governors of the
Federal Reserve System of the United States (the "Margin Regulations")) in
violation of the Margin Regulations. As of the date of this Agreement, neither
the Borrower nor any of its Subsidiaries owns any such margin stock. The
Borrower will not, nor will it permit any of its Subsidiaries to, own any margin
stock, except pursuant to an Acquisition permitted under Section 4-19 hereof and
then only to the extent the value of all margin stock of the Borrower and its
Subsidiaries (on a consolidated and unconsolidated basis) would be less than 25%
of the value (as determined by any reasonable method) of the assets of the
Borrower and its Subsidiaries (on a consolidated and unconsolidated basis) taken
as a whole which are subject to any limitation on sale, pledge or other
restriction hereunder.

4-15. ERISA.

(a)Neither the Borrower nor any ERISA Affiliate ever has or
hereafter shall:

(I) Violate or fail to be in compliance in all material respects
with the Borrower's Employee Benefit Plan.

(ii) Fail timely to file all reports and filings required by
ERISA to be filed by the Borrower.

(b) Neither Borrower, nor to Borrower's knowledge, any ERISA
affiliate ever has, and Borrower hereinafter shall not:

(I) Engage in any "prohibited transactions" or "reportable
events" (respectively as described in ERISA).

(ii) Engage in, or commit, any act such that a tax or penalty
could be imposed upon the Borrower on account thereof pursuant to ERISA
which could reasonably be expected to have a material adverse effect on the
business, operations, conditions (financial or otherwise) performance, or
properties of the Borrower..

(iii) Accumulate any material funding deficiency within the
meaning of ERISA.

(iv) Terminate any Employee Benefit Plan such that a lien could
be asserted against any assets of the Borrower on account thereof pursuant
to ERISA.

(b) Neither Borrower nor any ERISA Affiliate is as of the date
hereof a member of, contribute to, or have any obligation under any Employee
Benefit Plan which is a multiemployer plan within the meaning of Section 4001(a)
of ERISA.

/October 28, 1997/
37
<PAGE>

4-16. Hazardous Materials.

(a) Except for such releases of Hazardous Materials as have not
had, or would not be reasonably expected to have a Material Adverse Effect, the
Borrower has never:

(i) been legally responsible for any release or threat of
release of any Hazardous Material; or

(ii) received notification of any release or threat of
release of any Hazardous Material from any site or vessel occupied or
operated by the Borrower and/or of the incurrence of any expense or loss in
connection with the assessment, containment, or removal of any release or
threat of release of any Hazardous Material from any such site or vessel.

(b) The Borrower shall:

(i) dispose of any Hazardous Material only in compliance
with all Environmental Laws; and

(ii) not store on any site or vessel occupied or operated by
the Borrower and not transport or arrange for the transport of any
Hazardous Material, except if such storage or transport is in the ordinary
course of the Borrower's business and is in compliance with all
Environmental Laws.

(c) The Borrower shall provide the Agent with written notice
upon the Borrower's obtaining knowledge of any incurrence of any material
expense or material loss by any governmental authority or other Person in
connection with the assessment, containment, or removal of any Hazardous
Material, for which expense or loss the Borrower may be liable.

4-17. Litigation. Except as described in EXHIBIT 4-17, annexed
hereto, there is not presently pending or threatened by or against the Borrower
any suit, action, proceeding, or investigation which would have a material
adverse effect upon the Borrower's financial condition or ability to conduct its
business as such business is presently conducted or is contemplated to be
conducted in the foreseeable future.

4-18. Dividends or Investments. The Borrower shall not:

(a) Pay any cash dividend unless payment of such cash dividend
is permitted as described in the Indenture and would not result in the violation
of the Fixed Charge Covenant contained in Section 5-11 hereof.

(b) Own, redeem, retire, purchase, or acquire any of the
Borrower's capital stock.

(c) Except as permitted by Sections 4-19 and 4-20(d), invest in
or purchase any stock or securities or rights to purchase any such stock or
securities, of any corporation or other entity.

(d) Merge or consolidate or be merged or consolidated with or
into any other corporation or other entity other than as permitted by Sections
4-18(e) or 4-19.

(e) Except as permitted by Section 4-19, consolidate any of the
Borrower's operations with those of any other corporation or other entity except
that any Subsidiary of the Borrower may merge with any other Subsidiary of the
Borrower or the Borrower but in the case of the Borrower, only if the Borrower
is the surviving entity.

(f) Except as permitted by Section 419, organize or create any
Subsidiary without the prior written consent of the Agent, which consent may be
conditioned upon, among other things, the execution of a guaranty by such
Subsidiary of the Liabilities substantially in the form of EXHIBIT 4-3, and the
grant of a lien and security interest in substantially all of such Subsidiary's
assets.

(g) Subordinate any debts or obligations owed to the Borrower by
any third party to any other debts owed by such third party to any other Person.

4-19. Permitted Acquisitions. The Borrower may make Acquisitions
without the consent of the Agent or the Lenders; provided that:

/October 28, 1997/
38
<PAGE>

(a) Not less than Twenty-five (25) days prior written notice
(with reasonable particularity as to the facts and circumstances in respect of
which such notice is being given) of such Acquisition is given to the Agent.

(b) The aggregate purchase price (exclusive of the portion of
the purchase price paid for with capital stock of the Borrower) of all such
Acquisitions is not greater than Thirty Million Dollars ($30,000,000.00).

(c) The aggregate consideration paid in cash for all such
acquisitions does not exceed Fifteen Million Dollars ($15,000,000.00) million
unless the target of such acquisition, treated together with the Borrower as an
economic unit and reflecting those economies which would be realized if the
acquisition were consummated, which economies, the Agent in its reasonable
judgment agrees are supported by the specific facts and circumstances of the
transaction, would have satisfied the Fixed Charge Coverage Ratio for the 12
month period prior to such acquisition (with appropriate adjustments to which
the Agent, in the Agent's reasonable judgment agrees are supported by the
specific facts and circumstances of the transaction to the calculation of such
Fixed Charge Coverage Ratio to reflect the circumstances).

(d) No Event of Default then exists or would result from any
such Acquisition.

(e) With respect, to and in the event of any Acquisition which
consists of, or results in the creation of, a Subsidiary, Agent shall be
provided with such Subsidiary's Unlimited Guaranty (substantially in the form
of the Unlimited Guaranty provided in fulfillment of Section 4-3), which
Unlimited Guaranty shall be secured by first perfected security interests and
liens on substantially all of the assets of such Subsidiary.

4-20. Loans. The Borrower shall not 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 the Borrower's suppliers in the
ordinary course.

(b) Advances to the Borrower's officers, employees, and
salespersons with respect to reasonable expenses to be incurred by such
officers, employees, and salespersons for the benefit of the Borrower, which
expenses are properly substantiated by the person seeking such advance and
properly reimbursable by the Borrower.

(c)The Borrower and its Subsidiaries may acquire and hold(I)
receivables owing to them, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms
and (ii) promissory notes and other evidence of indebtedness issued to them as
payment of trade payables arising in the ordinary course of business so long as
the holding of such promissory notes is in the ordinary course of business of
the Borrower and its Subsidiaries and each of such notes is delivered and
pledged to the Agent.

(d)As long as no Revolving Credit Loans are then outstanding,
investments consisting of Cash Equivalents maintained at BankBoston, N.A.,
provided that such investments are pledged to the Agent as collateral for the
Liabilities by pledge agreements in form and substance reasonably satisfactory
to the Agent.

4-21. Protection of Assets. The Agent, in the Agent's discretion, and
from time to time, may discharge any tax or Encumbrance on any of the
Collateral, or take any other action that the Agent may deem necessary or
desirable to repair, insure, maintain, preserve, collect, or realize upon any of
the Collateral if the Borrower fails to do so. The 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 Agent has had an opportunity to be heard),
from which finding no further appeal is available, that the Agent had acted in
actual bad faith or in a grossly negligent manner. The Borrower shall pay to
the Agent, on demand, or the Agent, in its discretion, may add to the Loan
Account, all amounts paid or incurred by the Agent pursuant to this section.
The obligation of the Borrower to pay such amounts is a Liability.

4-22. Line of Business. The Borrower shall not engage in any business
other than the business in which it is currently engaged or a business
reasonably related thereto.

/October 28, 1997/
39
<PAGE>

4-23. Affiliate Transactions. Except as otherwise permitted in
accordance with this Agreement, or as described in EXHIBIT 4-23, annexed
hereto, the Borrower shall not make any payment, nor give any value to any
Affiliate (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any services or the entering
into of any contract, agreement, understanding, or guaranty) except for

(a) transactions pursuant to terms and for a price (if
applicable) which shall not differ from that which would
have been charged in an arms length transaction to a Person
not an Affiliate;

(b) transactions between the Borrower and any wholly-owned
Subsidiary or among wholly-owned Subsidiaries otherwise
permitted hereunder;

(d) dividends and payments under the New Notes otherwise
permitted under this Agreement.

4-24. Additional Assurances.

(a) The Borrower is not the owner of, nor has it any interest
in, any property or asset of a type which is included in the description of
"Collateral" which, immediately upon the satisfaction of the conditions
precedent to the effectiveness of the credit facility contemplated hereby
(Article 3) will be not be subject to a perfected security interest in favor of
the Agent (subject only to Permitted Encumbrances) to secure the Liabilities.

(b) The Borrower will not hereafter acquire any asset or any
interest in property of a type which is included in the description of
"Collateral" which is not, immediately upon such acquisition, subject to such
a perfected security interest in favor of the Agent to secure the Liabilities
(subject only to Permitted Encumbrances).

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

(d) A carbon, photographic, or other reproduction of this
Agreement or of any financing statement or other instrument executed pursuant
to this Section 4-24 shall be sufficient for filing to perfect the security
interests granted herein.

4-25. Adequacy of Disclosure.

(a) All financial statements furnished to the Agent and each
Lender by the Borrower have been prepared in accordance with GAAP consistently
applied and present fairly the financial condition of the Borrower at the
date(s) thereof and the results of operations and cash flows for the period(s)
covered. There has been no change in the financial condition, results of
operations, or cash flows of the Borrower since the date(s) of the most recent
such financial statements, other than changes which have not been materially
adverse, either singularly or in the aggregate to the business, operations,
properties or performance of the Borrower and its Subsidiaries taken as a whole.

(b) The Borrower does not have any contingent obligations or
obligation under any Lease or Capital Lease as of the date of this Agreement
which is not noted in the Borrower's financial statements furnished to the Agent
and each Lender prior to the execution of the within Agreement.

(c) No document, instrument, agreement, or paper now or
hereafter given the Agent by the Borrower or any guarantor of the Liabilities in
connection with the execution of the within Agreement by the Agent and each
Lender contains or will contain, as of the date furnished, (taken as a whole)
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 in light of the
circumstances under which they were made not misleading. There is no fact known
to the Borrower which has, or which, in the foreseeable future could reasonably
be expected to have, a material adverse effect on the financial condition of the
Borrower or any such guarantor which has not been disclosed in writing to the
Agent and each Lender.

/October 28, 1997/
40
<PAGE>

4-26. Other Covenants. The Borrower shall not indirectly do or cause
to be done any act which, if done directly by the Borrower, would breach any
covenant contained in this Agreement.

ARTICLE 5 - REPORTING REQUIREMENTS / FINANCIAL COVENANTS.

5-1. Maintain Records. The Borrower shall:

(a) At all times, keep proper books of account, in which full,
true, and accurate entries shall be made of all of the Borrower's transactions,
all in accordance with GAAP to fairly reflect the financial condition of the
Borrower 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 5 or otherwise, each of which
reports, statements and schedules shall be prepared, to the extent applicable,
in accordance with GAAP to fairly reflect the financial condition of the
Borrower at the close of, and its results of operations for, the period(s)
covered therein.

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

(d) At all times, retain Arthur Andersen or such other
independent certified public accountants who are reasonably satisfactory to the
Agent and instruct such accountants to fully cooperate with, and be available
to, the Agent and each Lender to discuss the Borrower's 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 or
that Lender.

(e) Not change the Borrower's fiscal year.

(f) Not change the Borrower's taxpayer identification number,
without prior notice to the Agent.

5-2. Access to Records.

(a) The Borrower shall accord the Agent and the Agent's
representatives with access from time to time as the Agent and such
representatives may reasonably require to all properties owned by or over which
the Borrower has control, all upon reasonably notice and at such reasonable
times during normal business hours. The Agent and the Agent's authorized
representatives shall have the right, and the Borrower will permit the Agent and
such representatives from time to time as the Agent and such representatives may
reasonably request, to examine, inspect, copy, and make extracts from any and
all of the Borrower's books, records, electronically stored data, papers, and
files, all upon reasonable notice and at such reasonable times during normal
business hours. The Borrower shall make all of the Borrower's copying
facilities available to the Lender, all upon reasonable notice and at such
reasonable times during normal business hours.

(b) The Borrower hereby authorizes the Agent and the Agent's
representatives to:

(i) Upon reasonable notice and at reasonable times during
normal business hours, inspect, copy, duplicate, review, cause to be
reduced to hard copy, run off, draw off, and otherwise use any and all
computer or electronically stored information or data which relates to the
Borrower, or any service bureau, contractor, accountant, or other person,
and directs any such service bureau, contractor, accountant, or other
person fully to cooperate with the Agent and the Agent's representatives
with respect thereto.

(ii) Verify at any time the Collateral or any portion
thereof, including verification with depositories and credit card
clearinghouses and processors, and/or with the Borrower's computer billing
companies, collection agencies, and accountants and to sign the name of the
Borrower on any notice to the Borrower's depositories and credit card
clearinghouses and processors, or verification of the Collateral.

/October 28, 1997/
41
<PAGE>

5-3. Immediate Notice to Agent.

(a) The Borrower shall provide the Agent with written notice
immediately 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 the Borrower's Senior Officers.

(ii) The completion of any physical count of the Borrower's
Inventory (together with a copy of the certified results thereof, if any).

(iii) Any ceasing of the Borrower's making of payment,
in the ordinary course, to any of its creditors which could reasonably be
expected to have a Material Adverse Effect (excluding the ceasing of the
making of such payments on account of a dispute with the subject creditor).

(iv) Any failure by the Borrower to pay rent at any of the
Borrower's locations, which failure continues beyond Twenty-five (25) days
after the expiration of any applicable grace period under the subject
lease.

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

(vi) The occurrence of any Suspension Event of which a
Senior Officer of the Borrower obtains knowledge.

(vii) Any intention on the part of the Borrower to
discharge the Borrower's present independent accountants or any withdrawal
or resignation by such independent accountants from their acting in such
capacity.

(viii) Any litigation which, if determined adversely to
the Borrower, might have a material adverse effect on the financial
condition of the Borrower.

(ix) The receipt of Net Proceeds from the sale, by the
Borrower, or by any Subsidiary of the Borrower, of its assets (other than sales
of Inventory in the ordinary course, sales of fixed assets in connection with
the closing of stores permitted hereunder, dispositions of worn out, damaged, or
obsolete Equipment, and the Net Proceeds of any sale of the Distribution
Facility).

(x) The occurrence of any event or circumstance which:
constitutes an event of default under the New Notes; constitutes the
acceleration of the New Notes; requires any mandatory prepayment of all or any
part of the principal of the New Notes.

(b) The Borrower shall:

(i) At the reasonable request of the 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).

(ii) Provide the Agent, when received by the Borrower, with
a copy of any management letter or similar communications from any
accountant of the Borrower.

(iii) Provide the Agent with a Certificate (which
Certificate shall include reasonable particularity as to the facts and
circumstances in respect of which such Certificate is being so furnished),
signed by the Borrower's Controller or Chief Financial Officer, at the
earlier of (A) the reinvestment in the Borrower's operations of Net
Proceeds, notice of the receipt of which Net Proceeds was provided pursuant
to Section 53(a)(ix) or (B) the failure by the Borrower to have so
reinvested such Net Proceeds within Two Hundred Ten (210) days following
receipt of such Net Proceeds.

(iv) Provide the Agent, when received by the Borrower, of
any notice of the occurrence of any claimed event of default under the New
Notes; purporting to accelerate the New Notes; or claiming that any
mandatory prepayment of all or any part of the principal of the New Notes
is, or will be due.

5-4. Borrowing Base Certificate. The Borrower shall provide the
Agent, weekly, on Wednesday of each week (as of the immediately preceding
Saturday), with a Borrowing Base Certificate (in the form of EXHIBIT 5-4 annexed
hereto, as such form may be revised from time to time by the Agent); provided,
however, the Borrower shall submit Borrowing Base Certificates on each day that
the Borrower desires to obtain a Revolving Credit Loan or the issuance of an L/C
or B/A hereunder. Such Certificate may be sent to the Agent

/October 28, 1997/
42
<PAGE>

by facsimile transmission, provided that the original thereof is forwarded to
the Agent on the date of such transmission, it being understood that inventory
values will be rolled forward weekly.

5-5. Monthly Reports.

(a) Monthly, the Borrower shall provide the Agent with original
counterparts of the following (each in such form as the Agent from time to time
may specify):

(i) Within Fifteen (15) days of the end of the previous
month:

(A) A "Stock Ledger Inventory Report" and a
Certificate (signed by the Borrower's Controller or Chief
Financial Officer, to the best of such officer's knowledge and
belief) concerning the Borrower's Inventory.

(B) An aging of the Borrower's Inventory.(1)

(ii) Within Thirty (30) days of the end of the previous
month:

(A) Reconciliations of the above described Report and
inventory Certificate (Section 5-5(a)(i)(A)) to Availability and
to the general ledger as of the end of the subject month.

(B) A Store Activity Report.

(D) An internally prepared financial statement of the
Borrower's financial condition the results of its operations for,
the period ending with the end of the subject month, which
financial statement shall include, at a minimum, a balance sheet,
income statement (on a "consolidated" basis), and cash flow
statement.

(b) For purposes of Section 5-5(a)(I), above, the first
"previous month" in respect of which the items required by that Section shall be
provided shall be September, 1997 and for purposes of Section 5-5(a)(ii), above,
the first "previous month" in respect of which the items required by that
Section shall be provided shall be September, 1997.

5-6. Quarterly Reports. Quarterly, within Forty Five (45) days
following the end of each of the Borrower's fiscal quarters, the Borrower shall
provide the Agent with the following:

(a) A store ranking report year to date by EBIDTA.

(b) A Letter of Credit Inventory Report breaking out the face
value of L/C Inventory with landed cost included.

- ---------------
(1) The Aging of Borrower's Inventory Report shall only be required
after such time as such Report can be prepared as a matter of
course under the Borrower's planned upgrade to its financial
information system.

/October 28, 1997/

43
<PAGE>

(c) For each of the first Three fiscal quarters of each year
only, an original counterpart of a management prepared financial statement of
the Borrower for the period from the beginning of the Borrower's 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,
at a minimum, a balance sheet, income statement (on a "consolidated" basis),
statement of changes in shareholders' equity (to the extent required by GAAP),
and cash flows and comparisons for the corresponding quarter of the then
immediately previous year, as well as to the Business Plan.

5-7. Annual Reports.

(a) Annually, within one hundred (100) days following the end of
the Borrower's fiscal year, the Borrower shall furnish the Agent with an
original signed counterpart of the Borrower's annual financial statement, which
statement shall have been prepared by, and bearing the unqualified opinion
(except for a going concern qualification) of, the Borrower's independent
certified public accountants (i.e. said statement shall be "certified" by such
accountants). Such annual statement shall include, at a minimum (with
comparative information for the then prior fiscal year) a balance sheet, income
statement, statement of changes in shareholders' equity (to the extent required
by GAAP), and cash flows.

(b) No later than the earlier of Fifteen (15) days prior to the
end of each of the Borrower's fiscal years or the date on which such accountants
commence their work on the preparation of the Borrower's annual financial
statement, the Borrower shall give written notice to such accountants (with a
copy of such notice, when sent, to the Agent) that:

(i) Such annual financial statement will be delivered by
the Borrower to the Agent (for subsequent distribution to each
Lender).

(ii) 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 facility contemplated by the
within Agreement.

(c) Each annual statement shall be accompanied by such
accountant's Certificate indicating that, in the preparation of such annual
statement, such accountants did not conclude that any Suspension Event had
occurred during the subject fiscal year (or if one or more had occurred, the
facts and circumstances thereof).

5-8. Officers' Compliance Certificates. The Borrower shall cause any
of the Borrower's President, Controller, or Chief Financial Officer
respectively to provide such Person's Certificate, to the best of such officer's
knowledge and belief, with those monthly, quarterly, and annual statements to be
furnished pursuant to this Agreement, which Certificate shall:

(a) Indicate that the subject statement presents fairly the
financial condition of the Borrower at the close of, and the results of the
Borrower's operations and cash flows for, the period(s) covered, subject,
however to the following:

(i) With the exception of the Certificate which accompanies
such annual statement) usual year end adjustments.

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

(ii) Include calculations concerning the Borrower's
compliance (or failure to comply) at the date of the subject statement with
the covenant included in Section 5-11(a).

(iii) Indicate that the statement was prepared in
accordance with GAAP consistently applied, with the exception of Material
Accounting Changes, written notice of each of which has been provided to
the Agent.

5-9. Inventories, Appraisals, and Audits.

(a) The Agent and each Lender, at the expense of the Borrower,
may participate in and/or observe each physical count and/or inventory of so
much

/October 28, 1997/
44
<PAGE>

of the Collateral as consists of Inventory which is undertaken on behalf of the
Borrower; the Agent's right to be reimbursed for its expenses, prior to the
occurrence, and during the continuance, of an Event of Default, being subject to
the Agent's participation being undertaken in conjunction with a field audit by
the Agent of the Borrower.

(b) Upon the Agent's request from time to time, the Borrower
shall obtain, or shall permit the Agent to obtain (in all events, at the
Borrower's expense) physical counts and/or inventories of the Collateral,
conducted by such inventory takers as are reasonably satisfactory to the Agent
and following such methodology as may be reasonably required by the Agent, each
of which physical counts and/or inventories shall be observed by the Borrower's
accountants. The Agent contemplates conducting One (1) such count and/or
inventory during any Twelve (12) month period during which the within Agreement
is in effect, but in its reasonable discretion, may undertake additional such
counts or inventories during such period.

(c) Upon the Agent's request from time to time, the Borrower
shall permit the Agent to obtain appraisals (in all events, at the Borrower's
expense) conducted by such appraisers as are satisfactory to the Agent.

(d) The Agent contemplates conducting up to Four (4) commercial
finance audits (in each event, at the Borrower's expense) of the Borrower's
books and records during any Twelve (12) month period during which the within
Agreement is in effect, but in its discretion, following the occurrence and
during the continuance of any Event of Default, may undertake additional such
audits during such period.

(e) The maximum aggregate cost for the following which the Agent
conducts or causes to be conducted in any Twelve (12) month period for which the
Borrower shall reimburse the Agent shall not exceed the aggregate of following,
it being understood, however, that (x) the maxima are subject to Borrower's
having made available, as appropriate, upon reasonable prior notice and during
normal business hours, its facilities, financial information, and personnel to
facilitate completion in the ordinary course of the following and (y) no Event
of Default having occurred and continuing (and that if either (x) or (y) does
not then obtain, there shall not be any such limitation on the aggregate of such
costs):

(i) Appraisals pursuant to Section 5-9(c): $80,000.00.

(ii) Commercial finance audits pursuant to Section 5-9(d):
$24,000.00.

5-10. Additional Financial Information. In addition to all other
information required to be provided pursuant to this Article 5, the Borrower
promptly shall provide the Agent (and any guarantor of the Liabilities), with
such other and additional information concerning the Borrower, the Collateral,
the operation of the Borrower's business, and the Borrower's financial
condition, including original counterparts of financial reports and statements,
as the Agent reasonably may from time to time request from the Borrower,
including, without limitation:

(a) an Open to Buy Report;

(b) a Comparable Sales Report;

(d) an Order Report by Department;

(e) a Velocity Report by Department; and

(f) a schedule of purchases from the Borrower's ten largest
vendors (in terms of year to date purchases), which schedule shall be in such
form as may be reasonably satisfactory to the Agent and shall include year to
date cumulative purchases and an aging of payables to each such vendor, to be
done in conjunction with the Agent's field audits.

5-11. Fixed Charge Coverage Ratio.

(a) The Borrower will not permit its Fixed Charge Coverage Ratio
to be less than 1.25 to 1.00.

(b) The Borrower's compliance with the covenant included in
Section 511(a) shall be measured at the end of each of the Borrower's Fiscal
quarters

/October 28, 1997/
45
<PAGE>

(commencing with the Borrower's Fiscal quarter ending on or about January 31,
1998), based upon the Borrower's performance and results for the then most
recent twelve months, except that for the first three Fiscal quarters ending
after November 2, 1997, the Borrower's compliance with Section 5-11(a) shall be
based upon the period commencing with the Borrower's Fiscal quarter commencing
on or about November 3, 1997 and ending at the end of the then most recent
Fiscal quarter.

ARTICLE 6 - USE AND COLLECTION OF COLLATERAL.

6-1. Use of Inventory Collateral.

(a) The Borrower shall not engage in any sale of the Inventory
other than: sales in the ordinary course and sales or other dispositions
permitted by Section 4-12(d); and shall not engage in sales or other
dispositions to creditors; nor use of any of the Inventory in breach of any
provision of this Agreement.

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

6-2. Inventory Quality. All Inventory now owned or hereafter acquired
by the Borrower is and will be of good and merchantable quality and free from
defects (other than defects within customary trade tolerances and "irregular"
inventory held for sale in outlet stores).

6-3. Adjustments and Allowances. The Borrower may grant such
allowances or other adjustments to the Borrower's Account Debtors (exclusive of
extending the time for payment of any Account or Account Receivable, which shall
not be done, if an Event of Default has occurred and is continuing, without
first obtaining the Agent's prior written consent in each instance) as the
Borrower may reasonably deem to accord with sound business practice, provided,
however, the authority granted the Borrower pursuant to this Section 63 may be
limited or terminated by the Agent at any time in the Agent's discretion.

6-4. Validity of Accounts.

(a) The amount of each Account shown on the books, records, and
invoices of the Borrower represented as owing by each Account Debtor to the best
of Borrower's knowledge is and will be the correct amount actually owing by such
Account Debtor and shall have been fully earned by performance by the Borrower.

(b) The Borrower has no knowledge of any impairment of the
validity or collectibility of any of the Accounts as of the date of this
Agreement and shall notify the Agent of any such fact immediately after Borrower
becomes aware of any such impairment.

(c) The Borrower shall not post any bond to secure the
Borrower's performance under any agreement to which the Borrower is a party nor
cause any surety, guarantor, or other third party obligee to become liable to
perform any obligation of the Borrower (other than to the Agent ) in the event
of the Borrower's failure so to perform.

6-5. Notification to Account Debtors. The Agent shall have the right
at any time (after an Event of Default has occurred and is continuing) to notify
any of the Borrower's Account Debtors to make payment directly to the Agent and
to collect all amounts due on account of the Collateral.

/October 28, 1997/
46
<PAGE>

ARTICLE 7 - CASH MANAGEMENT. PAYMENT OF LIABILITIES.

7-1 Depository Accounts.

(a) Annexed hereto as EXHIBIT 7-1 is a Schedule of all present
DDA's maintained as of the date of this Agreement, which Schedule includes, with
respect to each depository (i) the name and address of that depository; (ii) the
account number(s) of the account(s) maintained with such depository; and (iii) a
contact person at such depository.

(b) The Borrower shall deliver to the Agent:

(i) Upon the request of the Agent, notification, executed
on behalf of the Borrower, to each depository institution with which any
DDA is now or hereafter maintained (other than the Funding Account or any
Local DDA), in form satisfactory to the Agent, of the Agent's interest in
such DDA.

(ii) As a condition to the effectiveness of this Agreement,
an agreement (generally referred to as a "Blocked Account Agreement"), in
form reasonably satisfactory to the Agent, with any depository institution
at which both any DDA (other than the Funding Account) and the Funding
Account is maintained.

(iii) As a condition to the effectiveness of this
Agreement, an agreement (generally referred to as a "Blocked Account
Agreement"), in form reasonably satisfactory to the Agent, with any
depository institution at which a Central Account is maintained

(c) The Borrower will not establish any DDA hereafter (other
than the New Note Disbursement Account and a Local DDA) unless, contemporaneous
with such establishment, the Borrower delivers to the Institution at which the
DDA is maintained, with a copy to the Agent, a notification of the type
described in Section 7-1(b)(I) above.

7-2. Credit Card Receipts.

(a) Annexed hereto as EXHIBIT 7-2, is a Schedule which describes
all arrangements to which the Borrower is a party with respect to the payment to
the Borrower of the proceeds of all credit card charges for sales by the
Borrower as of the date of this Agreement.

(b) The Borrower shall deliver to the Agent, as a condition to
the effectiveness of the within Agreement, notification, executed on behalf of
the Borrower, to each of the Borrower's credit card clearinghouses and
processors of notice (in form satisfactory to the Agent), which notice provides
that payment of all credit card charges submitted by the Borrower to that
clearinghouse or other processor and any other amount payable to the Borrower by
such clearinghouse or other processor shall be directed to the Concentration
Account. The Borrower shall not change such direction or designation except upon
and with the prior written consent of the Agent.

7-3. The Concentration and the Funding Accounts.

(a) The following checking accounts have been or will be
established as of the date of this Agreement (and are so referred to herein):

(i) The Concentration Account: Established by the Agent
with BankBoston, N.A.

(ii) The Funding Account: Established by the Borrower with
U.S. Bank National Association.

(iii) The Central Account: Established by the Borrower
with U.S. Bank National Association.

(b) The contents of each DDA (other than the Funding Account)
and of the Central Account constitutes Collateral and Proceeds of Collateral.
The contents of the Concentration Account constitutes the Agent's property.

(c) The Borrower shall not establish any Central Account
hereafter except upon not less than Thirty (30) days' prior written notice to
the Agent and the delivery to the Agent of a Blocked Account Agreement similar
to that executed pursuant to Section 7-1(b)(iii) hereof.

(d) The Borrower shall establish its cash management systems,
including, wthout limitation, any Central Account and Funding Account, with
BankBoston, N.A. within five Business Days after the Borrower's receipt of
notice from the Agent that such systems are available.

(e) The Borrower shall pay all fees and charges of, and maintain
such minimum balances as may be required by the Lender or by any bank in which

/October 28, 1997/
47
<PAGE>

any account is opened (even if such account is opened by and/or is the property
of the Agent).

7-4. Proceeds and Collection of Accounts.

(a) All Receipts constitute Collateral and proceeds of
Collateral and shall be held in trust by the Borrower for the Agent; shall not
be commingled with any of the Borrower's other funds; and shall be deposited
and/or transferred only to the Central Account.

(b) The Borrower shall cause the ACH or wire transfer to the
Central Account, no less frequently than daily (and whether or not there is then
an outstanding balance in the Loan Account) of the then contents of each DDA
(other than (A) any Local DDA and (B) the Funding Account), each such transfer
to be net of any minimum balance, not to exceed $3,500.00, as may be required to
be maintained in the subject DDA by the bank at which such DDA is maintained).

(c) Whether or not any Liabilities are then outstanding, the
Borrower shall cause the ACH or wire transfer to the Concentration Account, no
less frequently than daily, of then entire ledger balance of the Central
Account, net of such minimum balance, not to exceed $5,000,000.00 as long as the
Central Account is maintained at U.S. Bank National Association, and otherwise
not to exceed $3,500.00 , as may be required to be maintained in the Central
Account by the bank at which the Central Account is maintained.

(d) In the event that, notwithstanding the provisions of this
Section 74, the Borrower 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 the Borrower for the Agent
and shall not be commingled with any of the Borrower's other funds or deposited
in any account of the Borrower other than as instructed by the Agent.

7-5. Payment of Liabilities.

(a) On each Business Day, the Agent shall apply, towards the
Liabilities, the then collected balance of the Concentration Account (net of
fees charged, and of such impressed balances as may be required by the bank at
which the Concentration Account is maintained).

(b) The following rules shall apply to deposits and payments
under and pursuant to this Agreement:

(i) Funds shall be deemed to have been deposited to the
Concentration Account on the Business Day on which deposited,
provided that notice of such deposit is available to the Agent by
2:00 PM on that Business Day.

(ii) Funds paid to the Agent, other than by deposit to the
Concentration Account, shall be deemed to have been received on
the Business Day when paid, provided that notice of such payment
is available to the Agent by 2:00PM on that Business Day.

(iii) If notice of a deposit to the Concentration
Account (Section 7-5(b)(i)) or payment (Section 7-5(b)(ii)) is
not available to the Agent until after 2:00PM on a Business Day,
such deposit or payment shall be deemed to have been made at 9:00
AM on the then next Business Day.

(iv) All deposits to the Concentration Account and other
payments to the Agent are subject to clearance and collection.

(c) The Agent shall transfer to the Funding Account any surplus
in the Concentration Account remaining after the application towards the
Liabilities referred to in Section 7-5(a), above (less those amount which are to
be netted out, as provided therein) provided, however, in the event that both
(i) a Suspension Event has occurred and is continuing and (ii) one or more L/C's
are then outstanding, the Agent may establish a funded reserve of up to 110% of
the aggregate Stated Amounts of such L/C's.

7-6. The Funding Account. Except as otherwise specifically provided
in, or permitted by, the within Agreement, all checks shall be drawn by the
Borrower upon, and other disbursements made by the Borrower solely from, the
Funding Account. The Borrower may use funds in the Local DDAs for petty cash
disbursements.

/October 28, 1997/
48
<PAGE>

ARTICLE 8 - GRANT OF SECURITY INTEREST

8-1. Grant of Security Interest. To secure the Borrower's prompt,
punctual, and faithful performance of all and each of the Borrower's
Liabilities, the Borrower hereby grants to the Agent, for the ratable benefit of
the Lenders, a continuing security interest in and to, and assigns for security
to the Agent, for the ratable benefit of the Lenders, the following, and each
item thereof, whether now owned or now due, or in which the Borrower has an
interest, or hereafter acquired, arising, or to become due, or in which the
Borrower obtains an interest, and all products, Proceeds, substitutions, and
accessions of or to any of the following (all of which, together with any other
property in which the Agent may in the future be granted a security interest, is
referred to herein as the "Collateral"):

(a) All Accounts and accounts receivable.

(b) All Inventory.

(d) All Chattel Paper.

(e) All books, records, and information relating to the
Collateral and/or to the operation of the Borrower's
business, and all rights of access to such books, records,
and information, and all property in which such books,
records, and information are stored, recorded, and
maintained.

(f) All Investment Property, Instruments, Documents, Deposit
Accounts, policies and certificates of insurance, deposits,
impressed accounts, compensating balances, money, cash, or
other property.

(g) 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(f)) or otherwise.

(h) All liens, guaranties, rights, remedies, and privileges
pertaining to any of the foregoing (8-1(a) through 8-1(f)),
including the right of stoppage in transit.

Notwithstanding anything in this Agreement to the contrary, (x) the
Collateral shall not include the New Note Disbursement Account) and (y) with
respect to each item of Collateral constituting an agreement, license, permit or
other instrument of the Borrower, such item shall be subject to the security
interest created hereby only to the extent that the granting of such security
interest, under the terms of such agreement, license, permit or other
instrument, or as provided by law, does not cause any default under or
termination of such agreement, license, permit or other instrument or the loss
of any material right of the Borrower thereunder; provided, however, that in no
event shall the foregoing be construed to exclude from the security interest
created by this Agreement, proceeds or products of any such agreement, license,
permit or other instrument of the Borrower or any accounts receivable or the
right to payments due or to become due the Borrower under any such agreement or
other instrument.

8-2. Extent and Duration of Security Interest. The within grant of a
security interest is in addition to, and supplemental of, any security interest
previously granted by the Borrower to the Agent and shall continue in full force
and effect applicable to all Liabilities until all Liabilities have been paid
and/or satisfied in full and the security interest granted herein is
specifically terminated in writing by a duly authorized officer of the Agent.

ARTICLE 9 - AGENT AS BORROWER'S ATTORNEY-IN-FACT.

9-1. Appointment as Attorney-In-Fact. The Borrower hereby
irrevocably constitutes and appoints the Agent as the Borrower's true and lawful
attorney, with full power of substitution, effective following the occurrence
and during the continuance of an Event of Default, to convert the Collateral
into cash at the sole risk, cost, and expense of

/October 28, 1997/
49
<PAGE>

the Borrower, but for the sole benefit of the Agent and the Lenders. If the
power of attorney is exercised prior to acceleration of the Liabilities, the
Agent will endeavor to advise the Borrower of the exercise of any such power;
however, the failure of the Agent to so notify the Borrower shall not create any
liability or claim against the Agent or the Lenders. The rights and powers
granted the Agent by the within 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
the Borrower's mail is to be sent to such address as the Agent shall designate;
receive and open the Borrower's mail; remove any Receivables Collateral and
Proceeds of Collateral therefrom and turn over the balance of such mail either
to the Borrower or to any trustee in bankruptcy, receiver, assignee for the
benefit of creditors of the Borrower, or other legal representative of the
Borrower whom the Agent determines to be the appropriate person to whom to so
turn over such mail.

(c) Endorse the name of the 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 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 Borrower on any notice to the
Borrower's Account Debtors or verification of the Receivables Collateral; sign
the Borrower's 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 the 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 the Borrower.

(g) Use, license or transfer any or all General Intangibles of
the Borrower, subject to the rights of any licensee existing on the date of this
Agreement.

(h) Sign and file or record any financing or other statements in
order to perfect or protect the Agent's security interest in the Collateral.

9-2. 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 9-1
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 the 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.

ARTICLE 10 - EVENTS OF DEFAULT.

The occurrence of any event described in this Article 10 respectively shall
constitute an "Event of Default" herein. Upon the occurrence of any Event of
Default described in Section 10-14, any and all Liabilities shall become due and
payable without any further act on the part of the Agent or any Lender. Upon
the occurrence and during the continuance of any other Event of Default, any and
all Liabilities may be declared immediately due and payable, at the option of
the Agent and without notice or demand.

10-1. Failure to Pay Principal. The failure by the Borrower to pay,
when due, any principal which constitutes a Liability.

10-2. Failure To Make Other Payments. The failure by the Borrower,
for a period longer than Five (5) consecutive days, to pay any amount, other
than principal, which consists of a Liability.

/October 28, 1997/
50
<PAGE>

10-3. Failure to Perform Covenant or Liability (No Grace Period).
The failure by the Borrower to promptly, punctually, faithfully and timely
perform, discharge, or comply with any covenant or Liability not otherwise
described in Section 101 or Section 102 hereof, and included in any of the
following provisions hereof:
Section Relates to :

4-5(a) Location of Collateral - solely to the
extent that the failure to comply has
resulted in the Lender to fail to have a
continuously perfected security interest
in the Collateral so removed or
relocated.

4-6(a) Title to Assets - except where any
Encumbrance is involuntarily placed on
the Borrower's assets, is de minimis in
amount (as determined by the Agent in
its reasonable discretion), and is being
diligently contested by the Borrower.

4-7 Indebtedness

4-8 Insurance Policies - solely if the
insurance required to be maintained by
the Borrower in canceled.

4-23 Affiliate Transactions

5-7 Annual Financial Statements

5-11 Fixed Charge Coverage Ratio

Article 7 Cash Management

10-4. Failure to Perform Covenant or Liability (Limited Grace).

(a) The failure by the Borrower to promptly, punctually, and
faithfully perform, discharge, or comply with any provisions of Sections 4-4,
4-5 (other than 4-5(a)), 4-8 or 4-23 of this Agreement not described in Section
10-4 hereof, or of Section 5 not described in Section 10-4 hereof, which failure
continues for ten (10) days after the date when due.

(b)(i) The failure of the Borrower to promptly, punctually and
faithfully perform, discharge, or comply with

(A) the provisions of Section 5-4 hereof; provided no Event of
Default shall arise hereunder if the Borrower complies
therewith no more than two (2) days after the due date
thereof and such failure to comply on the due date does not
occur more than three (3) occasions in any twelve-month
period; provided further that the Lenders shall have no
obligation to make Revolving Credit Loans or to cause the
issuance of L/Cs and B/As until such Borrowing Base
Certificate is received

(B) the provisions of Section 5-5 hereof; provided no Event of
Default shall arise hereunder if the Borrower complies
therewith no more than ten (10) days after the due date
thereof and such failure to comply on the due date does not
occur more than four (4) occasions in any twelve-month
period;

(C) the provisions of Section 5-6 hereof; provided no Event of
Default shall arise hereunder if the Borrower complies
therewith no more than ten (10) days after the due date
thereof and such failure to comply on the due date does not
occur more than one (1) occasion in any twelve-month period;

(D) the provisions of Section 5-8 hereof, within the time
periods (including applicable grace periods) set forth with
respect to Sections 5-5, 5-6, above, and Section 5-7, as
applicable.

10-5. Failure to Perform Covenant or Liability (Grace Period).
The failure by the Borrower, upon Thirty (30) days written notice by the
Agent, to cure the

/October 28, 1997/
51
<PAGE>

Borrower's failure to promptly, punctually and faithfully perform, discharge, or
comply with any covenant or Liability not described in any of Sections 10-1,
10-2, 10-3 or 10-4 hereof.

10-6. Misrepresentation. The failure of any representation or warranty
at any time made by the Borrower to the Agent or any Lender, to be true in all
material respects when given or confirmed.

10-7. Default in Other Indebtedness. The occurrence of any event
such that, after giving effect to the expiration of any applicable grace
periods, Indebtedness, which when aggregated with all other like Indebtedness of
the Borrower or any of its Subsidiaries to any creditor other than the Agent or
any Lender which could (after giving effect to the expiration of any applicable
grace periods) be accelerated, exceeds Three Million Dollars ($3,000,000.00).

10-8. Payment Default Under Any Lease. The occurrence of a material
payment default under any Lease, which default could reasonably be expected to
have a material adverse effect on the business or operations of the Borrower and
its subsidiaries, taken as a whole.

10-9. Default Under Other Agreements. The occurrence of any breach
or default (after giving effect to the expiration of any applicable grace
periods) under any Loan Documents, whether such Loan Document now exists or
hereafter arises (notwithstanding that the Agent or the subject Lender may not
have exercised its rights upon default under any such other Loan Document).

10-10. Events with Respect To New Notes The occurrence of any event
such that the New Notes, after the expiration of any applicable grace period,
could be accelerated or that prepayment of all or any part of the principal of
any New Note could be required.

10-11. Casualty Loss. Non-Ordinary Course Sales. The occurrence of
any (a) uninsured loss, theft, damage, or destruction of or to any material
portion of the Collateral, or (b) sale (other than sales in the ordinary course
of business or otherwise permitted hereunder) of any material portion of the
assets of the Borrower.

10-12. Judgment. Restraint of Business.

(a) The entry of any money judgment which, when aggregated with
like money judgments against the Borrower or any of its subsidiaries which are
neither satisfied nor appealed from (with execution or similar process stayed)
within Thirty (30) days of its entry, exceeds Three Million Dollars
($3,000,000.00).

(b) The entry of any nonmonetary judgment against the Borrower
or any of its subsidiaries, which judgement could reasonably be expected to
result in a material adverse effect on the Borrower and which judgement is
neither satisfied nor appealed from (with execution or similar process stayed)
within Thirty (30) days of its entry.

(c) The entry of any order or the imposition of any other
process having the force of law, the effect of which is to restrain in any
material adverse way the conduct by the Borrower or of its Subsidiaries of its
respective business in the ordinary course.

10-13. Business Failure. Any act by, or relating to the Borrower, or
its property or assets, which act constitutes the 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 the Borrower's
property; the granting of any trust mortgage or execution of an assignment for
the benefit of the creditors of the Borrower; the offering by or entering into
by the Borrower of any composition, extension, or any other arrangement seeking
relief from or extension of the debts of the Borrower; or the initiation of any
judicial or non-judicial proceeding or agreement by the Borrower which seeks or
intends to accomplish a reorganization or arrangement with creditors; and/or the
initiation by or on behalf of the Borrower of the liquidation or winding up of
all or any part of the Borrower's

/October 28, 1997/
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<PAGE>

business or operations; or the initiation of any proceeding against the Borrower
or its property or assets, which proceeding is not timely contested or, if so
contested, is not dismissed within Sixty (60) days of when initiated.

10-14. Bankruptcy. The failure by the Borrower to generally pay the
debts of the Borrower as they mature; adjudication of bankruptcy or insolvency
relative to the Borrower; the entry of an order for relief or similar order with
respect to the Borrower in any proceeding pursuant to the Bankruptcy Code or any
other federal bankruptcy law; the filing of any complaint, application, or
petition by the Borrower initiating any matter in which the Borrower is or may
be granted any relief from the debts of the Borrower pursuant to the Bankruptcy
Code or any other insolvency statute or procedure; the filing of any complaint,
application, or petition against the Borrower seeking the entry of an order for
relief under the Bankruptcy Code, which filing is not timely contested or, if
timely contested, is not dismissed within Sixty (60) days of when filed.

10-15. Default by Guarantor or Related Entity. The occurrence of any of
the foregoing Events of Default with respect to any guarantor of the
Liabilities, or the occurrence of any of the foregoing Events of Default with
respect to any Subsidiary, as if such guarantor or Subsidiary were the
"Borrower" described therein.

10-16. Indictment - Forfeiture. The indictment of, or institution of any
legal process or proceeding against, the Borrower, under any federal, state,
municipal, and other civil or criminal statute, rule, regulation, order, or
other requirement having the force of law where the relief, penalties, or
remedies sought or available include the forfeiture of any property of the
Borrower and/or the imposition of any stay or other order, the reasonable
likelihood of which could result in a material adverse restraint on the conduct
by the Borrower of its business in the ordinary course.

10-17. Challenge to Loan Documents.

(a) Any challenge by or on behalf of the Borrower or any
guarantor of the Liabilities 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 materially 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 substantially 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.

10-18. Executive Management. The death, disability, or failure of Sam
Forman at any time to exercise that authority and discharge those management
responsibilities with respect to the Borrower as are exercised and discharged or
are anticipated to be exercised or discharged by such Person at the execution of
the within Agreement or the entry of judicial process (not dismissed or
dissolved within Seven (7) days of such entry), the effect of which process is
to restrain such Person from exercising any material portion of those
management responsibilities with respect to the Borrower as are exercised and
discharged or are anticipated to be exercised or discharged by such Person at
the execution of the within Agreement, provided, however,

(a) such death, disability, failure of said Person or entry of
such process shall not constitute an "Event of Default" until One Hundred Five
(105) days after such occurrence and, unless the Agent sooner waives such Event
of Default, or gives written notice of the acceleration of the Liabilities (as
to which, see Proviso (b), below) such death, disability, failure, or entry of
process shall cease to be an "Event of Default" One Hundred Thirty-five (135)
days after its having occurred; and

(b) the Agent shall not accelerate the Liabilities on account of
such death, disability, or failure or entry of such process, except upon and
with Thirty (30) days written notice given at any time during the "window"
period described in Proviso (a), above.

/October 28, 1997/
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<PAGE>

The provisions of this Section 10-18 shall be void and of no further effect
fifteen (15) Business Days after the Agent's receipt of the financial statements
described in Section 5-7 hereof for the Borrower's fiscal year ending January
31, 1999 as long as no other Event of Default then exists hereunder.

10-19. Change in Control. Any Change in Control other than on account
of an initial public offering of the capital stock of the Borrower.

ARTICLE 11 - RIGHTS AND REMEDIES UPON DEFAULT.

In addition to all of the rights, remedies, powers, privileges, and
discretions which the Agent is provided prior to the occurrence of an Event of
Default, the Agent shall have the rights and remedies set forth in Sections 11-1
through and including 11-6 upon the occurrence, and during the continuance, of
any Event of Default and at any time thereafter.

11-1. Rights of Enforcement. The Agent shall have all of the rights
and remedies of a secured party upon default under the UCC, in addition to which
the Agent shall have all and each of the following rights and remedies:

(a) To collect the Receivables Collateral with or without the
taking of possession of any of the Collateral.

(b) To take possession of all or any portion of the Collateral.

(c) 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 Agent deems advisable and with or without the taking of possession of any of
the Collateral.

(d) To conduct one or more going out of business sales which
include the sale or other disposition of the Collateral.

(e) To apply the Receivables Collateral or the Proceeds of the
Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities.

(f) To exercise all or any of the rights, remedies, powers,
privileges, and discretions under all or any of the Loan Documents.

11-2. Sale of Collateral.

(a) Any sale or other disposition of the Collateral may be at
public or private sale upon such terms and in such manner as the Agent deems
advisable, having due regard to compliance with any statute or regulation which
might affect, limit, or apply to the Agent's disposition of the Collateral.

(b) The Agent, in the exercise of the Agent's rights and
remedies upon default, may conduct one or more going out of business sales, in
the Agent's own right or by one or more agents and contractors. Such sale(s) may
be conducted upon any premises owned, leased, or occupied by the Borrower. The
Agent and any such agent or contractor, 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 Agent or such agent or contractor). 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 Agent or such agent or contractor
and neither the Borrower nor any Person claiming under or in right of the
Borrower shall have any interest therein.

(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 Agent shall provide the Borrower with such notice as may be
practicable under the circumstances), the Agent shall give the Borrower at least
ten (10) days prior written notice of the date, time, and place of any proposed
public sale, and of the date after which any private sale or other disposition
of the Collateral may be made. The Borrower agrees that such written notice
shall satisfy all requirements for notice to the Borrower which are imposed
under the UCC or other applicable law with respect to the exercise of the
Agent's rights and

/October 28, 1997/
54
<PAGE>

remedies upon default.

(d) The Agent and any Lender may purchase the Collateral, or any
portion of it at any sale held under this Article.

(e) The Agent shall apply the proceeds of any exercise of the
Agent's Rights and Remedies under this Article 11 towards the Liabilities in
such manner, and with such frequency, as the Agent determines.

11-3. Occupation of Business Location. In connection with the Agent's
exercise of the Agent's rights under this Article 11, the Agent may enter upon,
occupy, and use any premises owned or occupied by the Borrower, and may exclude
the Borrower from such premises or portion thereof as may have been so entered
upon, occupied, or used by the Agent. The Agent shall not be required to remove
any of the Collateral from any such premises upon the Agent's taking possession
thereof, and may render any Collateral unusable to the Borrower. In no event
shall the Agent be liable to the Borrower for use or occupancy by the Agent of
any premises pursuant to this Article 11, nor for any charge (such as wages for
the Borrower's employees and utilities) incurred in connection with the Agent's
exercise of the Agent's Rights and Remedies.

11-4. Grant of Nonexclusive License. The Borrower hereby grants to
the Agent a royalty free nonexclusive irrevocable license to

(a) Use, apply, and affix any trademark, tradename, logo, or the
like in which the Borrower now or hereafter has rights, such license being with
respect to the Agent's exercise of the rights upon the occurrence and during the
continuance of an Event of Default under this Article 11 including, without
limitation, in connection with any completion of the manufacture of Inventory or
sale or other disposition of Inventory.

(b) Use all of the Borrower's Equipment and infrastructure.

11-5. Assembly of Collateral. The Agent may require the Borrower to
assemble the Collateral and make it available to the Agent at the Borrower's
sole risk and expense at a place or places which are reasonably convenient to
both the Agent and Borrower.

11-6. Rights and Remedies. The rights, remedies, powers,
privileges, and discretions of the Agent hereunder (herein, the " Agent's Rights
and Remedies") shall be cumulative and not exclusive of any rights or remedies
which it would otherwise have. No delay or omission by the Agent in exercising
or enforcing any of the Agent's 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 Agent's 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 Agent's Rights and
Remedies. No waiver by the Agent of any of the Agent's Rights and Remedies on
any one occasion shall be deemed a waiver on any subsequent occasion, nor shall
it be deemed a continuing waiver. All of the Agent's Rights and Remedies and
all of the Agent's rights, remedies, powers, privileges, and discretions under
any other agreement or transaction are cumulative, and not alternative or
exclusive, and may be exercised by the Agent at such time or times and in such
order of preference as the Agent in its sole discretion may determine. The
Agent's Rights and Remedies may be exercised without resort or regard to any
other source of satisfaction of the Liabilities.

ARTICLE 12 - NOTICES.

12-1. Notice Addresses. All notices, demands, and other
communications made in respect of this Agreement (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:

/October 28, 1997/
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<PAGE>

If to the Agent:
BankBoston Retail Finance Inc.
40 Broad Street
Boston, Massachusetts 02109
Attention : Mr. Michael Pizette
Vice President
Fax : 617 434-4339

With a copy to:
Riemer & Braunstein
Three Center Plaza
Boston, Massachusetts 02108
Attention : Richard B. Jacobs, Esquire
Fax : 617 723-6831

If to the Borrower:
County Seat Stores, Inc.
469 Seventh Avenue
New York, New York 10018
Attention : Mr. Paul Kittner
Fax : 212 714-4850

With copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention : Joseph Halliday, Esquire
Fax: : 212 735-2000
and

Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 W. Wacker Drive
Chicago, Illinois 60606
Attention : Lynn McGovern, Esquire
Fax: : 312 407-0411

12-2. Notice Given.

(a) Except as otherwise specifically provided herein, notices
shall be deemed made and correspondence received, as follows (all times being
local to the place of delivery or receipt):

(i) By mail: the sooner of when actually received or Three
(3) days following deposit in the United States mail, postage prepaid.

(ii) By recognized overnight express delivery: the Business
Day following the day when sent.

(iii) By Hand: If delivered on a Business Day after 9:00
AM and no later than 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
indicating the party sending such transmission): 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

/October 28, 1997/
56
<PAGE>

the then next Business Day.

(b) Rejection or refusal to accept delivery and inability to
deliver because of a changed address or Facsimile Number for which no due notice
was given shall each be deemed receipt of the notice sent.

ARTICLE 13 - TERM.

13-1. Termination of Revolving Credit. The Revolving Credit shall
remain in effect (subject to suspension as provided in Section 2-5(h) hereof)
until the Termination Date.

13-2. Effect of Termination. Upon the termination of the Revolving
Credit, the Borrower shall pay the Agent (whether or not then due), in
immediately available funds, all then Liabilities including, without limitation:
the entire balance of the Loan Account; any accrued and unpaid Line Fee; any
Early Termination Fee; and all unreimbursed costs and expenses of the Agent and
of each Lender for which the Borrower is responsible, and shall make such
arrangements concerning any L/C's and B/A's then outstanding are reasonably
satisfactory to the Agent . Until such payment, all provisions of this
Agreement, other than those contained in Article 2 which place an obligation on
the Agent and any Lender to make any loans or advances or to provide financial
accommodations under the Revolving Credit or otherwise, shall remain in full
force and effect until all Liabilities shall have been paid in full and upon
such payment, the Agent, at the expense of the Borrower, shall execute and
deliver to the Borrower such releases (including UCC termination statements) as
the Borrower shall reasonably request. The Agent will also execute and deliver
to Borrower, at the expense of the Borrower, all such releases and UCC
termination statements as Borrower shall request in connection with any
permitted sales of Collateral under this Agreement and in connection with any
sale or other disposition of the Distribution Facility. The release by the
Agent of the security and other collateral interests granted the Agent by the
Borrower hereunder may be upon such conditions and indemnifications as the Agent
may require.

ARTICLE 14 - GENERAL.

14-1. Protection of Collateral. The Agent has no duty as to the
collection or protection of the Collateral beyond the safe custody of such of
the Collateral as may come into the possession of the Agent and shall have no
duty as to the preservation of rights against prior parties or any other rights
pertaining thereto. The Agent may include reference to the Borrower (and may
utilize any logo or other distinctive symbol associated with the Borrower) in
connection with any advertising, promotion, or marketing undertaken by the
Agent.

14-2. Successors and Assigns. This Agreement shall be binding upon the
Borrower and the Borrower's successors, and assigns and shall enure to the
benefit of the Agent and each Lender and the respective successors and assigns
of each provided, however, no trustee or other fiduciary appointed with respect
to the Borrower shall have any rights hereunder. In the event that the Agent or
any Lender assigns or transfers its rights under this Agreement, the assignee
shall thereupon succeed to and become vested with all rights, powers,
privileges, and duties of such assignor hereunder and such assignor shall
thereupon be discharged and relieved from its duties and obligations hereunder
provided that such assignment is made in accordance with the requirements of
Section 219.

14-3. Severability. Any determination that any provision of this
Agreement or any application thereof is invalid, illegal, or unenforceable in
any respect in any

/October 28, 1997/
57
<PAGE>

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.

14-4. Amendments. Course of Dealing.

(a) This Agreement and the other Loan Documents incorporate all
discussions and negotiations between the Borrower and the Agent and each 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 thereof. No
failure by the Agent or any Lender to give notice to the Borrower of the
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 the
Agent in the manner by which Availability is determined shall obligate the Agent
to continue to determine Availability in that manner.

(b) The 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 Agent. 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 Agent and the Borrower.

14-5. Power of Attorney. In connection with all powers of attorney
included in this Agreement, the Borrower hereby grants unto the Agent full power
to do any and all things necessary or appropriate in connection with the
exercise of such powers as fully and effectually as the 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 the Borrower and
each shall survive the same. All powers conferred upon the Lender by this
Agreement, being coupled with an interest, shall be irrevocable until this
Agreement is terminated by a written instrument executed by a duly authorized
officer of the Agent.

14-6. 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 Agent
determines in its sole discretion. The Borrower shall remain liable for any
deficiency remaining following such application.

14-7. Costs and Expenses of Agent and Of Lenders. The Borrower shall
pay on demand all Costs of Collection and all reasonable out-of-pocket expenses
of the Agent in connection with the preparation, execution, and delivery of this
Agreement and of any other Loan Documents, whether now existing or hereafter
arising, and all other reasonable out-of- pocket expenses which may be incurred
by the Agent in preparing or amending this Agreement and all other agreements,
instruments, and documents related thereto, or otherwise incurred with respect
to the Liabilities. The Borrower specifically authorizes the Agent to pay all
such fees and expenses and in the Agent's discretion, to add such fees and
expenses to the Loan Account. The within undertaking, on the part of the
Borrower, shall survive payment of the Liabilities and/or any termination,
release, or discharge executed by the Agent in favor of the Borrower, other than
a termination, release, or discharge which makes specific reference to this
Section 14-7. The Borrower shall pay on demand all Costs of Collection and
reasonable out-of-pocket costs and expenses of the Agent and each Lender
incurred in connection with the Liabilities after the occurrence and during the
continuance of an Event of Default.

14-8. Copies and Facsimiles. This Agreement and all documents which
relate thereto, which have been or may be hereinafter furnished the Agent or any
Lender may be reproduced by that Person or by the Agent by any photographic,
microfilm, xerographic, digital imaging, or other process, and that Person 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

/October 28, 1997/
58
<PAGE>

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.

14-9. Massachusetts Law. This Agreement and all rights and obligations
hereunder, including matters of construction, validity, and performance, shall
be governed by the laws of The Commonwealth of Massachusetts.

14-10. Consent to Jurisdiction.

(a) The Borrower agrees that any legal action, proceeding, case,
or controversy against the Borrower with respect to any Loan Document may be
brought in the Superior Court of Suffolk County Massachusetts or in the United
States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, as the Agent may elect in the Lender's sole discretion. By
execution and delivery of this Agreement, the Borrower, for itself and in
respect of its property, accepts, submits, and consents generally and
unconditionally, to the jurisdiction of the aforesaid courts.

(b) The Borrower WAIVES personal service of any and all process
upon it, and irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by certified mail, postage prepaid, to the Borrower at the Borrower's
address for notices as specified herein, such service to become effective five
(5) Business Days after such mailing.

(c) The 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.

(d) Nothing herein shall affect the right of the Agent to bring
legal actions or proceedings in any other competent jurisdiction.

(e) The Borrower agrees that any action commenced by the
Borrower asserting any claim or counterclaim arising under or in connection with
this Agreement or any other Loan Document shall be brought solely in the
Superior Court of Suffolk County Massachusetts or in the United States District
Court, District of Massachusetts, sitting in Boston, Massachusetts, and that
such Courts shall have exclusive jurisdiction with respect to any such action.

14-11. Indemnification. The Borrower shall indemnify, defend, and
hold the Agent and each Lender and any employee, officer, or agent of any of the
foregoing (each, an "Indemnified Person") harmless of and from any claim brought
or threatened against any Indemnified Person by the Borrower, any guarantor or
endorser of the Liabilities, or any other Person (as well as from attorneys'
reasonable fees and expenses in connection therewith) on account of the
relationship of the Borrower or of any other guarantor or endorser of the
Liabilities with the Agent or any Lender hereunder or under any of the other
Loan Documents (each of claims which may be defended, compromised, settled, or
pursued by the Indemnified Person with counsel of such Person's selection, but
at the expense of the Borrower) other than any claim as to which a final
judgment against the Indemnified Person is entered in a judicial proceeding (in
which the Agent and any other Indemnified Person has had an opportunity to be
heard). The within indemnification shall survive payment of the Liabilities
and/or any termination, release, or discharge executed by the Agent in favor of
the Borrower, other than a termination, release, or discharge which makes
specific reference to this Section 14-11.

14-12. Rules of Construction. The following rules of construction
shall be applied in the interpretation, construction, and enforcement of this
Agreement and of the other Loan Documents:

(a) Words in the singular include the plural and words in the
plural include the singular.

(b) Headings (indicated by being underlined) and the Table of
Contents are solely for convenience of reference and do not constitute a part of
the instrument in which included and do not affect such instrument's meaning,
construction, or effect.

/October 28, 1997/
59
<PAGE>

(d) Text which follows the words "including, without limitation"
(or similar words) is illustrative and not limitational.

(e) Text which is underlined, shown in italics, shown in bold,
shown IN ALL CAPITAL LETTERS, or in any combination of the foregoing, shall be
deemed to be conspicuous.

(f) The words "may not" are prohibitive and not permissive.

(g) The word "or" is not exclusive.

(h) Terms which are defined in one section of an instrument are
used with such definition throughout the instrument in which so defined.

(i) The symbol "$" refers to United States Dollars.

(j) References to "herein", "hereof", and "within" are to this
entire Agreement and not merely the provision in which such reference is
included.

(k) Except as otherwise specifically provided, all references to
time are to Boston time.

(l) In the determination of any notice, grace, or other period
of time prescribed or allowed hereunder, 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.

(m) The Loan Documents shall be construed and interpreted in a
harmonious manner and in keeping with the intentions set forth in Section 14-13
hereof, provided, however, in the event of any inconsistency between the
provisions of the within Agreement and any other Loan Document, the provisions
of the within Agreement shall govern and control.

14-13. Intent. It is intended that:

(a) This Agreement take effect as a sealed instrument.

(b) The scope of the security interests created by this
Agreement be broadly construed in favor of the Agent.

(d) Unless otherwise explicitly provided herein, the Agent's
consent to any action of the Borrower which is prohibited unless such consent is
expressly given may be given or refused by the Agent in its sole discretion and
without reference to Section 2-13 hereof.

14-14. Right of Set-Off. Any and all deposits or other sums at any
time credited by or due to the undersigned from any Lender or from any
participant (a "Participant") with any Lender in the credit facility
contemplated hereby and any cash, securities, instruments or other property of
the undersigned in the possession of any Lender or any Affiliate of any Lender
or any Participant, 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 may be applied or set off against the Liabilities at
any time after the occurrence and during the continuance of an Event of Default,
whether or not such are then due and whether or not other collateral is then
available to the Agent or any Participant.

14-15. Maximum Interest Rate. Regardless of any provision of any Loan
Document, none of the Agent or any Lender shall be entitled to contract for,
charge, receive, collect, or apply as interest on any Liability, any amount in
excess of the maximum rate imposed by applicable law. Any payment which is made
which, if treated 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."

/October 28, 1997/
60
<PAGE>

14-16. Waivers.

(a) The Borrower makes each of the waivers included in Section
1416(b), below, knowingly, voluntarily, and intentionally, and understands that
the Agent and each Lender, in entering into the financial arrangements
contemplated hereby and in providing loans and other financial accommodations to
or for the account of the Borrower as provided herein, whether not or in the
future, is relying on such waivers.

(b) THE BORROWER WAIVES THE FOLLOWING:

(i) Except as otherwise specifically required hereby,
notice of non-payment, demand, presentment, protest and all forms of demand
and notice, both with respect to the Liabilities and the Collateral.

(ii) Except as otherwise specifically required hereby, the
right to notice and/or hearing prior to the 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 THE AGENT OR ANY LENDER IS OR BECOMES A PARTY (WHETHER
SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE AGENT OR ANY LENDER
OR IN WHICH THE AGENT OR ANY LENDER IS JOINED AS A PARTY LITIGANT), WHICH
CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF, ANY RELATIONSHIP
AMONGST OR BETWEEN THE BORROWER OR THE AGENT OR ANY LENDER IN CONNECTION
WITH ANY LOAN DOCUMENT (AND THE AGENT AND EACH 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 the Agent or any Lender, 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.

14-17. Confidentiality. The Agent and each of the Lenders agrees that
they will not disclose without the prior consent of the Borrower (other than to
its employees, Affiliates, advisors or counsel, each of whom shall be directed
to observe this confidentiality obligation) any information with respect to the
Borrower or any of its Subsidiaries which is now or in the future furnished
pursuant to this Agreement or any other Loan Document and which is designated by
the Borrower in writing as confidential, provided, however, that the Agent and
the Lenders may disclose any such information (i) as has become generally
available to the public, (ii) as may be required or appropriate in any report,
statement or testimony submitted to any municipal, state, or federal regulatory
body having or claiming to have jurisdiction over the Agent, (iii) as may be
required or appropriate in respect to any summons or subpoena or in connection
with any litigation, (iv) in order to comply with any law, order, regulation or
ruling applicable to the Agent, (v) to any prospective or actual transferee or
participant in connection with any contemplated transfer or participation of
this Agreement, the Liabilities, or any interest therein by the Agent, which
transfer or participation is permitted by the terms of this Agreement and (vi)
to the Agent and other Lenders provided, however, that such prospective
transferee or participant executes a confidentiality agreement with the Agent
containing similar provisions to those set forth in this Section 14-17, and
(vi) as may be reasonably required in connection with the Agent's enforcement of
this Agreement or the other Loan Documents against the Borrower and/or its
Subsidiaries.

/October 28, 1997/
61
<PAGE>

COUNTY SEAT STORES, INC.
("Borrower")

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

BANKBOSTON RETAIL FINANCE INC.
("Agent")

By
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
The "Lenders"

BANKBOSTON RETAIL FINANCE INC.

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

/October 28, 1997/
62

<PAGE>

Exhibit 10.2

REVOLVING CREDIT NOTE

Boston, Massachusetts As of December 11, 1997

FOR VALUE RECEIVED, the undersigned, County Seat Stores, Inc., a
Minnesota corporation with its principal executive offices at 469 Seventh
Avenue, New York, New York 10018 (the "Borrower") promises to pay to the order
of BankBoston Retail Finance Inc. (hereinafter, with any subsequent holder, a
"Lender") the aggregate principal sum of Thirty-five Million and 00/100 Dollars
($35,000,000.00) or the aggregate unpaid principal balance of loans and advances
made by the Lender to the Borrower pursuant to the Revolving Credit established
pursuant to the Loan and Security Agreement dated October 29, 1997 (as
heretofore or hereafter amended hereafter, the "Loan Agreement") between
BankBoston Retail Finance Inc., a Delaware corporation with its offices at 40
Broad Street Boston, Massachusetts 02109 (in such capacity, the "Agent"), as
agent for the ratable benefit of the "Lenders" named therein, the Lenders named
therein, and the Borrower, with interest at the rate and payable in the manner
stated therein.

This is a "Revolving Credit Note" to which reference is made in the
Loan Agreement, and is subject to all terms and provisions thereof. The
principal of, and interest on, this Revolving Credit Note shall be payable as
provided in the Loan Agreement and shall be subject to acceleration as provided
therein.

The Agent's books and records concerning loans and advances pursuant
to the Revolving Credit, the accrual of interest thereon, and the repayment of
such loans and advances, shall be prima facie evidence of the indebtedness to
the Lender hereunder.

No delay or omission by the Agent or Lender in exercising or enforcing
any of the Agent's or Lender's powers, rights, privileges, remedies, or
discretions hereunder shall operate as a waiver thereof on that occasion nor on
any other occasion. No waiver of any default hereunder shall operate as a
waiver of any other default hereunder, nor as a continuing waiver.

The Borrower, and each endorser and guarantor of this Revolving Credit
Note, respectively waives presentment, demand, notice, and protest, and also
waives any delay on the part of the holder hereof. Each assents to any
extension or other indulgence (including, without limitation, the release or
substitution of collateral) permitted by the Agent or the Lender with respect to
this Revolving Credit Note and/or any collateral given to secure this Revolving
Credit Note or any extension or other indulgence with respect to any other
liability or any collateral given to secure any other liability of the Borrower
or any other person obligated on account of this Revolving Credit Note.

This Revolving Credit Note shall be binding upon the Borrower, and
each endorser and guarantor hereof, and upon their respective heirs, successors
and assigns, and shall inure to the benefit of the Lender and its successors,
endorsees, and assigns.

The liabilities of the Borrower, and of any endorser or guarantor of
this Revolving Credit Note, are joint and several, provided, however, the
release by the Lender or by the

<PAGE>

Agent of any one or more such person, endorser or guarantor shall not release
any other person obligated on account of this Revolving Credit Note. Each
reference in this Revolving Credit Note to the Borrower, any endorser, and any
guarantor, is to such person individually and also to all such persons jointly.
No person obligated on account of this Revolving Credit Note may seek
contribution from any other person also obligated unless and until all
liabilities, obligations and indebtedness to the Lender of the person from whom
contribution is sought have been satisfied in full.

THIS REVOLVING CREDIT NOTE IS DELIVERED TO THE LENDER AT THE OFFICES
OF THE AGENT IN BOSTON, MASSACHUSETTS, SHALL BE GOVERNED BY THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL TAKE EFFECT AS A SEALED INSTRUMENT.

The Borrower makes the following waiver knowingly, voluntarily, and
intentionally, and understands that the Lender and the Agent in the
establishment and maintenance of their respective relationship with the Borrower
contemplated by this Revolving Credit Note, is relying thereon. THE BORROWER,
AND THE LENDER BY ITS ACCEPTANCE HEREOF, TO THE EXTENT ENTITLED THERETO, WAIVES
ANY PRESENT OR FUTURE RIGHT OF THE BORROWER, THE LENDER, OR OF ANY GUARANTOR OR
ENDORSER OF THE BORROWER OR OF ANY OTHER PERSON LIABLE TO THE LENDER ON ACCOUNT
OF OR IN RESPECT TO THE LIABILITIES, TO A TRIAL BY JURY IN ANY CASE OR
CONTROVERSY IN WHICH THE LENDER AND/OR THE AGENT IS OR BECOMES A PARTY (WHETHER
SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE LENDER AND/OR THE AGENT
OR IN WHICH THE LENDER AND/OR THE AGENT IS JOINED AS A PARTY LITIGANT), WHICH
CASE OR CONTROVERSY ARISES OUT OF, OR IS IN RESPECT TO, ANY RELATIONSHIP AMONGST
OR BETWEEN THE BORROWER, ANY SUCH PERSON, AND THE LENDER AND/OR THE AGENT.

COUNTY SEAT STORES, INC.
The ("Borrower")

By:
-------------------------------

<PAGE>

Exhibit 10.3

REVOLVING CREDIT NOTE

Boston, Massachusetts As of December 11, 1997

FOR VALUE RECEIVED, the undersigned, County Seat Stores, Inc., a
Minnesota corporation with its principal executive offices at 469 Seventh
Avenue, New York, New York 10018 (the "Borrower") promises to pay to the order
of BankAmerica Business Credit, Inc. (hereinafter, with any subsequent holder, a
"Lender") the aggregate principal sum of Twenty-two Million Five Hundred
Thousand and 00/100 Dollars ($22,500,000.00) or the aggregate unpaid principal
balance of loans and advances made by the Lender to the Borrower pursuant to the
Revolving Credit established pursuant to the Loan and Security Agreement dated
October 29, 1997 (as heretofore or hereafter amended hereafter, the "Loan
Agreement") between BankBoston Retail Finance Inc., a Delaware corporation with
its offices at 40 Broad Street Boston, Massachusetts 02109 (in such capacity,
the "Agent"), as agent for the ratable benefit of the "Lenders" named therein,
the Lenders named therein, and the Borrower, with interest at the rate and
payable in the manner stated therein.

The liabilities of the Borrower, and of any endorser or guarantor of
this Revolving Credit Note, are joint and several, provided, however, the
release by the Lender or by the

<PAGE>

COUNTY SEAT STORES, INC.
The ("Borrower")

By:
---------------------------

<PAGE>

Exhibit 10.4

REVOLVING CREDIT NOTE

Boston, Massachusetts As of December 11, 1997

FOR VALUE RECEIVED, the undersigned, County Seat Stores, Inc., a
Minnesota corporation with its principal executive offices at 469 Seventh
Avenue, New York, New York 10018 (the "Borrower") promises to pay to the order
of Congress Financial Corporation (Central) (hereinafter, with any subsequent
holder, a "Lender") the aggregate principal sum of Twenty-two Million Five
Hundred Thousand and 00/100 Dollars ($22,500,000.00) or the aggregate unpaid
principal balance of loans and advances made by the Lender to the Borrower
pursuant to the Revolving Credit established pursuant to the Loan and Security
Agreement dated October 29, 1997 (as heretofore or hereafter amended hereafter,
the "Loan Agreement") between BankBoston Retail Finance Inc., a Delaware
corporation with its offices at 40 Broad Street Boston, Massachusetts 02109 (in
such capacity, the "Agent"), as agent for the ratable benefit of the "Lenders"
named therein, the Lenders named therein, and the Borrower, with interest at the
rate and payable in the manner stated therein.

The liabilities of the Borrower, and of any endorser or guarantor of
this Revolving Credit Note, are joint and several, provided, however, the
release by the Lender or by the

<PAGE>

COUNTY SEAT STORES, INC.
The ("Borrower")

By:
-----------------------------

<PAGE>

Exhibit 10.5

REVOLVING CREDIT NOTE

Boston, Massachusetts As of December 11, 1997

FOR VALUE RECEIVED, the undersigned, County Seat Stores, Inc., a
Minnesota corporation with its principal executive offices at 469 Seventh
Avenue, New York, New York 10018 (the "Borrower") promises to pay to the order
of Foothill Capital Corporation (hereinafter, with any subsequent holder, a
"Lender") the aggregate principal sum of Fifteen Million and 00/100 Dollars
($15,000,000.00) or the aggregate unpaid principal balance of loans and advances
made by the Lender to the Borrower pursuant to the Revolving Credit established
pursuant to the Loan and Security Agreement dated October 29, 1997 (as
heretofore or hereafter amended hereafter, the "Loan Agreement") between
BankBoston Retail Finance Inc., a Delaware corporation with its offices at 40
Broad Street Boston, Massachusetts 02109 (in such capacity, the "Agent"), as
agent for the ratable benefit of the "Lenders" named therein, the Lenders named
therein, and the Borrower, with interest at the rate and payable in the manner
stated therein.

The liabilities of the Borrower, and of any endorser or guarantor of
this Revolving Credit Note, are joint and several, provided, however, the
release by the Lender or by the

<PAGE>

COUNTY SEAT STORES, INC.
The ("Borrower")

By:
---------------------------

<PAGE>

Exhibit 10.6

REVOLVING CREDIT NOTE

Boston, Massachusetts As of December 11, 1997

FOR VALUE RECEIVED, the undersigned, County Seat Stores, Inc., a
Minnesota corporation with its principal executive offices at 469 Seventh
Avenue, New York, New York 10018 (the "Borrower") promises to pay to the order
of FINOVA Capital Corporation (hereinafter, with any subsequent holder, a
"Lender") the aggregate principal sum of Ten Million and 00/100 Dollars
($10,000,000.00) or the aggregate unpaid principal balance of loans and advances
made by the Lender to the Borrower pursuant to the Revolving Credit established
pursuant to the Loan and Security Agreement dated October 29, 1997 (as
heretofore or hereafter amended hereafter, the "Loan Agreement") between
BankBoston Retail Finance Inc., a Delaware corporation with its offices at 40
Broad Street Boston, Massachusetts 02109 (in such capacity, the "Agent"), as
agent for the ratable benefit of the "Lenders" named therein, the Lenders named
therein, and the Borrower, with interest at the rate and payable in the manner
stated therein.

The liabilities of the Borrower, and of any endorser or guarantor of
this Revolving Credit Note, are joint and several, provided, however, the
release by the Lender or by the

<PAGE>

COUNTY SEAT STORES, INC.
The ("Borrower")

By:
-----------------------------

<PAGE>

Exhibit 10.7

REVOLVING CREDIT NOTE

Boston, Massachusetts As of December 11, 1997

FOR VALUE RECEIVED, the undersigned, County Seat Stores, Inc., a
Minnesota corporation with its principal executive offices at 469 Seventh
Avenue, New York, New York 10018 (the "Borrower") promises to pay to the order
of The CIT Group/Business Credit, Inc. (hereinafter, with any subsequent holder,
a "Lender") the aggregate principal sum of Ten Million and 00/100 Dollars
($10,000,000.00) or the aggregate unpaid principal balance of loans and advances
made by the Lender to the Borrower pursuant to the Revolving Credit established
pursuant to the Loan and Security Agreement dated October 29, 1997 (as
heretofore or hereafter amended hereafter, the "Loan Agreement") between
BankBoston Retail Finance Inc., a Delaware corporation with its offices at 40
Broad Street Boston, Massachusetts 02109 (in such capacity, the "Agent"), as
agent for the ratable benefit of the "Lenders" named therein, the Lenders named
therein, and the Borrower, with interest at the rate and payable in the manner
stated therein.

The liabilities of the Borrower, and of any endorser or guarantor of
this Revolving Credit Note, are joint and several, provided, however, the
release by the Lender or by the

<PAGE>

COUNTY SEAT STORES, INC.
The ("Borrower")

By:
--------------------------

<PAGE>

Exhibit 10.8

NON-ENCUMBRANCE AGREEMENT BankBoston Retail Finance Inc.

This Non-Encumbrance Agreement (the "Agreement") is made as of this 29th
day of October, 1997, by County Seat Stores, Inc, a Minnesota corporation with
its principal executive offices at 469 Seventh Avenue, New York, New York (the
"Owner"), in favor of BankBoston Retail Finance Inc., a Delaware corporation
with offices at 40 Broad Street Boston, Massachusetts 02109 (in such capacity,
the "Agent"), as Agent for the benefit of the Lenders from time to time a party
to that certain Loan and Security Agreement dated as of October 29, 1997 among
the Agent, such Lenders and the Borrower (as such may be amended hereafter, the
"Loan Agreement").

For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Owner hereby represents, warrants and agrees as
follows:

1. That the premises described on Exhibit A annexed hereto, and incorporated
herein by reference (hereinafter, the "Premises"), is presently owned
solely by the Owner and is not presently encumbered by any mortgage or deed
of trust, attachment or judgment.

2. Until payment in full of all Liabilities (as defined in the Loan Agreement)
and the Agent has no obligation to furnish financial accommodations to the
Owner, except as otherwise may be permitted by the Loan Agreement, the
Owner will not, without the prior written consent of a duly authorized
officer of the Agent, sell, lease, or otherwise dispose of the Premises (or
any portion thereof), or in any way voluntarily encumber the Premises (or
any portion thereof). Further, the Owner shall not incur or suffer to be
created any involuntary lien, encumbrance, attachment, or other
hypothecation of the Premises. In the event any such involuntary lien,
encumbrance, attachment, or other hypothecation is recorded or attaches to
the Premises, the Owner shall, within thirty (30) days thereafter obtain a
release of the same or post a bond to dissolve the same, provided however,
in the event that the Owner diligently contests any such involuntary lien,
encumbrance, or attachment the Agent agrees to extend the said thirty (30)
day period . Further the Owner covenants and agrees not to modify, change,
alter or extend any of the terms and conditions of any indebtedness
presently secured by the Premises (or any portion thereof), without the
Agent's prior written consent in each instance.

3. The Owner hereby covenants and agrees to faithfully and fully comply with
and abide by each and every term, covenant, condition contained in this
Agreement.

IN WITNESS WHEREOF, the Owner has caused its corporate seal to be affixed
hereto as of the date first written above.

"OWNER"

COUNTY SEAT STORES, INC.

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

<PAGE>

STATE OF
---------------
, ss , 1997
- ------- ----------

Then personally appeared the above-named _________________, the duly
authorized ________________ of County Seat Stores, Inc., and acknowledged the
foregoing instrument to be his/her free act and deed as _________________,
before me,

--------------------
Notary Public
My Commission Expires:
----------

<PAGE>

Exhibit A
Premises

<PAGE>

Exhibit 10.9

TRADEMARK AND TRADEMARK
APPLICATIONS SECURITY AGREEMENT BankBoston Retail Finance Inc.

October 29, 1997

This Trademark and Trademark Application Security Agreement (the "TM
Security Agreement") is made as of the 29th day of October, 1997, by County Seat
Stores, Inc. a Minnesota corporation with its principal executive offices at 469
Seventh Avenue, New York, New York 10018 (the "Obligor"), and BankBoston Retail
Finance Inc. (in such capacity, the "Agent"), a Delaware corporation with its
principal executive offices at 40 Broad Street, Boston, Massachusetts 02109, as
Agent for the Lenders under and as defined in that certain Loan and Security
Agreement, dated as of October 29., 1997 amongst the Obligor on the one hand,
and the Agent and the Lenders on the other, as such Loan and Security Agreement
is amended from time to time (hereafter, the "Loan Agreement").

RECITALS

WHEREAS, pursuant to the Loan Agreement the Agent and the Lenders from
time to time a party thereto have agreed to make certain loans and other
financial accommodations (hereinafter, the "Loans") available to the Obligor,
subject to, and in accordance with the provisions of, the Loan Agreement;

WHEREAS, under the Loan Agreement, the Obligor has created a security
interest in the Obligor's assets to secure the Liabilities (as defined in the
Loan Agreement and used herein as so defined);

WHEREAS, as a condition, among others, to the establishment of the
credit facility contemplated by the Loan Agreement, the Obligor has executed
this TM Security Agreement.

NOW THEREFORE, For good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Obligor and the Agent agree as
follows:

1. Terms used herein which are defined the Loan Agreement are used
as so defined.

2. To secure the Liabilities, the Obligor hereby grants to the Agent
for the ratable benefit of the Lenders, a continuing security interest in and
to, and assigns for security to the Agent for the ratable benefit of the
Lenders (with power of sale exercisable upon the occurrence of an Event of
Default as defined in the Loan Agreement), the following, and each item thereof,
whether now owned or in which the Obligor has an existing interest or hereafter
acquired or arising and all products, proceeds, substitutions, and accessions of
or to any of the following::

(a) All trademarks, trademark applications, service marks,
registered service marks and service mark applications including,
without limitation, those listed on EXHIBIT A annexed hereto and made
a part hereof, together with any goodwill connected with and
symbolized by any such trademarks, trademark applications, service
marks, registered service marks, and service mark applications.

(b) All renewals of any of the foregoing.

(c) All income, royalties, damages and payments now and
hereafter due and/or payable under and with respect to any of the
foregoing, including, without limitation, payments under all licenses
entered into in connection therewith and damages and payments for past
or future infringements or dilutions thereof.

(d) The right to sue for past, present and future infringements
and dilutions of any of the foregoing.

(e) All of Obligor's rights corresponding to any of the
foregoing throughout the world.

All of the foregoing trademarks, registered trademarks and trademark
applications, and service marks, registered service marks and service mark
applications described in Subsection 2.(a), together with the items respectively
described in Subsections 2.(b) through and including 2.(e) are hereinafter
individually and/or collectively referred to as the "Marks".

<PAGE>

3. Until this TM Security Agreement is terminated in writing by a
duly authorized officer of the Agent, the Obligor shall undertake the following
with respect to each Mark which is material to its business as then being
conducted:
(a) Pay all renewal fees and other fees and costs associated
with maintaining the Marks and with the processing of the Marks.

(b) At the Obligor's sole cost, expense, and risk, pursue the
prompt, diligent, processing of each Application for Registration
which is the subject of the security interest created herein.

(c) At the Obligor's sole cost, expense, and risk, take any and
all action which Obligor deems desirable to protect the Marks,
including, without limitation, but subject to Obligor's discretion,
the prosecution and defense of infringement actions.

4. In the event of

(a) the Obligor's failure, within Five (5) days of written
notice from the Agent, to cure any failure by the Obligor to perform
any of the Obligor's obligations set forth in Section 3, above; and/or

(b) the occurrence and continuance of any Event of Default
beyond applicable grace periods as provided for in the Loan Agreement,
the Agent acting in its own name or in that of the Obligor may (but
shall not be required to) act in the Obligor's place and stead and/or
in the Agents' own right in connection therewith.

5. The Obligor represents and warrants that:

(a) EXHIBIT A includes all of the registered trademarks, Federal
trademark applications, registered service marks and Federal service
mark applications now owned by the Obligor.

(b) No liens, claims or security interests which are still in
effect have been granted in any Mark by the Obligor to any Person
other than to the Agent.

6. In order to further secure the Liabilities:

(a) The Obligor shall give the Agent written notice (with
reasonable detail) within Twenty-five (25) days following the
occurrence of any of the following:

(i) The Obligor obtains rights to, and files applications
for registration of, any new trademarks, or service marks, or
otherwise acquires ownership of any newly registered trademarks,
registered service marks, trademark applications, or service mark
applications.

(ii) The Obligor becomes entitled to the benefit of any
registered trademarks, trademark applications, trademark
licenses, trademark license renewals, registered service marks,
service mark applications, service mark licenses or service mark
license renewals as licensee.

(b) The provisions of this TM Security Agreement shall
automatically apply to any such additional property or rights
described in 6.(a), above, all of which shall be deemed to be and
treated as "Marks" within the meaning of this TM Security Agreement.

(c) The Obligor hereby authorizes the Agent to modify this
agreement by amending EXHIBIT A to include any future registered
trademarks, trademark applications, registered service marks and
service mark applications, written notice of which is so given,
provided, however, the modification of said EXHIBIT shall not be a
condition to the creation or perfection of the security interest
created hereby.

2
<PAGE>

Chapter 106), with respect to the Marks, in addition to which the Agent, subject
to the terms of the Loan Agreement, may sell, license, assign, transfer, or
otherwise dispose of the Marks. Any person may conclusively rely upon an
affidavit of an officer of the Agent that an Event of Default has occurred and
that the Agent is authorized to exercise such rights and remedies.

8. The Obligor hereby irrevocably constitutes and designates the
Agent as and for the Obligor's attorney in fact, effective with and upon the
Agent's first exercise (the "First Exercise") of such powers following the
occurrence of any Event of Default continuing beyond applicable grace periods as
provided for in the Loan Agreement:

(a) To exercise any of the rights and powers referenced in
Section 7.

(b) To execute all and singular such instruments, documents, and
papers as the Agent determines to be appropriate in connection with
the exercise of such rights and powers and to cause the sale, license,
assignment, transfer, or other disposition of the Marks.

The within grant of a power of attorney, being coupled with an interest, shall
be irrevocable until the within TM Security Agreement is terminated by a duly
authorized officer of the Agent, but shall be exercisable only following the
occurrence of an Event of Default.

9. Any use by the Agent of the Marks as authorized hereunder in
connection with the exercise of the Agents' rights and remedies under the within
TM Security Agreement and the Loan Agreement shall be coextensive with Obligor's
rights thereunder and with respect thereto and without any liability for
royalties or other related charges from the Agent to the Obligor. Such use by
the Agent shall be permitted only with and upon the First Exercise following the
occurrence of an Event of Default continuing beyond applicable grace periods as
provided for in the Loan Agreement.

10. Agent hereby acknowledges that the Obligor shall continue to have
the exclusive right, prior to notice from the Agent following the occurrence of
an Event of Default continuing beyond applicable grace periods as provided for
in the Loan Agreement, to sue for past, present and future infringement of the
Marks including the right to seek injunctions and/or money damages, in an effort
by Obligor to protect the Marks against encroachment by third parties; provided,
however, that Obligor must promptly notify Agent in writing of its filing of a
lawsuit for enforcement of the trademarks against a particular party. All costs
arising in connection with any infringement shall be borne by Obligor.

11. Following the payment and satisfaction of all Liabilities, and
the termination of any obligation of the Agent to provide loans or financial
accommodations under the credit facility contemplated by the Loan Agreement,
this TM Security Agreement shall terminate and the Agent shall execute and
deliver to Obligor all such instruments as the Obligor reasonably may request to
release any Encumbrance in favor of the Agent created hereby or pursuant hereto,
subject, however, to any disposition thereof which may have been made by Agent
pursuant hereto or pursuant to the Loan Agreement. The Agent will also execute
and deliver to the Obligor such releases as Obligor shall reasonably request in
connection with any disposition permitted hereunder or under the Loan Agreement
of any Mark or other collateral pledged hereunder.

12. Neither anything contained in the within TM Security Agreement or
in the Loan Agreement nor any act, omission, or circumstance may be construed
as directly or indirectly conveying to the Agent any rights in and to the Marks
(except the grant of security pursuant to Section 2 hereof, and Section 8.1 of
the Loan Agreement) which rights are effective except following the occurrence
and continuance of any Event of Default beyond applicable grace periods as
provided for in the Loan Agreement (and in such circumstances, only with and
upon the First Exercise).

13. This TM Security Agreement is intended to be supplemental of the
Loan Agreement. All provisions of the Loan Agreement shall apply to the Marks
and the Agent shall have the same rights with respect to any and all security
interests in the Marks granted the Agent to secure the Liabilities hereunder as
thereunder. Notwithstanding the foregoing in the event of a conflict between
this TM Security Agreement and the Loan Agreement, the terms of this TM Security
Agreement shall control with respect to the Marks and the

3
<PAGE>

Loan Agreement with respect to all other collateral.

14. This TM Security Agreement and all rights and obligations hereunder,
including matters of construction, validity, and performance, shall be governed
by the laws of The Commonwealth of Massachusetts.

IN WITNESS WHEREOF, the Obligor and the Agent respectively have caused
this Loan Agreement to be executed by officers duly authorized so to do on the
date first above written.

COUNTY SEAT STORES, INC. BANKBOSTON RETAIL FINANCE INC.
(The "Obligor") (The "Agent")

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

............................
County of .........., ss

Then personally appeared before me ...................... who
acknowledged that such person is the duly authorized ................... of
County Seat Stores, Inc. and that such person had executed the foregoing
instrument on its behalf.

Witness my hand and seal this ..... day of .................

-----------------------------------------------
, Notary Public
My Commission Expires:

The ........ of .................
County of .............

Then personally appeared before me ...................., who
acknowledged that such person is the duly authorized .........................
of BankBoston Retail Finance Inc.; and that such person executed the foregoing
instrument on its behalf.

Witness my hand and seal this ...day of .................

-----------------------------------------------
, Notary Public
My Commission Expires:

4
<PAGE>

5
<PAGE>

EXHIBIT A

Obligor's now owned or existing or hereafter acquired or arising registered
service marks and Federal service mark applications, registered trademarks, and
Federal trade mark applications:

Trademark/Service Mark Registrations
TRADEMARK REGISTRATION NUMBER REGISTRATION DATE

Trademark Applications
MARK SERIAL NUMBER FILING DATE

<PAGE>
Exhibit 10.10
COPYRIGHT AND COPYRIGHT
APPLICATIONS SECURITY AGREEMENT BankBoston Retail Finance Inc.

October 29, 1997

This Copyright and Copyright Application Security Agreement (the
"Copyright Security Agreement") is made as of the 29th day of October by County
Seat Stores, Inc. a Minnesota corporation with its principal executive offices
at 469 Seventh Avenue, New York, New York 10018 (the "Obligor"), and BankBoston
Retail Finance Inc. (in such capacity, the "Agent"), a Delaware corporation
with its principal executive offices at 40 Broad Street, Boston, Massachusetts
02109, as Agent for the Lenders under and as defined in that certain Loan and
Security Agreement, dated as of October 29, 1997 amongst the Obligor on the one
hand, and the Agent and the Lenders on the other, as such Loan and Security
Agreement is amended from time to time (hereafter, the "Loan Agreement").

RECITALS

WHEREAS, under the Loan Agreement, the Obligor has created a security
interest in the Obligor's assets to secure the Liabilities (as defined in the
Loan Agreement and used herein as so defined);

WHEREAS, as a condition, among others, to the establishment of the
credit facility contemplated by the Loan Agreement, the Obligor has executed
this Copyright Security Agreement.

NOW THEREFORE, For good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Obligor and the Agent agree as
follows:

1. Terms used herein which are defined the Loan Agreement are used
as so defined.

2. To secure the Liabilities, the Obligor hereby grants to the Agent
for the ratable benefit of the Lenders, a continuing security interest in and
to, and assigns for security to the Agent for the ratable benefit of the Lenders
(with power of sale exercisable upon the occurrence of an Event of Default as
defined in the Loan Agreement), the following, and each item thereof, whether
now owned or in which the Obligor has an existing interest or hereafter acquired
or arising and all products, proceeds, substitutions, and accessions of or to
any of the following:

(a) All copyrights and copyright applications including, without
limitation, those listed on EXHIBIT A annexed hereto and made a part
hereof.

(b) All renewals of any of the foregoing.

(d) The right to sue for past, present and future infringements
of any of the foregoing.

(e) All of Obligor's rights corresponding to any of the
foregoing throughout the world.

All of the foregoing copyrights and copyright applications described in
Subsection 2.(a), together with the items respectively described in Subsections
2.(b) through and including 2.(e) are hereinafter individually and/or
collectively referred to as the "Copyrights".

3. Until this Copyright Security Agreement is terminated in writing
by a duly authorized officer of the Agent, the Obligor shall undertake the
following with

<PAGE>

respect to each Copyright which is material to its business as then being
conducted:

(a) Pay all renewal fees and other fees and costs associated
with maintaining the Copyrights and with the processing of the
Copyrights.

(b) At the Obligor's sole cost, expense, and risk, pursue the
prompt, diligent, processing of each Application for Registration
which is the subject of the security interest created herein.

(c) At the Obligor's sole cost, expense, and risk, take any and
all action which Obligor deems desirable to protect the Copyrights,
including, without limitation, but subject to Obligor's discretion,
the prosecution and defense of infringement actions.

4. In the event of

(a) the Obligor's failure, within Five (5) days of written
notice from the Agent, to cure any failure by the Obligor to perform
any of the Obligor's obligations set forth in Section 3, above; and/or

5. The Obligor represents and warrants that:

(a) EXHIBIT A includes all of the registered United States
copyrights and copyright applications now owned by the Obligor.

(b) No liens, claims or security interests which are still in
effect have been granted in any Copyright by the Obligor to any Person
other than to the Agent.

6. In order to further secure the Liabilities:

(a) The Obligor shall give the Agent written notice (with
reasonable detail) within Ten (10) days following the occurrence of
any of the following:

(i) The Obligor obtains rights to, and files applications
for registration of, any new copyrights, or otherwise acquires
ownership of any newly registered copyrights or copyright
applications.

(ii) The Obligor becomes entitled to the benefit of any
registered copyrights, copyright applications, copyright
licenses, copyright license renewals as licensee.

(b) The provisions of this Copyright Security Agreement shall
automatically apply to any such additional property or rights
described in 6.(a), above, all of which shall be deemed to be and
treated as "Copyrights" within the meaning of this Copyright Security
Agreement.

(c) The Obligor hereby authorizes the Agent to modify this
agreement by amending EXHIBIT A to include any future registered
copyrights, copyright applications, written notice of which is so
given, provided, however, the modification of said EXHIBIT shall not
be a condition to the creation or perfection of the security interest
created hereby.

7. Upon the occurrence of any Event of Default, and only if such
default shall be continuing beyond applicable grace periods as provided for in
the Loan Agreement, the Agent may exercise all rights and remedies of a secured
party upon default under the Uniform Commercial Code as adopted in Massachusetts
(Massachusetts General Laws, Chapter 106), with respect to the Copyrights, in
addition to which the Agent, subject to the terms of the Loan Agreement, may
sell, license, assign, transfer, or otherwise dispose of the Copyrights. Any
person may conclusively rely upon an affidavit of an officer of the Agent that
an Event of Default has occurred and that the Agent is authorized to exercise
such rights and remedies.

2
<PAGE>

(a) To exercise any of the rights and powers referenced in
Section 7.

The within grant of a power of attorney, being coupled with an interest, shall
be irrevocable until the within Copyright Security Agreement is terminated by a
duly authorized officer of the Agent, but shall be exercisable only following
the occurrence of an Event of Default.

9. Any use by the Agent of the Copyrights as authorized hereunder in
connection with the exercise of the Agents' rights and remedies under the within
Copyright Security Agreement and the Loan Agreement shall be coextensive with
Obligor's rights thereunder and with respect thereto and without any liability
for royalties or other related charges from the Agent to the Obligor. Such use
by the Agent shall be permitted only with and upon the First Exercise following
the occurrence of an Event of Default continuing beyond applicable grace periods
as provided for in the Loan Agreement.

10. Agent hereby acknowledges that the Obligor shall continue to have
the exclusive right, prior to notice from the Agent following the occurrence of
an Event of Default continuing beyond applicable grace periods as provided for
in the Loan Agreement, to sue for past, present and future infringement of the
Copyrights including the right to seek injunctions and/or money damages, in an
effort by Obligor to protect the Copyrights against encroachment by third
parties; provided, however, that Obligor must promptly notify Agent in writing
of its filing of a lawsuit for enforcement of the Copyrights against a
particular party. All costs arising in connection with any infringement shall be
borne by Obligor.

11. Following the payment and satisfaction of all Liabilities, and
the termination of any obligation of the Agent to provide loans or financial
accommodations under the credit facility contemplated by the Loan Agreement,
this Copyright Security Agreement shall terminate and the Agent shall execute
and deliver to Obligor all such instruments as the Obligor reasonably may
request to release any Encumbrance in favor of the Agent created hereby or
pursuant hereto, subject, however, to any disposition thereof which may have
been made by Agent pursuant hereto or pursuant to the Loan Agreement. The Agent
will also execute and deliver to the Obligor such releases as Obligor shall
reasonably request in connection with any disposition permitted hereunder or
under the Loan Agreement of any Mark or other collateral pledged hereunder.

12. Neither anything contained in the within Copyright Security
Agreement or in the Loan Agreement nor any act, omission, or circumstance may
be construed as directly or indirectly conveying to the Agent any rights in and
to the Copyrights (except the grant of security pursuant to Section 2 hereof,
and Section 8.1 of the Loan Agreement) which rights are effective except
following the occurrence and continuance of any Event of Default beyond
applicable grace periods as provided for in the Loan Agreement (and in such
circumstances, only with and upon the First Exercise).

13. This Copyright Security Agreement is intended to be supplemental
of the Loan Agreement. All provisions of the Loan Agreement shall apply to the
Copyrights and the Agent shall have the same rights with respect to any and all
security interests in the Copyrights granted the Agent to secure the Liabilities
hereunder as thereunder. Notwithstanding the foregoing in the event of a
conflict between this Copyright Security Agreement and the Loan Agreement, the
terms of this Copyright Security Agreement shall control with respect to the
Copyrights and the Loan Agreement with respect to all other collateral.

3
<PAGE>

14. This Agreement and all rights and oblgations hereunder, including
matters of construction, validity, and performance, shall be governed by the
laws of The Commonwealth of Massachusetts.

IN WITNESS WHEREOF, the Obligor and the Agent respectively have caused
this Loan Agreement to be executed by officers duly authorized so to do on the
date first above written.

COUNTY SEAT STORES, INC. BANKBOSTON RETAIL FINANCE INC.
(The "Obligor") (The "Agent")

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

............................
County of .........., ss

Witness my hand and seal this ..... day of .................

-----------------------------------------------
, Notary Public
My Commission Expires:

The ........ of .................
County of .............

Witness my hand and seal this ...day of .................

<PAGE>

-----------------------------------------------
, Notary Public
My Commission Expires:

5
<PAGE>

EXHIBIT A

Obligor's now owned or existing or hereafter acquired or arising registered
copyrights and Federal copyright applications:

<PAGE>

Exhibit 10.11

GUARANTY BankBoston Retail Finance Inc.

FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF
WHICH ARE ACKNOWLEDGED, the undersigned unconditionally guaranties, in
accordance with the terms hereof and without any prior written notice, the
payment and performance of all of the Liabilities (defined below) of County Seat
Stores, Inc. (the "Borrower"), a Minnesota corporation with its principal
executive offices at 469 Seventh Avenue, New York, New York 10018 to each of (i)
BankBoston Retail Finance Inc., a Delaware corporation with offices at 40 Broad
Street Boston, Massachusetts 02109 (in such capacity, the "Agent"), as Agent for
the benefit of the Lenders from time to time a party to that certain Loan and
Security Agreement dated as of October __, 1997 among the Agent, such Lenders
and the Borrower (as such may be amended hereafter, the "Loan Agreement") and
(ii) such Lenders.

DEFINITIONS. As used herein, the following terms have the following
meanings:

"Costs of Collection" has the meaning given that term in the Loan
Agreement.

"Liabilities" has the meaning given that term in the Loan Agreement.

"Loan Documents" has the meaning given that term in the Loan
Agreement.

"Participant" has the meaning given that term in the Loan Agreement.

INDEMNIFICATION. FOR SAID GOOD AND VALUABLE CONSIDERATION, the
undersigned shall also indemnify, defend, and hold the Agent and each Lender and
any employee, officer, or agent of any of the foregoing (each, an "Indemnified
Person") harmless of and from any claim (as well as from attorneys' reasonable
fees and expenses in connection therewith) brought or threatened against any
Indemnified Person by the Borrower, the undersigned, any guarantor or endorser
of the Liabilities, or any other Person on account of the relationship of the
Borrower, the undersigned, or of any other guarantor or endorser of the
Liabilities with the Agent or any Lender hereunder or under any of the other
Loan Documents (each of such claims which may be defended, compromised,
settled, or pursued by the Indemnified Person with counsel of the Indemnified
Person's selection, but at the expense of the Borrower) 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). The
within indemnification shall survive payment of the Liabilities and/or any
termination, release, or discharge executed by the Agent in favor of the
undersigned, other than a termination, release, or discharge which makes
specific reference to this paragraph.

INTEREST. The undersigned will pay on demand interest on all amounts
due to the Agent and under this Guaranty, or arising under any documents,
instruments, or agreements relating to any collateral securing this Guaranty,
from the time the Agent first demands payment of this Guaranty at a rate
(determined based upon a 360 day year and actual days elapsed) equal to the
lesser from time to time of (a) the Base Margin Rate (as defined in the Loan
Agreement) plus Two Percent (2.0 %) per annum or (b) the highest rate of
interest which under the circumstances may be charged under applicable law.

1
<PAGE>

OBLIGATIONS NOT AFFECTED. The obligations of the undersigned
hereunder shall not be affected by: any fraudulent, illegal, or improper act by
the Borrower, the undersigned, or any person liable or obligated to the Agent or
any Lender for or on the Liabilities; any release, discharge, or invalidation,
by operation of law or otherwise, of the Liabilities; or the legal incapacity of
the Borrower, the undersigned, or any other person liable or obligated to the
Agent or any Lender for or on the Liabilities. Interest and Costs of Collection
shall continue to accrue and shall continue to be deemed Liabilities guarantied
hereby notwithstanding any stay to the enforcement thereof against the Borrower
or the disallowance of any claim therefor against the Borrower.

INCORPORATION OF ALL DISCUSSIONS. The within instrument incorporates
all discussions and negotiations between the undersigned and the Agent
concerning the guaranty and indemnification provided by the undersigned hereby.
No such discussions or negotiations shall limit, modify, or otherwise affect the
provisions hereof. No provision hereof may be altered, amended, waived,
canceled or modified, except by a written instrument executed, sealed, and
acknowledged by a duly authorized officer of the Agent.

GENERAL WAIVERS. The undersigned WAIVES: presentment, demand, notice,
and protest with respect to the Liabilities and this Guaranty; any delay on the
part of the Agent or any Lender; any right to require the Agent to pursue or to
proceed against the Borrower or any collateral which the Agent might have been
granted to secure the Liabilities or to secure the obligations of the
undersigned hereunder; any benefit of, and any right to participate in, any
collateral which may secure the Liabilities; any claim which the undersigned may
have or to which the undersigned may become entitled to the extent that such
claim might otherwise cause any transfer to the Agent or any Lender by or on
behalf of the Borrower to be avoided as having been, or in the nature of, a
preference; and notice of acceptance of this Guaranty.

WAIVER OF SUBROGATION. The undersigned shall not undertake any of the
following:
(a) Exercise of any right against the Borrower, by way of
subrogation, reimbursement, indemnity, contribution, or the like
unless and until all Liabilities have been paid and satisfied in
full.

(b) The filing of any proof of any claim in competition with
the Agent in respect of any payment hereunder in any bankruptcy or
insolvency proceedings of any nature.

(c) The claiming of any set-off or counterclaim against the
Borrower in respect of any liability of the undersigned to the
Borrower.

SUBORDINATION. The payment of any amounts due with respect to any
indebtedness of the Borrower now or hereafter held by the undersigned for
borrowed money is hereby subordinated to the prior payment in full of the
Liabilities. The undersigned will not demand, sue for, or otherwise attempt to
collect any such indebtedness. Any amounts which are collected, enforced and
received by the undersigned shall be held by the undersigned as trustee for the
Agent and shall be paid over to the Agent on account of the Liabilities without
affecting in any manner the liability of the undersigned under this Guaranty.

AGENT'S/LENDER'S BOOKS AND RECORDS. The books and records of the
Agent or any Lender showing the account between the Agent and any such Lender
and the Borrower shall be admissible in any action or proceeding and constitute
prima facie evidence and proof of the items contained therein.

GUARANTOR'S OBLIGATIONS PRIMARY. The obligations of the undersigned
hereunder are primary, with no recourse necessary by the Agent or any Lender
against the Borrower or any collateral given to secure the Liabilities or to
secure the obligations of the undersigned hereunder or against any other person
liable for or on the Liabilities prior to proceeding against the undersigned
hereunder.

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<PAGE>

CHANGES IN LIABILITIES. The undersigned assents to any indulgence or
waiver which the Lender might grant or give the Borrower and/or any other person
liable or obligated to the Lender for or on the Liabilities. The undersigned
authorizes the Lender to alter, amend, cancel, waive, or modify any term or
condition of the Liabilities and of the obligations of any other person liable
or obligated to the Lender for or on the Liabilities, without notice to, or
consent from, the undersigned. No compromise, settlement, or release by the
Lender of the Liabilities or of the obligations of any such other person
(whether or not jointly liable with the undersigned) and no release of any
collateral securing the Liabilities or securing the obligations of any such
other person shall affect the obligations of the undersigned hereunder. No
action by the Lender which has been assented to herein shall affect the
obligations of the undersigned to the Lender hereunder.

FINANCIAL INFORMATION. The undersigned, from time to time at the
request of the Agent, will provide the Agent with such information concerning
the financial condition of the undersigned as the Agent reasonably may request
(including but not limited to financial statements in such form as reasonably
may be requested by the Agent and copies of the federal and state income tax
returns).

COSTS OF ENFORCEMENT. The undersigned will pay on demand, without
limitation, all attorneys' reasonable fees, reasonable out-of-pocket expenses
incurred by the Agent's attorneys and all reasonable out-of-pocket costs
incurred by the Agent, including, without limitation, costs and expenses
associated with travel on behalf of the Agent, which costs and expenses are
directly or indirectly related to or in respect of the Agent's administration,
negotiation, documentation, and amendment of this Guaranty and in the Agent's
efforts to collect and/or to enforce any of the obligations of the undersigned
hereunder and/or to enforce any of the Agent's rights, remedies, or powers
against or in respect of the undersigned (whether or not suit is instituted by
or against the Agent).

BINDING EFFECT. This instrument shall inure to the benefit of the
Lender, its successors and assigns; shall be binding upon the heirs, successors
and assigns of the undersigned; and shall apply to all Liabilities of the
Borrower and any successor to the Borrower, including any successor by operation
of law.

AGENT'S RIGHTS AND REMEDIES. The rights, remedies, powers,
privileges, and discretions of the Agent hereunder (herein, the "Agent's Rights
and Remedies") shall be cumulative and not exclusive of any rights or remedies
which it would otherwise have. No delay or omission by the Agent in exercising
or enforcing any of the Agent's Rights and Remedies shall operate as, or
constitute a waiver thereof. No waiver by the Agent of any of the Agent's
Rights and Remedies or of any default or remedies under any other agreement with
the undersigned, or of any default under any agreement with the Borrower, or any
other person liable or obligated for or on the Liabilities, shall operate as a
waiver of any other of the Agent's Rights and Remedies or of any default or
remedy hereunder or thereunder. No exercise of any of the Agent's Rights and
Remedies and no other agreement or transaction of whatever nature entered into
between the Agent and: the undersigned; and the Borrower; and/or any such other
person at any time shall preclude any other exercise of the Agent's Rights and
Remedies. No waiver by the Agent of any of the Agent's Rights and Remedies on
any one occasion shall be deemed a waiver on any subsequent occasion, nor shall
it be deemed a continuing waiver. All of the Agent's Rights and Remedies, and
all of the Agent's rights, remedies, powers, privileges, and discretions under
any other agreement or transaction with the undersigned, the Borrower, or any
such other person, shall be cumulative and not alternative or exclusive, and may
be exercised by the Agent at such time or times and in such order of preference
as the Agent in its sole discretion may determine.

COPIES AND FACSIMILES. This instrument and all documents which have
been or may be hereinafter furnished by the undersigned to the Agent may be
reproduced by the Agent by any photographic, microfilm, xerographic, digital
imaging, or other process. 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

3
<PAGE>

transmission shall be binding on the party which or on whose behalf such
transmission was initiated and likewise 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.

CHOICE OF LAWS. THIS INSTRUMENT SHALL BE GOVERNED CONSTRUED, AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.

CONSENT TO JURISDICTION. (a) The undersigned agrees that any legal
action, proceeding, case, or controversy against the undersigned with respect to
this Guaranty or otherwise, may be brought in the Superior Court of Suffolk
County Massachusetts or in the United States District Court, District of
Massachusetts, sitting in Boston, Massachusetts, as the Agent may elect in the
Agent's sole discretion. By execution and delivery of this Guaranty, the
undersigned accepts, submits, and consents generally and unconditionally, to the
jurisdiction of the aforesaid courts.

(b) The undersigned WAIVES personal service of any and all
process and irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by certified mail, postage prepaid, to the undersigned at the last
address of the undersigned of which the Agent then has written notice, such
service to become effective five (5) business days after such mailing.

(c) The undersigned WAIVES, at the option of Agent, any
objection based on forum non conveniens and any objection to venue of any action
or proceeding instituted hereunder and consents to the granting of such legal or
equitable remedy as is deemed appropriate by the court in which the Agent
initiates the subject action.

(d) Nothing herein shall affect the right of the Agent to bring
legal actions or proceedings in any other competent jurisdiction.

(e) The undersigned agrees that any action commenced by the
undersigned asserting any claim or counterclaim arising under or in connection
with this Guaranty or the Agent's relationship with the Borrower shall be
brought in the Superior Court of Suffolk County Massachusetts or in the United
States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, and that such Courts shall have exclusive jurisdiction with
respect to any such action.

BROAD SCOPE OF GUARANTY. It is the intention of the undersigned that
the provisions of the within Guaranty and indemnification be liberally construed
to the end that the Agent may be put in as good a position as if the Borrower
had promptly, punctually, and faithfully performed all Liabilities and that the
undersigned had promptly, punctually, and faithfully performed hereunder.

SEVERABILITY. Any determination that any provision herein 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
and shall not affect the validity, legality, or enforceability of any other
provision contained herein.

RIGHT OF SET-OFF. Any and all deposits or other sums at any time
credited by or due to the undersigned from any Lender or from any Participant
with any Lender in the credit facility contemplated by the Loan Agreement and
any cash, securities, instruments or other property of the undersigned in the
possession of any Lender or any Affiliate (as defined in the Loan Agreement) of
any Lender or any Participant, whether for safekeeping or otherwise (regardless
of the reason such Lender or the Participant had received the same) shall at all
times constitute security for all Liabilities and may be applied or set off
against the Liabilities at any time after the occurrence and during the
continuance of an Event of Default (as defined in the Loan Agreement), whether
or not such are then due and whether or not other collateral is then available
to the Agent, the Lender or any Participant.

TERMINATION. The obligations of the undersigned hereunder shall
remain in full force and effect as to all Liabilities, until the earlier of (a)
ten (10) days following the actual receipt by the Agent at its main office
(presently 40 Broad Street, Boston, Massachusetts 02109 Attention: Mr. Michael
Pizette) of written notice signed by the undersigned of the termination thereof
or (b) the delivery of written notice of termination dated and signed by a duly
authorized officer of the Agent, which notice of termination includes specific
reference

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<PAGE>

to this provision. No termination hereof shall affect any Liability in
existence or outstanding ten (10) days following the date of such actual receipt
or delivery (including, without limitation, those which are contingent or not
then due and those which arise out of any check, draft, item, or paper which was
made, executed, or drawn prior to the expiration of such ten (10) days, even if
received by the Agent thereafter) nor any which arises out of any continuing
commitment of the Agent to provide loans, advances, and financial accommodations
to the Borrower, nor any obligation of the undersigned hereunder, including,
without limitation, any which by its terms includes any of the Liabilities of a
contingent nature (including, without limitation, the indemnification provided
for herein). This Guaranty shall continue to be effective or, if previously
terminated, shall be automatically reinstated, without any further action, if at
any time any payment made or value received with respect to a Liability is
rescinded or must otherwise be returned by the Agent upon the insolvency,
bankruptcy or reorganization of the undersigned, or otherwise, all as though
such payment had not been made or value received. This Guaranty will be
terminated when the Agent consents to such termination or when all of the
Liabilities have been paid in full and the Agent shall have no obligation to
provide loans, advances or other financial accommodations to the Borrower.

MISCELLANEOUS. The undersigned represents and certifies that, prior
to the execution of this Guaranty, the undersigned had carefully read and
reviewed all of the provisions of this Guaranty and had been afforded an
opportunity to consult with counsel independently selected by the undersigned.
The undersigned further represents and certifies that the undersigned has freely
and willingly executed this Guaranty with full appreciation of the legal effect
of this Guaranty. The undersigned recognizes that the titles to the paragraphs
of the within Guaranty are for ease of reference; are not part of this Guaranty;
and do not alter or affect the substantive provisions hereof.

WAIVER OF JURY TRIAL. The undersigned, and the Agent by its
acceptance hereof, makes the following waiver knowingly, voluntarily, and
intentionally, and understands that the Agent, in the establishment and
maintenance of the Agent's relationship with the Borrower and the undersigned,
is relying thereon. THE UNDERSIGNED AND THE AGENT HEREBY RESPECTIVELY
IRREVOCABLY WAIVE ANY PRESENT OR FUTURE RIGHT OF THE UNDERSIGNED, THE BORROWER
OR ANY ENDORSER OR ANY OTHER GUARANTOR OF THE BORROWER, OR ANY OTHER SIMILAR
PERSON, THE AGENT OR ANY LENDER TO A TRIAL BY JURY OF ANY CASE OR CONTROVERSY IN
WHICH THE AGENT OR ANY LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR
CONTROVERSY IS INITIATED BY OR AGAINST THE AGENT OR ANY LENDER OR IN WHICH THE
AGENT OR ANY LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY
ARISES OUT OF, OR IS IN RESPECT OF, ANY RELATIONSHIP AMONGST OR BETWEEN THE
UNDERSIGNED, THE BORROWER, ANY SUCH PERSON, AND THE AGENT OR ANY LENDER.

It is intended that this Guaranty take effect as a sealed instrument
this _____ day of _____________.

CSS TRADE NAMES, INC.

By
------------------------------

<PAGE>

Exhibit 10.12

TRADEMARK AND TRADEMARK
APPLICATIONS SECURITY AGREEMENT BankBoston Retail Finance Inc.

January__, 1998

This Trademark and Trademark Application Security Agreement (the "TM
Security Agreement") is made as of the __th day of January, 1998 by CSS Trade
Names, Inc. a _________ corporation with its principal executive offices at 469
Seventh Avenue, New York, New York 10018 (the "Obligor"), and BankBoston Retail
Finance Inc. (in such capacity, the "Agent"), a Delaware corporation with its
principal executive offices at 40 Broad Street, Boston, Massachusetts 02109, as
Agent for the Lenders under and as defined in that certain Loan and Security
Agreement, dated as of October 29, 1997 amongst County Seat Stores, Inc. (the
"Borrower") on the one hand, and the Agent and the Lenders on the other, as such
Loan and Security Agreement is amended from time to time (hereafter, the "Loan
Agreement").
RECITALS

WHEREAS, pursuant to the Loan Agreement the Agent and the Lenders from
time to time a party thereto have agreed to make certain loans and other
financial accommodations (hereinafter, the "Loans") available to the Borrower,
subject to, and in accordance with the provisions of, the Loan Agreement;

WHEREAS, under the Loan Agreement, the Borrower has created a security
interest in the Borrower's assets to secure the Liabilities (as defined in the
Loan Agreement and used herein as so defined);

WHEREAS, as a condition, among others, to the establishment of the
credit facility contemplated by the Loan Agreement, the Obligor has guarantied
the Liabilities of the Borrower pursuant to the Obligor's Guaranty dated
November 14, 1997;

WHEREAS, to secure the Obligor's Guaranty, the Obligor has executed
this TM Security Agreement.

NOW THEREFORE, For good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Obligor and the Agent agree as
follows:

1. Terms used herein which are defined the Loan Agreement are used
as so defined.

(b) All renewals of any of the foregoing.

(d) The right to sue for past, present and future infringements
and dilutions of any of the foregoing.

(e) All of Obligor's rights corresponding to any of the
foregoing throughout the world.

<PAGE>

(a) Pay all renewal fees and other fees and costs associated
with maintaining the Marks and with the processing of the Marks.

(b) At the Obligor's sole cost, expense, and risk, pursue the
prompt, diligent, processing of each Application for Registration
which is the subject of the security interest created herein.

4. In the event of

(a) the Obligor's failure, within Five (5) days of written
notice from the Agent, to cure any failure by the Obligor to perform
any of the Obligor's obligations set forth in Section 3, above; and/or

(b) the occurrence and continuance of any Event of Default
beyond applicable grace periods as provided for in the Loan
Agreement, the Agent acting in its own name or in that of the
Obligor may (but shall not be required to) act in the Obligor's
place and stead and/or in the Agents' own right in connection
therewith.

5. The Obligor represents and warrants that:

(a) EXHIBIT A includes all of the registered trademarks, Federal
trademark applications, registered service marks and Federal service
mark applications now owned by the Obligor.

(b) No liens, claims or security interests which are still in
effect have been granted in any Mark by the Obligor to any Person
other than to the Agent.

6. In order to further secure the Liabilities:

(a) The Obligor shall give the Agent written notice (with
reasonable detail) within Twenty-five (25) days following the
occurrence of any of the following:

7. Upon the occurrence of any Event of Default, and only if such
default shall be continuing beyond applicable grace periods as provided for in
the Loan Agreement, the Agent may exercise all rights and remedies of a secured
party upon default under the Uniform Commercial Code as adopted in Massachusetts
(Massachusetts General Laws, Chapter 106), with respect to the Marks, in
addition to which the Agent, subject to the terms of the Loan Agreement, may
sell, license, assign, transfer, or otherwise dispose of the Marks. Any person
may conclusively rely upon an affidavit of an officer of the Agent that an Event
of Default has occurred and that the Agent is authorized to exercise such rights
and remedies.

<PAGE>

(a) To exercise any of the rights and powers referenced in
Section 7.

14. This TM Security Agreement and all rights and obligations
hereunder, including matters of construction, validity, and performance, shall
be governed by the laws of The Commonwealth of Massachusetts.

<PAGE>

IN WITNESS WHEREOF, the Obligor and the Agent respectively have caused
this Loan Agreement to be executed by officers duly authorized so to do on the
date first above written.

CSS TRADE NAMES, INC. BANKBOSTON RETAIL FINANCE INC.
(The "Obligor") (The "Agent")

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

............................
County of .........., ss

Then personally appeared before me ...................... who
acknowledged that such person is the duly authorized ................... of CSS
Trade Names, Inc. and that such person had executed the foregoing instrument on
its behalf.

Witness my hand and seal this ..... day of .................

-----------------------------------------------
, Notary Public
My Commission Expires:

The ........ of .................
County of .............

Witness my hand and seal this ...day of .................

-----------------------------------------------
, Notary Public
My Commission Expires:

<PAGE>

EXHIBIT A

Obligor's now owned or existing or hereafter acquired or arising registered
service marks and Federal service mark applications, registered trademarks, and
Federal trade mark applications:

Trademark/Service Mark Registrations
TRADEMARK REGISTRATION NUMBER REGISTRATION DATE

Trademark Applications
MARK SERIAL NUMBER FILING DATE

<PAGE>

TRADEMARK LICENSE AGREEMENT

This Agreement ("the Agreement") is made as of this 18th day of
September, 1996, by and between LEVI STRAUSS & CO., a Delaware corporation, with
its principal office at Levi's Plaza, 1155 Battery Street, San Francisco,
California 94111 (hereinafter "LICENSOR") and COUNTY SEAT STORES, INC., a
Minnesota corporation, with its principal office at 17950 Preston Road, Suite
1000, Dallas, Texas 75252, (hereinafter "LICENSEE").

WHEREAS, LICENSOR has, since 1850, been a major producer of apparel
and related products in the United States and elsewhere and owns certain
valuable trademarks in the United States; and

WHEREAS, LICENSEE is the owner of certain retail outlet stores
operating under the "Levi's Outlet" name through which it sells exclusively
closeouts, seconds and irregular apparel and related products which have been
manufactured by LICENSOR or by third parties under license from and/or on behalf
of LICENSOR; and

WHEREAS, LICENSEE has been selling such products in such stores
subject to oral license agreements which are being terminated and replaced
hereby; and

WHEREAS, the parties now wish to set forth their written agreement
on the terms of such license for LICENSEE's existing and future outlet stores
operating under the "Levi's Outlet" name;
<PAGE>

NOW, THEREFORE, for good and valuable consideration, including
without limitation the mutual premises set forth below, the parties agree as
follows:

1. Grant of Licence.

a. LICENSOR grants to LICENSEE, subject to the terms of this
Agreement, an exclusive, royalty-free license to use the Levi's(R) "Housemark"
trademark in the form shown in Exhibit A (which has been registered in the
United States Patent and Trademark Office having Registration Numbers 849,437;
1,122,468; 1,041,846 and 1,155,926 respectively) in combination with "Outlet by
County Seat" as shown in Exhibit B, within the territory described in Exhibit C
(the "TERRITORY"), in connection with the sale of closeouts, seconds and
irregulars of apparel and related products manufactured by LICENSOR or by third
parties under license from and/or on behalf of LICENSOR (the "PRODUCTS"), on
exterior signage, interior signage, stationery, receipts and PRODUCT tags in
retail outlets which have been individually pre-approved by LICENSOR as listed
in Exhibit E hereto (the "STORES") and which are devoted exclusively to the sale
of such PRODUCTS. The said license is limited to the said STORES operating at
the locations set forth in Exhibit E, and is not transferable to any other store
without LICENSOR'S prior written consent. The Levi's(R) Housemark trademark
licensed hereunder is referred to in this Agreement as the "LICENSED MARK."

b. This Agreement does not grant LICENSEE any rights in any
other trademarks, trade names or other proprietary rights of LICENSOR. Nothing
in this Agreement, however, limits any rights of LICENSEE, under such other
agreements as may exist from time to time, to use the LICENSED MARK standing
alone, or other appropriate trademarks of LICENSOR, in retail stores other than
the STORES in the

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<PAGE>

same fashion as permitted for use by other retailers authorized by LICENSOR in
conjunction with the promotion of LICENSOR's products, provided such use is
consistent with LICENSOR's policies and guidelines.

c. The combination forms of the Levi's(R) "Housemark" shown in
Exhibit B are collectively referred to as the "COMBINATION MARKS." Although the
service mark "County Seat" (which has been registered in the United States
Patent and Trademark Office under registration numbers 1099854 and 1490663) is
incorporated in the permitted combination forms, and must appear in any usage of
the COMBINATION MARKS by LICENSEE, LICENSOR neither claims nor shall obtain any
rights nor has any obligations with respect to such service mark.

d. The licenses granted herein constitute both a right and an
obligation to use the COMBINATION MARKS only in the manner specified herein in
conjunction with the sale of the PRODUCTS through the STORES.

e. LICENSOR reserves the right to use the LICENSED MARK with
or without the word "Outlet" in connection with retail and outlet stores owned
and operated by LICENSOR (or Levi's Only Stores, Inc. ("LOS Inc.") or other
subsidiary of LICENSOR) within the TERRITORY during the term of this Agreement.

2. Use of COMBINATION MARK. LICENSEE shall use the COMBINATION MARKS
as follows:

a. LICENSEE shall prominently display the COMBINATION MARKS in
one of the formats attached hereto as Exhibit B, and only in such format, when
referring to the STORES, including on exterior STORE signage, interior STORE

3
<PAGE>

signage, stationery, receipts and PRODUCT tags. The COMBINATION MARKS shall be
used in conformance with all policies and guidelines communicated in writing by
LICENSOR to LICENSEE, which policies and guidelines shall be consistent with
those communicated to other third party licensees who operate outlet stores
selling PRODUCTS under license in the United States. In the event that
LICENSEE's lease restrictions or other factors require LICENSEE's use of the
COMBINATION MARKS which are at variance with the formats shown on Exhibit B or
the license granted herein, LICENSEE must obtain LICENSOR's prior written
consent to any such variance.

b. LICENSEE shall sell the PRODUCTS and no other products in
the STORES.

c. LICENSEE shall not advertise the existence of STORES or
their business except that LICENSEE may advertise on billboards designed to
promote all retail outlet establishments within the mall in which the STORES are
located, which billboards shall be located within five (5) miles of any such
mall and shall advertise at least one other brand or retailers name as well as
the COMBINATION MARKS. LICENSEE shall also be permitted to advertise the STORES
using flyers and in local newspapers.

3. Exclusivity.

a. LICENSOR shall not grant licenses to third parties
(including, without limitation, joint ventures between LICENSOR and third
parties) to use the LICENSED MARK in connection with the sale of the PRODUCTS in
the TERRITORY subject, however, to certain exceptions as set forth in Exhibit C.

4
<PAGE>

LICENSOR (or Levi's Only Stores, Inc. ("LOS Inc.") or other subsidiary of
LICENSOR) may own and operate retail and outlet stores within the TERRITORY
during the term of this Agreement. LICENSOR does not presently intend to locate
such stores in any center where a STORE is located.

b. The licenses granted herein require LICENSEE to operate the
STORES exclusively as outlets for the PRODUCTS. LICENSEE is expressly prohibited
from using the COMBINATION MARKS: (i) in stores which offer products from
manufacturers other than or in addition to LICENSOR and (ii) in stores not
devoted exclusively to selling the PRODUCTS. No COMBINATION MARK may be used
hereunder in conjunction with the sale of first quality or in-season goods
except as specifically permitted by LICENSOR.

4. Modifications of COMBINATION MARKS. LICENSEE understands and
agrees that the prior written approval of the LICENSOR is required if LICENSEE
proposes to change in any respect the formats shown in Exhibit B or any
materials authorized under Section 2. LICENSEE agrees not to use any altered
version of such signage or materials without LICENSOR's prior written approval.
Any violation of this Section shall be deemed to constitute a material breach
and default but subject to the notice, cure and termination rights described in
Section 9.d of this Agreement.

5. Point of Sale Notification. LICENSEE shall display a notice to
its customers which conforms substantially to the form of notice set forth in
Exhibit D. Such notice shall be prominently displayed in the interior of each
STORE at all points of sale in a manner which clearly and conspicuously: (i)
notifies customers about the kinds of PRODUCTS sold (i.e., closeouts, seconds
and irregulars manufactured exclusively by or on behalf of LICENSOR); (ii)
defines the terms "closeout", "seconds"

5
<PAGE>

and "irregulars" so that customers understand the quality of the merchandise
offered for sale; and (iii) gives the identity of the company leasing and
operating the STORE (i.e., LICENSEE, not LICENSOR) and the fact that LICENSEE,
not LICENSOR, assumes all liabilities associated with the PRODUCTS and services
offered by the STORE, except for liabilities based on damage or injury caused by
the PRODUCTS, taking into account the fact that such PRODUCTS are closeouts,
seconds, irregular apparel and related products. All merchandise offered for
sale in the STORES shall be appropriately labeled as closeouts, seconds or
irregulars, respectively.

6. Other Point of Sale Material. LICENSOR may provide LICENSEE with
additional point of sale displays bearing the COMBINATION MARKS. LICENSEE may
also display its own point of sale materials bearing the COMBINATION MARKS,
provided that such materials conform to LICENSOR's written guidelines for
displaying such materials or, if LICENSEE has not been provided with such
written guidelines, then subject to LICENSOR's prior written approval and
quality control over the display and use of such materials.

7. Right of Inspection. LICENSOR shall have the right during regular
business hours, at its own expense, to inspect any STORE or other LICENSEE
facility whereon or wherein the COMBINATION MARKS are displayed for the purpose
of enabling LICENSOR to determine whether LICENSEE is adhering to the
requirements of this Agreement.

8. Authorized Outlets ("STORES"). LICENSEE has provided LICENSOR
with a list of all locations at which the COMBINATION MARKS are currently being
used and their related lease expiration dates and option provisions. Such list
is attached hereto as Exhibit E and, upon execution of this Agreement, those
locations

6
<PAGE>

shall become STORES subject to the terms of this Agreement. Upon request by
LICENSEE during the term of this Agreement, additional STORES may be approved by
LICENSOR on a case-by-case basis in LICENSOR's sole discretion. Such approval
shall be in writing and the additional STORES shall be added to this Agreement
only by amending Exhibit E.

9. Term and Termination.

a. The term of this Agreement shall commence upon execution by
both parties and shall expire July 31, 2000 ("the EXPIRATION DATE")
Notwithstanding the foregoing, the license for any STORE shall be for a period
coterminus with the lease term (excluding options) set forth in Exhibit E,
unless otherwise expressly stated in Exhibit E, and shall terminate upon
expiration of the lease term. The license for any STORE for which the lease term
ends before the EXPIRATION DATE shall be automatically renewed for a period
equal to the shorter of: (i) the term of any existing option specified on
Exhibit E which is exercised by LICENSEE prior to the expiration date of the
current term of the lease for that STORE or (ii) five years after the expiration
date of the current term of the lease (i.e., it may terminate before a
longer-than-five-year lease option expires). No lease for which the current term
expires after the EXPIRATION DATE shall be renewed except by an agreement in
writing signed by both LICENSEE AND LICENSOR. Exhibit E may be modified from
time to time upon the written agreement of both parties.

b. If either LICENSEE or LICENSOR wishes to renew this
Agreement, then that party shall give a written notice to that effect to the
other party not less than one-hundred-eighty (180) days before the EXPIRATION
DATE. LICENSEE and LICENSOR shall meet with ninety (90) days after the date of
such notice to

7
<PAGE>

discuss the matter. It is understood and agreed, however, that neither party is
obligated to renew, extend or modify the Agreement on any terms, and that such
decisions are entirely within the sole discretion of the individual parties.

c. If at any time LICENSOR or LICENSEE: (i) files a voluntary
bankruptcy petition under the United States Bankruptcy Code; (ii) has filed
against it a bankruptcy petition or other action seeking any reorganization,
composition, liquidation or similar relief under the United States Bankruptcy
Code or similar statute or law of the United States or any other jurisdiction
which remains undismissed and unstayed for a period of 60 days; (iii) seeks or
is the subject of any decree or order for the appointment of a receiver,
custodian, liquidator or trustee; (iv) winds up, dissolves or liquidates its
business (voluntarily or involuntarily); (v) ceases to function as a going
concern; (vi) fails to pay its debts (including, without limitation, obligations
to LICENSOR arising from the sale of PRODUCTS or of first quality merchandise
for LICENSEE'S County Seat stores) as they come due; or (vii) makes any
assignment for the benefit of creditors, the other party, as the case may be,
shall have the right to terminate this Agreement by providing written notice to
that effect to the other party. The termination shall be effective upon
transmission of that notice and have the effects described in Sections 9.f, 9.g
and 9.h.

d. If either party shall cause or permit any material breach
or default of this Agreement, the other party shall have the right to terminate
this Agreement by written notice to the party causing or permitting the breach
or default. Such termination shall be effective one-hundred-twenty (120) days
after the giving of such notice, unless prior thereto the party receiving said
notice cures such breach or default.

8
<PAGE>

e. Any material breach or default committed by LICENSEE with
respect to any STORE shall entitle LICENSEE to terminate the Agreement with
respect to all STORES, subject to the notice and cure rights described in
Section 9.d of this Agreement.

f. Upon termination of this Agreement for any reason, LICENSEE
shall, subject to Section 9.h, immediately cease and thereafter refrain from all
use of the COMBINATION MARKS and shall promptly remove or dispose of all retail
outlet STORE signage and other materials utilizing the same.

g. Upon termination of, the licenses granted herein with
respect to any STORE, LICENSEE shall, subject to Section 9.h, cease and
thereafter refrain from using the COMBINATION MARKS with respect to such STORE
and shall remove or dispose of all retail outlet store signage for such STORE
utilizing the same.

h. Upon expiration or termination of this Agreement in its
entirety or with respect to an individual STORE, LICENSOR and LICENSEE shall
develop a transition plan permitting LICENSEE a reasonable time (not to exceed
one-hundred-eighty (180) days after the effective date of termination or the
expiration date) to dispose of PRODUCTS (including PRODUCTS bearing the
COMBINATION MARKS) in LICENSEE's possession at the effective date of
termination, fixtures, POS, visual merchandising items and similar materials in
a manner approved by LICENSOR.

10. Fictitious Names. If LICENSEE is required to file a statement of
fictitious name in a state where it is using the LICENSED MARKS on signage on
its

9
<PAGE>

STORES, LICENSEE shall promptly so inform LICENSOR and obtain its prior written
consent.

11. LICENSEE's Covenants.

a. LICENSEE shall affirmatively and conspicuously display a
written representation in all STORES that LICENSEE, not LICENSOR, owns and
operates the STORES and that the relationship between LICENSOR and LICENSEE is
that of a manufacturer and an independent retailer of the PRODUCTS.

b. LICENSEE agrees that its promotion and sale of the PRODUCTS
in the STORES and its performance of this Agreement will be in full compliance
with fair business practices and all applicable laws and regulations of the
TERRITORY and the United States.

12. LICENSEE's Indemnification.

a. LICENSEE agrees to defend, indemnify and hold LICENSOR
harmless against any damages, liabilities and expenses LICENSOR may suffer,
including reasonable attorneys' fees and costs of suit, arising from any breach
of any agreement, representation or warranty given herein or from LICENSEE's
business activities, including without limitation, from claims based on personal
injury and property damage occurring within or around the STORES and
unauthorized activities with regard to LICENSEE's use of the LICENSED MARK. The
foregoing notwithstanding, LICENSEE's indemnification does not extend to
liabilities based upon the quality, safety or other properties of the PRODUCTS,
taking into account the fact that such PRODUCTS are closeouts, seconds,
irregular apparel and related

10
<PAGE>

products, or upon a claim of trademark infringement where such infringement
arises out of LICENSEE's use of the LICENSED MARK as permitted hereunder.

b. LICENSEE's obligation to indemnify shall not be effective
unless LICENSOR gives LICENSEE prompt notice of any claim which might trigger
such obligation and affords LICENSEE the opportunity to assume the defense
thereof. LICENSEE's obligation to indemnify shall not be effective in the event
that LICENSOR settles such claim without first obtaining LICENSEE's consent
thereto.

13. LICENSOR's Representations and Warranties.

a. Subject only to Sections 1.c and 1.e and to other license
agreements with third parties, LICENSOR represents and warrants (i) that it owns
all right, title and interest in and to the LICENSED MARK; and (ii) that it has
the full power and authority to grant LICENSEE the rights and licenses granted
herein.

b. LICENSOR agrees that its performance of this Agreement will
be in full compliance with all applicable laws and regulations of the TERRITORY
and the United States.

14. LICENSOR's Indemnification.

a. LICENSOR agrees to defend, indemnify and hold LICENSEE
harmless against any damages, liabilities and expenses LICENSEE may suffer,
including reasonable attorneys' fees and costs of suit, arising from a claim
that the LICENSED MARK infringes the trademark rights of a third party within
the TERRITORY; provided that such claim does not result directly or indirectly,
in whole or

11
<PAGE>

in part, from some unauthorized action or activity by LICENSEE with respect to
the LICENSED MARK.

b. LICENSOR's obligation to indemnify shall not be effective
unless LICENSEE gives LICENSOR prompt notice of any claim which might trigger
such obligation and affords LICENSOR the opportunity to assume the defense
thereof. LICENSOR's obligation to indemnify shall not be effective in the event
that LICENSEE settles such claim without first obtaining LICENSOR's consent
thereto.

15. Rights in LICENSED MARKS. LICENSEE recognizes that there is
great value to LICENSOR in the LICENSED MARK and the goodwill associated
therewith. LICENSEE agrees that nothing contained in this Agreement or in any
prior agreement or in any prior conduct of LICENSOR or LICENSEE gives LICENSEE
any interest or property rights in the LICENSED MARK or in any other mark or
trade name of LICENSOR except the right to use the LICENSED MARK as specifically
set forth herein. LICENSEE agrees that all uses by LICENSEE of such trademark
shall inure to the benefit of LICENSOR. Except for the rights expressly granted
herein, LICENSEE agrees that it will not, during the term of this Agreement or
thereafter, directly or indirectly, assert any interest in, right of use or
other rights in the LICENSED MARK or in any other mark or in any trade name of
LICENSOR. LICENSEE agrees to assist LICENSOR in all reasonable respects
requested by LICENSOR, and at LICENSOR's expense, in the establishment, renewal,
protection and enforcement of LICENSOR's rights in the LICENSED MARK.

12
<PAGE>

16. Terms Governing Purchase and Transfer of Merchandise.

a. PRODUCTS shall only be purchased directly from LICENSOR or
from third parties who are approved by LICENSOR on a case-by-case basis. Terms
of such purchases from LICENSOR shall be negotiated separately and in writing by
LICENSEE and LICENSOR. LICENSEE shall comply with those purchase terms,
including terms relating to time and amount of payment for PRODUCTS, it being
understood that such compliance is an integral element and material requirement
of this Agreement.

b. LICENSEE acknowledges that its access to PRODUCTS shall be
strictly on an "as available" basis, and that nothing in this Agreement, or any
other agreement or communication between LICENSOR and LICENSEE, shall be deemed
to constitute a guarantee of such availability. LICENSOR shall make reasonable
efforts to offer PRODUCTS on an equitable basis among LICENSEE and the other
operators of outlet stores, including LOS Inc.

c. LICENSEE agrees that it will dispose of its own seasonal
closeouts of LICENSOR's products by transferring them from its first quality
stores to its STORES licensed hereunder; provided, however, that nothing herein
is intended to prohibit the transfer of LICENSOR'S products offered for sale in
one of LICENSEE's first quality stores (including any of such stores that are
being closed) to another first quality stores operated by LICENSEE.

17. Injunctive Relief. Any breach by LICENSEE of this Agreement
which involves LICENSEE's misuse of the LICENSED MARK would result in
irreparable injury to LICENSOR and therefore, in addition to all other remedies

13
<PAGE>

provided at law or in equity, including, without limitation, remedies provided
under The Uniform Trade Secret Act, California Civil Code Sections 3426 et.
seq., LICENSOR shall be entitled to a temporary restraining order and a
permanent injunction to prevent the continuance of such breach. No notice shall
be required in order to obtain such injunctive relief. In the event that
LICENSOR seeks an injunction hereunder, LICENSEE hereby waives any requirement
that LICENSOR post a bond or any other security.

18. No Assignment or Sublicense. This Agreement contemplates a
highly-visible use of LICENSOR's trademarks, with corresponding trademark
protection, brand image and enhancement implications. Accordingly, compliance
with the standards described in this Agreement, and the identity of the operator
of the STORES, are critical. To that end, LICENSEE may not assign, sublicense or
otherwise transfer any of its rights or obligations hereunder without the prior
written approval of LICENSOR. For purpose of this Section, an assignment,
sublicense or other transfer shall include: (i) any direct or indirect
assignment, sublicense or other transfer, in whole or in part, of any of
LICENSEE's rights or obligations under this Agreement, (ii) any direct or
indirect transfer of any of the assets with which the COMBINATION MARKS are
being used (including the STORES or their leases), (iii) any direct or indirect
transfer of control of LICENSEE, or (iv) any transfer of any interest, direct or
indirect, in LICENSEE or its assets, to a competitor of LICENSOR (provided that
the ordinary purchase of LICENSEE's shares in a publicly-traded market for such
shares, if any, shall not constitute a sale to a competitor for purposes of this
Section 18(iv)). Any attempt to assign, sublicense or otherwise transfer any of
LICENSEE's rights or obligations without the prior written consent of LICENSOR
shall be void and shall be deemed to be a material breach of this Agreement.

14
<PAGE>

19. Notices. All notices, demands and requests required or permitted
by this Agreement shall be given in writing and delivered by U.S. mail or
overnight courier, postage prepaid. All such notices shall be deemed effective
upon deposit in the U.S. mail or upon delivery to an overnight courier. All such
notices shall be addressed as follows:

if to LICENSOR:

Levi Strauss & Co.
Levi's Plaza
1155 Battery Street
San Francisco, California 94111
Attention: Vice President, Customer Relations

with a copy to:

General Counsel
Levi Strauss & Co.
Levi's Plaza
1155 Battery Street
San Francisco, California 94111

if to LICENSEE:

County Seat Stores, Inc.
17950 Preston Road, Suite 1000
Dallas, Texas 75252

with a copy to:

County Seat Stores, Inc.
6585 City West Parkway
Eden Prairie, Minnesota 55344
Attn: General Counsel

Each party may change its notice address by giving a written notice to that
effect to the other party.

15
<PAGE>

20. No Agency. Nothing in this Agreement shall be construed so as to
constitute either party the agent, partner or joint venture of or with the other
for any purpose whatsoever. LICENSEE shall have no right or authority to pledge
the credit of or to represent itself as agent of or as authorized to assume or
create any obligation of any kind, expressed or implied on behalf of LICENSOR in
any respect whatsoever. At all times, LICENSEE shall maintain such notices and
make other arrangements in its STORES as may be reasonably necessary to enable
its customers to understand that the STORES are owned and operated by LICENSEE,
not LICENSOR.

21. Governing Law; Jurisdiction. The validity, construction,
performance, enforcement, termination and effect of this Agreement shall be
governed by and construed under and in accordance with the laws of the State of
California applicable to agreements made and to be wholly performed therein. The
parties irrevocably consent to the jurisdiction of the state courts of
California and of any federal courts located in the Northern District of
California and in Texas, in connection with any action or proceeding respecting
this Agreement or the rights and obligations set forth herein. The rights and
remedies provided in this Agreement shall not be exhaustive and are in addition
to any other rights and remedies provided by law.

22. Severability. Should any part or provision of this Agreement be
held unenforceable or in conflict with applicable law, such part or provision
shall be severed from this Agreement in such jurisdiction to the extent
necessary to make this Agreement enforceable and the validity of the remaining
parts or provisions shall remain in full force and effect. Additionally, in such
event the parties shall discuss such changes as may be necessary to preserve the
original intent of this Agreement and if the parties cannot agree on changes
within 30 days, then either party shall have

16
<PAGE>

the option to terminate this Agreement by notice to the other, effective upon
receipt and subject to Section 9h.

23. Entire Agreement. This Agreement and its Exhibits constitutes
the entire, final and exclusive agreement between the parties relating to the
use of the LICENSED MARK and the COMBINATION MARKS and supersedes any and all
prior agreements, communications, practices, arrangements or understandings,
whether written, oral, express, implied or derived from conduct between the
parties.

24. Amendment of Agreement. This Agreement may not be amended,
altered or modified except in writing signed by both of the parties hereto.

25. Binding Effect. Except as herein otherwise specifically
provided, this Agreement shall be binding upon and inure to the benefit of the
parties and their legal representatives, heirs, administrators, executors,
successors and permitted assigns.

26. Waiver. No failure on the part of either party to exercise, and
no delay in exercising, any right or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right or remedy granted hereby or by law.

27. Survival. The terms of Sections 9(f), 9(g), 9(h), 12(a), 14(a),
15, 17, 21, 22, and 23 shall survive the termination of this Agreement and shall
continue to bind the parties thereafter.

17
<PAGE>

28. Counterparts. This Agreement may be signed in any number of
counterparts.

IN WITNESS WHEREOF, the parties have executed this Agreement by
their respective officers hereunto duly authorized as of the day and year first
above written.

LEVI STRAUSS & CO. COUNTY SEAT STORES, INC.

By: /s/ [illegible] By: /s/ Matthew J. Knopf
--------------------------- -----------------------------------

Its: Vice President Its: Vice President and General Counsel
--------------------------- -----------------------------------

18
<PAGE>

EXHIBIT A

LEVI'S(R) HOUSEMARK

[GRAPHIC OMITTED]
<PAGE>

EXHIBIT B

[GRAPHIC OMITTED]

Alternative signage shown used where necessary to conform to local signage
requirements.
<PAGE>

EXHIBIT C

TERRITORY

Arkansas
Iowa
Kansas
Louisiana*
Minnesota
Missouri*
Nebraska
North Dakota
Oklahoma
South Dakota
Texas

* Two stores operated by Designs, Inc., a Delaware corporation, one in
each of the states indicated by asterisks, are grandfathered and shall be
exceptions to the exclusivity of territory granted to County Seat herein.
<PAGE>

EXHIBIT D

FORM OF EXPLANATORY NOTICE

[GRAPHIC OMITTED]
Outlet
by
County Seat

WHAT IS...
FIRST QUALITY?

*Discontinued Styles
*Discontinued Colors
*Manufacturer's Overruns
*Fully Guaranteed

[GRAPHIC OMITTED]
Outlet
by
County Seat

WHAT IS...
IRREGULAR?

*Perfectly Wearable
*Good Quality
*Slightly Blemished
*Fully Guaranteed

<PAGE>

EXHIBIT E

LEVI'S OUTLETS

<TABLE>
<CAPTION>
STORE LOCATION (by state) DEVELOPER REG MALL W/I 50+/- MILES STORE SF TERM OPEN DATE EXPIRATION DATE 1994 SALES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
808 HOT SPRINGS F. 0. Cabral Realty University, Park Plaza, 12,000 7 YRS. + 08/14/1994 01/31/2002 913,405
4334 Central Ave (Hwy. 7) McCain, The Pines 1) 5 YR. OPTION
HOT SPRINGS, AR 71913
501/525-5665

804 TANGER F. 0. Tanger Old Capitol, Sycamore, 12,000 7 YRS. + 03/01/1994 01/31/2002 2,252,579
Tanger Drive, Suite 505 Lindale, Westdale 1) 5 YR. OPTION
(1-80 @ Exit 220)
WILLIAMSBURG, IA 52361
319/668-9730

803 TANGER F. 0. Tanger Westridge, Oak Park, Metro 10,000 7 YRS. + 12/11/1993 01/31/2001 1,750,274
1025 N. 3rd, Suite 125 North, Ward Parkway, Bannister, 1) 5 YR. OPTION
(I-70 & Hwy. 59) Blue Ridge, Independence,
LAWRENCE, KS 66044 Country Club, Mission Center,
913/841-7402 Metcalf South, Indian Springs

795 TANGER F. 0. Tanger Cortana, Esplanade, 12,000 7 YRS. + 08/21/1993 01/31/2001 2,125,959
2300 Tanger Blvd., Suite 128 Southland 1) 5 YR. OPTION
(I-10 & Hwy. 30)
GONZALES, LA 70737
504/647-3514

817 FACTORY STORES Factory Stores Prien Lakes 11,348 10 YRS. 07/26/1994 01/31/2005 814,866
800 Factory Outlet Rd of America
(I-10 @ Exit 43)
IOWA, LA 70647
318/582-6790
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
STORE LOCATION (by state) DEVELOPER REG MALL W/I 50+/- MILES STORE SF TERM OPEN DATE EXPIRATION DATE 1994 SALES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
790 HORIZON OUTLET Horizon Outlets Maplewood, St. Paul Ctr, 12,048 5 YRS. + 07/24/1992 01/31/1998 2,177,935
10150 Hudson Rd Rosedale, Northtown, City Ctr, 1) 5 YR. OPTION
(I-94 & Co. Rd. 19) Southdale, Ridgedale, Knollwood,
WOODBURY, MN 55125 Eden Prairie, Burnsville
612/739-2737

813 MEDFORD OUTLET McArthur/Glen Apache, Mankato, Oakpark, 10,000 7 YRS. + 03/15/1995 01/31/2002 N/A
361 Co. Rd. 12 SW Burnsville 2) 5 YR. OPTION
(I-35 5. & Co. Rd. 12)
MEDFORD, MN 55049
507/451-9738

800 TANGER F. 0. Tanger Mall of America, Southdale, 9,000 7 YRS. + 10/25/1993 01/31/2001 1,706,583
38573 Tanger Dr, Suite 219 Ridgedale, Eden Prairie Ctr, 1) 5 YR. OPTION
(I-35 & Hwy. 95) Burnsville, Knollwood, Rosedale,
NORTH BRANCH, MN 55056 Maplewood, Brookdale, Northtown,
612/674-8838 City Center, St. Paul Centre.
Signal Hills

801 TANGER F. 0. Tanger Battlefield 13,700 10 YRS. + 11/23/1994 01/31/2005 456,687
300 Tanger Blvd., Suite 210 1) 5 YR. OPTION
(Hwy. 76)
BRANSON, MO 65616
417/337-9897

802 SIKESTON F. 0. JWR & Assoc. Westpark, Kentucky Oaks 10,000 7 YRS. + 07/16/1993 01/31/2001 1,684,841
100 Outlet Dr, Space 45-47 1) 7 YR. OPTION
(I-55 & U.S. 62)
MINER, MO 63801
314/471-8780
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
STORE LOCATION (by state) DEVELOPER REG MALL W/I 50+/- MILES STORE SF TERM OPEN DATE EXPIRATION DATE 1994 SALES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
812 KANSAS CITY F. 0. JMJ Properties Blue Ridge, County Club, 10,500 7 YRS. + 07/21/1995 01/31/2003 N/A
Independence, Bannister, 1) 7 YR. OPTION
(I-70 & U.S. 131) Ward Parkway, Metro North,
ODESSA, MO 64076 Oak Park, Mission Center,
816/230-5961 Metcalf South, Indian Springs

798 WARRENTON 0. C. McArthur/Glen Creatwood Plaza, South County, 8,940 10 YRS. + 11/13/1993 01/31/2004 1,919,554
1000 Warrenton Outlet Ctr Chesterfield, St. Louis Centre, 2) 5 YR. OPTION
(I-70 @ exit 193) St. Louis Galleria, Jamestown, West
WARRENTON, MO 63383 County, Mid Rivers
324/456-1730

792 NEBRASKA CROSSNG Prime Retail Southroads, Gateway, Oakview 10,000 7 YRS. 10/22/1993 01/31/2001 1,619,113
1433 S. Hwy 31, Suite Al13 Crossroads, Westroads, Mall
(I-80 & Hwy. 6) of the Bluffs
GRETNA, NE 68028
402/332-5600

796 TANGER F. 0. Tanger Quail Springs, Crossroads, 10,000 7 YRS. + 08/19/1993 01/31/2001 1,525,431
307 Tanger Dr. Penn Square, Sooner, 1) 7 YR. OPTION
(I-44 & Hwy. 99) Eastland, Promenade,
STROUD, OK 74079 Woodland Hills
918/968-4909

797 EXPOSITION MILLS Horizon Golden Triangle, Midway, 10,423 10 YRS. 11/24/1992 01/31/2003 1,624,625
5800 N. 1-35 Galleria, Northpark,
(I-35 N. & Loop 288) Prestonwood, Valley View,
DENTON, TX 76207 Collin Creek, Vista Ridge,
817/380-0630 Town East, Red Bird, The Parks,
Six Flags, Irving, North Hills, Northeast,
Hulen, Ridgmar, Richardson Sq
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
STORE LOCATION (by state) DEVELOPER REG MALL W/I 50+/- MILES STORE SF TERM OPEN DATE EXPIRATION DATE 1994 SALES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
815 GAINESVILLE F. S. Prime Retail Midway, Golden Triangle, 12,000 7 YRS. + 11/11/1994 01/31/2002 609,555
4321 1-35 N, Suite 680 Vista Ridge, Collin Creek 1) 7 YR. OPTION
I-35 & Rt. 1202
GAINESVILLE, TX 76240
817/665-8599

810 TANGER F. 0. Tanger Galleria, Northpark, 12,000 7 YRS. + 08/29/1994 01/31/2002 914,632
301 Tanger Dr, Space 211 Valley View, Prestonwood, 1) 5 YR. OPTION
(I-20 & Hwy. 34) Collin Creek, Richardson Square,
TERRELL, TX 75160 Town East
214/551-0641

806 SOUTHWEST 0. C. McArthur/Glen Richland 12,000 7 YRS. + 05/25/1995 01/31/2003 N/A
104 NE I-35, Space 194 2) 5 YR. OPTION
I-35, Rt. 22 & Corsicana Hwy.
HILLSBORO, TX 76645
817/582-2373

799 TANGER F. 0. Tanger Highland, Barton Creek, 13,000 10 YRS. + 06/11/1993 01/31/2004 4,468,745
4015 1-35 5, Suite 323 Rivercenter, North Star, 1) 5 YR. OPTION
(I-35 & Hwy. 123) Ingram Park, Rolling Oaks,
SAN MARCOS, TX 78666 Windsor Park, Central Park,
512/392-7676 McCreless, Southpark

805 CONROS OUTLET CTR McArthur/Glen The Woodlands, Deerbrook, 12,000 7 YRS. + 06/13/1994 01/3112002 1,726,328
1111 League Line Rd, Suite 193 Willowbrook, Greenspoint, 2) 5 YR. OPTIONS
I-45 & League Line Rd. Northwest, Memorial City,
CONROE, TX 77303 Town & Country, Gallerla,
Westwood, Sharpstown, West Oak,
Gulfgate, Pasadena Town Ctr,
Almeda, San Jacinto

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
STORE LOCATION (by state) DEVELOPER REG MALL W/I 50+/- MILES STORE SF TERM OPEN DATE EXPIRATION DATE 1994 SALES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
807 LONE STAR F. S. Factory Stores Mall of Mainland, Galvez, 9,900 7 YRS. + 10/30/1 993 01/31/2001 1,835,422
14057 Delany Rd . Brazos, Almeda, Pasadena 1) 5 YR. OPTION
1-45 @ Exit 13 Town Sq. San Jacinto, Gulfgate,
LA MARQUE, TX 77568 Sharpstown, Westwood, West Oaks,
409/936-0138 First Colony, Town & Country,
Memorial City, Northwest, Greenspoint,
Deerbrook, Galleria

827 GREAT MALL OF THE Perlmutter/Lord Oak Park, Bannister, Mission 12,000 7 YRS. + 04/01/1997(est) 01/31/2005 N/A
GREAT PLAINS Center, Metcalf South, Indian 2) 5 YR. OPTIONS
1-35, SR K71169 & 151st St. Springs, Metro North, Ward
OLATHE, KS 66061 Parkway, Westridge
</TABLE>

<PAGE>

Exhibit 10.15

FORMAN ENTERPRISES, INC.
178 Thorn Hill Drive
Warrendale, Pennsylvania 15086

November 14, 1997

County Seat Stores, Inc.
469 Seventh Avenue, 11th Floor
New York, New York 10018

This letter agreement (this "Agreement") confirms that County Seat
Stores, Inc. (the "Company") has retained Forman Enterprises, Inc. (the
"Consultant") to provide certain consulting services, which are more fully
described herein and in Annex A hereto, upon the terms and conditions set
forth below.

1. Retention; Independent Contractor Status. (a) The Company hereby
retains the Consultant to provide certain sourcing, merchandising, financial
budgeting, store management, and other related services to the Company more
fully described in Annex A hereto (the "Consulting Services"), and the
Consultant hereby accepts such retention. The Company hereby confirms that
the Consultant is being retained only to provide the Consulting Services in
accordance with the terms hereof and not to provide any other services,
including all or any portion of the Company's general financial,
merchandising, retailing, store management, or other service needs or advice
relating thereto except as provided herein.

(b) The parties hereto intend that an independent contractor
relationship be created by this Agreement, and nothing herein shall be
construed as creating any employer/employee relationship, partnership, joint
venture, or other business relationship, business group or concerted action.
The personnel performing services under this Agreement shall at all times be
under the Consultant's exclusive direction and control and shall be employees
of the Consultant and not of the Company. The Consultant shall pay all wages,
salaries, and other amounts due to its employees in connection with this
Agreement and shall be responsible for all reports and obligations respecting
them relating to social security, income tax withholding, unemployment
compensation, workers' compensation, and similar matters.

(c) During performance of the Consulting Services, the Consultant shall
be an independent contractor and not an agent of the Company. The Consultant
shall supervise the performance of its own services and shall have control of
the manner and means by which its services are performed, subject to the
terms hereof.

2. Compensation. In consideration of and full payment for the
Consulting Services rendered and to be rendered hereunder by the Consultant
and its affiliates (as defined below) and reimbursement of all of their
related costs and expenses, the Company shall make the following payments to
the Consultant on the first business day of each month (the "Monthly Fee"):
(i) an

<PAGE>

County Seat Stores, Inc.
November 14, 1997
Page 2

amount equal to 50%, 75%, and 75%, respectively, of the monthly salary and
benefits payable by the Consultant to Howard Karcher, Amaz Zivony, and Wendy
Forman, as reflected on the Consultant's payroll and (ii) $40,000 per month
for additional services to be provided by the Consultant, which services are
detailed on Annex A hereto; provided, however, that from each payment of the
Monthly Fee the Company shall deduct an amount equal to $5,000 (the "Monthly
Rental Share"), which deduction shall constitute payment in full of all
obligations of the Consultant to share in the payment of the monthly rental
fee for any office space shared by the Consultant with the Company and
located in New York City; provided further that the Company's entire right to
payment of the Monthly Rental Share shall be subsumed by the right to make
the foregoing deduction from the Monthly Fee, and in no event shall the
Consultant have any independent obligation to pay all or any portion of the
Monthly Rental Share from any other funds.

3. Term; Termination. This Agreement shall have a term of five years
commencing from the date of this Agreement; provided, however, that either
party may in its sole discretion terminate this Agreement upon at least 30
days' prior written notice to the other specifying the date of termination
(the "Termination Date"). Upon any such termination of this Agreement or
expiration in accordance with its terms, the Company shall pay the
Consultant, and the Consultant shall be entitled to receive, no later than
the Termination Date, payment in full of all amounts payable to the
Consultant pursuant to Section 2 above through the Termination Date.

4. Confidentiality; Etc. Neither party hereto shall (i) divulge any
trade secrets or other confidential information of the other party or (ii)
divert any corporate opportunity of the other party to itself. Any
information (written, oral or observed) received by either party hereto
during the term of this Agreement as a result of the arrangements provided
for herein shall be deemed to be confidential. Such information (x) may not
be used, in the case of the Company if about the Consultant, and (y) may only
be used, in the case of the Consultant if about the Company, only in the
provision of the Consulting Services hereunder. The confidential information
subject to this Section 4 does not include information that either party
hereto can demonstrate (I) was or has become generally available to the
public other than as a result of a disclosure by such party or any of its
affiliates, (II) was available to such party on a non-confidential basis
prior to its disclosure to such party by or on behalf of the other party in
connection with this Agreement, (III) is information that has become
available to either party on a non-confidential basis from a source other
than the first party or its representative properly entitled to possess such
information, provided that such source is not bound by a confidentiality
agreement with the first party and is not otherwise prohibited from
furnishing any such information by a contractual, legal or fiduciary
obligation to such first party, or (IV) is or was developed by either party
or its representatives independently of and without reference to information
furnished by or on behalf of the other party.

<PAGE>

County Seat Stores, Inc.
November 14, 1997
Page 3

5. Survival of Certain Provisions. The compensation agreements in
Section 2 and 3 above, the confidentiality agreement in Section 4 above and
the indemnification provisions in Section 7 below shall remain operative and
in full force and effect regardless any termination or expiration of this
Agreement or the Consulting Services and shall be binding on, and inure to
the benefit of, any successors, assigns, heirs, and personal representatives
of the Company, the Consultant and the Indemnified Parties (as defined below).

6. Attorneys' Fees. All attorney fees and expenses incurred by the
Consultant pertaining to this Agreement shall be paid by the Company.

7. Indemnification. (a) The Company agrees that if the Consultant,
any of its affiliates or any of their officers, directors, shareholders,
counsel, employees or agents (each, an "Indemnified Party") is made a party,
or is threatened to be made a party, to any action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason of the
Consultant having entered into, performed or allegedly failed to perform this
Agreement or by reason of the fact that any Indemnified Party was a director,
officer, member, executive or agent of the Company or its affiliates or is or
was serving at the request of the Company or its affiliates as a director,
officer, member, executive or agent of another corporation, partnership,
joint venture, trust or other enterprise (a "Proceeding"), the Indemnified
Party shall be indemnified and held harmless by the Company, to the fullest
extent permitted or authorized by law, against all cost, expense, liability
and loss (including, without limitation, attorney's fees and expenses,
judgments, fines, penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by the Indemnified Party in connection
therewith, and such indemnification shall continue as to the Indemnified
Party even if the Indemnified Party has ceased to be a director, member,
executive or agent of the Company or its affiliates or other entity and shall
inure to the benefit of the Indemnified Party's successors, heirs, executors
and administrators; provided, however, that the Company shall not be
responsible for any such cost, expense, liability and loss to the extent that
it is finally judicially determined that they result from actions taken or
omitted to be taken by such Indemnified Party that constitute its own gross
negligence or willful misconduct.

(b) The Company shall pay to the Indemnified Party all reasonable costs
and expenses actually incurred by such Indemnified Party in connection with a
Proceeding within thirty (30) days after receipt by the Company of a written
request for such payment, together with reasonable supporting documentation
required by the Company and an undertaking by the Indemnified Party to repay
the amount of such payment if it shall ultimately be determined that such
Indemnified Party is not entitled to be indemnified against such costs and
expenses.

<PAGE>

County Seat Stores, Inc.
November 14, 1997
Page 4

(c) As used herein, the term "affiliate" shall mean, with respect to any
person or entity, any other person or corporation or other business entity
controlling, controlled by or under common control with such person or entity.

8. Notices. Any notice, demand, request or other communication
required or permitted under this Agreement shall be deemed to have been
effectively made or given if in writing, and delivered by hand, mailed by
registered or certified mail, postage prepaid, return receipt requested, or
sent by reputable overnight courier service, properly addressed as (a) if to
the Company, at the address set forth above, and (b) if to the Consultant or
any of its affiliates, to the Consultant at its offices at 178 Thorn Hill
Drive, Warrendale, Pennsylvania 15086, Attention: President and Chief
Executive Officer, with a copy to Eaton & Van Winkle, 600 Third Avenue, New
York, New York 10016, Attention: Thomas A. Hickey, Esq., or in any such case
to such other address as furnished by a party in writing pursuant to this
Section 8. Telecopiers may be used for convenience only and the delivery of
any notice, demand, request or other communication by telecopy or facsimile
shall not be sufficient for purposes of giving notice hereunder.

9. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.

10. No Third Party Beneficiaries. This Agreement has been and is made
solely for the benefit of the Company and the Consultant and the other
Indemnified Parties referred to herein and their respective successors' and
assigns, and no other person or entity shall acquire or have and right under
or by virtue of this Agreement.

11. Assignment and Succession. The rights and obligations of the
parties hereunder shall inure to the benefit of an be binding upon their
respective successors and assigns. Neither party's rights or obligations
hereunder shall be assigned or delegated without the prior written consent of
the other party, and any assignment or delegation in violation of this
sentence shall be void.

12. Entire Agreement; Amendments. This instrument contains the entire
agreement between the parties as to the subject matter hereof. All prior
employment understandings and agreements regarding compensation or bonus
compensation, other terms of employment and negotiations and agreements with
respect thereto are merged herein and are deemed canceled. Any amendment or
modification hereto must be in writing and signed by all parties hereto.

<PAGE>

County Seat Stores, Inc.
November 14, 1997
Page 5

13. Severability. The invalidity, illegality, or unenforceability of
any provision hereof shall not in any way affect, impair, invalidate or
render unenforceable this Agreement or any other provision hereof.

14. Governing Law. This Agreement shall at all times be governed by and
construed, interpreted and enforced in accordance with laws of the State of
New York, without regard to principles of conflicts of law.

Please sign and return an original and one copy of this letter to the
undersigned to indicate your acceptance of the terms set forth herein,
whereupon this letter Agreement and your acceptance shall constitute a
binding agreement between the Company and the Consultant effective as of July
1, 1997 (it being understood that the Consultant shall be retained and the
compensation provided for under this Agreement shall be payable as of such
date).

COUNTY SEAT STORES, INC.

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

FORMAN ENTERPRISES, INC.

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

<PAGE>

Annex A
to Consulting Agreement

DESCRIPTION OF CONSULTING SERVICES

The following is a partial listing of services currently provided to
County Seat Stores, Inc. (the "Company") by Forman Enterprises, Inc. (the
"Consultant"), typically on a day-to-day basis. The following list is not
intended to be either an exhaustive or mandatory list, and the parties to the
Consulting Agreement acknowledge that the precise mix of sea-vices to be
provided by the Consultant to the Company from time to time may vary.
Generally, the Consultant is actively involved in:

- Sourcing and production of products;
- Merchandise assortment and planning;
- In-store merchandising and presentation;
- Purchase and receipt flow;
- Vendor development and relationship management;
- Negotiating payment terms with vendors, and arranging for extensions
of trade credit, including provision offers of credit;
- General administrative support;
- Advice and analysis for efficiency improvement relating to all aspects
of Company operations;
- Management consulting;
- Senior management visits to stores and reporting thereof
- Recruiting and development of store personnel; and
- Real estate analysis, including profitability analyses of individual
stores on a stand-alone basis and in terms of their contribution to
the overall Company enterprise.

<PAGE>
Exhibit 10.16

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

RETAIL CONSULTING SERVICES, INC.

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

July 30, 1996

CONFIDENTIAL
- ------------

VIA FACSIMILE: (214) 248-5253
- -----------------------------

Mr. Robert A. Shapiro
Senior Vice President
County Seat, Inc.
17950 Preston Road
Suite 1000
Dallas, Texas 75252

Dear Mr. Shapiro:

This letter shall set forth the terms of the engagement of Retail Consulting
Services, Inc., ("RCS"), as Special Real Estate Consultant ("Consultant") to
County Seat, Inc.("County Seat") with respect to analysis, advice, and the
re-negotiation with respect to rental reductions and other lease modifications
of County Seat's real estate assets.

I. TERM: The term of this agreement shall expire upon completion of the services
provided herein unless terminated prior to completion by RCS or County Seat upon
thirty (30) days written notice, after February l, 1997. However, any
negotiations which have been substantially completed by RCS which County Seat
shall ultimately conclude and enter into within six (6) months of such early
termination, shall be considered accomplished by RCS as provided hereunder.

II. SERVICES: During the term of this agreement Consultant shall provide the
following services:

A. The creation of a lease portfolio book showing the current lease terms,
sales, store contribution, occupancy cost percentage, by store and by
landlord;

B. Consultant shall undergo an in-depth analysis of all real estate assets.
Such analysis will involve a review of each asset's occupancy costs
relative to sales volume and store profit contribution. Consultant shall
meet with County Seat to discuss its analysis and establish goals and
parameters;

<PAGE>

C. RCS will assist Company in identifying the appropriate course of action
with respect to those stores that should be sold, closed or re-negotiated.

D. Subsequent to said meeting, Consultant shall contact each landlord with
respect to negotiation of the said goals and parameters such as rent
reductions, and any other modification deemed necessary for all of County
Seat's real estate assets.

E. Consultant will work with landlords and Company to document accurately
all lease modification proposals.

F. Consultant shall provide timely status reports which shall show lease
savings to date and other pertinent information with respect to the
progress Consultant is making to achieving the goals and parameters set
forth.

G. If requested, Consultant shall monitor all lease default notices such
that if Company deems it necessary to withhold any rental payments,
Consultant shall attempt to prevent unwanted lease terminations brought on
by landlords, for those stores that would have going forward value to
County Seat.

III. COMPENSATION: Compensation to Consultant shall be as follows:

A. Upon execution of this agreement, County Seat shall pay Consultant a
retainer fee of twenty-five thousand dollars ($25,000) which shall be
applied to first fees earned herein. It is understood that Consultant shall
return any unused portion of the retainer promptly upon completion of this
agreement.

B. Consultant's fee for renegotiating the lease terms for the re-negotiated
lease shall be the lesser of Fifteen percent (15%) of the total reduction
savings achieved per re-negotiated lease to a maximum of thirty-five
hundred dollars ($3,500.00) per lease re-negotiated by Consultant, provided
the re-negotiated terms are accepted and agreed to by County Seat, which
acceptance and agreement shall be at County Seat's sole discretion. This
amount shall be payable thirty (30) days after the earlier of (i) the
execution of a lease amendment; or (ii) the date the Company begins to
receive the benefits of the re-negotiation, as substantiated by a letter
agreement with the subject landlord. To the extent that with respect to a
particular lease modification County Seat has paid RCS and the lease
amendment thereafter is modified, or is not executed by County Seat or the
Landlord, then County, Seat and RCS shall make pro rata adjustments to the
fee, and RCS will reimburse County Seat for any overpayment.

C. Company also agrees that it will pay RCS a grand total fee of five and
one-half percent (5.5%) of the present value (calculated using an eight
percent (8%) discount rate) of the total reduction savings Company realizes
from the lease re-negotiated by RCS. If, upon the expiration of this
agreement or the completion of RCS's services, whichever comes first,
Company has paid fees totaling less than five and one half percent (5.5%)
of the total rental reduction savings effected by RCS, Company agrees to
pay RCS within 30 days, the

<PAGE>

difference between the six percent (6%) and the fees paid to date, present
valued calculated as above. If Company has paid fees totaling more than six
percent (6%) no further amounts will be due or owing.

D. For any lease modification achieved by RCS not involving rent savings
such as lease extensions, deferred rent payments, renewals, etc. which
terms are accepted and agreed to by Company, whose acceptance shall be at
Company's sole discretion, RCS shall receive three thousand dollars
($3,000) per re-negotiated lease. Such fee is to be paid as stated in
B.III. of this agreement, and is not in addition to other fees earned with
respect to a particular lease.

E. For the monitoring of lease default notices, RCS shall receive one
hundred dollars, ($100.00) per lease.

F. All out-of-pocket expenses, including, but not limited to, telephone
charges, lodging, travel, express mail, postage, photocopying and facsimile
pertaining to Consultant's services in connection with this agreement,
shall be borne by Company. Any item in excess of five hundred dollars
($500) must be approved by Company prior to expenditure. The Company agrees
to pay such expenses upon proper presentation of invoices.

IV. MISCELLANEOUS:

A. RCS will not be responsible for any transactional costs and/or legal
expenses incurred by County Seat in connection with its retention of RCS
and its involvement with the properties.

B. This agreement shall be construed fairly as to all parties, and there
shall be no presumption against the party upon whose letterhead this
agreement is drafted in the interpretation of this agreement.

C. By executing or otherwise accepting this agreement, Company acknowledges
and represents that it is represented by and has consulted with legal
counsel with respect to the terms and conditions contained herein.

D. Any and all issues, disputes, controversies, claims or causes of action
which relate or pertain to, or result or arise from this agreement, the
alleged breach thereof, or Consultant's services thereunder shall be
settled with venue vesting exclusively in New York County, in the State of
New York, and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof.

E. Consultant hereby agrees that any information furnished to it by County
Seat shall not at any time be disclosed to any third party, except with
Company's prior written approval, and shall not be used by Consultant other
than in connection with this agreement. This does not preclude Consultant
from using specific store's financial information and or other

<PAGE>

store information to negotiate any new lease terms with individual
landlords. management companies or lenders.

F. The services to be provided by RCS pursuant to this agreement are, in
general, transactional in nature, and RCS will not be billing County Seat
by the hour nor keeping a record of its time spent on behalf of County
Seat.

G. This agreement may be executed in original counterparts and an executed
facsimile may be deemed the equivalent of an original.

H. Company acknowledges and represents that the decision to adopt any
strategy or to engage in a business transaction of any kind is the sole
responsibility of Company. The services to be provided by Consultant is in
their role as consultant only. Consultant is not an attorney and does not
provide legal advice. Consultant strongly suggests that Company obtain
legal counsel in connection with its decisions to adopt any strategy or to
engage in a business transaction of any kind.

I. All communications and inquiries regarding leases, other than general
communications and inquiries, whether directed to the Company, the
Company's counsel or other professionals, shall be directed to RCS.

If the foregoing correctly sets forth our understanding, kindly sign, where
indicated below, and return the original copy of this letter, with retainer
enclosed herewith.

Very truly yours, AGREED AND ACCEPTED
Retail Consulting Services, Inc. this day of , 1996

Ivan L. Friedman County Seat, Inc.
President
BY: ___________________
ITS: ___________________

<PAGE>

Exhibit 10.17

COUNTY SEAT
THE JEANSTORE

March 12, 1997

Mr. Ivan L. Friedman VIA FACSIMILE
President
Retail Consulting Services, Inc.
460 West 34th Street
New York, NY 10001

Dear Ivan:

This letter sets forth out mutual understanding, clarifying and amending certain
terms of your engagement letter with us dated July 30, 1996:

- you have agreed to make pro rata adjustments under Section 3(b) and
reimburse County Seat for any overpayment in the event a store is
subsequently closed for which a fee was paid pursuant to this Section;

- we have agreed to use a discount rate of 10% in calculating the fee
payable under Section 3(c); and

- the "grand total" fee under Section 3(c) is reduced from 5 1/2% to 5%;

provided, that the foregoing amendments shall have no force or effect in the
event County Seat terminates your engagement without your consent prior to the
confirmation of a plan of reorganization.

Thank you for all of your hard work to date. If this reflects our mutual
understanding, please sign and return a copy of this letter to me.

Sincerely,

Matthew J. Knopf
Senior Vice President and
General Counsel

MJK/jj

Accepted and Agreed to this
___ day of _________, 1997

RETAIL CONSULTING SERVICES, INC. cc: Brett Forman
Bill Lackey
By: /s/ Ivan L. Friedman Ed Tomechko
-------------------------- Bob Austein
Ivan L. Friedman

Its: President
--------------------------

<PAGE>

Exhibit 10.18

EMPLOYMENT AGREEMENT

Employment Agreement (this "Agreement") dated as of August 11, 1997
between Sam Forman (the "Executive") and County Seat Stores, Inc. ("CSSI"), a
Minnesota corporation, and CSS Trade Names, Inc. ("Trade Names," and together
with CSSI, the "Company"), with their principal office at 17950 Preston Road,
Dallas, Texas.

WHEREAS, the parties hereto and County Seat, Inc. ("CSI"), a Delaware
corporation, entered into an Employment Agreement dated as of November 11, 1996
(as amended, the "Old Agreement") and all such parties have determined that it
is in their mutual best interests to enter into a new employment agreement, on
the terms and conditions set forth in this Agreement, which new agreement shall,
effective on the Commencement Date (defined below), supersede and replace in its
entirety the Old Agreement.

NOW THEREFORE, in consideration of the agreements and covenants
contained herein, the Executive and the Company hereby agree as follows.

ARTICLE I
EMPLOYMENT

Section 1.1. Employment. The Company hereby agrees to employ the
Executive in the positions set forth in Section 1.3 hereof, and the Executive
hereby accepts such employment, on the terms and conditions hereinafter set
forth.

Section 1.2. Employment Period. The period of employment of the Executive
hereunder shall commence as of the date of approval of this Agreement (the
"Commencement Date") by the Bankruptcy Court (defined below) and shall end five
(5) years from the Commencement Date, unless earlier terminated as set forth
herein (the "Employment Period").

Section 1.3. Position and Duties. During the Employment Period, the
Executive shall serve as Chief Executive Officer and President of CSSI and Trade
Names, and as a member of the Board of Directors of CSSI (the "Board"). During
the Employment Period, subject to the supervisory powers of the Board, the
Executive shall have those powers and duties consistent with his positions as
Chief Executive Officer and President of the Company and member of the Board as
may be prescribed by the Board, including but not limited to, being responsible
for all facets of the operations of the Company, including administrative,
purchasing, financing, sales distribution, inventory and expense control,
advertising, customer service, products and services, employee and independent
contractor hiring, supervision and termination, strategic planning, expansion,
acquisitions and all other issues affecting the Company, including the selection
of outside legal counsel to the Company. During the Employment Period, the
Executive agrees to devote substantially all of his working time, attention and
energies to the performance of his duties for the Company; provided, however,
that nothing contained in this Section 1.3 shall prohibit the Executive from
continuing as

<PAGE>

Chairman of the Board and/or majority (or other significant) stockholder of
Forman Enterprises, Inc. (it being understood that another person will be the
chief executive officer of such company) and devoting reasonable time and
energies thereto provided that such activities do not significantly interfere
with his duties hereunder and his obligations to devote substantially all of his
working time, attention and energies to the performance of such duties. The
Executive shall neither (i) divulge any trade secrets or other confidential
information of the Company to Forman Enterprises, Inc., nor (ii) divert any
corporate opportunities of the Company to Forman Enterprises, Inc.

Section 1.4. Place of Performance. In connection with his employment by
the Company, the Executive shall not be required to relocate or transfer his
principal residence from the West Palm Beach, Florida vicinity. Notwithstanding
the foregoing, the Executive shall spend, on average, not less than three (3)
business days each week in Dallas or such other place where the Company has or,
with the Executive's prior written consent not to be unreasonably withheld, to
which the Company may relocate its executive offices (collectively, the
"Executive Office"), provided that time spent away from the Executive Office on
Company business trips shall be included when determining compliance herewith.
In addition to other expenses covered hereby, the Company shall pay for the
Executive's reasonable travel between his Florida residence and the Executive
Office and shall pay for reasonable meals and lodging for the Executive at the
Executive Office.

Section 1.5. Representations and Warranties of Executive. The Executive
represents and warrants to the Company (i) the Executive is under no contractual
restriction or other restrictions or obligations that are inconsistent with the
execution of this Agreement or the performance of his duties and the covenants
hereunder, and (ii) the Executive is under no physical or mental disability that
would interfere with the Executive keeping and performing all of the agreements,
covenants and conditions to be kept or performed hereunder.

ARTICLE II
COMPENSATION

Section 2.1. Base Salary. As compensation for the performance by the
Executive of his duties hereunder, during the Employment Period, the Company
shall pay the Executive a base salary commencing at an annual rate of $600,000
(the "Base Salary"). The Base Salary shall be increased annually upon the
anniversary date of the Commencement Date in accordance with the federal cost of
living index. The Base Salary shall be payable monthly in accordance with the
Company's normal payroll practices; provided that in any event, Base Salary
shall be prorated for any period of service less than a full month.

Section 2.2. Equity Incentive Compensation. (a) Effective as of the
earlier of (i) the effective date of the Company's plan of reorganization (the
"Plan") and (ii) the consummation date of the Plan (such earlier date being the
"Grant Date"), the Executive shall be granted, pursuant to stock option plans
and agreements containing customary terms and conditions that are in any event
acceptable to the Executive in his reasonable discretion, five

<PAGE>

year warrants (the "Executive Warrants") to purchase an aggregate of 15% of the
fully diluted (including, for purposes of determining such 15%, shares subject
to the Executive Warrants) common stock of the reorganized Company (the "Common
Stock"), together with a pro rata interest (the "Additional Executive Equity
Interest"; collectively, with the Executive Warrants and, if applicable at the
time of determination, any Common Stock purchased pursuant to the exercise of
any Executive Warrants, the "Executive Equity Interest") in any other equity
securities issued by the reorganized Company on terms no less favorable than the
best terms offered to other recipients (collectively, with the Common Stock, the
"Equity Securities"), and outstanding on the Grant Date (or otherwise issued
pursuant to the Plan); provided, however, that such 15% shall be subject to
dilution as a result of issuances on or after the Grant Date of (x) Equity
Securities at fair market value for cash (for purposes of this clause (x), it is
understood and agreed that any equity securities issued by the Company to
purchasers of the Notes (as defined in the letter agreement dated June 25, 1997
addressed to CSI from Jeffries & Company, Inc.) in connection with the initial
placement of the Notes in a transaction for which the Company receives total
cash compensation equal to the Notes' and such other equity securities' fair
market value shall be included as further diluting such 15%) and (y) employee
options to purchase at fair market value on the date of grant up to that number
of shares of Common Stock such that, after giving effect to all such purchases
pursuant to this clause (y) the aggregate number of shares of Common Stock
purchased or available for purchase in all such purchases shall constitute a
maximum of 5% of the total outstanding fully diluted Common Stock of the
reorganized Company; provided further that, except as provided in the
immediately preceding proviso, the Executive Equity Interest shall be entitled
to anti-dilution protection in the event of mergers, recapitalizations, stock
splits and other related events, with such protection to be on customary terms
and conditions that are in any event acceptable to the Executive in his
reasonable discretion.

(b) The Executive Warrants shall vest in three separate tranches (each, a
"Tranche"), with each Tranche covering one third of the Executive Warrants, and
with the first Tranche (the "First Tranche") vesting on the Grant Date, the
second Tranche (the "Second Tranche") vesting on the first anniversary of the
Grant Date, and the third Tranche (the "Third Tranche") vesting on the third
anniversary of the Grant Date, in each case provided that the Executive remains
employed in the positions set forth in Section 1.3 hereof and in all other
respects in accordance with and subject to the terms hereof; provided, however,
that notwithstanding anything to the contrary contained herein the vesting
schedule shall be subject to automatic acceleration upon (i) a Change in Control
(defined below), (ii) the termination of the Executive's employment by the
Company without Cause (defined below) or (iii) the termination of this Agreement
by the Executive for Good Reason (defined below) in accordance with the terms
hereof; provided further that the Executive Warrants shall vest in such a manner
that those with the lowest exercise price vest first, those with the next lowest
exercise price vest second and those with the highest exercise price vest last;
provided further that notwithstanding anything to the contrary contained herein,
if the Executive's employment with the Company terminates or is terminated other
than for Cause at any time on or after the second anniversary of the Grant Date
but prior to the third anniversary of the Grant Date, vesting of the Third
Tranche shall automatically accelerate and be deemed to have occurred

<PAGE>

immediately prior to such termination; provided further that vesting of any
Additional Executive Equity Interests shall be in accordance with a schedule
comparable to that set forth above for the Executive Warrants.

(c) The strike price for the Executive Warrants shall be determined on the
Grant Date; provided, however, that (i) the First Tranche of Executive Warrants
shall have an exercise price which represents a recovery to the holders of
general unsecured claims under the Plan (any such recovery being a "Recovery";
such holders being the "Unsecured Creditors") of 40%, (ii) the Second Tranche of
Executive Warrants shall have an exercise price which represents a Recovery of
70% to the Unsecured Creditors, and (iii) the Third Tranche of Executive
Warrants shall have an exercise price which represents a Recovery of 90% to the
Unsecured Creditors; provided further that, notwithstanding the foregoing, if,
for any consecutive ten trading days during the five year term of the Executive
Warrants, the product of the average value per share of the Company's Common
Stock (if the Common Stock is listed on a national securities exchange including
NASDAQ, as calculated by multiplying the average per share closing price for
each of such ten trading days or, if not so listed or traded, as determined
pursuant to subsection (e) of this Section 2.2) times the number of outstanding
shares of such Common Stock (including shares reserved for issuance at prices
less than such average price but excluding any shares underlying Executive
Warrants issued pursuant to this Section 2.2) exceeds $200 million, then the
exercise price of the Executive Warrants covered by the First Tranche shall be
$0 per Executive Warrant.

(d) The Executive may at any time transfer the Executive Warrants and
Additional Executive Equity Interests in whole or in part only to his immediate
family members (subject to such transfer restrictions as may reasonably be
required for purposes of compliance with applicable law); provided, however,
that if at any time during the Employment Period the Company terminates the
Executive's employment hereunder other than pursuant to Section 3.1(c), or if at
any time the Executive terminates this Agreement pursuant to Section 3.2(b), the
transfer restrictions set forth above in this clause (d) prior to this proviso
shall no longer apply, except that any transfer shall be subject to such
transfer restrictions as may reasonably be required for purposes of compliance
with applicable law.

(e) For purposes of valuing (i) Common Stock pursuant to subsection (c) of
this Section 2.2 if such stock is not listed on a national securities exchange
(including NASDAQ) or (ii) the fair market value of the Executive Equity
Interest pursuant to subsection (b) of Section 4.2, such valuations shall be
determined by a nationally recognized investment banking firm mutually agreeable
to the parties and paid for by the Company, using such methodologies as such
firm shall determine to be appropriate. If the parties are unable to agree on
an investment banking firm, each of the Company and the Executive shall nominate
a nationally-recognized investment banking firm who shall then select a third
nationally-recognized investment banking firm to perform the valuation. The
Company and the Executive hereby agree that such firm's determination shall,
absent manifest error, be final and binding.

<PAGE>

Section 2.3. Other Employee Benefits. During the Employment Period, the
Executive shall be eligible to participate in all employee benefit and welfare
plans and programs for which he meets the eligibility standards (including group
life insurance, medical and dental insurance, and accident and disability
insurance) and in which other senior executives of the Company are generally
eligible to participate. The Executive shall be entitled to paid vacations
during the Employment Period in accordance with the policies applicable
generally to senior executives of the Company.

Section 2.4. Expense Reimbursements. Subject to the limitations set forth
in Section 1.4, during the Employment Period, the Company shall promptly
reimburse the Executive for all reasonable business expenses incurred by him on
behalf of the Company in performing services hereunder upon the presentation of
records of such expenses, in accordance with the applicable policies and
procedures of the Company then in force.

ARTICLE III
TERMINATION OF EMPLOYMENT

Section 3.1. By the Company. The Company may terminate this
Agreement:

(a) immediately upon the death of the Executive;

(b) in the case of the Disability of the Executive if the Executive shall
not have returned to the performance of his duties within thirty (30) days after
written notice from the Board has been given to the Executive of the intention
to terminate due to Disability. For purposes of this Agreement, "Disability"
shall mean the inability of the Executive to perform his duties hereunder for a
continuous period of not less than three (3) consecutive months due to physical
or mental illness or injury.

(c) for "Cause" immediately upon giving the Executive written notice. For
purposes of this subsection, "Cause" shall mean:

(i) wilful misconduct by the Executive in the performance of his
duties to the Company resulting in material harm to the Company; or

(ii) commission by the Executive of an act of personal dishonesty or
breach of fiduciary duty which involves personal profit and relates to
the Company (other than a dispute relating to the erroneous reporting
of an amount as an expense); or

(iii) conviction of the Executive of (or the entry of a plea of nolo
contendre to) a felony; or

(iv) a material breach by the Executive of any provision of this
Agreement where such conduct continues or breach remains unremedied
for a period of

<PAGE>

thirty (30) days after the receipt by the Executive personally of
specific written notice of such conduct or breach from the Board,
unless such breach is of a nature as cannot be cured within such
thirty (30) day period and the Executive makes good faith and diligent
efforts to cure such breach, in which case the period of cure will be
reasonably extended.

Section 3.2. By the Executive. The Executive may terminate this
Agreement:

(a) at any time upon sixty (60) days' Written Notice to the Board; or

(b) immediately for "Good Reason," which for purposes of this Agreement
shall be defined as:

(i) the assignment to the Executive of any duties inconsistent with
the Executive's status as the chief executive officer of the Company,
the removal of the Executive from any Board of Directors, or a
substantial adverse alteration in the nature of the Executive's
responsibilities from those in effect on the Commencement Date; or

(ii) the failure to elect such one additional member designated by
the Executive (the "Executive's Designee") to the Board at any time;
or

(iii) the removal of the Executive's Designee from the Board at any
time without the Executive's prior written consent; or

(iv) the reduction by the Company of the Executive's annual Base
Salary as in effect on the Commencement Date or as may be increased
from time to time; or

(v) relocation, without the Executive's consent (which consent
shall not be unreasonably withheld), of the headquarters outside
Dallas, Texas or such other place to which the Company may relocate
the Executive Office or requiring the Executive, without the
Executive's consent (which consent shall not be unreasonably
withheld), to be based anywhere other than Dallas, Texas or such
other place, except for travel as otherwise required by the terms
of this Agreement; or

(vi) failure by the Company to pay to the Executive any portion of
his compensation or Executive Equity Interest within thirty (30) days
when due; or

(vii) failure by the Company to provide the Executive with the
benefits at least comparable to those enjoyed by the Executive under
any of the pension, life insurance, medical, health and accident, or
disability plans in which the Executive was participating on the
Commencement Date or the taking of any action that would materially
impair or reduce such benefits; or

<PAGE>

(viii) a material breach by the Company of any material provision
of this Agreement which continues for a period of thirty (30) days
after the receipt of written notice of such breach by the Company; or

(ix) the consummation of a Change in Control; or

(x) any purported termination of the Executive's employment that is
not in accordance with the termination provisions as provided in this
Agreement.

Section 3.3. Written Notice. Any termination by the Company or the
Executive pursuant to this Section shall be communicated by written "Notice of
Termination" to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provisions of this Agreement relied upon.

Section 3.4. Severance. Except as otherwise provided in Sections 4.1
and 4.2, if at any time during the Employment Period the Company terminates the
Executive's employment other than pursuant to Section 3.1(c), or if at any time
the Executive terminates this Agreement for "Good Reason" pursuant to Section
3.2(b), the Executive shall be entitled to receive a severance payment, within
fifteen (15) days following the date of such termination, in a lump sum equal to
the greater of:

(a) the Base Salary in effect at the time of termination (in addition
to accrued but unpaid salary and/or bonus hereunder and, if applicable,
under the Old Agreement) for the balance of the Employment Period, and any
unreimbursed expenses under Section 2.4; or

(b) six (6) months Base Salary in effect at the time of termination
(in addition to accrued but unpaid salary and/or bonus hereunder and, if
applicable, under the Old Agreement), and any unreimbursed expenses under
Section 2.4;

provided, however, that upon any termination of the Executive's employment due
to the Company's liquidation prior to the consummation date of the Plan, such
lump sum shall be an amount equal to the Base Salary in effect at the time of
termination for one (1) year (plus accrued but unpaid salary and/or bonus
hereunder and, if applicable, under the Old Agreement).

Section 3.5. Arbitration; Administrative Claim.

(a) Arbitration. Any dispute or controversy arising under or in
connection with this Agreement, other than arising under Article V, which cannot
be resolved informally by the parties, including the arbitrability of the
dispute or controversy itself, shall be submitted to arbitration in New York
City and adjudicated by a panel of three arbitrators pursuant to the rules of
the American Arbitration Association then in effect. The decision of the
arbitrator shall be final and binding on the parties hereto, and judgment may be
entered on the

<PAGE>

arbitrator's award in any court having jurisdiction thereof. Each party shall
be responsible for its own costs in the arbitration, provided, however, that the
arbitrator shall assess against the party that does not prevail, a reasonable
sum for attorney fees and expenses incurred by the prevailing party in
connection with the arbitration.

(b) Administrative Claim. All amounts due and not paid under this
Agreement shall be treated as and have the priority of an administrative claim
within the meaning of section 507 of the United States Code, 11 U.S.C. sections
101 et seq. (the "Bankruptcy Code"). The obligations of the Company under this
Agreement shall be unfunded. The Company shall not be required to segregate any
assets that may at any time be represented by benefits under this Agreement.
The Company shall not be deemed to be a trustee of any amounts to be paid under
this Agreement. Any liability of the Company to the Executive with respect to
any benefit shall be based solely upon any contractual obligations created
hereunder; no such obligation shall be deemed to be secured by any pledge or any
encumbrance or any property of the Company.

Section 3.6. Bankruptcy Court Approval. Subject to approval by the United
States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court")
and waiver of certain covenants in its credit documents with its senior lenders,
the Company has full power and authority to enter into this Agreement. As
promptly as practical following the date hereof, the Company shall (i) file a
motion with the Bankruptcy Court seeking approval of the employment of the
Executive pursuant to the terms of this Agreement, and (ii) seek approval of the
Company's senior lenders, and shall use its reasonable best efforts to secure
such approvals. If the Executive's employment is not so approved within twenty
(20) days of the date of such filing (or such other date as the parties may
agree) this Agreement shall be null and void and the Old Agreement shall remain
in full force and effect.

ARTICLE IV
ADDITIONAL COMPENSATION

Section 4.1. Change in Control During Bankruptcy. In lieu of the benefits
and compensation otherwise applicable under Section 3.4, if prior to the
consummation date of the Plan a Change in Control (defined below) shall occur
and the Executive shall terminate his employment hereunder pursuant to Section
3.2(b)(x), the Executive shall be entitled to receive, within fifteen (15) days
following the date of such Change in Control, a payment in a lump sum equal to
the greater of:

(a) one and one half (1 1/2) times the Base Salary in effect at the
time of such Change in Control or

(b) 10% of the amount by which the Recovery to Unsecured Creditors
exceeds $60 million.

<PAGE>

Section 4.2. Change in Control After Bankruptcy. In lieu of the
benefits and compensation otherwise applicable under Section 3.4 to a
termination under Section 3.2(b)(x), if within the first eighteen months after
the consummation date of the Plan a Change in Control shall occur and the
Executive shall terminate his employment hereunder pursuant to Section
3.2(b)(x), the Executive shall be entitled to receive, within fifteen (15) days
following the date of such Change in Control, a payment in a lump sum equal to
the sum of:

(a) two times the Base Salary then in effect at the time of such
Change in Control; plus

(b) an amount (which if negative shall be zero) equal to (i) 10% of
the amount by which the Recovery to Unsecured Creditors exceeds $60
million less (ii) the then fair market value of the Executive Equity
Interest (as calculated in accordance with subsection (e) of Section
2.2).

Section 4.3. Change in Control Definition. For purposes of this
Agreement, "Change in Control" shall mean the consummation of the first
transaction or group of transactions (including, without limitation, any merger
or consolidation) on or after the date hereof, the result of which is that any
person or entity, or group of persons or entities, (i) if prior to the
consummation date of the Plan, other than the unsecured creditors of the Company
on the date hereof becomes the "beneficial owner" (as such term is defined in
Rule 13d-3 and Rule 13d-5 under the Securities Exchange Act of 1934, as
amended), directly or indirectly, of 51% or more of the aggregate claims of all
such unsecured creditors as of the date hereof, or (ii) if on or after the
consummation date of the Plan (and except as provided by the Plan), becomes the
"beneficial owner" (as so defined), directly or indirectly, of 51% or more of,
the aggregate number of shares of Common Stock and securities of the Company
convertible into or exercisable for Common Stock.

ARTICLE V
NON-COMPETITION; CONFIDENTIAL INFORMATION

Section 5.1. Non-Competition. Subject to Section 5.3, (x) at any time
during the Employment Period, and (y) if the Executive's employment hereunder is
terminated by the Company for Cause or otherwise or is terminated voluntarily by
the Executive other than for Good Reason, for a period of one year following the
date of termination of the Executive's employment hereunder (or, if less, for
such lesser period ending on the fifth anniversary of the Commencement Date),
the Executive:

(a) shall not engage in any activities, whether as employer, proprietor,
partner, stockholder (other than as the holder of less than 5% of the stock of a
corporation, the securities of which are traded on a national securities
exchange or in the over-the-counter market), director, officer, employee,
advisor or otherwise, in the business of operating specialty retail stores
selling jeans and jeans-related casual apparel and accessories as a

<PAGE>

substantial part of their merchandise assortment, in competition with the
Company or any of its subsidiaries with net sales in excess of $10,000,000 for
the most then recently completed fiscal year (a "Competing Business"); and

(b) shall not take any action which is calculated to induce or attempt to
persuade any employee of the Company (except for Brett Forman), or any of its
subsidiaries, to terminate his or her employment relationship with the Company;
provided, however, the Executive's continued service as Chairman of the Board
and/or majority (or significant) stockholder of Forman Enterprises, Inc. shall
not be considered engaging in a Competing Business for purposes of this Section
5.1 (provided that the Executive complies with Section 1.3).

Section 5.2. Confidential Information. Subject to Section 5.3, the
Executive shall not, at any time during the Employment Period or thereafter,
divulge any trade secrets or other confidential information of the Company or
any of its subsidiaries, except to the extent that (through no action by the
Executive) such information becomes a matter of public record or is published in
a newspaper, magazine or other periodical available to the general public (other
than as a result of a breach of this Agreement), or as the Board may so
authorize in writing. When the Executive shall cease to be employed by the
Company, the Executive shall surrender to the Company all records and other
documents obtained by him or entrusted to him during and in the course of his
employment hereunder (together with all copies thereof); provided, however, that
the Executive may retain copies of such documents as necessary for the
Executive's personal records for tax purposes.

Section 5.3. Scope of Covenants; Remedies. The following provisions shall
apply to the covenants of the Executive contained in Sections 5.1 and 5.2:

(a) the covenants contained in subsections (a) and (b) of Section 5.1
shall apply within all the territories in which the Company or any of its
subsidiaries are actively engaged in the conduct of any of the phases of the
Company's business including, without limitation, production, promotional and
marketing activities, purchases, sales and distribution during the Employment
Period;

(b) without limiting the right of the Company to pursue all other legal
and equitable remedies available for violation by the Executive of the covenants
contained in Sections 5.1 and 5.2, it is expressly agreed by the Executive and
the Company that such other remedies cannot fully compensate the Company for any
such violation or any continuing violation and that the Company shall be
entitled to injunctive relief to prevent any such violation thereof;
notwithstanding the foregoing, under no circumstances will the Executive be
forced to forfeit his equity interest in the Company as a remedy for violating
the covenants contained in Section 5.1.

(c) each party intends and agrees that if in any action before any courts
or agency legally empowered to enforce the covenants contained in Section 5.1
and 5.2, any term,

<PAGE>

restriction, covenant or promise contained herein is found to be unreasonable
and accordingly unenforceable, then such term, restriction, covenant or promise
shall be deemed modified only to the extent necessary to make it enforceable by
such court or agency; and

(d) except as otherwise specifically provided herein, the covenants
contained in 5.2 shall survive the conclusion of the Executive's employment
hereunder.

Section 5.4. Purchase of Equity Interest. In the event all or
substantially all of either the Company's stock or the Company's assets are
auctioned for sale, nothing herein shall prohibit the Executive or his designee,
upon disclosure to the Board, the Creditors' Committee, and the Company's senior
lenders, from participating as a potential buyer in such auction, provided that
the Executive complies with any appropriate safeguards adopted by and
implemented at the instructions of the Board in advance to avoid any conflict of
interest.

ARTICLE VI
MISCELLANEOUS

Section 6.1. Key Man Life Insurance. The Company and the Executive
acknowledge that from time to time the Company may procure on the life of the
Executive key man insurance with the Company as the sole beneficiary thereof.
In the event that the Company intends at any time to procure insurance policies
on the life of the Executive, the Executive agrees to cooperate in the obtaining
of such life insurance, including, but not limited to, executing such insurance
applications and submitting to such medical examinations as may be reasonably
required.

Section 6.2. Attorneys Fees. All attorney fees and expenses incurred by
the Executive pertaining to this Agreement shall be paid by the Company.

Section 6.3. Indemnification, Defend and Hold Harmless Clause.

(a) The Company agrees that if the Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the Executive entering
into and performing this Agreement or by reason of the fact that the Executive
is or was a director, officer or executive of the Company or its affiliates or
is or was serving at the request of the Company or its affiliates as a director,
officer, member, executive or agent of another corporation, partnership, joint
venture, trust or other enterprise (a "Proceeding"), the Executive shall be
indemnified and held harmless by the Company, to the fullest extent permitted or
authorized by law, against all cost, expense, liability and loss (including,
without limitation, attorney's fees and expenses, judgments, fines, penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
the Executive in connection therewith, and such indemnification shall continue
as to the Executive even if he has ceased to be a director, member, executive or
agent of the Company or its affiliates or other entity and shall inure to the
benefit of the Executive's heirs, executors and administrators; provided,
however, that the foregoing indemnification shall not apply to

<PAGE>

any cost, expense, liability or loss to the extent that there has been a final
and binding judicial determination before a court of competent jurisdiction that
such cost, expense, liability or loss resulted from the Executive's gross
negligence or willful misconduct.

(b) The Company shall pay to the Executive all reasonable costs and
expenses actually incurred by Executive in connection with a Proceeding within
thirty (30) days after receipt by the Company of a written request for such
payment, together with reasonable supporting documentation required by the
Company and an undertaking by the Executive to repay the amount of such payment
if it shall ultimately be determined that he is not entitled to be indemnified
against such costs and expenses.

(c) As used herein, the term "affiliate" shall mean any corporation or
other business entity controlling, controlled by or under common control with
the Company; provided, however, that in no event shall the term "affiliate" as
used herein include Forman Enterprises, Inc. or any of its subsidiaries. The
provisions of this Section 6.3 shall survive the termination of this Agreement.

Section 6.4. Notices. Any notice, demand, request or other communication
required or permitted under this Agreement shall be deemed to have been
effectively made or given if in writing, and delivered by hand, mailed by
registered or certified mail, postage prepaid, return receipt requested, or sent
by reputable overnight courier service, properly addressed as follows:

If to the Executive at: 130 Sunrise Avenue
Palm Beach, Florida 33480
Telephone No.: (561) 835-9706
Telecopy No.: (561) 832-2704
Attention: Sam Forman

With a copy to: Eaton & Van Winkle
600 Third Avenue
New York, New York 10016
Telephone No.: (212) 867-0606
Telecopy No.: (212) 661-5077
Thomas A. Hickey, Esq.

If to the Company at: County Seat, Inc.
County Seat Stores, Inc.
6585 City West Parkway
Eden Prairie, Minnesota 55344-7824
Telephone No.: (612) 829-1996
Telecopy No.: (612) 829-2188
Attention: Chairman of the Board

<PAGE>

With a copy to: County Seat Stores, Inc.
6585 City West Parkway
Eden Prairie, Minnesota 55344-7824
Telephone No.: (612) 829-2124
Telecopy No.: (612) 829-2188
Attention: Matthew J. Knopf, Esq.,
Senior Vice President & General Counsel

or to such other address as furnished by a party in writing pursuant to this
Section 6.4. The telecopier numbers set forth above are for convenience only
and the delivery of any notice, demand, request or other communication by
telecopy or facsimile shall not be sufficient for purposes of giving notice
hereunder.

Section 6.5. Assignment and Succession. The rights and obligations of the
Company under this Agreement shall inure to the benefit of and be binding upon
its successors and assigns, and the Executive's rights and obligations hereunder
shall inure to the benefit of and be binding upon his legal representatives.
The Executive's obligations hereunder shall not be assignable by the Executive.

Section 6.6. Old Agreement. Upon the approval of this Agreement by the
Bankruptcy Court, this Agreement shall supersede in its entirety the Old
Agreement; provided, however, that notwithstanding anything to the contrary
contained herein, the Executive shall be entitled to receive promptly all
compensation earned and or accrued and all expense reimbursements to which the
Executive may be entitled under the Old Agreement through the time of such
approval in accordance with the terms thereof as though such Old Agreement had
not been superseded as provided for herein.

Section 6.7. Headings. The Article, Section, subsection and paragraph
headings are for convenience of reference only and shall not define or limit the
provisions hereof.

Section 6.8. Entire Agreement. This instrument contains the entire
agreement between the parties as to the subject matter hereof. All prior
employment understandings and agreements regarding compensation or bonus
compensation, other terms of employment and negotiations and agreements with
respect thereto are merged herein and are deemed cancelled. Any amendment or
modification hereto must be in writing and signed by all parties hereto.

Section 6.9. Severability. The invalidity, illegality, or
unenforceability of any provision hereof shall not in any way affect, impair,
invalidate or render unenforceable this Agreement or any other provision hereof.

Section 6.10. Taxes. The Company shall be entitled to deduct or withhold
all applicable payroll and social security taxes where required on all
applicable compensation paid to the Executive or any successor in interest.

<PAGE>

Section 6.11. Applicable Law. This Agreement shall at all times be
governed by and construed, interpreted and enforced in accordance with laws of
the State of New York.

IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its duly authorized officer and the Executive has signed this Agreement as of
the day and year first above written.

COUNTY SEAT STORES, INC.

- -------------------------- By:
Sam Forman ---------------------------------------
Its: Senior Vice President
and General Counsel

CSS TRADE NAMES, INC.

By:
---------------------------------------
Its: Senior Vice President
and General Counsel

Acknowledged and Agreed as of
this ____ day of August, 1997:

COUNTY SEAT, INC.

By:
---------------------------------------
Its: Senior Vice President
and General Counsel

<PAGE>

Exhibit 12.1

County Seat Stores, Inc. and Subsidiary
Unaudited Computation of Earnings to Fixed Charges
(Amounts in Thousands)

39 Weeks
Ended
November 1,
1997 1996 1995 1994 1993 1992
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before Income Taxes
and Extraordinary Items...................... (57,687) (74,938) (79,401) 10,518 (1,647) 6,111

Add:
Interest Expense, net.......................... 3,481 14,610 19,163 18,426 17,722 18,213
Amortization of debt expense and
debt discount................................ 538 835 1,272 2,599 1,857 1,959
----------- -------- -------- -------- -------- --------
Income as adjusted............................. (53,668) (59,493) (58,966) 31,543 17,932 26,283
----------- -------- -------- -------- -------- --------
----------- -------- -------- -------- -------- --------
Fixed Charges:
Interest Expense, net.......................... 3,481 14,610 19,163 18,426 17,722 18,213
Amortization of debt expense and
debt discount................................ 538 835 1,272 2,599 1,857 1,959
----------- -------- -------- -------- -------- --------
Total Fixed Charges............................ 4,019 15,445 20,435 21,025 19,579 20,172
----------- -------- -------- -------- -------- --------
----------- -------- -------- -------- -------- --------
Ratio of earnings to fixed charges............. n/a n/a n/a 1.5 0.9 1.3
----------- -------- -------- -------- -------- --------
----------- -------- -------- -------- -------- --------
</TABLE>

When earnings are negative there is no ratio of earnings to fixed charges as
is indicated by n/a ("not applicable").

<PAGE>

Exhibit 21.1

CSS Trade Names, Inc., a Minnesota Corporation

<PAGE>
EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
Registration Statement No. X-XXXXX.

ARTHUR ANDERSEN LLP

New York, New York

March 16, 1998

<PAGE>

Exhibit 25.2

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

FORM T-1

Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee

FIRST TRUST NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)

United States 41-0257700
(State of Incorporation) (I.R.S. Employer
Identification No.)

First Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)

COUNTY SEAT STORES, INC.
(Exact name of Registrant as specified in its charter)

Minnesota 41-1272706
(State of Incorporation) (I.R.S. Employer
Identification No.)

469 Seventh Avenue
New York, NY 10018
(Address of Principal Executive Offices) (Zip Code)

12 3/4% Senior Notes due 2004
(Title of the Indenture Securities)

<PAGE>

GENERAL

1. General Information Furnish the following information as to the Trustee.

(a) Name and address of each examining or supervising authority
to which it is subject.
Comptroller of the Currency
Washington, D.C.

(b) Whether it is authorized to exercise corporate trust powers.
Yes

2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation.
None

See Note following Item 16.

Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.

16. LIST OF EXHIBITS List below all exhibits filed as a part of this statement
of eligibility and qualification.

1. Copy of Articles of Association.*

2. Copy of Certificate of Authority to Commence Business.*

3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).*

4. Copy of existing By-Laws.*

5. Copy of each Indenture referred to in Item 4. N/A.

6. The consents of the Trustee required by Section 321(b) of the act.

7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority is incorporated by reference to Registration Number 333-42147.

* Incorporated by reference to Registration Number 22-27000.

<PAGE>

NOTE

The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors, or affiliates, are based
upon information furnished to the Trustee by the obligors. While the Trustee
has no reason to doubt the accuracy of any such information, it cannot accept
any responsibility therefor.

SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, First Trust National Association, an Association organized and existing
under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Saint Paul and State of Minnesota on the day of March, 1998.

FIRST TRUST NATIONAL ASSOCIATION

------------------------------------
Kathe M. Barrett
Trust Officer

- ------------------------------
Darlene A. Garsteig
Assistant Secretary

<PAGE>

NOTE

SIGNATURE

FIRST TRUST NATIONAL ASSOCIATION

/s/ Kathe M. Barrett
------------------------------------
Kathe M. Barrett
Trust Officer

/s/ Darlene A. Garsteig
- -----------------------------
Darlene A. Garsteig
Assistant Secretary

<PAGE>

EXHIBIT 6

CONSENT

In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, FIRST TRUST NATIONAL ASSOCIATION hereby consents that reports of
examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.

Dated: March , 1998

FIRST TRUST NATIONAL ASSOCIATION

------------------------------------
Kathe M. Barrett
Trust Officer

<PAGE>

EXHIBIT 6

CONSENT

Dated: March , 1998

FIRST TRUST NATIONAL ASSOCIATION

/s/ Kathe M. Barrett
------------------------------------
Kathe M. Barrett
Trust Officer

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> NOV-01-1997
<CASH> 26,374
<SECURITIES> 0
<RECEIVABLES> 2,736
<ALLOWANCES> 0
<INVENTORY> 74,701
<CURRENT-ASSETS> 105,511
<PP&E> 32,360
<DEPRECIATION> 0
<TOTAL-ASSETS> 220,635
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0
0
<COMMON> 200
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<SALES> 277,137
<TOTAL-REVENUES> 277,137
<CGS> 214,799
<TOTAL-COSTS> 116,006
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<INTEREST-EXPENSE> 4,019
<INCOME-PRETAX> (57,687)
<INCOME-TAX> 0
<INCOME-CONTINUING> (57,687)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (57,687)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>