1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 F O R M 10 - Q


                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934




For the quarterly period ended October 31, 1998
                               -----------------    


Commission file no. 1-10299
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                               VENATOR GROUP, INC.
                               -------------------
             (Exact name of registrant as specified in its charter)


             New York                             13-3513936        
- --------------------------------           ----------------------------------  
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
 incorporation or organization)


233 Broadway, New York, New York                                    10279-0003
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(Address of principal executive offices)                            (Zip Code)


Registrant's telephone number:  (212)-553-2000
                                --------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.      YES  X     NO 
                                            ----      ----



Number of shares of Common Stock outstanding at November 27, 1998: 135,614,566
                                                                   -----------

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                               VENATOR GROUP, INC.
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                                TABLE OF CONTENTS
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                                                                     Page No.
                                                                     --------
Part I. Financial Information

     Item 1. Financial Statements

             Condensed Consolidated Balance Sheets.......................1

             Condensed Consolidated Statements
                of Operations............................................2

             Condensed Consolidated Statements
                of Comprehensive Income (Loss)...........................3

             Condensed Consolidated Statements
                of Retained Earnings.....................................4

             Condensed Consolidated Statements
                of Cash Flows............................................5

             Notes to Condensed Consolidated
                Financial Statements...................................6-9

     Item 2. Management's Discussion and Analysis of
                Financial Condition and Results of Operations.........9-15


Part II.  Other Information

     Item 1.     Legal Proceedings......................................16

     Item 6.     Exhibits and Reports on Form 8-K.......................16

                 Signature..............................................17

                 Index to Exhibits...................................18-20


                                        i
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                         PART I - FINANCIAL INFORMATION
                         ------------------------------


Item 1.  FINANCIAL STATEMENTS
- -------  --------------------


                               VENATOR GROUP, INC.
                               -------------------


                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      -------------------------------------
                                  (in millions)
October 31, October 25, January 31, 1998 1997 1998 ---- ---- ---- (Unaudited) (Unaudited) (Audited) ASSETS ------ Current assets Cash and cash equivalents ........... $ 147 $ 17 $ 81 Merchandise inventories ............. 1,112 886 754 Net assets of discontinued operations 220 597 619 Other current assets ................ 136 149 131 ----- ----- ----- 1,615 1,649 1,585 Property and equipment, net ............ 916 511 625 Deferred charges and other assets ...... 614 655 585 ----- ----- ----- $3,145 $ 2,815 $ 2,795 ===== ===== ===== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities Short-term debt ..................... $ 371 $ 21 $ -- Accounts payable and accrued liabilities ...................... 652 490 507 Current portion of reserve for discontinued operations .......... 217 128 72 Current portion of long-term debt and obligations under capital leases ......................... 20 13 19 ---- ---- ---- 1,260 652 598 Long-term debt and obligations under capital leases ................ 508 510 508 Deferred taxes and other liabilities ... 345 432 400 Reserve for discontinued operations .... 30 67 18 Shareholders' Equity Common stock and paid-in capital .... 327 315 317 Retained earnings ................... 860 925 1,033 Accumulated other comprehensive loss . (185) (86) (79) ----- ---- ----- Total shareholders' equity ............ 1,002 1,154 1,271 Commitments ............................ ----- ----- ----- $ 3,145 $ 2,815 $ 2,795 ===== ===== =====
See Accompanying Notes to Condensed Consolidated Financial Statements. 1 4 VENATOR GROUP, INC. ------------------- CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ----------------------------------------------- (Unaudited) (in millions, except per share amounts)
Thirteen weeks ended Thirty-nine weeks ended -------------------- ----------------------- October 31, October 25, October 31, October 25, 1998 1997 1998 1997 ---- ---- ---- ---- Sales......................... $ 1,122 $ 1,107 $ 3,223 $ 3,198 Costs and expenses Cost of sales............... 840 741 2,324 2,167 Selling, general and administrative expenses . 302 252 827 744 Depreciation and amortization 38 30 108 90 Interest expense, net....... 18 8 35 25 Other income................ - - (19) - ----- ----- ----- ----- 1,198 1,031 3,275 3,026 ----- ----- ----- ----- Income (loss) from continuing operations before income taxes ...................... (76) 76 (52) 172 Income tax expense (benefit) . (36) 26 (26) 65 Income (loss) from continuing ---- ---- ---- ---- operations ................. (40) 50 (26) 107 Income (loss) from discontinued operations, net of income tax expense (benefit) of $6, $5, $(14) and $(26), respectively 6 5 (26) (37) Net loss on disposal of discontinued operations, net of income tax expense (benefit) of $52, $0, $52, and $(115), respectively ............... (121) - (121) (195) ----- ----- ----- ----- Net income (loss) ............ $ (155) $ 55 $ (173) $ (125) ====== ===== ====== ====== Basic earnings per share: Income (loss) from continuing operations ............... $ (0.29) $ 0.37 $ (0.19) $ 0.80 Income (loss) from discontinued operations .. (0.85) 0.04 (1.08) (1.73) ------ ---- ------ ------ Net income (loss) .......... $ (1.14) $ 0.41 $ (1.27) $ (0.93) ===== ===== ===== ===== Weighted-average common shares outstanding .............. 135.6 134.9 135.4 134.5 Diluted earnings per share: Income (loss) from continuing operations ............. $ (0.29) $ 0.37 $ (0.19) $ 0.79 Income (loss) from discontinued operations ............... (0.85) 0.03 (1.08) (1.71) ----- ----- ----- ----- Net income (loss) ....... $ (1.14) $ 0.40 $ (1.27) $ (0.92) Weighted-average common shares ===== ===== ===== ===== assuming dilution .......... 135.6 136.3 135.4 135.8
See Accompanying Notes to Condensed Consolidated Financial Statements. 2 5 VENATOR GROUP, INC. ------------------- CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) ---------------------------------------------------------------- (Unaudited) (in millions)
Thirteen weeks ended Thirty-nine weeks ended -------------------- ----------------------- October 31, October 25, October 31, October 25, 1998 1997 1998 1997 ---- ---- ---- ---- Net income (loss)........... $ (155) $ 55 $ (173) $ (125) Other comprehensive income (loss), net of tax: Foreign currency translation adjustments: Translation adjustments arising during period (pre-tax $(216), $10, $(216), and $(114), respectively)........... (108) 6 (108) (71) Less: reclassification adjustment for gains included in net income (loss) (pre-tax $298).......... 149 - 149 - ----- ----- ----- ----- 41 6 41 (71) Minimum pension liability adjustments (pre-tax $4) 2 - 2 - ----- ----- ----- ----- Comprehensive income (loss). $ (112) $ 61 $ (130) $ (196) ===== ===== ===== =====
See Accompanying Notes to Condensed Consolidated Financial Statements. 3 6 VENATOR GROUP, INC. ------------------- CONDENSED CONSOLIDATED STATEMENTS OF RETAINED EARNINGS ------------------------------------------------------ (Unaudited) (in millions)
Thirty-nine weeks ended ----------------------------- October 31, October 25, 1998 1997 ---- ---- Retained earnings at beginning of year ... $ 1,033 $ 1,050 Net loss ................................. (173) (125) ----- ----- Retained earnings at end of interim period $ 860 $ 925 ===== =====
See Accompanying Notes to Condensed Consolidated Financial Statements. 4 7 VENATOR GROUP, INC. ------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------- (Unaudited) (in millions)
Thirty-nine weeks ended ----------------------- October 31, October 25, 1998 1997 ---- ---- From Operating Activities: Net loss ....................................... $ (173) $ (125) Adjustments to reconcile net loss to net cash .. provided by (used in) operating activities: Non-cash charge for discontinued operations, net of tax ................................. 121 195 Discontinued operations reserve activity . (127) (104) Depreciation and amortization ............ 108 90 Net gain on sales of real estate ......... - (3) Net gain on sales of assets and investments (19) - Deferred income taxes .................... (38) (37) Change in assets and liabilities, net of acquisition: Merchandise inventories .................. (356) (238) Accounts payable and other liabilities ... 146 29 Net assets of discontinued operations .... (56) 299 Other, net ............................... (15) (54) Net cash provided by (used in) operating ---- ---- activities ............................... (409) 52 ---- ---- From Investing Activities: Net proceeds from businesses disposed ........ 495 - Proceeds from sales of assets and investments 22 - Proceeds from sales of real estate ........... - 3 Capital expenditures ......................... (395) (114) Payments for businesses acquired, net of cash acquired ................................... (29) (148) Net cash provided by (used in) investing ---- ---- activities ................................. 93 (259) ---- ---- From Financing Activities: Increase in short-term debt .................. 371 21 Reduction in long-term debt and capital lease obligations ................................ (2) (2) Issuance of common stock ..................... 10 16 ---- ---- Net cash provided by financing activities .. 379 35 ---- ---- Effect of exchange rate fluctuations on Cash and Cash Equivalents ................. 3 (8) ---- ---- Net change in Cash and Cash Equivalents ......... 66 (180) Cash and Cash Equivalents at beginning of year .. 81 197 ---- ---- Cash and Cash Equivalents at end of interim period $ 147 $ 17 ==== ==== Cash paid during the period: Interest ..................................... $ 32 $ 21 Income taxes ................................. $ 14 $ 58
See Accompanying Notes to Condensed Consolidated Financial Statements. 5 8 VENATOR GROUP, INC. ------------------- NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------------- Basis of Presentation - --------------------- The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Notes to Consolidated Financial Statements contained in the Registrant's Form 10-K for the year ended January 31, 1998, as filed with the Securities and Exchange Commission (the "SEC") on April 21, 1998. The Condensed Consolidated Statement of Comprehensive Income (Loss) was prepared in conformity with generally accepted accounting principles and was not required for the year ended January 31, 1998. Certain items included in these statements are based on management's estimates. In the opinion of management, all material adjustments, which are of a normal recurring nature, necessary for a fair presentation of the results for the interim periods have been included. The results for the thirty-nine weeks ended October 31, 1998 are not necessarily indicative of the results expected for the year. All financial statements have been restated to reflect the discontinuance of the Specialty Footwear and International General Merchandise segments. Name Change - ----------- The Registrant changed its name to Venator Group, Inc. (formerly Woolworth Corporation) effective June 11, 1998. Discontinued Operations - ----------------------- On September 22, 1998, the Registrant announced that it is exiting its International General Merchandise segment. On October 22, 1998, the Registrant completed the sale of its 357 store German general merchandise business for $563 million, pursuant to a definitive agreement. The Registrant recorded a net gain on the disposal of the International General Merchandise segment of $174 million before-tax, or $39 million after-tax, in the third quarter 1998. The disposition of the International General Merchandise segment will be completed in 1999. On September 16, 1998, the Registrant announced that it is exiting its Specialty Footwear segment including 467 Kinney Shoe stores and 103 Footquarters stores. The Registrant expects to convert approximately 60 of these locations to its Lady Foot Locker, Kids Foot Locker, and Colorado formats. Additionally, the Registrant will launch a new athletic outlet chain utilizing approximately 35 Footquarters locations and 40 existing Foot Locker and Champs Sports outlet stores. The remaining stores are expected to close or be disposed of in 1999. The Registrant recorded a charge to earnings of $243 million before-tax, or $160 million after-tax, for the loss on disposal of the Specialty Footwear operations. On July 17, 1997, the Registrant announced that it was exiting its 400 store Domestic General Merchandise segment and recorded a charge to earnings of $310 million before-tax, or $195 million after-tax, for the loss on disposal of discontinued operations. The Registrant plans to convert approximately 150 locations to Foot Locker, Champs Sports, and other athletic or specialty formats. The Registrant has opened 147 stores in former domestic general merchandise locations through October 31, 1998. The results of operations for all periods presented for the International General Merchandise segment, the Specialty Footwear segment, and the Domestic General Merchandise segment have been classified as discontinued operations in the Condensed Consolidated Statements of Operations. Sales and net income or loss from discontinued operations for the quarter and year-to-date periods through the date of discontinuance of each segment are presented below. 6 9
Sales Thirteen weeks ended Thirty-nine weeks ended - ----- -------------------- ----------------------- (in millions) October 31, October 25, October 31, October 25, 1998 1997 1998 1997 ---- ---- ---- ---- International General Merchandise $ 234 $ 340 $ 842 $ 1,040 Specialty Footwear .............. 79 136 301 384 Domestic General Merchandise .... - - - 427 ---- ---- ----- ----- Total ........................... $ 313 $ 476 $ 1,143 $ 1,851 ==== ==== ===== ===== Net income (loss) Thirteen weeks ended Thirty-nine weeks ended - ----------------- -------------------- ----------------------- (in millions) October 31, October 25, October 31, October 25, 1998 1997 1998 1997 ---- ---- ---- ---- International General Merchandise $ (1) $ 4 $ (9) $ (2) Specialty Footwear .............. 7 1 (17) (7) Domestic General Merchandise .... - - - (28) ---- ---- ---- ---- Total ........................... $ 6 $ 5 $ (26) $ (37) ==== ==== ==== ==== The following is a summary of the net assets of discontinued operations: (in millions) October 31, October 25, Jan. 31, 1998 1997 1998 ---- ---- ---- International General Merchandise Assets .......................... $ 57 $ 854 $ 786 Liabilities ..................... 13 419 354 Net assets of discontinued ---- ---- ---- operations .................... $ 44 $ 435 $ 432 ==== ==== ==== Specialty Footwear Assets .......................... $ 190 $ 244 $ 213 Liabilities ..................... 26 33 33 Net assets of discontinued ---- ---- ---- operations .................... $ 164 $ 211 $ 180 ==== ==== ==== Domestic General Merchandise Assets .......................... $ 46 $ 100 $ 28 Liabilities ..................... 34 149 21 Net assets (liabilities) of ---- ---- ---- discontinued operations ....... $ 12 $ (49) $ 7 ==== ==== ==== Total Net Assets of discontinued operations ................... $ 220 $ 597 $ 619 ==== ==== ====
The assets of each segment consist primarily of inventory and fixed assets. The liabilities of the International General Merchandise segment at October 25, 1997 and January 31, 1998 predominantly include amounts due to vendors and pension liabilities. The decrease in net assets of International General Merchandise discontinued operations at October 31, 1998 reflects the sale of the German general merchandise operations on October 22, 1998. The liabilities of the Specialty Footwear and Domestic General Merchandise segments primarily reflect amounts due to vendors. 7 10 The discontinued operations reserve for International General Merchandise of $41 million was reduced by a $2 million foreign currency translation adjustment. Disposition activity of $48 million for the period from September 16, 1998 to October 31, 1998 reduced the reserve of $243 million recorded for Specialty Footwear discontinued operations to $195 million. Disposition activity related to the discontinued operations reserve for the quarter and year-to-date periods ended October 31, 1998 was approximately $32 million and $77 million, respectively, for the domestic general merchandise business. The remaining reserve balance at October 31, 1998 was $13 million. Earnings Per Share - ------------------ Basic earnings per share is computed as net earnings divided by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur from common shares issuable through stock-based compensation including stock options, restricted stock awards and other convertible securities. A reconciliation of weighted-average common shares outstanding to weighted-average common shares assuming dilution follows:
Thirteen weeks ended Thirty-nine weeks ended -------------------- ----------------------- October 31, October 25, October 31, October 25, (in millions) 1998 1997 1998 1997 ---- ---- ---- ---- Weighted-average common shares outstanding ................ 135.6 134.9 135.4 134.5 Incremental common shares issuable ................... - 1.4 - 1.3 Weighted-average common shares ----- ----- ----- ----- assuming dilution .......... 135.6 136.3 135.4 135.8 ===== ===== ===== =====
Incremental common shares were not included in the computation for the quarter and year-to-date periods ended October 31, 1998 since their inclusion in periods when the Registrant reported a loss from continuing operations would be antidilutive. For the thirteen and the thirty-nine weeks ended October 25, 1997, options with an exercise price greater than the average market price are not included in the computation of diluted earnings per share and would not have a material impact on diluted earnings per share. Comprehensive Income - -------------------- The Registrant adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," in the first quarter of 1998. SFAS No. 130 establishes standards for reporting and display of comprehensive income or loss and its components in the financial statements. Comprehensive income is a more inclusive financial reporting methodology that includes the disclosure of certain financial information that has not been recognized in the calculation of net income or loss, such as foreign currency translations and changes in minimum pension liability which are recorded directly to shareholders' equity. Accumulated other comprehensive loss was comprised of foreign currency translation adjustments of $142 million, $49 million, and $34 million, and minimum pension liability adjustments of $43 million, $37 million, and $45 million, at October 31, 1998, October 25, 1997, and January 31, 1998, respectively. Reclassifications - ----------------- Certain balances in prior periods have been reclassified to conform with the presentation adopted in the current period. As discussed above, all financial statements have been restated to reflect the discontinuance of the Specialty Footwear and International General Merchandise segments. Legal Proceedings - ----------------- There are no material legal proceedings. 8 11 Recent Accounting Pronouncements - -------------------------------- In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," which is effective for financial statements issued for fiscal years beginning after December 15, 1997 and therefore, effective for the Registrant in 1998. The Registrant will adopt the provisions of this standard in the fourth quarter of 1998. SFAS No. 131 supersedes previously established standards for reporting operating segments in the financial statements and requires disclosures regarding selected information about operating segments in interim and annual financial reports. In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," which is effective for fiscal years beginning after December 15, 1997 and therefore, effective for the Registrant in 1998. This statement revises employers' disclosures about pensions and other postretirement benefit plans. It does not change the measurement or recognition of those plans. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which is effective for fiscal quarters of fiscal years beginning after June 15, 1999 and therefore, effective for the Registrant in 2000. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Registrant is in the process of evaluating SFAS No. 133 to determine its impact on the consolidated financial statements. Short-Term Debt - --------------- On September 25, 1998, the Registrant borrowed $180 million under a separate loan agreement ,in addition to amounts borrowed under its April 9, 1997 $500 million revolving credit agreement ("revolving credit agreement"). This facility was subsequently repaid with proceeds received from the sale of its German general merchandise business. Due to lower than planned earnings in the quarter and the charges related to the closing of the Registrant's Specialty Footwear operations, the Registrant obtained a waiver with regard to certain financial covenants contained in the revolving credit agreement for the period from October 31, 1998 through March 19, 1999. During the waiver period, the Registrant is prohibited from paying cash dividends or repurchasing, redeeming, retiring, or acquiring any shares of its capital stock. The Registrant is in the process of amending its revolving credit agreement and expects to have an amended credit facility in place prior to expiration of the waiver. Subsequent Event - ---------------- On June 22, 1998, the Registrant entered into an agreement to sell its Corporate Headquarters building in New York, the Woolworth Building, and lease back four floors. These transactions were completed on December 4, 1998 for gross proceeds of $137.5 million. The Registrant will record a gain on the sale totaling approximately $55 million after-tax, a substantial portion of which will be recongnized in the fourth quarter with the remainder recognized over the lease terms. Item 2. Management's Discussion and Analysis of Financial Condition and Results - -------------------------------------------------------------------------------- of Operations - ------------- As discussed more fully in the footnotes to the Condensed Consolidated Financial Statements, the Registrant announced that it was exiting its Specialty Footwear and its International General Merchandise segments. Accordingly, the results of operations for all periods presented for these businesses have been classified as discontinued operations and all financial statements have been restated. Total sales for the 1998 third quarter increased 1.4 percent to $1,122 million as compared with $1,107 million for the third quarter of 1997, reflecting sales from 384 additional stores, offset by a comparable-store sales decline of 5.3 percent. Excluding the effect of foreign currency fluctuations and sales from disposed operations, sales increased 2.8 percent for the quarter. Sales for the thirty-nine weeks ended October 31, 1998 increased 0.8 percent to $3,223 million as compared with $3,198 million for the same period a year earlier. Excluding the effect of foreign currency fluctuations and sales from disposed operations, sales increased 2.0 percent as compared with the corresponding prior-year period. Year-to-date comparable-store sales decreased 6.4 percent. 9 12 Gross margin, as a percentage of sales, decreased 790 basis points to 25.1 percent for the quarter and decreased from 32.2 percent to 27.9 percent for the year-to-date period in 1998, as compared with the corresponding periods a year earlier. These declines primarily reflect increased markdowns as a result of the Registrant's decision to embark on an aggressive inventory reduction program in the third quarter 1998 to ensure that inventories remain current in order to enhance its competitiveness for 1999. Selling, general and administrative expenses increased $50 million and $83 million for the thirteen and thirty-nine weeks ended October 31, 1998 as compared with the corresponding prior-year periods. These increases primarily reflect the incremental costs associated with the additional stores year-over-year attributable to the new store program. These increases were partially offset by decreases in net pension and net postretirement benefit expense, which primarily reflects the amortization of the plans' unrecognized gains and losses over the average remaining life expectancy of inactive participants, who now comprise the majority of the plans' participants. Previously, the unrecognized gains and losses were amortized over the average remaining service period of active participants. Third quarter operating results from continuing operations (before corporate expense, interest expense and income taxes) reflect a $30 million loss for 1998 as compared with a profit of $91 million for the third quarter of 1997, reflecting a significant increase in inventory markdown activity and an increase in selling, general and administrative expenses. For the thirty-nine weeks ended October 31, 1998, operating profit declined to $43 million from $245 million in the corresponding prior-year period. Interest expense, net of interest income, increased $10 million for the 1998 third quarter and year-to-date periods as compared with the corresponding prior-year periods. The incremental interest expense is attributable to increased short- term borrowing levels during 1998 and is partially offset by interest income of approximately $7 million related to a franchise tax settlement in the second quarter. The Registrant reported a loss from continuing operations for the thirteen weeks ended October 31, 1998 of $40 million, or $0.29 per diluted share, as compared with income of $50 million, or $0.37 per diluted share for the prior-year period ended October 25, 1997. Year-to-date continuing operations include a $26 million loss for 1998 as compared with $107 million in income for the prior-year period. During the quarter the effective tax rate was adjusted to 47.4 percent and 50 percent for the quarter and year-to-date periods ended October 31, 1998, respectively, as compared with 34.2 percent and 37.8 percent for the corresponding prior-year periods. The increase reflects the impact of non-deductible terms, such as goodwill amortization, at lower earnings levels. The net loss for the quarter of $155 million or $1.14 per diluted share includes $115 million (after-tax) or $0.85 per diluted share for discontinued operations. This compares with net income of $55 million, or $0.40 per diluted share for the corresponding prior-year period. The net loss for the thirty-nine weeks ended October 31, 1998 of $173 million or $1.27 per diluted share, includes $147 million (after-tax), or $1.08 per diluted share for discontinued operations. This compares with a net loss of $125 million, or $0.92 per diluted share for the corresponding prior-year period, which includes $232 million (after-tax) or $1.71 per diluted share for discontinued operations. Consistent with an announcement made by the Registrant during the quarter, in light of current trends, particularly in athletic apparel, and based upon its intention to continue to position its inventory properly for the beginning of 1999, the Registrant expects fourth quarter earnings to be below plan. The Registrant ended the third quarter with 5,964 stores consisting of 3,869 in the Athletic Group, 914 in the Northern Group and 1,181 in Other Specialty. This compares with 5,580 stores at the end of the corresponding prior-year period. During the thirty-nine weeks ended October 31, 1998, the Registrant opened 500 stores, closed or disposed of 258 stores and remodeled or relocated 361 stores. Of the 500 stores opened, 90 stores represent the first quarter acquisition of Athletic Fitters stores. 10 13 SALES - ----- The following table summarizes sales for continuing operations by segment and geographic area:
Thirteen weeks ended Thirty-nine weeks ended -------------------- ----------------------- (in millions) October 31, October 25, October 31, October 25, By Segment: ................ 1998 1997 1998 1997 ---- ---- ---- ---- Specialty: Athletic Group .......... $ 945 $ 912 $ 2,730 $ 2,685 Northern Group .......... 97 110 256 270 Other Specialty ......... 80 79 233 229 ----- ----- ----- ----- Specialty total ............ 1,122 1,101 3,219 3,184 ===== ===== ===== ===== Disposed operations ........ - 6 4 14 ----- ----- ----- ----- $ 1,122 $ 1,107 $ 3,223 $ 3,198 ===== ===== ===== ===== By Geographic Area: Domestic ................ $ 936 $ 909 $ 2,711 $ 2,681 International ........... 186 192 508 503 Disposed operations ..... - 6 4 14 ----- ----- ----- ----- $ 1,122 $ 1,107 $ 3,223 $ 3,198 ===== ===== ===== =====
Athletic Group sales increased by 3.6 percent for the 1998 third quarter and by 1.7 percent for the year-to-date period, as compared with the corresponding periods a year earlier. The increase was primarily attributable to sales from 360 additional stores and also, in part, to increased sales from remodeled stores. Comparable-store sales declined by 5.1 percent and by 7.1 percent for the quarter and year-to-date periods reflecting decreased sales of branded and licensed product, offset by improved sales from several athletic footwear categories, such as running, trail and basketball. Excluding the impact of foreign currency fluctuations, the Northern Group's sales decreased by 8.7 percent and by 1.9 percent for the thirteen and thirty-nine week periods, respectively. Comparable-store sales declined by 15.7 percent and 9.6 percent, respectively, reflecting the impact of a change in merchandise mix and decreased sales from stores in the southern United States, which experienced unusually mild weather in the fall. Other Specialty 1998 third quarter and year-to-date comparable-store sales increased by 9.9 percent and by 7.4 percent, as compared with the corresponding prior-year periods. The afterthoughts format is primarily responsible for these increases, reflecting, in part, the success of the format's larger-store design. 11 14 OPERATING RESULTS - ----------------- Operating results from continuing operations (before corporate expense, interest expense, and income taxes) are as follows:
Thirteen weeks ended Thirty-nine weeks ended -------------------- ----------------------- (in millions) October 31, October 25, October 31, October 25 1998 1997 1998 1997 ---- ---- ---- ---- Specialty .................... $ (30) $ 92 $ 26 $ 247 Disposed operations .......... - (1) 17 (2) ---- ---- ---- ---- $ (30) $ 91 $ 43 $ 245 ==== ==== ==== ==== By Geographic Area: Domestic ..................... $ (36) $ 75 $ 24 $ 225 International ................ 6 17 2 22 Disposed operations .......... - (1) 17 (2) ---- ---- ---- ---- $ (30) $ 91 $ 43 $ 245 ==== ==== ==== ====
The Specialty segment reported a loss of $30 million for the 1998 third quarter as compared with a profit of $92 million in the 1997 third quarter. The Athletic Group sales increases were more than offset by the increased promotional markdowns taken as part of the aggressive inventory reduction program undertaken by the Registrant in the third quarter, in order to keep the product assortment current and enhance the Registrant's competitiveness for 1999. Operating results for the Northern Group for the 1998 third quarter and year-to-date periods decreased due to disappointing sales. Other Specialty operating results improved by 42.9 percent and by 36.4 percent for the thirteen and thirty-nine weeks ended October 31, 1998, respectively, as compared with the corresponding prior year periods, predominantly related to the afterthoughts format. Included in disposed operations for the thirty-nine weeks ended October 31, 1998 is a $19 million gain from the sale of the Registrant's six-store nursery chain. This gain is offset by a $2 million loss, including operating losses, for the shutdown of the U.S. Randy River operations. This is part of the Registrant's continuing program to reduce its investment in non-strategic businesses. The prior-year amount represents the operating results of these operations. SEASONALITY - ----------- The Registrant's businesses are seasonal in nature. Historically, the greatest proportion of sales and net income is generated in the fourth quarter and the lowest proportion of sales and net income is generated in the first quarter, reflecting seasonal buying patterns. As a result of these seasonal sales patterns, inventory generally increases in the third quarter in anticipation of the strong fourth quarter sales. 12 15 LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Net cash used in operating activities was $409 million for the thirty-nine weeks ended October 31, 1998, as compared with net cash provided by operating activities of $52 million in the corresponding prior-year period. This principally reflects the liquidation of the domestic general merchandise business in the prior year and the operating losses incurred from continuing operations in 1998. Inventories purchased in 1998 contributed to the increase in accounts payable, and included inventory for approximately 200 new and remodeled stores which were scheduled for completion in November. Net cash from investing activities totaled $93 million for the thirty-nine weeks ended October 31, 1998, as compared with $259 million net cash used during the corresponding prior-year period. On October 22, 1998, the Registrant sold its German general merchandise business for $563 million. Net proceeds received from the sale amounted to $495 million, the majority of which were used to reduce short-term borrowings. Cash used in investing activities in the prior year was predominantly due to the first quarter acquisition of Eastbay, Inc. for $140 million, in a transaction accounted for as a purchase. Capital expenditures totaled $395 million for the thirty-nine weeks ended October 31, 1998 as compared with $114 million for the corresponding prior-year period reflecting planned expenditures related to the Registrant's aggressive new store and remodeling program. Additionally, the increase is attributable to unplanned expenditures relating to the repositioning of 50 additional domestic general merchandise locations, as well as costs associated with a European distribution center and the relocation and reduction in size of the Registrant's divisional and corporate office space in connection with the sale of its Corporate Headquarters. Capital expenditures for 1998 are expected to total $515 million. Short-term debt, net of cash, increased by $220 million as of October 31, 1998, from October 25, 1997, reflecting increased borrowings under the Registrant's revolving credit agreement primarily due to lower than expected sales and increased capital expenditures. During the quarter, the Registrant borrowed $180 million under a separate loan agreement, in addition to amounts borrowed under the revolving credit agreement. This facility was subsequently repaid with proceeds received from the sale of its German general merchandise business. Due to lower than planned earnings in the quarter and the charges related to the closing of the Registrant's Specialty Footwear operations, the Registrant obtained a waiver with regard to the fixed charge coverage ratio and the minimum consolidated tangible net worth covenants contained in the revolving credit agreement for the period from October 31, 1998 through March 19, 1999. During the waiver period, the Registrant is prohibited from paying cash dividends or repurchasing, redeeming, retiring, or acquiring any shares of its capital stock. The Registrant is in the process of amending its revolving credit agreement and expects to have an amended credit facility in place prior to expiration of the waiver. The Registrant completed the sale of its Corporate Headquarters building in New York, the Woolworth Building, and leased back four floors, on December 4, 1998 for gross proceeds of $137.5 million. The net proceeds will be used for general corporate purposes. On September 10, 1998, the Registrant and The Sports Authority, Inc. jointly announced that they had mutually agreed to terminate, effective immediately, the merger agreement pursuant to which The Sports Authority would have become a wholly-owned subsidiary of the Registrant through a pooling of interests. 13 16 YEAR 2000 READINESS DISCLOSURE ------------------------------ The Year 2000 ("Y2K") issue is the result of computer programs being written using two digits, rather than four, to define the applicable year. Mistaking "00" for the year 1900 could result in miscalculations and errors and cause significant business interruptions for the Registrant, as well as for the government and most other companies. The Registrant has instituted a plan to assess its state of readiness for Y2K, to remediate those systems that are non-compliant and to assure that material third parties will be Y2K compliant. State of Readiness - ------------------ The Registrant has assessed all mainframe, operating and application systems (including point of sale) for Y2K readiness, giving the highest priority to those information technology applications (IT) systems that are considered critical to its business operations. Those applications considered most critical to the Registrant's business operations have been remediated and testing is scheduled to begin in December 1998. The remediation of the point of sale equipment is expected to be completed in early 1999, with pilot testing anticipated in March and April. Extensive testing of all remediated systems will be performed throughout 1999 for implementation during that year. Apart from the Y2K issue, the Registrant had developed and installed throughout its business units beginning in 1997 a comprehensive information computer system ("ECLIPSE"), encompassing merchandising, logistics, finance and human resources. The ECLIPSE project was undertaken for business reasons unrelated to Y2K. However, the installation of ECLIPSE eliminates the need to reprogram or replace certain existing software for Y2K compliance. The Registrant has compiled a comprehensive inventory of its non-IT systems, which include those systems containing embedded chip technology commonly found in buildings and equipment connected with a building's infrastructure. Management is currently in the process of establishing the priority and possible remediation of systems identified as non-compliant. Preliminary investigations of the embedded chip systems indicate that Y2K will not affect systems such as heating, ventilation and security in most store locations. Ongoing testing and implementation of any remediation required for the non-IT systems will be performed throughout 1999. Material Third Parties - ---------------------- Key vendors and service providers have been identified, whose non-compliance could have a material impact on the Registrant's ability to operate worldwide. Management has undertaken to determine the state of readiness of its approximately 20 key vendors by issuing questionnaires and conducting meetings and on-site visits. The level of compliance of the Registrant's major providers of banking services, transportation, telecommunications and utilities is in the course of being ascertained and the related risks established. Y2K Costs - --------- The Registrant is utilizing both internal and external resources to address the Y2K issue. Internal resources reflect the reallocation of IT personnel to the Y2K project from other IT projects. In the opinion of management, the deferral of such other projects will not have a significant adverse effect on continuing operations. The total direct cost, excluding ECLIPSE, to remediate the Y2K issue is estimated to be approximately $5 million, of which $1.2 million has been spent. All costs, excluding ECLIPSE, are being expensed as incurred and are funded through operating cash flows. The Registrant's Y2K costs are based on management's best estimates and may be updated as additional information becomes available. Management does not expect the total Y2K remediation costs to be material to the Registrant's results of operations or financial condition. Contingency Plan/Risks - ---------------------- The Registrant is in the process of developing contingency plans for those areas which might be affected by Y2K. Although the full consequences are unknown, the failure of either the Registrant's critical systems or those of its material third parties to be Y2K compliant could result in the interruption of its business, which could have a material adverse effect on the results of operations or financial condition of the Registrant. 14 17 IMPACT OF EUROPEAN MONETARY UNION - --------------------------------- The European Union is comprised of fifteen member states, eleven of which will adopt a common currency, the "euro," effective January 1, 1999. From that date until January 1, 2002, the transition period, the national currencies will remain legal tender in the participating countries as denominations of the euro. Monetary, capital, foreign exchange and interbank markets will convert to the euro and non-cash transactions will be possible in euros. On January 1, 2002, euro bank notes and coins will be issued and the former national currencies will be withdrawn from circulation no later than July 1, 2002. The Registrant has reviewed the impact of the euro conversion on its information systems, accounting systems, vendor payments and human resources. Modifications required to be made to the point of sale hardware and software will be facilitated by the Y2K remediation. The adoption of a single European currency will lead to greater product pricing transparency and a more competitive environment. The Registrant will display the euro equivalent price of merchandise as a customer service during the transition period, as will many retailers until the official euro conversion in 2002. The Registrant does not expect the euro conversion to have a material adverse effect on its results of operations or financial condition. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS - ----------------------------------------------- Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the federal securities laws. All statements, other than statements of historical facts, which address activities, events or developments that the Registrant expects or anticipates will or may occur in the future, including such things as future capital expenditures, expansion, strategic plans, growth of the Registrant's business and operations, Y2K and euro related actions and other such matters are forward-looking statements. These forward-looking statements are based on many assumptions and factors including effects of currency fluctuations, consumer preferences and economic conditions worldwide and the ability of the Registrant to implement, in a timely manner, the programs and actions related to the Y2K and euro issues. Any changes in such assumptions or factors could produce significantly different results. 15 18 PART II - OTHER INFORMATION --------------------------- Item 1. Legal Proceedings - ------------------------- There are no material legal proceedings. Item 6. Exhibits and Reports on Form 8-K - ---------------------------------------- (a) Exhibits -------- An index of the exhibits that are required by this item, and which are furnished in accordance with Item 601 of Regulation S-K, appears on pages 18 through 20. The exhibits which are in this report immediately follow the index. (b) Reports on Form 8-K -------------------- The Registrant filed a report on Form 8-K dated August 12, 1998 (date of earliest event reported) reporting that the Board of Directors amended the By-laws of the Registrant to provide that the fiscal year of the Registrant shall end on the Saturday closest to the last day in January of each year, rather than on the last Saturday in January. The Registrant filed a report on Form 8-K dated September 10, 1998 (date of earliest event reported) reporting that the Registrant and The Sports Authority, Inc. jointly announced that they had mutually agreed to terminate the merger agreement, effective immediately, pursuant to which the Registrant would have acquired The Sports Authority, Inc. in a tax-free exchange of shares. The Registrant filed a report on Form 8-K dated September 16, 1998 (date of earliest event reported) reporting that: (i) the Registrant announced that it is exiting its Specialty Footwear operations, including 467 Kinney Shoe stores and 103 Footquarters stores, on September 16, 1998, and (ii) on September 22, 1998, the Registrant announced that it is exiting its International General Merchandise business, including its 357 store German general merchandise operations, which are being sold pursuant to a definitive agreement in a management led buy-out backed by Electra Fleming, based in London. 16 19 SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VENATOR GROUP, INC. -------------------- (Registrant) Date: December 14, 1998 /s/ Reid Johnson -------------------------- REID JOHNSON Senior Vice President and Chief Financial Officer 17 20 VENATOR GROUP, INC. ------------------- INDEX OF EXHIBITS REQUIRED BY ITEM 6(a) OF FORM 10-Q AND FURNISHED IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K ----------------------------------------------------------- Exhibit No. in Item 601 of Regulation S-K Description ----------------- ----------- 1 * 2 * 3(i)(a) Certificate of Incorporation of the Registrant, as filed by the Department of State of the State of New York on April 7, 1989 (incorporated herein by reference to Exhibit 3(i)(a) to the Quarterly Report on Form 10-Q for the quarterly period ended July 26, 1997, filed by the Registrant with the SEC on September 4, 1997 (the "July 26, 1997 Form 10-Q")). 3(i)(b) Certificates of Amendment of the Certificate of Incorporation of the Registrant, as filed by the Department of State of the State of New York on (a) July 20, 1989 (b) July 24, 1990 (c) July 9, 1997 (incorporated herein by reference to Exhibit 3(i)(b) to the July 26, 1997 Form 10-Q) and (d) June 11, 1998 (incorporated herein by reference to Exhibit 4.2(a) of the Registration Statement on Form S-8 (Registration No. 333-62425) previously filed with the SEC). 3(ii) By-laws of the Registrant, as amended (incorporated herein by reference to Exhibit 4.2 of the Registration Statement on Form S-8 (Registration No. 333-62425) previously filed with the SEC). 4.1 The rights of holders of the Registrant's equity securities are defined in the Registrant's Certificate of Incorporation, as amended (incorporated herein by reference to Exhibits 3(i)(a) and 3(i)(b) to the July 26, 1997 Form 10-Q and Exhibit 4.2(a) to the Registration Statement on Form S-8 (Registration No. 333-62425) previously filed with the SEC). 4.2 Rights Agreement dated as of March 11, 1998, between Venator Group, Inc. and First Chicago Trust Company of New York, as Rights Agent (incorporated herein by reference to Exhibit 4 to the Form 8-K dated March 11, 1998). 4.3 Indenture dated as of October 10, 1991 (incorporated herein by reference to Exhibit 4.1 to the Registration Statement on Form S-3 (Registration No. 33-43334) previously filed with the SEC). 4.4 Forms of Medium-Term Notes (Fixed Rate and Floating Rate) (incorporated herein by reference to Exhibits 4.4 and 4.5 to the Registration Statement on Form S-3 (Registration No. 33-43334) previously filed with the SEC). 18 21 Exhibit No. in Item 601 of Regulation S-K Description ----------------- ----------- 4.5 Form of 8 1/2 % Debentures due 2022 (incorporated herein by reference to Exhibit 4 to the Registrant's Form 8-K dated January 16, 1992). 4.6 Purchase Agreement dated June 1, 1995 and Form of 7% Notes due 2000 (incorporated herein by reference to Exhibits 1 and 4, respectively, to the Registrant's Form 8-K dated June 7, 1995). 4.7 Distribution Agreement dated July 13, 1995 and Forms of Fixed Rate and Floating Rate Notes (incorporated herein by reference to Exhibits 1, 4.1 and 4.2, respectively, to the Registrant's Form 8-K dated July 13, 1995). 5 * 8 * 9 * 10.1 Venator Group Executive Severance Pay Plan. 10.2 Form of Senior Executive Severance Agreement. 10.3 Bridge Loan Agreement dated as of September 25, 1998. 10.4 Waiver dated as of November 6, 1998 to the Credit Agreement dated April 9, 1997. 10.5 Agreement with S. Ronald Gaston dated November 10, 1998. 10.6 Agreement with Reid Johnson, dated September 17, 1998 10.7 Purchase and Sale Agreement, as amended. 11 * 12 * 13 * 15 Letter re: Unaudited Interim Financial Statements. 16 * 17 * 18 * 19 * 20 * 21 * 22 * 23 * 24 * 25 * 19 22 Exhibit No. in Item 601 of Regulation S-K Description ----------------- ----------- 26 * 27.1 Financial Data Schedule, October 31, 1998 (which is submitted electronically to the SEC for information only and not filed). 27.2 Restated Financial Data Schedule - October 25, 1997 (which is submitted electronically to the SEC for information only and not filed). 99 Independent Accountants' Review Report. - ------------------- * Not applicable 20 23 Exhibits filed with this Form 10-Q: Exhibit No. Description - ----------- ----------- 10.1 Venator Group Executive Severance Pay Plan. 10.2 Form of Senior Executive Severance Agreement. 10.3 Bridge Loan Agreement dated as of September 25, 1998. 10.4 Waiver dated as of November 6, 1998 to the Credit Agreement dated April 9, 1997. 10.5 Agreement with S. Ronald Gaston dated November 10, 1998. 10.6 Agreement with Reid Johnson dated, September 17, 1998. 10.7 Purchase and Sale Agreement, as amended. 15 Letter re: Unaudited Interim Financial Statements. 27.1 Financial Data Schedule - October 31, 1998. 27.2 Restated Financial Data Schedule - October 25, 1997. 99 Independent Accountants' Review Report.

    1    
                                                                    EXHIBIT 10.1

                                                      As Amended August 12, 1998



                               VENATOR GROUP, INC.
                          EXECUTIVE SEVERANCE PAY PLAN
                          (Effective February 1, 1996)
                                  INTRODUCTION

     The purpose of this Executive  Severance Pay Plan (the "Plan") is to enable
Venator Group, Inc. (the Company') to offer a form of protection to officers and
other key  employees  of the  Company  and its  Affiliates  in the  event  their
employment with the Company and its Affiliates terminates.

     Accordingly,  the Company's  Board of Directors has adopted this Plan, upon
the recommendation of the Compensation Committee, effective February 1, 1996 for
selected  officers  and key  employees of the Company and its  Affiliates  in an
effort to assist in  replacing  the loss of income  caused by a  termination  of
employment under the circumstances described herein.

     The Plan, effective February 1, 1996, amended as of August 12, 1998, amends
and supersedes any severance plan,  policies and/or  practices of the Company or
any Affiliate in effect for  Participants  in the Plan.  Any  Participant in the
Plan shall not be eligible to participate in any other severance plan, policy or
practice of the Company or any Affiliate.


                                    ARTICLE I
                                   Definitions

     1.1 "Affiliate"  shall mean the Company and any entity  affiliated with the
Company  within the meaning of Code Section  414(b) with respect to a controlled
group of corporations,  Code Section 414(c) with respect to trades or businesses
under  common  control with the  Company,  Code  Section  414(m) with respect to
affiliated  service groups and any other entity  required to be aggregated  with
the Company under  Section  414(o) of the Code. No entity shall be treated as an
Affiliate  for any period during which it is not part of the  controlled  group,
under common control or otherwise  required to be aggregated  under Code Section
414.

     1.2 "Board" shall mean the Board of Directors of the Company.

     1.3 "Bonus"  shall mean an amount equal to the target bonus  expected to be
earned by an Employee under the Company's Annual Incentive  Compensation Plan or
such other annual bonus plan or program that may be  applicable  to the Employee
in a fiscal year, if the applicable target performance goal is satisfied.

     1.4  "Cause"  shall mean (with  regard to a  Participant's  termination  of
employment with the Control Group): (a) with regard to any member of the Control
Group or any of such member's assets or business, the refusal or willful failure
by the

                                        1

    2

Participant to substantially  perform his or her duties,  (b) with regard to any
member of the Control  Group or any of such  member's  assets or  business,  the
Participant's  dishonesty,  willful  misconduct,  misappropriation,   breach  of
fiduciary duty or fraud, or (c) the Participant's  conviction of a felony (other
than a traffic  violation) or any other crime involving,  in the sole discretion
of the Committee, moral turpitude.

     1.5  "Change in  Control"  shall have the  meaning  set forth in Appendix A
attached hereto.

     1.6 "Code" shall mean the Internal  Revenue Code of 1986, as amended and as
hereafter amended from time to time.

     1.7 "Committee"  shall mean the  Compensation  Committee of the Board or an
administrative committee appointed by the Compensation Committee.

     1.8 "Company" shall mean Venator Group,  Inc., a New York corporation,  and
any successor as provided in Article VI hereof.

     1.9 "Control Group" shall mean the Company and its Affiliates.

     1.10 "Effective Date" shall mean February 1, 1996.

     1.11  "Employee"  shall mean any officer,  member of senior  management  or
other key employee employed by an Employer.

     1.12 "Employer"  shall mean the Company and any Affiliate which has adopted
this Plan in accordance with Section 6.1 hereof.

     1.13 "Good Reason" shall mean (with respect to a Participant's  termination
of  employment  with  the  Control  Group):  (a) any  material  demotion  of the
Participant  or  any  material  reduction  in  the  Participant's  authority  or
responsibility,  except in each case in connection  with the  termination of the
Participant's  employment  for  Cause  or  disability  or  as a  result  of  the
Participant's death, or temporarily as a result of the Participant's  illness or
other  absence;   (b)  prior  to  a  Change  in  Control,  a  reduction  in  the
Participant's  rate of base  salary as payable  from time to time,  other than a
reduction  that occurs in connection  with,  and in the same  percentage  as, an
across-the-board  reduction over any  three-year  period in the base salaries of
all  Employees of the Company of a similar level and where the reduction is less
than 20 percent of the Participant's  base salary measured from the beginning of
such three-year  period;  or (c) a reduction in the  Participant's  annual bonus
classification  level other than in connection with a redesign of the applicable
bonus plan that affects all Employees at the Participant's bonus level.

     1.14 "Participant"  shall mean any Employee  designated by the Committee to
be a  participant  in the  Plan.  The  Committee  may,  in its sole  discretion,
terminate the participation of a Participant at any time.


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    3

     1.15 "Plan" shall mean the Venator Group Executive Severance Pay Plan.

     1.16 "Salary" shall mean an Employee's base monthly cash  compensation rate
for  services  paid by the  Employer  to the  Employee at the time of his or her
termination of employment from the Control Group, as reflected in the Employer's
payroll records.  Salary shall not include commissions,  bonuses,  overtime pay,
incentive  compensation,  benefits  paid  under any  qualified  plan,  any group
medical, dental or other welfare benefit plan, noncash compensation or any other
additional  compensation  but  shall  include  amounts  reduced  pursuant  to an
Employee's  salary reduction  agreement under Sections 125 or 401(k) of the Code
(if any) or a nonqualified  elective  deferred  compensation  arrangement to the
extent that in each such case the reduction is to base salary.

     1.17  "Severance  Benefit"  shall  mean (a) in the case of a  Participant's
termination  of  employment  that does not occur  within the  twelve  (12) month
period  following a Change in Control,  one (1) week's Salary  multiplied by the
Participant's Years of Service, with a minimum of thirteen (13) weeks; or (b) in
the case of a  Participant's  termination  of employment  within the twelve (12)
month period following a Change in Control,  two (2) week's Salary plus prorated
Bonus for two (2) weeks multiplied by the Participant's Years of Service, with a
minimum of twenty-six  (26) weeks.  A  Participant's  prorated Bonus for one (1)
week shall equal a Participant's Bonus divided by fifty-two (52).

     1.18  "Severance  Period"  shall  mean (a) in the  case of a  Participant's
termination  of  employment  that does not occur  within the  twelve  (12) month
period  following  a  Change  in  Control,   one  (1)  week  multiplied  by  the
Participant's Years of Service, with a minimum of thirteen (13) weeks; or (b) in
the case of a  Participant's  termination  of employment  within the twelve (12)
month  period  following a Change in Control,  two (2) weeks  multiplied  by the
Participant's Years of Service, with a minimum of twenty-six (26) weeks.

     1.19 "Year of Service" shall mean each twelve (12) consecutive month period
commencing on the Employee's  date of hire by the Employer and each  anniversary
thereof in which the  Employee is paid by the Employer  for the  performance  of
full-time  services as an  Employee.  For  purposes of this  section,  full-time
services shall mean that the Employee is employed for at least thirty (30) hours
per week. A Year of Service shall include any period during which an Employee is
not working due to  disability,  leave of absence or layoff so long as he or she
is being paid by the Employer  (other than through an employee  benefit plan). A
Year of Service also shall include  service in any branch of the armed forces of
the  United  States by any person who is an  Employee  on the date such  service
commenced,  but only to the extent  required by  applicable  law. If an Employee
terminates  his or her  employment  prior to completing a Year of Service during
the period commencing on his or her date of hire or an anniversary  thereof, the
Employee shall be credited with a fractional Year of Service equal to the number
of  consecutive  months  he or she  has  been  paid  by  the  Employer  for  the
performance of full-time services as an Employee from his or her date of hire or
anniversary   thereof  through  the  date  of  the  Employee's   termination  of
employment, over twelve (12).


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    4


                                   ARTICLE II
                                    Benefits

     2.1 Eligibility for Benefits.  Any  Participant  whose  employment with the
Control  Group is  terminated  without  Cause by an Employer  or who  terminates
employment with the Control Group within sixty (60) days after the occurrence of
a Good  Reason  event with  regard to such  Participant,  shall be entitled to a
Severance  Benefit in the manner set forth in Section 2.2 below.  A  Participant
shall not be  entitled  to a Severance  Benefit if he or she is  terminated  for
Cause.

     2.2 Form of Benefits.  Any Participant described in Section 2.1 above shall
receive his or her  Severance  Benefit in the form of a lump sum cash payment as
soon as administratively feasible following his or her termination of employment
with the  Control  Group,  provided,  however,  that  interest  shall be payable
beginning on the tenth day following such termination of employment at the prime
rate of interest as stated in The Wall Street Journal.

     2.3  Additional  Benefits.  A  Participant  entitled to receive a Severance
Benefit shall continue,  to the extent  permitted  under legal and  underwriting
requirements (if any), to participate  during his or her Severance Period in any
group medical,  dental or life insurance plan he or she participated in prior to
his or her  termination of  employment,  under  substantially  similar terms and
conditions as an active Employee;  provided participation in such group medical,
dental and life insurance benefits shall  correspondingly  cease at such time as
the Participant becomes eligible for a future employer's medical,  dental and/or
life insurance  coverage (or would become  eligible if the  Participant  did not
waive coverage). Notwithstanding the foregoing, the Participant may not continue
to participate in such plans on a pre-tax or tax-favored basis.  Notwithstanding
anything else herein, a Participant shall not be entitled to any benefits during
the  Severance  Period other than the benefits  provided in Sections 2.2 and 2.3
herein and,  without  limiting the  generality of the  foregoing,  a Participant
specifically  shall not be  entitled to  continue  to  participate  in any group
disability or voluntary  accidental death or dismemberment  insurance plan he or
she  participated  in prior to his or her  termination  of  employment.  Without
limiting  the  generality  of the  foregoing,  a  Participant  shall not  accrue
additional  benefits  under any  pension  plan of the  Employer  (whether or not
qualified  under  Section  401(a)  of the Code)  during  the  Severance  Period,
provided,  however, that payment of any Severance Benefit shall be included in a
Participant's earnings for purposes of calculating a Participant's benefit under
the Venator Group Retirement Plan,  Venator Group 401(k) Plan, and Venator Group
Excess Cash Balance Plan.

     2.4  Release.  As  a  condition  of  receiving  benefits   hereunder,   the
Participant  shall be  required to provide  the  Employer  with a release of all
claims of any kind whatsoever against the Control Group, its officers, directors
and  employees,  known or unknown,  as of the date of his or her  termination of
employment. The release shall be in such form as requested by the Employer.


                                        4
    5

     2.5 No Duty to  Mitigate/Set-Off.  No  Participant  entitled  to  receive a
Severance  Benefit  hereunder  shall be required to seek other  employment or to
attempt in any way to reduce any amounts  payable to him or her pursuant to this
Plan.  Further,  the amount of the Severance Benefit payable hereunder shall not
be  reduced  by any  compensation  earned  by the  Participant  as a  result  of
employment by another employer or otherwise.  An Employer's  obligations to make
payment of Severance Benefits and otherwise to perform its obligations hereunder
shall not be affected by any circumstances,  including without  limitation,  any
set-off, counterclaim,  recoupment, defense or other right which an Employer may
have against the Participant.

                                   ARTICLE III
                                     Funding

     3.1  Funding.  The Plan  shall be funded out of the  general  assets of the
Company as and when benefits are payable under the Plan. All Participants  shall
be solely general creditors of the Company.  If the Company decides to establish
any advance  accrued reserve on its books against the future expense of benefits
payable  hereunder,  or if the  Company is  required  to fund a trust under this
Plan, such reserve or trust shall not under any circumstances be deemed to be an
asset of the Plan.

                                   ARTICLE IV
                           Administration of the Plan

     4.1 Plan Administrator. The general administration of the Plan on behalf of
the Employers shall be placed with the Committee.

     4.2  Reimbursement  of Expenses of Plan Committee.  The Company may, in its
sole  discretion,  pay or  reimburse  the  members  of  the  Committee  for  all
reasonable expenses incurred in connection with their duties hereunder.

     4.3 Action by the Plan Committee.  Decisions of the Committee shall be made
by a majority  of its  members  attending a meeting at which a quorum is present
(which meeting may be held  telephonically),  or by written action in accordance
with applicable  law. All decisions of the Committee on any question  concerning
the selection of Participants and the  interpretation  and administration of the
Plan shall be final, conclusive and binding upon all parties.

     4.4 Decisions of Plan  Committee are Binding on All Persons.  The Committee
(or its delegate) shall have the exclusive right,  power, and authority,  in its
sole and absolute  discretion,  to administer,  apply and interpret the Plan and
any other Plan  documents and to decide all matters  arising in connection  with
the operation or administration of the Plan.  Without limiting the generality of
the foregoing,  the Committee (or its delegate) shall have the sole and absolute
discretionary  authority:  (a) to take all actions and make all  decisions  with
respect to the eligibility  for, and the amount of,  benefits  payable under the
Plan;  (b) to  formulate,  interpret and apply rules,  regulations  and policies
necessary to  administer  the Plan in accordance  with its terms;  (c) to decide
questions, including legal

                                        5
    6

or factual questions,  relating to the calculation and payment of benefits under
the Plan;  (d) to resolve and/or clarify any  ambiguities,  inconsistencies  and
omissions  arising  under the Plan or other  Plan  documents;  (e) to decide for
purposes of paying benefits hereunder,  whether, based on the terms of the Plan,
a termination  of employment is for Good Reason or for Cause;  and (f) except as
specifically provided to the contrary in Section 4.11, to process and approve or
deny benefit claims and rule on any benefit exclusions.  All determinations made
by the  Committee  (or any delate) with respect to any matter  arising under the
Plan and any other Plan documents shall be final,  binding and conclusive on all
parties.

     4.5 Delegation of Authority.  The Committee may delegate any and all of its
powers and  responsibilities  hereunder  to other  persons by formal  resolution
filed with and accepted by the Board. Any such delegation shall not be effective
until  it is  accepted  by the  Board  and  the  persons  designated  and may be
rescinded at any time by written notice from the Committee to the person to whom
the delegation is made.

     4.6  Retention of  Professional  Assistance.  The Committee may employ such
legal counsel,  accountants and other persons as may be required in carrying out
its work in connection with the Plan.

     4.7 Accounts and Records.  The Committee  shall  maintain such accounts and
records  regarding the fiscal and other  transactions of the Plan and such other
data as may be required to carry out its functions  under the Plan and to comply
with all applicable laws.

     4.8 Compliance  with  Applicable  Law. The Company shall be deemed the Plan
Administrator  for the purposes of any  applicable  law and shall be responsible
for the preparation and filing of any required returns,  reports,  statements or
other filings with appropriate  governmental agencies. The Company shall also be
responsible for the preparation and delivery of information to persons  entitled
to such information under any applicable law.

     4.9  Liability.  No member of the  Committee  and no  officer,  director or
employee of the Company or any other member of the Control Group shall be liable
for any action or inaction with respect to his or her  functions  under the Plan
unless  such  action or  inaction  is  adjudged  to be due to gross  negligence,
willful misconduct or fraud.  Further, no such person shall be personally liable
merely  by  virtue  of any  instrument  executed  by him or her or on his or her
behalf in connection with the Plan.

     4.10  Indemnification.  Each Employer shall  indemnify,  to the full extent
permitted by law and its Certificate of  Incorporation  and By-laws (but only to
the extent  not  covered by  insurance)  its  officers  and  directors  (and any
employee involved in carrying out the functions of such Employer under the Plan)
and each member of the Committee  (and any employee  designated by the Committee
as a delegate)  against any expenses,  including amounts paid in settlement of a
liability,  which are reasonably incurred in connection with any legal action to
which such person is a party by reason of his or her duties or  responsibilities
with respect to the Plan (other than as a Participant), except with

                                        6
    7

regard to matters as to which he or she shall be  adjudged  in such action to be
liable for gross negligence,  willful  misconduct or fraud in the performance of
his or her duties.

     4.11  Claims  Procedure.  Any  claim  by  a  Participant  with  respect  to
eligibility,  participation,  contributions,  benefits  or other  aspects of the
operation  of the Plan shall be made in writing to the  Secretary of the Company
or such other  person  designated  by the  Committee  from time to time for such
purpose.  If  the  designated  person  receiving  a  claim  believes,  following
consultation  with the  Chairman  of the  Committee,  that the  claim  should be
denied,  he or she shall notify the  Participant in writing of the denial of the
claim within ninety (90) days after his or her receipt  thereof (this period may
be extended an additional ninety (90) days in special circumstances and, in such
event,  the  Participant  shall be notified in writing of the  extension).  Such
notice shall (a) set forth the specific  reason or reasons for the denial making
reference to the pertinent  provisions of the Plan or of Plan documents on which
the  denial is based,  (b)  describe  any  additional  material  or  information
necessary to perfect the claim, and explain why such material or information, if
any, is necessary,  and (c) inform the  Participant of his or her right pursuant
to this Section 4.11 to request review of the decision.

     A  Participant  may appeal the  denial of a claim by  submitting  a written
request for review to the  Committee,  within  sixty (60) days after the date on
which such denial is received.  Such period may be extended by the Committee for
good  cause  shown.  The  claim  will  then  be  reviewed  by the  Committee.  A
Participant or his or her duly authorized  representative may discuss any issues
relevant to the claim, may review pertinent  documents and may submit issues and
comments  in  writing.  If the  Committee  deems it  appropriate,  it may hold a
hearing as to a claim. If a hearing is held, the  Participant  shall be entitled
to be represented by counsel. The Committee shall decide whether or not to grant
the claim  within sixty (60) days after  receipt of the request for review,  but
this period may be extended by the Committee for up to an additional  sixty (60)
days in special circumstances.  Written notice of any such special circumstances
shall be sent to the  Participant.  Any claim not decided  upon in the  required
time period shall be deemed  denied.  All  interpretations,  determinations  and
decisions of the  Committee  with respect to any claim shall be made in its sole
discretion  based on the Plan and other  relevant  documents and shall be final,
conclusive and binding on all persons.

                                    ARTICLE V
                            Amendment and Termination

     5.1 Amendment and Termination.  The Company reserves the right, in its sole
and absolute  discretion to amend or terminate,  in whole or in part, any or all
of the  provisions  of this Plan by  action  of the Board (or a duly  authorized
committee  thereof)  at any  time,  provided  that any  amendment  reducing  the
benefits  provided  hereunder or any Plan termination (a) shall not be effective
prior to the second  anniversary of the Effective Date and (b) no such amendment
or Plan  termination may take effect sooner than one (1) year following the date
on which the Board takes such action.  Any termination or amendment of the Plan,
however, shall not affect the Severance Benefit or other benefits hereunder,  if
any, payable to any Participant who is entitled to such Severance Benefit or

                                        7
    8

other benefits as of the date of the amendment or termination of the Plan.

                                   ARTICLE VI
                     Participating Employers and Successors

     6.1 Participating Employers.  Upon approval by the Committee, this Plan may
be adopted by any Affiliate of the Company.  Upon such  adoption,  the Affiliate
shall become an Employer hereunder and the provisions of the Plan shall be fully
applicable to the Employees of that Affiliate.

     6.2  Successors.  Subject to Section 5.1 hereof,  the Company shall require
any  successor or assignee,  whether  direct or indirect,  by purchase,  merger,
consolidation or otherwise,  to all or substantially  all the business or assets
of the Company, expressly and unconditionally to assume and agree to perform the
Company's obligations under this Plan, in the same manner and to the same extent
that  the  Company  would  be  required  to  perform  if no such  succession  or
assignment had taken place.  In such event,  the term "Company," as used in this
Plan,  shall mean the  Company as  hereinbefore  defined  and any  successor  or
assignee to the business or assets which by reason  hereof  becomes bound by the
terms and  provisions  of this Plan.  In the event an  Affiliate  ceases to be a
member of the Control Group, it may by such written agreement,  but shall not be
obligated  to,  continue the Plan as a separate  plan and all  references to the
"Company"  shall  become  reference  to  the  Affiliate.  If  this  Plan  is not
specifically  continued by the Affiliate,  it shall terminate as to Employees of
such  Affiliate.  If this Plan is specifically  continued by the Affiliate,  the
Affiliate,  but not  the  Company,  shall  be  liable  to the  Employees  of the
Affiliate for any benefits due hereunder.

                                   ARTICLE VII
                                  Miscellaneous

     7.1  Rights  of  Employees.  Nothing  herein  contained  shall  be  held or
construed to create any liability or obligation  upon the Employer to retain any
Employee in its service.  All  Employees  shall  remain  subject to discharge or
discipline to the same extent as if the Plan had not been put into effect.

     7.2  Headings.  The headings of the Plan are inserted  for  convenience  of
reference  only and shall  have no effect  upon the  meaning  of the  provisions
hereof.

     7.3 Use of Words.  Whenever used in this  instrument,  a masculine  pronoun
shall be deemed to include the  masculine  and feminine  gender,  and a singular
word shall be deemed to include the singular and plural,  in all cases where the
context so requires.

     7.4 Controlling Law. The construction and  administration of the Plan shall
be governed by the Employee  Retirement Income Security Act of 1974, as amended.
To the extent not so governed,  it shall be governed by the laws of the State of
New York (without reference to rules relating to conflicts of law).


                                        8
    9

     7.5 Withholding.  The Employer shall have the right to make such provisions
as it deems  necessary or appropriate  to satisfy any  obligations it reasonably
believes it may have to withhold  federal,  state or local income or other taxes
incurred  by reason of  payments  pursuant to this Plan.  In lieu  thereof,  the
Employer  shall  have the right to  withhold  the  amount of such taxes from any
other sums due or to become due from the Employer to the  Participant  upon such
terms and conditions as the Committee may prescribe.

     7.6 Severability. Should any provisions of the Plan be deemed or held to be
unlawful  or invalid for any reason,  such fact shall not  adversely  affect the
other provisions of the Plan unless such  determination  shall render impossible
or  impracticable  the functioning of the Plan, and in such case, an appropriate
provision  or  provisions  shall be  adopted  so that the Plan may  continue  to
function properly.

     7.7 Incompetency.  In the event that the Committee finds that a Participant
is unable to care for his or her affairs  because of illness or  accident,  then
benefits  payable  hereunder,  unless  claim  has been made  therefor  by a duly
appointed guardian,  committee,  or other legal  representative,  may be paid in
such manner as the Committee shall determine,  and the application thereof shall
be a complete  discharge of all  liability for any payments or benefits to which
such Participant was or would have been otherwise entitled under this Plan.

     7.8 Payments to a Minor. Any payments to a minor from this Plan may be paid
by the Committee in its sole and absolute discretion (a) directly to such minor;
(b) to the legal or natural  guardian or such minor; or (c) to any other person,
whether or not  appointed  guardian  of the  minor,  who shall have the care and
custody  of such  minor.  The  receipt  by such  individual  shall be a complete
discharge of all liability under the Plan therefor.

     7.9 Assignment and  Alienation.  The benefits  payable under the Plan shall
not be subject to alienation,  transfer, assignment,  garnishment,  execution or
levy of any kind, and any attempt to cause any benefits to be so subjected shall
not be recognized.

     7.10  Top-hat  Plan.  This Plan is intended to be a "top-hat"  welfare plan
within the meaning of Department of Labor Regulation Section 2520.104-24.



                                        9

    10


                                   APPENDIX A
                                   ----------

                                Change in Control
                                -----------------

     A Change in Control shall mean any of the following:  (i) (A) the making of
a tender or  exchange  offer by any  person  or  entity  or group of  associated
persons or entities  (within the meaning of Section  13(d)(3) or 14(d)(2) of the
Exchange  Act of 1934) (a "Person")  (other than the Company or its  Affiliates)
for shares of common stock  pursuant to which  purchases  are made of securities
representing at least twenty percent (20%) of the total combined voting power of
the Company's then issued and outstanding voting  securities;  (B) the merger or
consolidation  of  the  Company  with,  or the  sale  or  disposition  of all or
substantially  all of the assets of the Company to, any Person  other than (a) a
merger or  consolidation  which  would  result in the voting  securities  of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining  outstanding  or by being  converted  into  voting  securities  of the
surviving or parent  entity) fifty percent (50%) or more of the combined  voting
power of the voting securities of the Company or such surviving or parent entity
outstanding  immediately after such merger or consolidation;  or (b) a merger or
capitalization  effected  to  implement  a  recapitalization  of the Company (or
similar  transaction)  in which no Person is or becomes  the  beneficial  owner,
directly or indirectly (as  determined  under Rule 13d-3  promulgated  under the
Exchange Act), of securities representing more than the amounts set forth in (C)
below;  (C) the  acquisition  of direct or  indirect  beneficial  ownership  (as
determined  under Rule 13d-3  promulgated  under the Securities  Exchange Act of
1934),  in the  aggregate,  of  securities  of the Company  representing  twenty
percent (20%) or more of the total  combined  voting power of the Company's then
issued and outstanding  voting  securities by any Person acting in concert as of
the date of the Plan; provided, however, that the Board may at any time and from
time to time  and in the  sole  discretion  of the  Board,  as the  case may be,
increase the voting security ownership  percentage threshold of this item (C) to
an  amount  not  exceeding  forty  percent  (40%);  or (D) the  approval  by the
shareholders of the Company of any plan or proposal for the complete liquidation
or dissolution of the Company or for the sale of all or substantially all of the
assets  of the  Company;  or (ii)  during  any  period  of not more than two (2)
consecutive  years,  individuals who at the beginning of such period  constitute
the Board,  and any new director  (other than a director  designated by a person
who has  entered  into  agreement  with the  Company  to  effect  a  transaction
described in clause (i)) whose  election by the Board or nomination for election
by the  Company's  shareholders  was  approved by a vote of at least  two-thirds
(2/3) of the  directors  then still in office who either were  directors  at the
beginning  of the  period or whose  election  or  nomination  for  election  was
previously  so approved,  cease for any reason to constitute at least a majority
thereof.
 

                                       10

    1                                   
                                                                    Exhibit 10.2

                                    AGREEMENT
                                    ---------

     THIS AGREEMENT made as of [Date] by and between VENATOR GROUP,  INC., a New
York corporation  with its principal office at 233 Broadway,  New York, New York
10279 (the "Company") and [Executive], residing at [Address] (the "Executive").

                              W I T N E S S E T H:
                              --------------------

     WHEREAS,  the Company believes that the  establishment and maintenance of a
sound and vital  management  of the Company is essential to the  protection  and
enhancement of the interests of the Company and its shareholders; and

     WHEREAS, the Company wishes to offer a form of protection to the Executive,
as one of a select  group of officers  and key  employees of the Company and its
Affiliates,  in the event the  Executive's  employment  with the  Control  Group
terminates; and

     WHEREAS,  the Company also  recognizes  that the possibility of a Change in
Control of the Company, with the attendant uncertainties and risks, might result
in the  departure  or  distraction  of the  Executive  to the  detriment  of the
Company; and

     WHEREAS,  the  Company  wishes to induce the  Executive  to remain with the
Control  Group,  and  to  reinforce  and  encourage  the  Executive's  continued
attention and dedication, when faced with the possibility of a Change in Control
of the Company; and

     WHEREAS,  this Agreement  amends and  supersedes any employment  agreement,
severance  plan,  policy  and/or  practice  of the  Company  in  effect  for the
Executive.

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

     1.  Definitions.  The following  terms shall have the meanings set forth in
this section as follows:

     (a) "Affiliate"  shall mean the Company and any entity  affiliated with the
Company  within the meaning of Code Section  414(b) with respect to a controlled
group of corporations,  Code Section 414(c) with respect to trades or businesses
under  common  control with the  Company,  Code  Section  414(m) with respect to
affiliated  service groups and any other entity  required to be aggregated  with
the Company under  Section  414(o) of the Code. No entity shall be treated as an
Affiliate  for any period during which it is not part of the  controlled  group,
under common control or otherwise  required to be aggregated  under Code Section
414.

     (b) "Beneficiary" shall mean the individual designated by the Executive, on
a form  acceptable  by the  Committee,  to receive  benefits  payable under this
Agreement  in  the  event  of  the  Executive's  death.  If  no  Beneficiary  is
designated,  the Executive's  Beneficiary  shall be his or her spouse, or if the
Executive is not survived by a spouse, the Executive's estate.

     (c) "Board" shall mean the Board of Directors of the Company.


                                        1
    2

     (d) "Bonus"  shall mean an amount equal to the target bonus  expected to be
earned by the Executive under the Company's Annual Incentive  Compensation  Plan
or such other annual bonus plan or program  that may then be  applicable  to the
Executive  in a  fiscal  year,  if the  applicable  target  performance  goal is
satisfied.

     (e)  "Cause"  shall mean (with  regard to the  Executive's  termination  of
employment  with the Control  Group):  (i) the refusal or willful failure by the
Executive to  substantially  perform his or her duties,  (ii) with regard to the
Control Group or any of their assets or businesses,  the Executive's dishonesty,
willful  misconduct,  misappropriation,  breach of fiduciary  duty or fraud,  or
(iii) the Executive's conviction of a felony (other than a traffic violation) or
any other  crime  involving,  in the sole  discretion  of the  Committee,  moral
turpitude.

     (f)  "Change in  Control"  shall have the  meaning  set forth in Appendix A
attached hereto.

     (g) "Code" shall mean the Internal  Revenue Code of 1986, as amended and as
hereafter amended from time to time.

     (h) "Committee"  shall mean the  Compensation  Committee of the Board or an
administrative committee appointed by the Compensation Committee.

     (i) "Competition" shall mean the (i) participating, directly or indirectly,
as an individual proprietor,  stockholder,  officer,  employee,  director, joint
venturer,  investor,  lender, or in any capacity  whatsoever  (within the United
States  of  America,  or in any  country  where  any of the  Executive's  former
employing  members  of  the  Control  Group  does  business)  in a  business  in
competition  with any business  conducted by any member of the Control Group for
which  the  Executive  worked  at  any  time,  provided,   however,   that  such
participation  shall  not  include  (A) the mere  ownership  of not more  than 1
percent of the total  outstanding  stock of a  publicly  held  company;  (B) the
performance  of services for any  enterprise to the extent such services are not
performed, directly or indirectly, for a business in which any of the Employee's
employing  members of the Control Group is engaged;  or (C) any activity engaged
in with the  prior  written  approval  of the  Board or the  Committee;  or (ii)
intentional recruiting,  soliciting or inducing, of any employee or employees of
the Control Group to terminate their  employment  with, or otherwise cease their
relationship  with the former employing  members of the Control Group where such
employee or employees do in fact so terminate their employment.

     (j) "Control Group" shall mean the Company and its Affiliates.

     (k) "Good Reason" shall mean (with respect to an Executive's termination of
employment with the Control Group):  (i) any material  demotion of the Executive
or any material reduction in the Executive's authority or responsibility, except
in each case in connection with the  termination of the  Executive's  employment
for Cause or disability or as a result of the Executive's  death, or temporarily
as a result of the Executive's illness or other absence;  (ii) prior to a Change
                                       2

    3

in Control,  a reduction in the Executive's  rate of base salary as payable from
time to time,  other than a reduction that occurs in connection with, and in the
same percentage as, an across-the-board  reduction over any three-year period in
the base salaries of all  executives of the Company of a similar level and where
the reduction is less than 20 percent of the  Executive's  base salary  measured
from the  beginning  of such  three-year  period;  (iii) on or after a Change in
Control,  any reduction in the  Executive's  rate of base salary as payable from
time to time;  (iv) a reduction in the Executive's  annual bonus  classification
level other than in connection with a redesign of the applicable bonus plan that
affects all  employees  at the  Executive's  bonus  level;  (v) a failure of the
Company to  continue  in effect the  benefits  applicable  to, or the  Company's
reduction of the benefits applicable to, the Executive under any benefit plan or
arrangement (including without limitation,  any pension, life insurance,  health
or disability  plan) in which the Executive  participates  as of the date of the
Change in Control  without  implementation  of a  substitute  plan(s)  providing
materially  similar benefits in the aggregate to those  discontinued or reduced,
except for a discontinuance of, or reduction under, any such plan or arrangement
that is legally  required  and/or  generally  applies to all  executives  of the
Company of a similar  level,  provided  that in either  such  event the  Company
provides  similar  benefits (or the economic effect thereof) to the Executive in
any manner  determined  by the Company;  or (vi) failure of any successor to the
Company to assume in writing the obligations hereunder.

     (l) "Salary" shall mean an Executive's base monthly cash  compensation rate
for services paid to the Executive by the Company or an Affiliate at the time of
his or her  termination of employment  from the Control Group.  Salary shall not
include commissions,  bonuses,  overtime pay, incentive  compensation,  benefits
paid  under any  qualified  plan,  any group  medical,  dental or other  welfare
benefit plan,  noncash  compensation or any other  additional  compensation  but
shall  include  amounts  reduced  pursuant to an  Executive's  salary  reduction
agreement  under  Sections 125 or 401(k) of the Code (if any) or a  nonqualified
elective deferred compensation  arrangement to the extent that in each such case
the reduction is to base salary.

     (m)  "Severance  Benefit"  shall  mean (i) in the  case of the  Executive's
termination  of  employment  that  does not  occur  within  the 12 month  period
following a Change in Control,  two weeks' Salary plus prorated Bonus multiplied
by the Executive's Years of Service,  with a minimum of 26 weeks; or (ii) in the
case of an  Executive's  termination  of  employment  within the 12 month period
following a Change in Control,  two weeks' Salary plus prorated Bonus multiplied
by the Executive's Years of Service, with a minimum of 78 weeks. The Executive's
prorated Bonus for one week shall equal the Executive's  Bonus divided by 52. In
no event, however, shall the Severance Benefit payable to an Executive hereunder
be less than 12 months' Salary.

     (n)  "Severance  Period"  shall  mean  (i) in the  case of the  Executive's
termination  of  employment  that  does not  occur  within  the 12 month  period
following a Change in Control,  two weeks multiplied by the Executive's Years of
Service,  with a  minimum  of 52  weeks;  or (ii) in the case of an  Executive's
termination  of  employment  within the 12 month  period  following  a Change in
Control,  two weeks  multiplied  by the  Executive's  Years of  Service,  with a
minimum of 78 weeks.

     (o)  "Year  of  Service"  shall  mean  each  12  consecutive  month  period
commencing  on the  Executive's  date of hire by the Company or an Affiliate and
each  anniversary  thereof in which the  Executive  is paid by the Company or an
Affiliate  for the  performance  of  full-time  services  as an  Executive.  For
purposes of this  section,  full-time  services  shall mean that the Employee is
employed  for at least 30 hours per week.  A Year of Service  shall  include any
period  during  which an Employee is not  working  due to  disability,  leave of
absence or layoff so long as he or she is being paid by the

                                       3
    4

Employer (other than through any employee  benefit plan). A Year of Service also
shall include  service in any branch of the armed forces of the United States by
any person who is an Executive on the date such service  commenced,  but only to
the extent required by applicable law.

     2. Term. The initial term of this Agreement shall end on December 31 of the
year  following the year in which this Agreement is entered into. On December 31
of each year, the term shall be automatically renewed for an additional one year
so that the term shall then be for two years,  unless the Committee notifies the
Executive  prior  to any  December  31  that  the  term  shall  not be  renewed.
Notwithstanding  anything  in this  Agreement  to the  contrary,  if the Company
becomes  obligated  to make any payment to the  Executive  pursuant to the terms
hereof at or prior to the  expiration  of this  Agreement,  then this  Agreement
shall  remain in effect until all of the  Company's  obligations  hereunder  are
fulfilled.

     3. Benefits Upon Termination.  In the event the Executive's employment with
the  Control  Group is  terminated  without  Cause or the  Executive  terminates
employment  with the Control Group within 60 days after the occurrence of a Good
Reason event with regard to the Executive,  the Executive shall be entitled to a
Severance Benefit as set forth below.

     (a) The Executive shall receive 50 percent of his or her Severance  Benefit
in the form of a lump  sum cash  payment  as soon as  administratively  feasible
following his or her termination of employment with the Control Group, provided,
however,  that  interest  shall be payable  beginning on the tenth day following
such  termination  of  employment at the prime rate of interest as stated in The
Wall Street Journal.

     (b) The  Executive  shall  receive the  remaining  50 percent of his or her
Severance  Benefit  in  the  form  of  a  lump  sum  cash  payment  as  soon  as
administratively  feasible following the one year anniversary of the Executive's
termination  of  employment  with  the  Control  Group,  subject  to (c)  below,
provided,  however,  that interest  shall be payable  beginning on the tenth day
following such termination of employment at the prime rate of interest as stated
in The Wall  Street  Journal.  Notwithstanding  the  foregoing,  if a Change  in
Control occurs prior to the  Executive's  receipt of the remaining 50 percent of
his or her  Severance  Benefit,  the Executive  shall receive such  remaining 50
percent  within 10 days following the Change in Control (and, if not paid within
such 10 day period,  with interest payable  beginning on the tenth day following
the Change in Control at the prime rate of interest as stated in The Wall Street
Journal).

     (c) The  Executive  shall  only be  entitled  to the  portion of his or her
Severance  Benefit  described in (b) above if the  Executive  does not engage in
Competition  during the one year  period  following  his or her  termination  of
employment  with the  Control  Group  and if the  Executive  has not  materially
violated the  provisions of Section 14 hereof.  If the Executive  does engage in
Competition  or  violates  the  provisions  of Section  14 during  such one year
period, the portion of the Executive's  Severance Benefit described in (b) above
shall be forfeited.  If the restriction set forth in this subsection is found by
any court of competent  jurisdiction to be unenforceable  because it extends for
too long a  period  of time or over too  great a range of  activities  or in too
broad a  geographic  area,  it shall be  interpreted  to extend over the maximum
period of time,  range of activities  or  geographic  area as to which it may be
enforceable.

                                        4
    5

     (d)  Notwithstanding  anything to the  contrary  contained  herein,  if the
Executive's  employment with the Control Group is terminated as described in the
introductory  paragraph to this Section 3 following a Change in Control, (i) the
Executive shall receive 100 percent of his or her Severance  Benefit in the form
of a lump sum cash payment  within 10 days  following his or her  termination of
employment  with the Control  Group (and, if not paid within such 10 day period,
with interest  payable  beginning on the tenth day following such termination of
employment at the prime rate of interest as stated in The Wall Street  Journal),
and (ii) the  restriction  on  competition  contained  in Section 3(c) shall not
apply.

     (e) The Executive shall continue,  to the extent  permitted under legal and
underwriting  requirements (if any), to participate  during his or her Severance
Period  in  any  group  medical,  dental  or  life  insurance  plan  he  or  she
participated  in  prior  to  his  or  her   termination  of  employment,   under
substantially  similar  terms and  conditions  as an active  Employee;  provided
participation  in such group medical,  dental and life insurance  benefits shall
correspondingly  cease at such  time as the  Executive  becomes  eligible  for a
future  employer's  medical,  dental  and/or life  insurance  coverage (or would
become eligible if the Executive did not waive  coverage).  Notwithstanding  the
foregoing,  the  Executive  may not continue to  participate  in such plans on a
pre-tax  or  tax-favored  basis.   Notwithstanding  anything  else  herein,  the
Executive  shall not be entitled to any  benefits  during the  Severance  Period
other than the benefits  provided in Section 3  herein and, without limiting the
generality of the foregoing, the Executive specifically shall not be entitled to
continue to participate in any group disability or voluntary accidental death or
dismemberment  insurance  plan he or she  participated  in  prior  to his or her
termination of employment. Without limiting the generality of the foregoing, the
Executive  shall not accrue  additional  benefits  under any pension plan of the
Employer  (whether or not qualified under Section 401(a) of the Code) during the
Severance Period, provided, however, that payment of any Severance Benefit shall
be  included  in the  Executive's  earnings  for  purposes  of  calculating  the
Executive's  benefit  under the Venator  Group  Retirement  Plan,  Venator Group
401(k) Plan, and Venator Group Excess Cash Balance Plan.

     (f) In the event of the Executive's  death after becoming  eligible for the
portion of the Severance  Benefit described in (a) above and prior to payment of
such  amount,  such  portion  of the  Severance  Benefit  shall  be  paid to the
Executive's  Beneficiary.  In  addition  to the  foregoing,  in the event of the
Executive's  death  prior to payment of the  portion  of the  Severance  Benefit
described  in  (b)  above,   such  amount  shall  be  paid  to  the  Executive's
Beneficiary,  but only to the extent that the Executive satisfied the provisions
set forth in (c) above for the period  following the Executive's  termination of
employment with the Control Group and prior to his or her death.

     (g) Notwithstanding anything else herein, to the extent the Executive would
be subject to the excise tax under  Section  4999 of the Code on the  amounts in
(a) or (b) above and such other  amounts or benefits he or she received from the
Company  and its  Affiliates  required  to be  included  in the  calculation  of
parachute  payments  for  purposes  of Sections  280G and 4999 of the Code,  the
amounts  provided  under this  Agreement  shall be  automatically  reduced to an
amount one dollar  less than that,  when  combined  with such other  amounts and
benefits  required to be so included,  would subject the Executive to the excise
tax under Section 4999 of the Code, if, and only if, the reduced amount received
by the Executive,  would be greater than the unreduced  amount to be received by
the  Executive  minus the excise tax payable  under  Section 4999 of the Code on
such amount and the

                                        5
    6

other amounts and benefits received by the Executive and required to be included
in the calculation of a parachute payment for purposes of Sections 280G and 4999
of the Code.

     4. No Duty to Mitigate/Set-off.  The Company agrees that if the Executive's
employment with the Company is terminated during the term of this Agreement, the
Executive  shall not be required to seek other  employment  or to attempt in any
way to reduce any amounts  payable to the  Executive by the Company  pursuant to
this Agreement.  Further, except to the extent provided for in Section 3(c), the
amount of the  Severance  Benefit  provided for in this  Agreement  shall not be
reduced by any  compensation  earned by the Executive or benefit provided to the
Executive as the result of employment by another  employer or otherwise.  Except
as otherwise  provided  herein,  the Company's  obligations to make the payments
provided  for in  this  Agreement  and  otherwise  to  perform  its  obligations
hereunder  shall  not  be  affected  by  any  circumstances,  including  without
limitation, any set-off, counterclaim,  recoupment, defense or other right which
the Company may have against the Executive.  The Executive  shall retain any and
all rights under all pension plans, welfare plans, equity plans and other plans,
including  other severance  plans,  under which the Executive would otherwise be
entitled to benefits.

     5. Funding. Severance Benefits shall be funded out of the general assets of
the Company as and when they are payable  under this  Agreement.  The  Executive
shall be solely a general  creditor of the  Company.  If the Company  decides to
establish any advance accrued reserve on its books against the future expense of
benefits payable hereunder,  or if the Company is required to fund a trust under
this  Agreement,  such  reserve or trust  shall not under any  circumstances  be
deemed to be an asset of this Agreement.

     6.  Administration.  This Agreement shall be administered by the Committee.
The Committee  (or its delegate)  shall have the  exclusive  right,  power,  and
authority,  in its  sole and  absolute  discretion,  to  administer,  apply  and
interpret the Agreement and to decide all matters arising in connection with the
operation or administration of the Agreement. Without limiting the generality of
the  foregoing,  the  Committee  shall have the sole and absolute  discretionary
authority:  (a) to take all actions and make all  decisions  with respect to the
eligibility for, and the amount of, benefits payable under the Agreement; (b) to
formulate,  interpret  and apply rules,  regulations  and policies  necessary to
administer the Agreement in accordance with its terms; (c) to decide  questions,
including legal or factual questions, relating to the calculation and payment of
benefits  under the Agreement;  (d) to resolve  and/or clarify any  ambiguities,
inconsistencies  and omissions  arising under the  Agreement;  (e) to decide for
purposes  of  paying  benefits  hereunder,  whether,  based on the terms of this
Agreement,  a termination of employment is for Good Reason or for Cause; and (f)
except as specifically  provided to the contrary herein,  to process and approve
or deny benefit claims and rule on any benefit  exclusions.  All  determinations
made by the Committee (or any delegate) with respect to any matter arising under
the Agreement shall be final, binding and conclusive on all parties.

     Decisions  of the  Committee  shall be made by a  majority  of its  members
attending  a meeting at which a quorum is  present  (which  meeting  may be held
telephonically),  or by written action in accordance  with  applicable  law. All
decisions of the Committee on any question  concerning  the  interpretation  and
administration of the Agreement shall be final,  conclusive and binding upon all
parties.

                                        6
    7

     No member of the  Committee  and no  officer,  director  or employee of the
Company or any other  Affiliate  shall be liable for any action or inaction with
respect to his or her  functions  under this  Agreement  unless  such  action or
inaction is adjudged to be due to gross negligence, willful misconduct or fraud.
Further,  no such  person  shall be  personally  liable  merely by virtue of any
instrument  executed  by him or her or on his or her behalf in  connection  with
this Agreement.

     The Company shall  indemnify,  to the full extent  permitted by law and its
Certificate of Incorporation  and By-laws (but only to the extent not covered by
insurance) its officers and directors (and any employee involved in carrying out
the  functions  of the  Company  under  the  Agreement)  and each  member of the
Committee  against any  expenses,  including  amounts  paid in  settlement  of a
liability,  which are reasonably incurred in connection with any legal action to
which such person is a party by reason of his or her duties or  responsibilities
with respect to the  Agreement,  except with regard to matters as to which he or
she shall be adjudged in such action to be liable for gross negligence,  willful
misconduct or fraud in the performance of his or her duties.

     7.  Claims   Procedures.   Any  claim  by  the  Executive  or   Beneficiary
("Claimant")  with respect to  participation,  contributions,  benefits or other
aspects  of the  operation  of the  Agreement  shall be made in  writing  to the
Secretary of the Company or such other person  designated by the Committee  from
time to time  for such  purpose.  If the  designated  person  receiving  a claim
believes,  following  consultation with the Chairman of the Committee,  that the
claim  should be denied,  he or she shall  notify the Claimant in writing of the
denial of the claim within 90 days after his or her receipt thereof (this period
may be  extended an  additional  90 days in special  circumstances  and, in such
event, the Claimant shall be notified in writing of the extension).  Such notice
shall  (a) set forth  the  specific  reason or  reasons  for the  denial  making
reference to the  pertinent  provisions  of the Agreement on which the denial is
based, (b) describe any additional material or information  necessary to perfect
the claim,  and explain why such material or information,  if any, is necessary,
and (c) inform the  Claimant  of his or her right  pursuant  to this  section to
request review of the decision.

     A Claimant may appeal the denial of a claim by submitting a written request
for review to the Committee,  within 60 days after the date on which such denial
is received.  Such period may be extended by the Committee for good cause shown.
The claim will then be reviewed by the Committee.  A Claimant or his or her duly
authorized  representative  may  discuss any issues  relevant to the claim,  may
review pertinent documents and may submit issues and comments in writing. If the
Committee  deems it  appropriate,  it may  hold a  hearing  as to a claim.  If a
hearing is held,  the Claimant  shall be entitled to be  represented by counsel.
The  Committee  shall  decide  whether or not to grant the claim  within 60 days
after receipt of the request for review,  but this period may be extended by the
Committee  for up to an  additional  60 days in special  circumstances.  Written
notice of any such  special  circumstances  shall be sent to the  Claimant.  Any
claim not decided upon in the required time period shall be deemed  denied.  All
interpretations,  determinations  and decisions of the Committee with respect to
any claim shall be made in its sole discretion  based on the Agreement and other
relevant documents and shall be final, conclusive and binding on all persons.

     8. Incompetency;  Payments to Minors. In the event that the Committee finds
that a Participant  is unable to care for his or her affairs  because of illness
or  accident,  then  benefits  payable  hereunder,  unless  claim  has been made
therefor by a duly appointed guardian, committee, or other

                                        7
    8

legal  representative,  may be  paid  in  such  manner  as the  Committee  shall
determine,  and the  application  thereof  shall be a complete  discharge of all
liability  for any payments or benefits to which such  Participant  was or would
have been  otherwise  entitled  under this  Agreement.  Any  payments to a minor
pursuant to this Agreement may be paid by the Committee in its sole and absolute
discretion  (a) directly to such minor;  (b) to the legal or natural guardian of
such minor; or (c) to any other person, whether or not appointed guardian of the
minor,  who shall have the care and custody of such  minor.  The receipt by such
individual  shall be a complete  discharge of all liability  under the Agreement
therefor.

     9. Withholding. The Company shall have the right to make such provisions as
it deems  necessary or  appropriate  to satisfy any  obligations  it may have to
withhold  federal,  state or local  income or other taxes  incurred by reason of
payments  pursuant to this Agreement.  In lieu thereof,  the Employer shall have
the right to  withhold  the  amount of such  taxes from any other sums due or to
become due from the Employer to the Executive  upon such terms and conditions as
the Committee may prescribe.

     10.  Assignment and  Alienation.  Except as provided  herein,  the benefits
payable  under this  Agreement  shall not be subject  to  alienation,  transfer,
assignment, garnishment, execution or levy of any kind, and any attempt to cause
any benefits to be so subjected shall not be recognized.

     11. Successors;  Binding Agreement.  In addition to any obligations imposed
by law upon any successor to the Company, the Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or  substantially  all of the  business  and/or  assets  of the  Company  to
expressly  assume and agree in writing to  perform  this  Agreement  in the same
manner and to the same extent  that the Company  would be required to perform it
if no such succession had taken place. This Agreement shall inure to the benefit
of and be  enforceable  by the  Executive's  personal or legal  representatives,
executors,   administrators,   successors,  heirs,  distributees,  devisees  and
legatees.  If the Executive shall die while any amount would still be payable to
the  Executive  hereunder  if the  Executive  had  continued  to live,  all such
amounts,  unless otherwise provided herein, shall be paid in accordance with the
terms  of this  Agreement  to the  Executive's  Beneficiary,  or the  executors,
personal representatives or administrators of the Executive's estate.

     12. Miscellaneous.  No provisions of this Agreement may be modified, waived
or  discharged  unless such  waiver,  modification  or discharge is agreed to in
writing  and signed by the  Executive  and such  officer as may be  specifically
designated  by the Board.  No waiver by either  party  hereto at any time of any
breach by the other  party  hereto of, or  compliance  with,  any  condition  or
provision  shall be deemed a waiver  of  similar  or  dissimilar  provisions  or
conditions  at the same or at any prior or  subsequent  time.  No  agreements or
representations,  oral or  otherwise,  express or implied,  with  respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement. All references to sections of the Code or any other law
shall be deemed also to refer to any  successor  provisions to such sections and
laws.

     13. Counterparts.  This Agreement may be executed in several  counterparts,
each of which shall be deemed to be an original but all of which  together  will
constitute one and the same instrument.

                                        8

    9
     14. Confidentiality. The Executive shall not at any time during the term of
this  Agreement,  or  thereafter,  communicate  or disclose to any  unauthorized
person,  or use for the  Executive's  own  account,  without  the prior  written
consent  of  the  Board,  any  proprietary  processes,   or  other  confidential
information  of the  Company or any  subsidiary  concerning  their  business  or
affairs,  accounts  or  customers,  it  being  understood,   however,  that  the
obligations  of this  section  shall not apply to the extent that the  aforesaid
matters (a) are  disclosed in  circumstances  in which the  Executive is legally
required to do so, or (b) become generally known to and available for use by the
public other than by the Executive's wrongful act or omission.

     15. Severability.  If any provisions of this Agreement shall be declared to
be  invalid  or  unenforceable,   in  whole  or  in  part,  such  invalidity  or
unenforceability  shall not affect the remaining  provisions  hereof which shall
remain in full force and effect.

     16. Arbitration.  Any dispute or controversy arising under or in connection
with this  Agreement  shall be settled  exclusively  by  arbitration,  conducted
before a panel of three arbitrators in New York, New York, or in such other city
in which the  Executive is then  located,  in  accordance  with the rules of the
American  Arbitration  Association  then in  effect.  The  determination  of the
arbitrators,  which  shall  be  based  upon a de  novo  interpretation  of  this
Agreement,  shall be final  and  binding  and  judgment  may be  entered  on the
arbitrators' award in any court having  jurisdiction.  The Company shall pay all
costs of the American Arbitration Association and the arbitrator.

     17.  Non-Exclusivity of Rights.  Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit,  bonus,
incentive  or  other  plan or  program  provided  by the  Company  or any of its
subsidiary companies and for which the Executive may qualify.

     18.  Governing Law. This  Agreement  shall be construed,  interpreted,  and
governed by the Employee  Retirement Income Security Act of 1974, as amended. To
the extent not so governed, it shall be governed by the laws of the State of New
York (without reference to rules relating to conflicts of law).

     19. Top-hat Plan. This Agreement is intended to be a "top-hat" welfare plan
within the meaning of Department of Labor Regulation Section 2520.104-24.


     IN WITNESS  WHEREOF,  the  Company  has caused  this  Agreement  to be duly
executed and the Executive's hand has hereunto been set as of the date first set
forth above.


                                               VENATOR GROUP, INC.

                                               By:____________________________
                    
    
                                                  ____________________________
                                                  [Executive]

                                        9
    10
                                                                    
                                   APPENDIX A
                                   ----------


                                Change in Control
                                -----------------

     A Change in Control shall mean any of the following:  (i) (A) the making of
a tender or  exchange  offer by any  person  or  entity  or group of  associated
persons or entities  (within the meaning of Section  13(d)(3) or 14(d)(2) of the
Securities  Exchange  Act of 1934 (a  "Person")  (other  than the Company or its
Affiliates)  for  shares  of  common  stock  of the  Company  pursuant  to which
purchases are made of securities  representing  at least twenty percent (20%) of
the total  combined  voting power of the Company's  then issued and  outstanding
voting  securities;  (B) the merger or consolidation of the Company with, or the
sale or disposition of all or substantially all of the assets of the Company to,
any Person  other than (a) a merger or  consolidation  which would result in the
voting  securities  of  the  Company   outstanding   immediately  prior  thereto
continuing to represent  (either by remaining  outstanding or by being converted
into voting securities of the surviving or parent entity) fifty percent (50%) or
more of the  combined  voting power of the voting  securities  of the Company or
such  surviving or parent entity  outstanding  immediately  after such merger or
consolidation;  or (b) a  merger  or  capitalization  effected  to  implement  a
recapitalization  of the Company (or similar  transaction) in which no Person is
or becomes the beneficial  owner,  directly or indirectly  (as determined  under
Rule 13d-3 promulgated under the Securities Exchange Act of 1934), of securities
representing  more than the amounts set forth in (C) below;  (C) the acquisition
of direct or  indirect  beneficial  ownership  (as  determined  under Rule 13d-3
promulgated  under the Securities  Exchange Act of 1934),  in the aggregate,  of
securities of the Company representing twenty percent (20%) or more of the total
combined  voting  power of the  Company's  then  issued and  outstanding  voting
securities  by any Person  acting in  concert as of the date of this  Agreement;
provided,  however,  that the Board may at any time and from time to time and in
the sole  discretion  of the  Board,  as the case may be,  increase  the  voting
security  ownership  percentage  threshold  of this  item (C) to an  amount  not
exceeding  forty percent (40%); or (D) the  approval by the  shareholders of the
Company of any plan or proposal for the complete  liquidation  or dissolution of
the  Company  or for the sale of all or  substantially  all of the assets of the
Company;  or (ii) during any period of not more than two (2) consecutive  years,
individuals  who at the beginning of such period  constitute the Board,  and any
new director (other than a director  designated by a person who has entered into
agreement  with the  Company to effect a  transaction  described  in clause (i))
whose  election  by the  Board  or  nomination  for  election  by the  Company's
stockholders  was  approved  by a  vote  of at  least  two-thirds  (2/3)  of the
directors then still in office who either were directors at the beginning of the
period or whose  election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof.

srexec

                                       10

    

    1

                                                                    Exhibit 10.3




                              BRIDGE LOAN AGREEMENT


                                   dated as of


                               September 25, 1998


                                      among


                               Venator Group, Inc.


                             The Banks Party Hereto

                                       and

                   Morgan Guaranty Trust Company of New York,
                             as Administrative Agent




(NY) 27009/335/CA/ca.98


 
    2
                                              
                                TABLE OF CONTENTS

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

                                                                       Page
                                                                       ----

                                    ARTICLE 1
                                   Definitions

Section 1.01.  Definitions...............................................1
Section 1.02.  Accounting Terms and Determinations......................13
Section 1.03.  Types of Borrowings......................................13

                                    ARTICLE 2
                                   The Credits

Section 2.01.  Commitments to Lend......................................13
Section 2.02.  Notice of Borrowing......................................14
Section 2.03.  Notice to Banks; Funding of Loans........................14
Section 2.04.  Notes....................................................15
Section 2.05.  Maturity of Loans........................................15
Section 2.06.  Interest Rates...........................................15
Section 2.07.  Method of Electing Interest Rates........................17
Section 2.08.  Commitment Fee...........................................18
Section 2.09.  Optional Termination or Reduction of Commitments.........18
Section 2.10.  Mandatory Termination or Reduction of Commitments........18
Section 2.11.  Optional Prepayments.....................................19
Section 2.12.  Mandatory Prepayments....................................19
Section 2.13.  General Provisions as to Payments........................20
Section 2.14.  Funding Losses...........................................21
Section 2.15.  Computation of Interest and Fees.........................21

                                    ARTICLE 3
                                   Conditions

Section 3.01.  Effectiveness of this Agreement; Closing.................21
Section 3.02.  Extensions of Credit.....................................22

                                    ARTICLE 4
                         Representations and Warranties

Section 4.01.  Corporate Existence and Power............................23
Section 4.02.  Concentration and Governmental Authorization; No
         Contravention..................................................23
Section 4.03.  Binding Effect...........................................23
                                      
(NY) 27009/335/CA/ca.98


    3 
                                                                       Page
                                                                       ----

Section 4.04.  Financial Information....................................23
Section 4.05.  Litigation...............................................24
Section 4.06.  Compliance with Laws.....................................24
Section 4.07.  Compliance with ERISA....................................24
Section 4.08.  Environmental Matters....................................25
Section 4.09.  Taxes....................................................25
Section 4.10.  Subsidiaries.............................................25
Section 4.11.  Not an Investment Company................................25
Section 4.12.  Full Disclosure..........................................25

                                    ARTICLE 5
                                    Covenants

Section 5.01.  Information..............................................26
Section 5.02.  Maintenance of Property; Insurance.......................29
Section 5.03.  Conduct of Business and Maintenance of Existence.........29
Section 5.04.  Compliance with Laws.....................................29
Section 5.05.  Inspection of Property, Books and Records................30
Section 5.06.  Negative Pledge..........................................30
Section 5.07.  Minimum Consolidated Tangible Net Worth..................31
Section 5.08.  Leverage Ratio...........................................31
Section 5.09.  Limitation on Debt of Subsidiaries.......................31
Section 5.10.  Fixed Charge Coverage Ratio..............................31
Section 5.11.  Consolidations, Mergers and Sales of Assets..............32
Section 5.12.  Use of Proceeds..........................................32
Section 5.13.  Restricted Payments......................................32
Section 5.14.  German Purchase Agreement................................32

                                    ARTICLE 6
                                    Defaults

Section 6.01.  Events of Default........................................32
Section 6.02.  Notice of Default........................................35

                                    ARTICLE 7
                            The Administrative Agent

Section 7.01.  Appointment and Authorization............................35
Section 7.02.  Administrative Agents and Affiliates.....................35
Section 7.03.  Obligations of Administrative Agent......................35
Section 7.04.  Consultation with Experts................................35

(NY) 27009/335/CA/ca.98

                                       ii

    4 
                                                                       Page
                                                                       ----

Section 7.05.  Liability of Agents......................................35
Section 7.06.  Indemnification..........................................36
Section 7.07.  Credit Decision..........................................36
Section 7.08.  Successor Administrative Agent...........................36
Section 7.09.  Administrative Agent's Fees..............................37

                                    ARTICLE 8
                             Change in Circumstances

Section 8.01.  Basis for Determining Interest Rate Inadequate or Unfair.37
Section 8.02.  Illegality...............................................38
Section 8.03.  Increased Cost and Reduced Return........................38
Section 8.04.  Taxes....................................................40
Section 8.05.  Base Rate Loans Substituted for Affected Euro-Dollar
         Loans..........................................................42
Section 8.06.  Substitution of Bank.....................................42

                                    ARTICLE 9
                                  Miscellaneous

Section 9.01.  Notices..................................................43
Section 9.02.  No Waivers...............................................44
Section 9.03.  Expenses; Indemnification................................44
Section 9.04.  Sharing of Set-offs......................................44
Section 9.05.  Amendments and Waivers...................................45
Section 9.06.  Successors and Assigns...................................45
Section 9.07.  No-Reliance on Margin Stock..............................47
Section 9.08.  Governing Law; Submission to Jurisdiction................47
Section 9.09.  Counterparts.............................................47
Section 9.10.  Waiver of Jury Trial.....................................48


(NY) 27009/335/CA/ca.98

                                      iii
    5


Commitment Schedule

Exhibit A -     Form of Note

Exhibit B   -   Form of Opinion of Special Counsel for the Borrower

Exhibit C   -   Form of Opinion of General Counsel of the Borrower

Exhibit D   -   Form of Opinion of Special Counsel for the
                      Administrative Agent

Exhibit E   -   Form of Assignment and Assumption Agreement



(NY) 27009/335/CA/ca.98


 
    6

                              BRIDGE LOAN AGREEMENT

     AGREEMENT  dated as of September 25, 1998 among VENATOR  GROUP,  INC.,  the
BANKS  party  hereto  and  MORGAN   GUARANTY  TRUST  COMPANY  OF  NEW  YORK,  as
Administrative Agent.

     The parties hereto agree as follows:



                                    ARTICLE 1
                                   Definitions

     Section 1.01.  Definitions.  The following terms, as used herein,  have the
following meanings:

     "Adjusted  London  Interbank  Offered  Rate" has the  meaning  set forth in
Section 2.06(b).

     "Administrative  Agent" means Morgan Guaranty Trust Company of New York, in
its capacity as administrative agent for the Banks hereunder, and its successors
in such capacity.

     "Administrative  Questionnaire"  means,  with  respect  to  each  Bank,  an
administrative  questionnaire in the form prepared by the  Administrative  Agent
and submitted to the  Administrative  Agent (with a copy to the  Borrower)  duly
completed by such Bank.

     "Affiliate"  means,  as to any Person,  any Person  directly or  indirectly
controlling,  controlled  by or under common  control with such Person,  whether
through the ownership of voting securities, by contract or otherwise.

     "Annual  Rent  Expense"  means,  for purposes of  calculations  pursuant to
Section 5.10 as of the end of each Fiscal Year (the "Relevant  Fiscal Year") and
the end of each of the first three Fiscal  Quarters of the next Fiscal Year, the
total rent expense (net of sublease income) of the Borrower and its Consolidated
Subsidiaries for the Relevant Fiscal Year,  calculated in the same manner as the
$611,000,000  amount shown as total rent  expense  (net of sublease  income) for
Fiscal Year 1997 in Note 14  ("Leases") to the audited  financial  statements of
the Borrower contained in the Borrower's 1997 Form 10-K.

(NY) 27009/335/CA/ca.98


 
    7

     "Applicable  Lending  Office"  means,  with respect to any Bank, (i) in the
case of its Base Rate Loans, its Domestic Lending Office and (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office.

     "Asset Sale" means any sale, lease or other disposition (including any such
transaction  effected  by way of  merger or  consolidation)  of any asset by the
Borrower  or  any  of  its  Subsidiaries,   including  without   limitation  any
sale-leaseback  transaction,  whether or not involving a capital lease,  and any
sale of real estate,  but excluding (i)  dispositions  of inventory,  cash, cash
equivalents  and other  cash  management  investments  and  obsolete,  unused or
unnecessary  equipment,  in each case in the ordinary  course of business,  (ii)
dispositions  in  connection  with  the  liquidation  of the  Kinney  Shoes  and
Footquarters  divisions,  (iii)  dispositions  of  assets to the  Borrower  or a
Subsidiary  and (iv) any  transaction  involving  a  disposition  of one or more
assets for a consideration less than $250,000.  Asset Sale shall include, in any
event, any sale, lease or other  disposition of (i) the Borrower's  headquarters
building at 233 Broadway,  New York, New York (the  "Headquarters  Building") or
(ii) the "Woolworth Group" as defined in the German Purchase Agreement.

     "Assignee" has the meaning set forth in Section 9.06(c).

     "Available Net Cash Proceeds" means:

          (i) with  respect  to any  Asset  Sale,  an  amount  equal to the cash
     proceeds  received by the  Borrower or any of its  Subsidiaries  from or in
     respect of such Asset Sale (including any cash proceeds  received as income
     or other proceeds of any noncash proceeds of such Asset Sale), less (w) any
     expenses  reasonably incurred by such Person in respect of such Asset Sale,
     (x) the amount of any Debt  secured by a Lien on any asset  disposed  of in
     such Asset Sale and  discharged  from the proceeds  thereof,  (y) any taxes
     actually  paid or to be payable by such  Person (as  estimated  by a senior
     financial  or  accounting  officer of the  Borrower,  giving  effect to the
     overall tax position of the Borrower  and its  Subsidiaries)  in respect of
     such Asset Sale and (z) up to  $30,000,000 of proceeds from the sale of the
     Headquarters Building that are transferred to a "qualified intermediary" as
     defined in Treasury Reg. $1.1031(k) - 1(g)(4),

          (ii) with respect to any Public Debt Issuance,  an amount equal to the
     cash  proceeds  received  by the  Borrower  or any of its  Subsidiaries  in
     respect  thereof less any expenses  reasonably  incurred by them in respect
     thereof, and


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                                        2
    8

          (iii) with respect to any Equity Issuance, an amount equal to the cash
     proceeds  received by the  Borrower or any of its  Subsidiaries  in respect
     thereof less any expenses reasonably incurred by them in respect thereof.

     "Bank" means each bank listed on the signature pages hereof,  each Assignee
which  becomes  a  Bank  pursuant  to  Section  9.06(c),  and  their  respective
successors.

     "Bank Parties" means the Banks and the Administrative Agent.

     "Base Rate" means, for any day, a rate per annum equal to the higher of (i)
the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds
Rate for such day.

     "Base  Rate  Loan"  means a Loan  which  bears  interest  at the Base  Rate
pursuant  to the  applicable  Notice of  Borrowing  or Notice of  Interest  Rate
Election or the provisions of Article VIII.

     "Borrower"  means  Venator  Group,  Inc., a New York  corporation,  and its
successors.

     "Borrower's 1997 Form 10-K" means the Borrower's annual report on Form 10-K
for 1997, as filed with the SEC pursuant to the Exchange Act.

     "Borrower's Latest 10-Q" means the Borrower's quarterly report on Form 10-Q
for the  quarter  ended  August 1, 1998,  as filed with the SEC  pursuant to the
Exchange Act.

     "Borrowing" has the meaning set forth in Section 1.03.

     "Change in  Consolidated  Net  Working  Investment"  means,  for any Fiscal
Quarter,  the amount (which may be positive or negative) obtained by subtracting
Consolidated Net Working Investment at the beginning of such Fiscal Quarter from
Consolidated  Net  Working  Investment  at the end of such Fiscal  Quarter.  For
purposes of this definition, "Consolidated Net Working Investment" means, at any
time, the amount obtained by subtracting  consolidated  accounts  payable of the
Borrower  and its  Consolidated  Subsidiaries  at such  time  from  consolidated
merchandise  inventories of the Borrower and its  Consolidated  Subsidiaries  at
such time.

     "Commitment"  means,  with  respect  to each  Bank,  the  amount  set forth
opposite the name of such Bank on the Commitment Schedule (or, in the case of

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                                        3
    9

an Assignee,  the portion of the transferor Bank's  Commitment  assigned to such
Assignee  pursuant  to  Section  9.06(c)),  in each case as such  amount  may be
reduced  from time to time  pursuant to  Sections  2.09 and 2.10 or changed as a
result of an assignment pursuant to Section 8.06 or 9.06(c).

     "Commitment Schedule" means the Commitment Schedule attached hereto.

     "Consolidated  Capital  Expenditures"  means,  for any  period,  the  gross
additions to property, plant and equipment and other capital expenditures of the
Borrower and its Consolidated Subsidiaries for such period.

     "Consolidated  Debt"  means at any date  the Debt of the  Borrower  and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.

     "Consolidated  Subsidiary" means at any date any Subsidiary or other entity
the  accounts of which would be  consolidated  with those of the Borrower in its
consolidated  financial  statements if such  statements were prepared as of such
date in accordance with generally accepted accounting principles.

     "Consolidated  Tangible  Net  Worth"  means at any  date  the  consolidated
shareholders'  equity of the Borrower and its  Consolidated  Subsidiaries  as of
such date less their consolidated goodwill as of such date.

     "Continuing Director" means at any date a member of the Borrower's board of
directors  who was either (i) a member of such board twelve months prior to such
date or (ii) nominated for election to such board by at least  two-thirds of the
Continuing Directors then in office.

     "Credit  Exposure"  means,  as to any Bank at any time,  the sum of (i) its
Commitment plus (ii) the aggregate  outstanding  principal  amount of its Loans,
all  determined at such time after giving effect to any prior  assignments by or
to such Bank pursuant to Section 9.06(c).

     "Debt"  of any  Person  means at any  date,  without  duplication,  (i) all
obligations  of such Person for borrowed  money,  (ii) all  obligations  of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services,  except  trade  accounts  payable  arising in the  ordinary  course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all non-contingent
obligations  (and,  for purposes of Section 5.06 and the  definition of Material
Debt, all contingent  obligations) of such Person to reimburse any bank or other
Person in

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                                        4
    10

respect of amounts paid under a letter of credit or similar instrument, (vi) all
Debt secured by a Lien on any asset of such Person,  whether or not such Debt is
otherwise an obligation of such Person,  and (vii) all Guarantees by such Person
of Debt of another Person (each such  Guarantee to constitute  Debt in an amount
equal to the maximum  amount of such other  Person's Debt  Guaranteed  thereby);
provided  that the term "Debt" shall not include  amounts  borrowed  against the
cash value of life insurance policies.

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

     "Domestic  Business  Day" means any day except a Saturday,  Sunday or other
day on which commercial banks in New York City are authorized or required by law
to close.

     "Domestic Lending Office" means, as to each Bank, its office located at its
address set forth in its  Administrative  Questionnaire  (or  identified  in its
Administrative  Questionnaire  as its  Domestic  Lending  Office)  or such other
office as such Bank may hereafter  designate as its Domestic  Lending  Office by
notice to the Borrower and the Administrative Agent;

     "EBIT" means, for any period, the sum of (i) the consolidated net income of
the Borrower and its Consolidated  Subsidiaries for such period plus (ii) to the
extent  deducted in determining  such  consolidated  net income,  the sum of (A)
Interest   Expense,   (B)  income  taxes,   (C)  the  after-tax  effect  of  any
extraordinary   non-cash   losses  (or  minus  the   after-tax   effect  of  any
extraordinary  non-cash gains),  (D) the before-tax  effect of any non-recurring
non-cash  losses that are not classified as  extraordinary  losses (or minus the
before-tax  effect of any non- recurring  non-cash gains that are not classified
as extraordinary  gains) and (E) any pre-tax loss (or minus any pre-tax gain) on
the sale of any ownership or leasehold interest in real property.

     "Effective  Date"  means the date on which the  Administrative  Agent shall
have received the documents specified in or pursuant to Section 3.01.

     "Environmental  Laws" means any and all federal,  state,  local and foreign
statutes, laws, judicial decisions,  regulations,  ordinances, rules, judgments,
orders, injunctions, permits, licenses and agreements relating to the protection
of the  environment,  to the  effect of the  environment  on human  health or to
emissions,  discharges  or releases of  pollutants,  contaminants,  hazardous or
toxic substances or wastes into the environment  including,  without limitation,
ambient air, surface water,  ground water, or land, or otherwise relating to the
manufacture, processing,

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                                        5
    11

distribution,  use,  treatment,  storage,  disposal,  transport  or  handling of
pollutants,  contaminants,  hazardous  or  toxic  substances  or  wastes  or the
clean-up or other remediation thereof.

     "Equity Issuance" means any issuance of equity  securities,  or any sale or
other transfer of treasury  stock,  by the Borrower or any of its  Subsidiaries,
other than equity  securities  issued to, or treasury  stock sold or transferred
to, the Borrower or any of its Subsidiaries.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended, or any successor statute.

     "ERISA  Group"  means the  Borrower,  any  Subsidiary  and all members of a
controlled  group of corporations  and all trades or businesses  (whether or not
incorporated)  under common  control  which,  together  with the Borrower or any
Subsidiary,  are treated as a single employer under  subsection (b), (c), (m) or
(o) of Section 414 of the Internal Revenue Code.

     "Euro-Dollar  Business  Day"  means  any  Domestic  Business  Day on  which
commercial  banks are open for  international  business  (including  dealings in
dollar deposits) in London.

     "Euro-Dollar Lending Office" means, as to each Bank, its office,  branch or
affiliate located at its address set forth in its  Administrative  Questionnaire
(or identified in its  Administrative  Questionnaire as its Euro-Dollar  Lending
Office)  or such  other  office,  branch  or  affiliate  of such  Bank as it may
hereafter  designate as its Euro-Dollar Lending Office by notice to the Borrower
and the Administrative Agent.

     "Euro-Dollar  Loan" means a Loan which bears interest at a Euro-Dollar Rate
pursuant  to the  applicable  Notice of  Borrowing  or Notice of  Interest  Rate
Election.

     "Euro-Dollar Margin" has the meaning set forth in Section 2.06(b).

     "Euro-Dollar Rate" means a rate of interest  determined pursuant to Section
2.06(b) on the basis of an Adjusted London Interbank Offered Rate.

     "Euro-Dollar  Reserve  Percentage"  has the  meaning  set forth in  Section
2.06(b).

     "Event of Default" has the meaning set forth in Section 6.01.

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                                        6
    12

     "Exchange Act" means the  Securities  Exchange Act of 1934, as amended from
time to time.

     "Extension of Credit" means the making of a Loan.

     "Federal  Funds  Rate"  means,  for any day,  the rate per  annum  (rounded
upward,  if  necessary,  to the  nearest  1/100th  of 1%) equal to the  weighted
average of the rates on overnight Federal funds transactions with members of the
Federal  Reserve  System  arranged  by Federal  funds  brokers  on such day,  as
published by the Federal  Reserve Bank of New York on the Domestic  Business Day
next  succeeding  such  day,  provided  that (i) if such  day is not a  Domestic
Business  Day,  the  Federal  Funds Rate for such day shall be such rate on such
transactions on the next preceding  Domestic Business Day as so published on the
next succeeding  Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding  Domestic  Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Morgan on such day on such  transactions
as determined by the Administrative Agent.

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

     "Fiscal  Year"  means a  fiscal  year of the  Borrower.  A  Fiscal  Year is
identified by the calendar year which  includes  approximately  eleven months of
such Fiscal Year (e.g., Fiscal Year 1998 refers to the Fiscal Year that will end
on January 30, 1999).

     "German  Purchase  Agreement"  means  the  Purchase  Agreement  dated as of
September 20, 1998 between Retail Company of Germany, Inc., Venator Group, Inc.,
Dr.   Peter   Wessels   Vermogensverwaltungs   GmbH   and  Dr.   Peter   Wessels
Beteiligungsverwaltungs GmbH.

     "Group of Loans" or "Group"  means at any time a group of Loans  consisting
of (i) all Loans which are Base Rate Loans at such time and (ii) all Euro-Dollar
Loans having the same Interest  Period at such time;  provided that if a Loan of
any  particular  Bank is  converted  to or made as a Base Rate Loan  pursuant to
Section 8.02 or 8.05, such Loan shall be included in the same Group or Groups of
Loans from time to time as it would have been in if it had not been so converted
or made.

     "Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person  directly or  indirectly  guaranteeing  any Debt of any other Person
and, without limiting the generality of the foregoing, any obligation, direct or
indirect,  contingent  or  otherwise,  of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt (whether

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                                        7
    13

arising by virtue of  partnership  arrangements,  by agreement to keep-well,  to
purchase assets, goods,  securities or services, to take-or-pay,  or to maintain
financial  statement  conditions  or  otherwise)  or (ii)  entered  into for the
purpose of assuring in any other  manner the obligee of such Debt of the payment
thereof or to protect such obligee  against loss in respect thereof (in whole or
in part),  provided that the term Guarantee shall not include  endorsements  for
collection or deposit,  in either case in the ordinary  course of business.  The
term "Guarantee" used as a verb has a corresponding meaning.

     "Immaterial  Subsidiaries"  means at any time one or more Subsidiaries that
in the  aggregate  did not  account  for (i)  more  than 5% of the  consolidated
revenues  or  consolidated  net  income  of the  Borrower  and its  Consolidated
Subsidiaries for the then most recent Fiscal Year for which audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries have been
delivered  to the Banks or (ii) more than 5% of the  consolidated  assets of the
Borrower and its Consolidated Subsidiaries at the end of such Fiscal Year.

     "Indemnitee" has the meaning set forth in Section 9.03(b).

     "Interest Expense" means, for any period, the consolidated interest expense
(net of interest income) of the Borrower and its  Consolidated  Subsidiaries for
such  period,  calculated  in the same manner as the amounts  shown as "Interest
Expense" in the consolidated  statements of operations of the Borrower contained
in the Borrower's 1997 Form 10-K.

     "Interest  Period" means,  with respect to each Euro-Dollar  Loan, a period
commencing  on the date of  borrowing  specified  in the  applicable  Notice  of
Borrowing or on the date  specified in the  applicable  Notice of Interest  Rate
Election and ending one week thereafter; provided that:

     (a) any Interest  Period which would  otherwise end on a day which is not a
Euro-Dollar  Business Day shall be extended to the next  succeeding  Euro-Dollar
Business Day; and

     (b) any Interest  Period which would  otherwise  end after the  Termination
Date shall end on the Termination Date.

     "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute.

     "Investment" means any investment in any Person,  whether by means of share
purchase, capital contribution, loan, time deposit or otherwise.



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                                       8
    14

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

     "Loan" means a loan made or to be made by a Bank  pursuant to Section 2.01;
provided  that, if any such loan or loans (or portions  thereof) are combined or
subdivided pursuant to a Notice of Interest Rate Election, the term "Loan" shall
refer to the combined  principal  amount  resulting from such  combination or to
each of the separate  principal amounts resulting from such subdivision,  as the
case may be.

     "London  Interbank  Offered  Rate" has the  meaning  set  forth in  Section
2.06(b).

     "Material  Adverse  Effect"  means a  material  adverse  effect  on (i) the
business,  operations or condition  (financial or otherwise) of the Borrower and
its  Subsidiaries  taken as a whole  or (ii)  the  ability  of the  Borrower  to
perform, or of any Bank Party to enforce, any payment obligation of the Borrower
under this Agreement and the Notes.

     "Material  Assets" means at any time assets that accounted for more than 5%
of the aggregate book value of the  consolidated  assets of the Borrower and its
Consolidated  Subsidiaries  at the end of the then most  recent  Fiscal Year for
which  audited  consolidated  financial  statements  of  the  Borrower  and  its
Consolidated Subsidiaries have been delivered to the Banks.

     "Material  Debt" means Debt (other than the Loans) of the  Borrower  and/or
one or more of its  Subsidiaries,  arising in one or more  related or  unrelated
transactions, in an aggregate principal or face amount exceeding $25,000,000.

     "Material Plan" means at any time a Plan (or any two or more Plans, each of
which has Unfunded  Liabilities) having aggregate Unfunded Liabilities in excess
of $25,000,000.

     "Morgan" means Morgan Guaranty Trust Company of New York.

     "Multiemployer  Plan" means at any time an employee  pension  benefit  plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of

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                                       9

    15 


the ERISA Group is then making or accruing an obligation  to make  contributions
or has within the preceding  five plan years made  contributions,  including for
these  purposes any Person which ceased to be a member of the ERISA Group during
such five year period.

     'Notes" means promissory  notes of the Borrower,  substantially in the form
of Exhibit A hereto,  evidencing  the  obligation  of the  Borrower to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.

     "Notice of Borrowing" has the meaning set forth in Section 2.02.

     "Notice of  Interest  Rate  Election"  has the meaning set forth in Section
2.07.

     "Parent" means, with respect to any Bank Party, any Person controlling such
Bank Party.

     "Participant" has the meaning set forth in Section 9.06(b).

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

     "Person" means an  individual,  a  corporation,  a  partnership,  a limited
liability company, an association,  a trust or any other entity or organization,
including a government or political  subdivision or an agency or instrumentality
thereof.

     "Plan"  means at any time an employee  pension  benefit  plan (other than a
Multiemployer  Plan)  which is  covered  by Title IV of ERISA or  subject to the
minimum  funding  standards  under Section 412 of the Internal  Revenue Code and
either (i) is maintained,  or  contributed  to, by any member of the ERISA Group
for  employees  of any member of the ERISA  Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for  employees  of any Person which
was at such time a member of the ERISA Group.

     "Prime  Rate"  means a rate of  interest  per  annum  equal  to the rate of
interest publicly  announced from time to time in New York City by Morgan as its
Prime Rate.

     "Public  Debt  Issuance"  means the issuance of any Debt by the Borrower or
any of its  Subsidiaries  for  cash  in a  transaction  that is  required  to be
registered

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                                       10
    16 

with the SEC (or would have been required to be registered  with the SEC if such
transaction had occurred within the United States).

     "Reduction  Event"  means the receipt by the  Borrower or a  Subsidiary  of
Available  Net Cash  Proceeds in respect of any one or more Asset Sales,  Public
Debt  Issuances or Equity  Issuances in an aggregate  amount equal to or greater
than $10,000,000.

     "Reference Bank" means the principal London office of Morgan.

     'Regulation U" means  Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.

     "Requesting  Banks" means at any time one or more Banks having at least 15%
of the aggregate amount of the Credit Exposures at such time.

     "Required  Banks"  means  at any time  Banks  having  more  than 50% of the
aggregate amount of the Credit Exposures at such time.

     "Responsible  Officer"  means,  with  respect  to the  Borrower,  its chief
operating  officer,  its chief  financial  officer,  its  general  counsel,  its
treasurer, any assistant treasurer or any other officer whose duties include the
administration of this Agreement.

     "Restricted  Payment" means (i) any dividend or other  distribution  on any
shares of the  Borrower's  capital stock  (except  dividends  payable  solely in
shares of its capital stock of the same class) or (ii) any payment on account of
the purchase,  redemption,  retirement or  acquisition  of (a) any shares of the
Borrower's  capital stock or (b) any option,  warrant or other rights to acquire
shares of the Borrower's capital stock (but not including payments of principal,
premium (if any) or interest  made  pursuant  to the terms of  convertible  debt
securities prior to conversion).

     "SEC" means the Securities and Exchange Commission.

     "Subsidiary"  means,  as to any Person,  any corporation or other entity of
which  securities or other ownership  interests  having ordinary voting power to
elect a majority of the board of directors or other persons  performing  similar
functions are at the time directly or  indirectly  owned by such Person;  unless
otherwise specified, "Subsidiary" means a Subsidiary of the Borrower.

     "Termination  Date"  means  November  16,  1998,  or,  if such day is not a
Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day.

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                                       11
    17 

     "Total Borrowed Funds" means at any date the sum, without duplication, of

          (i) Consolidated Debt at such date,

          (ii) the present value of operating lease  commitments of the Borrower
          and its Consolidated Subsidiaries, and

          (iii) the present value of third-party  operating lease payments under
          guarantees  entered into after the date hereof by the Borrower and its
          Consolidated Subsidiaries.

The present value referred to in clause (ii) of this definition  shall be deemed
to be $1,952,000,000  (being the "present value of operating lease  commitments"
of the Borrower and its Consolidated Subsidiaries at January 31, 1998) until the
first  officer's  certificate  to be  delivered  pursuant to Section  5.01(e) is
delivered,  and  thereafter  shall be deemed to be the  amount  set forth as the
present value of operating lease commitments at the end of the applicable Fiscal
Year in the officer's  certificate  delivered most recently  pursuant to Section
5.01(e).  The present value referred to in clause (iii) of this definition shall
be deemed  to be zero  until the first  officer's  certificate  to be  delivered
pursuant to Section 5.01(e) is delivered,  and thereafter  shall be deemed to be
the  amount  set  forth as the  present  value of  third-party  operating  lease
payments guaranteed by the Borrower and its Consolidated Subsidiaries at the end
of the  applicable  Fiscal  Year in the  officer's  certificate  delivered  most
recently pursuant to Section 5.01(e).

     "Total  Capitalization"  means at any date  the sum of (i)  Total  Borrowed
Funds at such date and (ii) Consolidated Tangible Net Worth at such date.

     "Unfunded  Liabilities'  means,  with respect to any Plan at any time,  the
amount  (if any) by which (i) the value of all  benefit  liabilities  under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for  purposes of Section  4044 of ERISA,  exceeds  (ii) the fair market
value of all Plan assets allocable to such  liabilities  under Title IV of ERISA
(excluding any accrued but unpaid contributions),  all determined as of the then
most  recent  valuation  date for such Plan,  but only to the  extent  that such
excess  represents  a potential  liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.

     "United  States" means the United  States of America,  including the States
thereof  and the  District  of  Columbia,  but  excluding  its  territories  and
possessions.

(NY) 27009/335/CA/ca.98

                                       12
    18 

     Section  1.02.  Accounting  Terms  and  Determinations.   Unless  otherwise
specified  herein,  all accounting  terms used herein shall be interpreted,  all
accounting  determinations hereunder shall be made, and all financial statements
required  to be  delivered  hereunder  shall be  prepared,  in  accordance  with
generally accepted accounting principles as in effect from time to time, applied
on a  basis  consistent  (except  for  changes  concurred  in by the  Borrower's
independent  public  accountants)  with the  most  recent  audited  consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Banks;  provided that if the Borrower notifies the  Administrative  Agent
that the Borrower  wishes to amend any provision  hereof to eliminate the effect
of any change in generally  accepted  accounting  principles on the operation of
such  provision (or if the  Administrative  Agent notifies the Borrower that the
Required Banks wish to amend any provision  hereof for such purpose),  then such
provision  shall be  applied  on the  basis  of  generally  accepted  accounting
principles  in effect  immediately  before  the  relevant  change  in  generally
accepted  accounting  principles became  effective,  until either such notice is
withdrawn or such provision is amended in a manner  satisfactory to the Borrower
and the Required Banks.

     Section  1.03.  Types of  Borrowings.  The  term  "Borrowing"  denotes  the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant to
Article II on the same date, all of which Loans are of the same type (subject to
Article VIII) and, except in the case of Base Rate Loans,  have the same initial
Interest  Period.  Borrowings  are  classified for purposes of this Agreement by
reference  to  the  pricing  of  Loans   comprising  such  Borrowing   (i.e.,  a
"Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans and a Base
Rate Borrowing" is a Borrowing comprised of Base Rate Loans).



                                    ARTICLE 2
                                   The Credits

     Section 2.01. Commitments to Lend. Each Bank severally agrees, on the terms
and  conditions  set  forth in this  Agreement,  to make  loans to the  Borrower
pursuant to this Section from time to time on and after the  Effective  Date and
prior to the Termination Date;  provided that the aggregate  principal amount of
Loans  made by such Bank on any date shall not  exceed  its  Commitment  at such
date.  Each  Borrowing  under this Section  shall be in an  aggregate  principal
amount of  $10,000,000 or any larger  multiple of $1,000,000;  provided that any
such Borrowing may be in an aggregate  amount equal to the then aggregate amount
of the  Commitments.  Each such  Borrowing  shall be made from the several Banks
ratably in proportion to their respective Commitments. The Commitments are not

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                                       13
    19

revolving  in  nature,  and  amounts  prepaid  or repaid  may not be  reborrowed
hereunder.

     Section   2.02.   Notice  of  Borrowing.   The  Borrower   shall  give  the
Administrative  Agent notice (a "Notice of Borrowing") not later than 11:00 A.M.
(New York City  time) on (x) the date of each  Base Rate  Borrowing  and (y) the
third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:

     (a) the date of such Borrowing,  which shall be a Domestic  Business Day in
the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case of a
Euro-Dollar Borrowing,

     (b) the aggregate amount of such Borrowing, and

     (c)  whether  the Loans  comprising  such  Borrowing  are to bear  interest
initially at the Base Rate or a Euro-Dollar Rate.

     Section  2.03.  Notice to Banks;  Funding of Loans.  (a) Upon  receipt of a
Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of
the contents  thereof and of such Bank's share of such Borrowing and such Notice
of Borrowing shall not thereafter be revocable by the Borrower.

     (b) Not  later  than 1:00  P.M.  (New  York City  time) on the date of each
Borrowing,  each Bank  shall  make  available  its share of such  Borrowing,  in
Federal  or  other  funds  immediately  available  in  New  York  City,  to  the
Administrative  Agent at its  address  referred to in Section  9.01.  Unless the
Administrative  Agent  determines  that any  applicable  condition  specified in
Article III has not been satisfied the Administrative Agent shall make the funds
so received  from the Banks  available  to the Borrower not later than 2:00 P.M.
(New York City time) at the Administrative Agent's aforesaid address.

     (c) Unless the Administrative  Agent shall have received notice from a Bank
prior to the date of any Borrowing that such Bank will not make available to the
Administrative  Agent such Bank's share of such  Borrowing,  the  Administrative
Agent  may  assume  that  such  Bank  has  made  such  share  available  to  the
Administrative Agent on the date of such Borrowing in accordance with subsection
(b) of this Section 2.03 and the Administrative Agent may, in reliance upon such
assumption,  make available to the Borrower on such date a corresponding amount.
If and to the extent that such Bank shall not have so made such share  available
to the Administrative Agent, such Bank and the Borrower severally agree to repay
to the  Administrative  Agent  forthwith  on demand  such  corresponding  amount
together with interest  thereon,  for each day from the date such amount is made
available to the Borrower until the date such amount is



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repaid to the Administrative  Agent, at (i) in the case of the Borrower,  a rate
per annum equal to the higher of the Federal  Funds Rate and the  interest  rate
applicable  thereto  pursuant to Section 2.06 and (ii) in the case of such Bank,
the Federal  Funds Rate.  If such Bank shall repay to the  Administrative  Agent
such  corresponding  amount,  such amount so repaid shall constitute such Bank's
Loan included in such Borrowing for purposes of this Agreement.

     Section  2.04.  Notes.  (a) The Loans of each Bank shall be  evidenced by a
single Note payable to the order of such Bank for the account of its  Applicable
Lending Office in an amount equal to the aggregate  unpaid  principal  amount of
such Bank's Loans.

     (b) Each Bank may, by notice to the Borrower and the Administrative  Agent,
request that its Loans of a particular  type be evidenced by a separate  Note in
an amount equal to the aggregate  unpaid  principal  amount of such Loans.  Each
such  Note  shall  be in  substantially  the  form  of  Exhibit  A  hereto  with
appropriate  modifications to reflect the fact that it evidences solely Loans of
the relevant  type.  Each reference in this Agreement to the "Note" of such Bank
shall be deemed to refer to and include any or all of such Notes, as the context
may require.

     (c) Upon  receipt of each Bank's  Note  pursuant  to Section  3.01(b),  the
Administrative  Agent  shall  forward  such Note to such  Bank.  Each Bank shall
record  the date and  amount of each Loan made by it and the date and  amount of
each payment of principal made by the Borrower with respect thereto, and may, if
such Bank so elects in connection  with any transfer or enforcement of its Note,
endorse on the schedule forming a part thereof appropriate notations to evidence
the  foregoing  information  with  respect  to each such Loan then  outstanding;
provided  that neither the failure by any Bank to make any such  recordation  or
endorsement, nor any error therein, shall affect the obligations of the Borrower
hereunder or under the Notes. Each Bank is hereby irrevocably  authorized by the
Borrower  so to endorse  its Note and to attach to and make a part of its Note a
continuation of any such schedule as and when required.

     Section 2.05.  Maturity of Loans. Each Loan shall mature, and the principal
amount thereof shall be due and payable, together with accrued interest thereon,
on the Termination Date.

     Section 2.06.  Interest Rates.  (a) Each Base Rate Loan shall bear interest
on the outstanding  principal  amount  thereof,  for each day from the date such
Loan is made (or is converted from a Euro-Dollar Loan to a Base Rate Loan) until
it becomes due or is  converted,  at a rate per annum equal to the Base Rate for
such day.  Accrued  interest shall be payable for each calendar month in arrears
on the last  Domestic  Business Day thereof and,  with respect to the  principal



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amount of any Base Rate Loan  converted to a Euro-Dollar  Loan, on the date such
principal  amount is so converted.  Any overdue  principal of or interest on any
Base Rate Loan shall bear interest,  payable on demand,  for each day until paid
at a rate per annum equal to the sum of 2% plus the Base Rate for such day.

     (b) Each Euro-Dollar Loan shall bear interest on the outstanding  principal
amount thereof,  for each day during each Interest Period applicable thereto, at
a rate per annum  equal to the sum of the  Euro-Dollar  Margin for such day plus
the Adjusted London  Interbank  Offered Rate applicable to such Interest Period.
Such interest shall be payable for each Interest Period on the last day thereof.

     "Euro-Dollar Margin" means 1.00% per annum.

     The "Adjusted London Interbank Offered Rate" applicable to (a) any Interest
Period  (other than an Interest  Period  beginning on September 25, 1998 means a
rate per annum equal to the quotient obtained (rounded upward, if necessary,  to
the next higher 1/100 of 1%) by dividing  (i) the  applicable  London  Interbank
Offered Rate by (ii) 1.00 minus the Euro-Dollar  Reserve  Percentage and (b) the
Interest  Period  beginning  on  September  25,  1998  means  the rate per annum
determined by the Administrative  Agent in the manner agreed by the Borrower and
the Administrative Agent on September 24, 1998.

     The "London  Interbank  Offered  Rate"  applicable  to any Interest  Period
(other than an Interest  Period  beginning on the  September 25, 1998) means the
rate per annum at which deposits in dollars are offered to the Reference Bank in
the  London  interbank  market at  approximately  11:00 A.M.  (London  time) two
Euro-Dollar  Business  Days before the first day of such  Interest  Period in an
amount  approximately  equal to the principal  amount of the Euro-Dollar Loan of
the Reference Bank to which such Interest Period is to apply and for a period of
time comparable to such Interest Period.

     'Euro-Dollar   Reserve  Percentage"  means  for  any  day  that  percentage
(expressed  as a decimal)  which is in effect on such day, as  prescribed by the
Board  of  Governors  of the  Federal  Reserve  System  (or any  successor)  for
determining  the maximum  reserve  requirement  for a member bank of the Federal
Reserve System in New York City with deposits  exceeding five billion dollars in
respect of  "Eurocurrency  liabilities"  (or in respect of any other category of
liabilities  which includes  deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United  States office of any Bank to United
States residents). The Adjusted London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the Euro-Dollar
Reserve Percentage.



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     (c) Any overdue principal of or interest on any Euro-Dollar Loan shall bear
interest,  payable on demand,  for each day until paid at a rate per annum equal
to the sum of 2% plus the Base Rate for such day.

     (d) The Administrative  Agent shall determine each interest rate applicable
to the Loans hereunder. The Administrative Agent shall give prompt notice to the
Borrower  and  the  Banks  of each  rate  of  interest  so  determined,  and its
determination thereof shall be conclusive in the absence of manifest error.

     (e) The Reference Bank agrees to use its best efforts to furnish quotations
to the  Administrative  Agent as contemplated by this Section.  If the Reference
Bank does not furnish a timely  quotation,  the provisions of Section 8.01 shall
apply.

     Section 2.07.  Method of Electing Interest Rates. (a) The Loans included in
each  Borrowing  shall bear interest  initially at the type of rate specified by
the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower may
from time to time elect to change or continue the type of interest rate borne by
each Group of Loans (subject in each case to the provisions of Article VIII), as
follows:

          (i) if such  Loans  are Base Rate  Loans,  the  Borrower  may elect to
          convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business
          Day; or

          (ii) if such Loans are  Euro-Dollar  Loans,  the Borrower may elect to
          convert such Loans to Base Rate Loans or elect to continue  such Loans
          as Euro-Dollar  Loans for an additional  Interest Period, in each case
          effective  on the  last  day  of  the  then  current  Interest  Period
          applicable to such Loans.

Each such  election  shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Administrative  Agent at least three Euro-Dollar Business
Days  before the  conversion  or  continuation  selected in such notice is to be
effective. A Notice of Interest Rate Election may, if it so specifies,  apply to
only a portion of the aggregate principal amount of the relevant Group of Loans;
provided that (i) such portion is allocated  ratably among the Loans  comprising
such Group and (ii) the portion to which such notice applies,  and the remaining
portion to which it does not apply,  are each $10,000,000 or any larger multiple
of $1,000,000.

     (b)  Each  Notice  of  Interest   Rate   Election   shall   specify:   (NY)
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                                       17
 
    23
         

          (i) the Group of Loans  (or  portion  thereof)  to which  such  notice
          applies;

          (ii) the date on which the conversion or continuation selected in such
          notice is to be  effective,  which shall  comply  with the  applicable
          clause of subsection (a) above;

          (iii) if the Loans comprising such Group are to be converted,  the new
          type of Loans; and

          (iv) if such Loans are to be  continued  as  Euro-Dollar  Loans for an
          additional Interest Period, such election.

     (c) Upon receipt of a Notice of Interest  Rate  Election  from the Borrower
pursuant to subsection (a) above, the Administrative Agent shall promptly notify
each Bank of the  contents  thereof  and such  notice  shall not  thereafter  be
revocable by the Borrower.  If the Borrower  fails to deliver a timely Notice of
Interest Rate Election to the Administrative  Agent for any Group of Euro-Dollar
Loans, such Loans shall be converted into Base Rate Loans on the last day of the
then current Interest Period applicable thereto.

     Section 2.08.  Commitment Fee. The Borrower shall pay to the Administrative
Agent for the  account  of each Bank a  commitment  fee at the rate of 0.10% per
annum on the daily average  amount of such Bank's  Commitment.  Such  commitment
fees shall  accrue for each day from and  including  the  Effective  Date to but
excluding  the  Termination   Date  (or  earlier  date  of  termination  of  the
Commitments  in  their  entirety)  and  shall  be  payable  in  arrears  on  the
Termination  Date (or earlier date of  termination  of the  Commitments in their
entirety).

     Section  2.09.  Optional  Termination  or  Reduction  of  Commitments.  The
Borrower may, without premium or penalty,  upon at least three Domestic Business
Days' notice to the  Administrative  Agent, (i) terminate the Commitments at any
time or (ii) ratably reduce the  Commitments  from time to time, in each case by
an  aggregate  amount  of at least  $10,000,000.  Upon any such  termination  or
reduction of the  Commitments,  the  Administrative  Agent shall promptly notify
each Bank of such termination or reduction.

     Section 2.10.  Mandatory  Termination or Reduction of Commitments.  (a) The
Commitments  shall  terminate  on  the  Termination  Date  and  any  Loans  then
outstanding (together with accrued interest thereon) shall be due and payable on
such date.

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    24

     (b) On the date of each  Borrowing,  the  Commitment  of each Bank shall be
automatically reduced by the amount of its Loan included in such Borrowing.

     (c) On the date upon which any  Reduction  Event  occurs,  the  Commitments
shall be  automatically  and ratably  reduced by an amount  equal to the largest
multiple  of  $1,000,000  which does not exceed the  excess,  if any, of (i) the
aggregate  Available Net Cash Proceeds in respect of such  Reduction  Event over
(ii) the  portion  of such  Available  Net Cash  Proceeds  to be  applied to the
prepayment of Loans pursuant to Section 2.12.

     Section 2.11. Optional Prepayments.  (a) The Borrower may upon at least one
Domestic Business Day's notice to the Administrative Agent, prepay the Base Rate
Loans in whole at any time, or from time to time in part in amounts  aggregating
$10,000,000 or any larger multiple of $1,000,000, by paying the principal amount
to be prepaid  together with accrued interest thereon to the date of prepayment.
Each such optional  prepayment  shall be applied to prepay ratably the Base Rate
Loans of the several Banks.

     (b)  Subject  to  Section  2.14,  the  Borrower  may,  upon at least  three
Euro-Dollar Business Days' notice to the Administrative  Agent, in the case of a
Group of Euro-Dollar  Loans,  prepay the Loans comprising such a Group, in whole
at any time, or from time to time in part in amounts aggregating  $10,000,000 or
any larger multiple of $1,000,000,  by paying the principal amount to be prepaid
together  with accrued  interest  thereon to the date of  prepayment.  Each such
optional  prepayment shall be applied to prepay ratably the Loans of the several
Banks included in such Group.

     (c) In connection with any  substitution of Banks pursuant to Section 8.06,
the  Borrower  may prepay the Loans of the Bank being  replaced,  as provided in
clause (ii) of Section 8.06.

     (d) Upon receipt of a notice of prepayment  pursuant to this  Section,  the
Administrative Agent shall promptly notify each Bank of the contents thereof and
of such  Bank's  ratable  share of such  prepayment  and such  notice  shall not
thereafter be revocable by the Borrower.

     Section 2.12. Mandatory Prepayments. (a) Upon the occurrence of a Reduction
Event,  the Borrower  shall prepay a principal  amount of the Loans equal to the
largest  multiple of $1,000,000  which does not exceed the  aggregate  amount of
Available Net Cash Proceeds in respect of such Reduction Event.  Such prepayment
shall be made not later than the second  Euro-Dollar  Business Day following the
date of such Reduction  Event,  and shall be applied ratably to the Loans of the
Banks included in such outstanding Group or Groups of Loans as the

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                                       19
    25

Borrower may designate in the notice required by subsection (b) or, failing such
designation by the Borrower,  as the Administrative  Agent may specify by notice
to the Borrower and the Banks.

     (b) The Borrower  shall notify the  Administrative  Agent of each Reduction
Event and the related  Available  Net Cash  Proceeds  not later than the date of
such Reduction Event. The  Administrative  Agent shall promptly notify each Bank
of the  contents of each such notice  received by it and of such Bank's  ratable
share of any  prepayment  pursuant  to this  Section  2.12 or  reduction  of the
Commitments pursuant to Section 2.10(c) in respect of such Reduction Event.

     Section 2.13.  General  Provisions as to Payments.  (a) The Borrower  shall
make each  payment  of  principal  of,  and  interest  on, the Loans and of fees
hereunder,  not later than 12:00 Noon (New York City time) on the date when due,
in  Federal  or other  funds  immediately  available  in New York  City,  to the
Administrative   Agent  at  its  address   referred  to  in  Section  9.01.  The
Administrative  Agent will promptly distribute to each Bank its ratable share of
each such payment  received by the  Administrative  Agent for the account of the
Banks. Whenever any payment of principal of, or interest on, the Base Rate Loans
or fees shall be due on a day which is not a Domestic Business Day, the date for
payment thereof shall be extended to the next succeeding  Domestic Business Day.
Whenever any payment of  principal  of, or interest  on, any  Euro-Dollar  Loans
shall be due on a day  which is not a  Euro-Dollar  Business  Day,  the date for
payment  thereof shall be extended to the next succeeding  Euro-Dollar  Business
Day unless such  Euro-Dollar  Business Day falls in another  calendar  month, in
which case the date for payment thereof shall be the next preceding  Euro-Dollar
Business  Day. If the date for any payment of principal is extended by operation
of law or otherwise, interest thereon shall be payable for such extended time.

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


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                                       20
    26

     Section  2.14.  Funding  Losses.  If the  Borrower  makes  any  payment  of
principal with respect to any Euro-Dollar  Loan or any such Loan is converted to
a Base Rate Loan  (pursuant to Article 2, 6 or 8 or  otherwise) on any day other
than the last day of an Interest Period applicable  thereto,  or the last day of
an applicable period fixed pursuant to Section 2.06(c), or if the Borrower fails
to borrow or prepay any  Euro-Dollar  Loans or fails to continue any Euro-Dollar
Loans for an  additional  Interest  Period or fails to convert  any  outstanding
Loans to  Euro-Dollar  Loans,  in each  case  after  notice  of such  borrowing,
prepayment,  continuation or conversion has been given to any Bank in accordance
with Section 2.03(a),  2.07(c), 2.11(d) or 2.12(b), the Borrower shall reimburse
each Bank within 15 days after demand for any resulting loss or expense incurred
by it (or by an  existing  or  prospective  Participant  in the  related  Loan),
including  (without  limitation) any loss incurred in obtaining,  liquidating or
employing  deposits from third  parties,  but  excluding  loss of margin for the
period  after any such  payment or  conversion  or  failure  to borrow,  prepay,
continue  or  convert,  provided  that such Bank  shall  have  delivered  to the
Borrower  a  certificate  as to the  amount  of  such  loss  or  expense,  which
certificate shall be conclusive in the absence of manifest error.

     Section 2.15. Computation of Interest and Fees. Interest based on the Prime
Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days
in a leap year) and paid for the actual  number of days elapsed  (including  the
first day but excluding the last day). All other  interest and  commitment  fees
shall be  computed  on the  basis of a year of 360 days and paid for the  actual
number of days elapsed (including the first day but excluding the last day).



                                    ARTICLE 3
                                   Conditions

     Section 3.01.  Effectiveness  of this  Agreement;  Closing.  This Agreement
shall  become  effective,  and the  closing  hereunder  shall  occur,  when  the
Administrative Agent shall have received the following:

     (a) a counterpart hereof signed by each party listed on the signature pages
hereof  or  facsimile  or  other  written   confirmation   satisfactory  to  the
Administrative Agent that each such party has signed a counterpart hereof;

     (b) a duly  executed Note for the account of each Bank  complying  with the
provisions of Section 2.04 dated the Effective Date;

     (c) an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel
for the Borrower, substantially in the form of Exhibit B hereto, dated the


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                                       21
 
    27
          
Effective Date and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;

     (d) an  opinion  of  Gary  M.  Bahler,  General  Counsel  of the  Borrower,
substantially  in the form of  Exhibit C hereto,  dated the  Effective  Date and
covering  such  additional  matters  relating to the  transactions  contemplated
hereby as the Required Banks may reasonably request;

     (e)  an  opinion  of  Davis  Polk  &  Wardwell,  special  counsel  for  the
Administrative  Agent,  substantially in the form of Exhibit D hereto, dated the
Effective Date and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request; and

     (f) all documents  that the  Administrative  Agent may  reasonably  request
relating to the existence of the Borrower,  the corporate  authority for and the
validity of this Agreement, the Notes and any other matters relevant hereto, all
in form and substance satisfactory to the Administrative Agent.

The Administrative Agent shall promptly notify the Borrower and the Banks of the
Effective  Date,  and such notice shall be conclusive and binding on all parties
hereto.

     Section 3.02.  Extensions of Credit.  The  obligation of any Bank to make a
Loan on the  occasion of any  Borrowing  is subject to the  satisfaction  of the
following conditions:

     (a) the fact that the  Effective  Date shall have  occurred  on or prior to
September 25, 1998;

     (b)  receipt  by the  Administrative  Agent of a  Notice  of  Borrowing  as
required by Section 2.02;

     (c) the fact that,  immediately  before and after such Extension of Credit,
no Default shall have occurred and be continuing; and

     (d)  the  fact  that  each of the  representations  and  warranties  of the
Borrower contained in this Agreement shall be true on and as of the date of such
Extension of Credit.

Each Extension of Credit  hereunder shall be deemed to be a  representation  and
warranty by the Borrower on the date of such Extension of Credit as to the facts
specified in clauses (c) and (d) of this Section.



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                                       22
 
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                                    ARTICLE 4
                         Representations and Warranties

     The Borrower represents and warrants that:

     Section 4.01.  Corporate Existence and Power. The Borrower is a corporation
duly  incorporated,  validly existing and in good standing under the laws of the
State of New York,  and has all corporate  powers and all material  governmental
licenses,  authorizations,  consents  and  approvals  required  to  carry on its
business as now  conducted,  except  where  failures to possess  such  licenses,
authorizations,  consents and approvals could not, in the aggregate,  reasonably
be expected to result in a Material Adverse Effect.

     Section   4.02.   Concentration   and   Governmental   Authorization;    No
Contravention.  The execution,  delivery and performance by the Borrower of this
Agreement and the Notes are within the Borrower's  corporate  powers,  have been
duly authorized by all necessary  corporate  action,  require no action by or in
respect of, or filing with, any governmental body, agency or official and do not
contravene,  or constitute a default  under,  any provision of applicable law or
regulation or of the certificate of  incorporation or by-laws of the Borrower or
of any  agreement,  judgment,  injunction,  order,  decree  or other  instrument
binding upon the Borrower or any of its  Subsidiaries  or result in the creation
or  imposition  of  any  Lien  on  any  asset  of  the  Borrower  or  any of its
Subsidiaries.

     Section  4.03.  Binding  Effect.  This  Agreement  constitutes  a valid and
binding  agreement  of the  Borrower  and each of the Notes,  when  executed and
delivered in accordance with this Agreement, will constitute a valid and binding
obligation  of the Borrower,  in each case  enforceable  in accordance  with its
terms.

     Section 4.04. Financial Information.  (a) The consolidated balance sheet of
the Borrower and its  Consolidated  Subsidiaries  as of January 31, 1998 and the
related  consolidated  statements  of  operations,  cash  flows and  changes  in
shareholders'  equity for the Fiscal Year then  ended,  reported on by KPMG Peat
Marwick LLP and set forth in the Borrower's  1997 Form 10-K, a copy of which has
been  delivered  to  each of the  Banks,  fairly  present,  in  conformity  with
generally accepted accounting principles, the consolidated financial position of
the Borrower and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such Fiscal Year.

     (b) The  unaudited  consolidated  balance  sheet  of the  Borrower  and its
Consolidated  Subsidiaries  as of  August  1,  1998  and the  related  unaudited
consolidated  statements of operations,  cash flows and changes in shareholders'
equity for the six months then ended, set forth in the Borrower's Latest Form






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                                       23
    29

10-Q, a copy of which has been delivered to each of the Banks,  fairly  present,
on a basis  consistent with the financial  statements  referred to in subsection
(a) of this Section, the consolidated financial position of the Borrower and its
Consolidated  Subsidiaries  as of such date and their  consolidated  results  of
operations and cash flows for such six-month  period (subject to normal year-end
adjustments).

     (c) Since August 1, 1998 there has been no material  adverse  change in the
business, financial position, results of operations or prospects of the Borrower
and its Consolidated Subsidiaries, considered as a whole.

     Section 4.05.  Litigation.  There is no action,  suit or proceeding pending
against,  or to the knowledge of the Borrower  threatened  against or affecting,
the Borrower or any of its  Subsidiaries  before any court or  arbitrator or any
governmental  body,  agency or official  which could  reasonably  be expected to
result in a Material Adverse Effect.

     Section 4.06.  Compliance with Laws. The Borrower and its  Subsidiaries are
in compliance in all material  respects with all  applicable  laws,  ordinances,
rules, regulations and binding requirements of governmental authorities,  except
where (i) the necessity of compliance therewith is being contested in good faith
by appropriate proceedings or (ii) failure to comply therewith could not, in the
aggregate, reasonably be expected to result in a Material Adverse Effect.

     Section  4.07.  Compliance  with ERISA.  Each member of the ERISA Group has
fulfilled its obligations  under the minimum funding  standards of ERISA and the
Internal  Revenue  Code with  respect to each Plan and is in  compliance  in all
material  respects  with the  presently  applicable  provisions of ERISA and the
Internal  Revenue Code with  respect to each Plan.  No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal  Revenue  Code  in  respect  of any  Plan,  (ii)  failed  to  make  any
contribution or payment to any Plan or Multiemployer  Plan or made any amendment
to any Plan, which has resulted or will result in the imposition of a Lien under
Section  412(n)  of  the  Internal  Revenue  Code  or  in  the  incurrence  of a
requirement under Section 401(a)(29) of the Internal Revenue Code to post a bond
or other  security in order to retain the  tax-qualified  status of such Plan or
(iii)incurred  any  liability  under Title IV of ERISA other than a liability to
the PBGC for premiums under Section 4007 of ERISA.

     Section 4.08.  Environmental Matters. To the knowledge of the Borrower, (i)
the Borrower and its Subsidiaries are in material compliance with all applicable
Environmental Laws, (ii) there are no claims,  demands or investigations against
the Borrower or any of its Subsidiaries by any  governmental  authority or other
person or entity that may reasonably be expected to result in material liability




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                                       24
    30

for the clean up of materials that have been released into the  environment  and
(iii)  there  are no  conditions  that are  reasonably  likely to result in such
claims,   demands  or  investigations   against  the  Borrower  or  any  of  its
Subsidiaries,  except for  failures  to comply  and  liabilities  which,  in the
aggregate, are unlikely to result in a Material Adverse Effect.
       

     Section  4.09.  Taxes.  The  Borrower and its  Subsidiaries  have filed all
United  States  Federal  income tax returns and all other  material  tax returns
which are  required to be filed by them and have paid all taxes due  pursuant to
such returns or pursuant to any material  assessment received by the Borrower or
any Subsidiary, except taxes and assessments which are not yet delinquent or are
being contested in good faith by appropriate proceedings.  The charges, accruals
and  reserves on the books of the Borrower  and its  Subsidiaries  in respect of
taxes or  other  governmental  charges  are,  in the  opinion  of the  Borrower,
adequate.

     Section 4.10.  Subsidiaries.  Each of the Borrower's corporate Subsidiaries
is a corporation duly incorporated,  validly existing and in good standing under
the laws of its jurisdiction of incorporation,  and has all corporate powers and
all material  governmental  licenses,  authorizations,  consents  and  approvals
required to carry on its business as now  conducted,  except  where  failures to
possess such licenses, authorizations,  consents and approvals could not, in the
aggregate, reasonably be expected to result in a Material Adverse Effect.

     Section 4.11. Not an Investment Company. The Borrower is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.

     Section  4.12.  Full  Disclosure.   All  information  (taken  as  a  whole)
heretofore  furnished  in writing by the Borrower to any Bank for purposes of or
in connection with this Agreement or any transaction contemplated hereby is, and
all such information  hereafter furnished in writing by the Borrower to any Bank
will be, true in all material  respects on the date as of which such information
is stated or certified.  Any  projections  and pro forma  financial  information
contained  in any such  writing  will be based  upon good  faith  estimates  and
assumptions believed by the Borrower to be reasonable at the time made, it being
recognized by the Banks that such  projections as to future events are not to be
viewed as facts and that actual results during the period or periods  covered by
any such  projections  may differ from the projected  results.  The Borrower has
disclosed  to the Banks in writing any and all facts which could  reasonably  be
expected to result in a Material  Adverse Effect (to the extent the Borrower can
now reasonably foresee, utilizing reasonable assumptions and the information now
actually known to the Borrower's Responsible Officers).


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                                       25
 
    31



                                    ARTICLE 5
                                    Covenants

     The  Borrower  agrees  that,  so long as any Bank has any  Credit  Exposure
hereunder:

     Section 5.01. Information. The Borrower will deliver to each of the Banks:

     (a) as soon as  available  and in any event within 90 days after the end of
each  Fiscal  Year,  a  consolidated  balance  sheet  of the  Borrower  and  its
Consolidated  Subsidiaries  as of the end of such  Fiscal  Year and the  related
consolidated  statements of operations,  cash flows and changes in shareholders'
equity for such Fiscal Year,  setting forth in each case in comparative form the
figures as of the end of and for the  previous  Fiscal  Year,  all  reported  on
(without any qualification  that would not be acceptable to the SEC for purposes
of filings under the Exchange Act) by KPMG Peat Marwick LLP or other independent
public accountants of nationally recognized standing;

     (b) as soon as  available  and in any event within 45 days after the end of
each of the first three  Fiscal  Quarters of each Fiscal  Year,  a  consolidated
condensed balance sheet of the Borrower and its Consolidated  Subsidiaries as of
the end of such Fiscal Quarter, the related consolidated  condensed statement of
operations  for such  Fiscal  Quarter  and the  related  consolidated  condensed
statements of  operations,  cash flows and retained  earnings for the portion of
the  Fiscal  Year  ended at the end of such  Fiscal  Quarter,  setting  forth in
comparative  form (i) in the case of such statement of  operations,  the figures
for the corresponding Fiscal Quarter of the previous Fiscal Year and (ii) in the
case of such  statements of operations,  cash flows and retained  earnings,  the
figures for the corresponding portion of the previous Fiscal Year, all certified
(subject  to  normal  year-end  adjustments)  as to  fairness  of  presentation,
generally accepted accounting  principles and consistency by the chief financial
officer or the chief accounting officer of the Borrower;


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                                       26
    32

     (c)  simultaneously  with the delivery of each set of financial  statements
referred to in clauses (a) and (b) above, a certificate of the Borrower's  chief
financial  officer or chief  accounting  officer (i) setting forth in reasonable
detail the  calculations  required  to  establish  whether the  Borrower  was in
compliance  with the  requirements of Sections 5.06 to 5.10,  inclusive,  on the
date of such financial statements and (ii) stating whether any Default exists on
the date of such certificate and, if any Default then exists,  setting forth the
details  thereof and the action which the Borrower is taking or proposes to take
with respect thereto;

     (d)  simultaneously  with the delivery of each set of financial  statements
referred to in clause (a) above, a statement of the firm of  independent  public
accountants  which reported on such statements (i) whether  anything has come to
their attention to cause them to believe that any Default existed on the date of
such statements and (ii) confirming the  calculations set forth in the officer's
certificate delivered simultaneously therewith pursuant to clause (c) above;

     (e) as soon as practicable and in any event within 90 days after the end of
each Fiscal  Year, a  certificate  of the  Borrower's  chief  financial  officer
setting forth:

          (i) the total rent  expense  (net of sublease  income) of the Borrower
          and its Consolidated Subsidiaries for such Fiscal Year;

          (ii)  the  present  value,  at the end of  such  Fiscal  Year,  of the
          operating  lease  commitments  of the  Borrower  and its  Consolidated
          Subsidiaries; and

          (iii) the present value, at the end of such Fiscal Year, of any third-
          party operating lease payments under guarantees entered into after the
          date hereof by the Borrower and its Consolidated Subsidiaries;

and certifying that the amounts set forth have been calculated on the same basis
as the comparable  amounts shown in Note 14 ("Leases") to the audited  financial
statements of the Borrower  contained in the Borrower's 1997 Form 10-K (treating
the guaranteed amounts set forth pursuant to clause (iii) as if they were direct
obligations of the Borrower and its Consolidated Subsidiaries);

     (f)  within  five  Domestic  Business  Days after any  Responsible  Officer
obtains  knowledge  of any  Default,  if  such  Default  is then  continuing,  a
certificate  of the  Borrower's  chief  financial  officer  or chief  accounting
officer  setting forth the details  thereof and the action which the Borrower is
taking or proposes to take with respect thereto;

     (g) promptly upon the mailing  thereof to the  shareholders of the Borrower
generally,  copies of all financial statements,  reports and proxy statements so
mailed;

     (h) promptly upon the filing thereof, copies of all registration statements
(other than the exhibits thereto and any registration  statements on Form S-8 or
its equivalent)  and reports on Forms 10-K, 10-Q and 8-K (or their  equivalents)
which the Borrower shall have filed with the SEC;


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                                       27
    33

     (i) if and when any member of the ERISA  Group (i) gives or is  required to
give notice to the PBGC of any  "reportable  event" defined in PBGC  Regulations
Sections 2615.11(a),  .12(a),  .14(a),  .16(a), .17(a), .21(a), .22(a) or .23(a)
with respect to any Plan, or, with respect to any Plan,  gives or is required to
give notice to the PBGC under  Section  4043(b)(3) of ERISA or would be required
to give notice under such Section but for the  provisions of Section  4043(b)(2)
of ERISA  or knows  that  the  plan  administrator  of any Plan has  given or is
required to give notice of any such  reportable  event,  a copy of the notice of
such  reportable  event given or required to be given to the PBGC, or that would
be  required  to be given but for the  provisions  of Section  4043(b)(2);  (ii)
receives  notice of complete or partial  withdrawal  liability under Title IV of
ERISA or notice that any Multiemployer Plan is in  reorganization,  is insolvent
or has been  terminated,  a copy of such notice;  (iii) receives notice from the
PBGC under Title IV of ERISA of an intent to terminate,  impose liability (other
than for  premiums  under  Section  4007 of ERISA) in  respect  of, or appoint a
trustee to  administer,  any Plan,  a copy of such  notice;  (iv)  applies for a
waiver of the minimum funding standard under Section 412 of the Internal Revenue
Code, a copy of such  application;  (v) gives notice of intent to terminate  any
Plan under Section 4041(c) of ERISA, a copy of such notice and other information
filed with the PBGC;  (vi) gives notice of withdrawal  from any Plan pursuant to
Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment
or contribution to any Plan or Multiemployer  Plan or makes any amendment to any
Plan or which has  resulted  or will  result in the  imposition  of a Lien under
Section  412(n) of the Internal  Revenue Code or the incurrence of a requirement
under Section  401(a)(29)  of the Internal  Revenue Code to post a bond or other
security  in  order  to  retain  the  tax-  qualified  status  of such  Plan,  a
certificate  of the  Borrower's  chief  financial  officer  or chief  accounting
officer  setting forth details as to such  occurrence and action,  if any, which
the  Borrower or  applicable  member of the ERISA Group has taken or proposes to
take; and

     (j) from time to time such additional  information  regarding the financial
position or business of the Borrower and its  Subsidiaries  (including,  without
limitation,  the status of the transactions  contemplated by the German Purchase
Agreement)  as the  Administrative  Agent,  at the  request  of  any  Bank,  may
reasonably request.

     Section 5.02.  Maintenance  of Property;  Insurance.  (a) The Borrower will
keep, and will cause each Subsidiary to keep, all material properties useful and
necessary in its business in good working order and condition, ordinary wear and
tear excepted.

     (b) The Borrower will, and will cause each of its Subsidiaries to, maintain
(either in the name of the Borrower or in such Subsidiary's own name)



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                                       28
 
    34     
with financially  sound and responsible  insurance  companies,  insurance on all
their  respective  properties in at least such amounts and against at least such
risks (and with such risk  retention) as are usually insured against in the same
general area by companies of established repute engaged in the same or a similar
business;  provided  that such risks may be covered by  self-insurance  programs
consistent  with past  practice.  The Borrower  will furnish to the Banks,  upon
request from the  Administrative  Agent,  information  presented  in  reasonable
detail as to the insurance so carried.

     Section  5.03.  Conduct of  Business  and  Maintenance  of  Existence.  The
Borrower will continue, and will cause each Subsidiary to continue, to engage in
business of the same  general  type as now  conducted  by the  Borrower  and its
Subsidiaries,  and will preserve,  renew and keep in full force and effect,  and
will cause each Subsidiary to preserve,  renew and keep in full force and effect
their  respective   existence  and  their  respective  rights,   privileges  and
franchises  necessary  or desirable  in the normal  conduct of business,  except
where failures to possess such rights,  privileges and franchises  could not, in
the aggregate,  reasonably be expected to result in a Material  Adverse  Effect;
provided  that  nothing  in this  Section  shall  prohibit  (i) the  merger of a
Subsidiary into the Borrower or the merger or consolidation of a Subsidiary with
or into another Person if the corporation surviving such consolidation or merger
is a Subsidiary and if, in each case,  after giving effect  thereto,  no Default
shall have occurred and be continuing or (ii) the  termination  of the existence
of any Subsidiary if the Borrower in good faith determines that such termination
is in the best interest of the Borrower and is not materially disadvantageous to
the Banks.

     Section 5.04.  Compliance  with Laws.  The Borrower will comply,  and cause
each Subsidiary to comply,  in all material  respects with all applicable  laws,
ordinances,   rules,  regulations,  and  binding  requirements  of  governmental
authorities (including, without limitation, Environmental Laws and ERISA and the
rules and regulations thereunder),  except where (i) the necessity of compliance
therewith is being  contested in good faith by  appropriate  proceedings or (ii)
failures to comply therewith could not, in the aggregate, reasonably be expected
to result in a Material Adverse Effect.

     Section 5.05. Inspection of Property,  Books and Records. The Borrower will
keep, and will cause each Subsidiary  (except for  Subsidiaries  that constitute
Immaterial  Subsidiaries)  to keep,  proper books of record and account in which
full, true and correct entries shall be made of all dealings and transactions in
relation to its business and  activities;  and will permit,  and will cause each
Subsidiary (except for Subsidiaries that constitute Immaterial  Subsidiaries) to
permit,  representatives  of any Bank at such Bank's  expense,  upon  reasonable
prior  notice,  to visit and  inspect  any of their  respective  properties,  to
examine and make



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                                       29
 
    35

abstracts  from any of their  respective  books and records and to discuss their
respective  affairs,  finances  and  accounts  with their  respective  officers,
employees and independent public  accountants,  all at such reasonable times and
as often as may reasonably be desired.

     Section 5.06. Negative Pledge. Neither the Borrower nor any Subsidiary will
create,  assume or suffer to exist any Lien on any asset now owned or  hereafter
acquired by it, except:

     (a) Liens  existing on April 4, 1997 securing Debt  outstanding on April 4,
1997 in an aggregate principal or face amount not exceeding $100,000,000;

     (b) any Lien on any asset (or improvement  thereon)  securing Debt incurred
or assumed  solely for the purpose of  financing  all or any part of the cost of
acquiring such asset (or improvement thereon),  provided that such Lien attaches
to such asset (or improvement thereon) concurrently with or within 90 days after
the acquisition thereof;

     (c) any Lien  existing  on any  asset of any  corporation  at the time such
corporation becomes a Subsidiary and not created in contemplation of such event;

     (d) any Lien on any  asset of any  corporation  existing  at the time  such
corporation is merged or consolidated  with or into the Borrower or a Subsidiary
and not created in contemplation of such event;

     (e) any Lien  existing  on any asset prior to the  acquisition  (whether by
purchase,  merger or otherwise)  thereof by the Borrower or a Subsidiary and not
created in contemplation of such acquisition;

     (f)  any  Lien  arising  out  of the  refinancing,  extension,  renewal  or
refunding  of any Debt  secured by any Lien  permitted  by any of the  foregoing
clauses of this  Section,  provided  that such Debt is not  increased and is not
secured by any additional assets;

     (g) Liens on life insurance  policies securing amounts borrowed against the
cash value of such policies;

     (h) Liens arising in the ordinary  course of its business  which (i) do not
secure  Debt,  (ii) do not  secure any  single  obligation  or series of related
obligations  in an  amount  exceeding  $100,000,000  and  (iii)  do  not  in the
aggregate  materially  detract from the value of its assets or materially impair
the use thereof in the operation of its business; and



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    36  
    
     
     (i) Liens not otherwise  permitted by the foregoing clauses of this Section
securing Debt in an aggregate principal or face amount at any date not to exceed
15% of Consolidated Tangible Net Worth.

     Section  5.07.  Minimum  Consolidated  Tangible  Net  Worth.   Consolidated
Tangible Net Worth will at no time be less than the sum of (i) $800,000,000 plus
(ii) for each Fiscal  Quarter  ended at or prior to such time (but after January
25,  1997),  50%  of  the  consolidated  net  income  of the  Borrower  and  its
Consolidated Subsidiaries for such Fiscal Quarter (if greater than zero).

     Section 5.08.  Leverage Ratio. Total Borrowed Funds will not (i) exceed 75%
of Total  Capitalization  at any time from the Effective Date through the end of
Fiscal  Year  1998  or (ii)  exceed  70% of  Total  Capitalization  at any  time
thereafter.

     Section  5.09.  Limitation on Debt of  Subsidiaries.  The total Debt of all
Consolidated  Subsidiaries  (excluding  Debt owed to the  Borrower or to another
Consolidated Subsidiary) will not at any time exceed $300,000,000.

     Section  5.10.  Fixed  Charge  Coverage  Ratio.  At the end of each  Fiscal
Quarter listed below, the ratio of

          (i) the sum of EBIT plus 1/3 of Annual Rent Expense,  in each case for
          the four consecutive Fiscal Quarters then ended, to

          (ii) the sum of Interest  Expense plus 1/3 of Annual Rent Expense,  in
          each case for the same four consecutive Fiscal Quarters,

will not be less than the ratio set forth  below  with  respect  to such  Fiscal
Quarter:

                    Fiscal Quarter                       Ratio
          -----------------------------      ---------------------------
             Each Fiscal Quarter of                    1.75 to 1
               Fiscal Year 1998

          Each subsequent Fiscal Quarter               2.00 to 1


     Section  5.11.  Consolidations,  Mergers and Sales of Assets.  The Borrower
will not  consolidate or merge with or into any other Person;  provided that the
Borrower  may merge with another  Person if (A) the Borrower is the  corporation
surviving such merger and (B) immediately  after giving effect to such merger no
Default shall have occurred and be continuing. The Borrower and its Subsidiaries
will not sell,  lease or  otherwise  transfer,  directly or  indirectly,  all or
substantially all of the assets of the Borrower and its Subsidiaries, taken as a
whole,  to any other Person;  provided that the foregoing  limitation  shall not
apply



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                                       31
 
    37  
   
to sales of inventory or sales and other dispositions of surplus assets, in each
case in the ordinary course of business.

     Section  5.12.  Use of Proceeds.  The proceeds of the Loans made under this
Agreement will be used by the Borrower for its working capital needs.

     Section 5.13. Restricted Payments.  Neither the Borrower nor any Subsidiary
will declare or make any Restricted Payment.

     Section 5.14. German Purchase Agreement.  The Borrower shall not permit the
German Purchase  Agreement to be amended,  supplemented or otherwise modified if
the effect thereof would be to (i) materially  reduce the purchase price (or the
portion thereof payable in cash),  (ii) materially delay the consummation of the
transactions  contemplated  therein  or (iii)  impose  any  additional  material
conditions to the consummation of the transactions contemplated therein.



                                    ARTICLE 6
                                    Defaults

     Section 6.01.  Events of Default.  If one or more of the  following  events
("Events of Default") shall have occurred and be continuing:

     (a) the Borrower  shall fail (i) to pay any  principal of any Loan when due
or (ii) to pay any interest on any Loan,  any fees or any other  amount  payable
hereunder within two Domestic Business Days after the due date thereof;

     (b) the Borrower shall fail to observe or perform any covenant contained in
Sections 5.06 to 5.14, inclusive;

     (c) the Borrower shall fail to observe or perform any covenant or agreement
contained  in this  Agreement  (other  than  those  covered by clause (a) or (b)
above) for 30 days after written  notice  thereof has been given to the Borrower
by the Administrative Agent at the request of any Requesting Banks;

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


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                                       32
    38      
        
     (e) the Borrower and/or any of its Subsidiaries shall fail to pay, when due
or within any applicable  grace period,  an amount or amounts  aggregating  more
than $25,000,000 payable in respect of their Debt;

     (f) any event or condition shall occur which results in the acceleration of
the  maturity  of any  Material  Debt or enables  the holder of such Debt or any
Person acting on such holder's behalf to accelerate the maturity thereof;

     (g)  any  of  the  Borrower  or  one  or  more  Subsidiaries  (unless  such
Subsidiaries  are  Immaterial  Subsidiaries)  shall commence a voluntary case or
other  proceeding  seeking  liquidation,  reorganization  or other  relief  with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or  hereafter  in  effect  or  seeking  the  appointment  of a  trustee,
receiver, liquidator,  custodian or other similar official of it or any Material
Assets,  or shall consent to any such relief or to the  appointment  of any such
official or to any such official taking  possession of Material Assets, or shall
make a general  assignment for the benefit of creditors,  or shall state that it
is unable to pay its debts  generally  as they  become  due,  or shall  take any
corporate action to authorize any of the foregoing;

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

     (i) any member of the ERISA  Group  shall fail to pay when due an amount or
amounts  aggregating in excess of $10,000,000  which it shall have become liable
to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan
(except for any termination under Section 4041(b) of ERISA) shall be filed under
Title IV of ERISA by any member of the ERISA Group,  any plan  administrator  or
any combination of the foregoing;  or the PBGC shall institute proceedings under
Title IV of ERISA to  terminate,  to impose  liability  (other than for premiums
under  Section  4007 of  ERISA)  in  respect  of,  or to cause a  trustee  to be
appointed to administer, any Material Plan; or a condition shall exist by reason
of which the PBGC would be  entitled  to obtain a decree  adjudicating  that any
Material  Plan must be  terminated;  or there  shall occur a complete or partial
withdrawal  from,  or a default,  within the  meaning of Section  4219(c)(5)  of
ERISA, with respect to, one or more Multiemployer Plans which could cause one

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                                       33
 
    39
          
or more  members of the ERISA  Group to incur a current  payment  obligation  in
excess of $25,000,000;

     (j) a judgment or order for the  payment of money in excess of  $10,000,000
shall be rendered  against the Borrower or any  Subsidiary  and such judgment or
order shall continue unsatisfied and unstayed for a period of 10 days; or

     (k) any person or group of persons  (within the meaning of Section 13 or 14
of the  Exchange  Act) shall have  acquired  beneficial  ownership  (within  the
meaning of Rule 13d-3  promulgated  by the SEC under said Act) of 20% or more of
the outstanding shares of common stock of the Borrower;  or Continuing Directors
shall cease to constitute a majority of the board of directors of the Borrower;

then, and in every such event, the  Administrative  Agent shall (i) if requested
by Banks having more than 50% in aggregate amount of the Commitments,  by notice
to the Borrower  terminate the Commitments  and they shall thereupon  terminate,
and (ii) if  requested by Banks  holding  more than 50% in  aggregate  principal
amount of the Loans, by notice to the Borrower  declare the Loans (together with
accrued  interest  thereon) to be, and the Loans (together with accrued interest
thereon)  shall   thereupon   become,   immediately   due  and  payable  without
presentment,  demand,  protest  or other  notice of any  kind,  all of which are
hereby waived by the Borrower;  provided that if any Event of Default  specified
in clause (g) or (h) above occurs with respect to the Borrower, then without any
notice  to the  Borrower  or any other  act by the  Administrative  Agent or the
Banks,  the Commitments  shall thereupon  terminate and the Loans (together with
accrued  interest  thereon)  shall become  immediately  due and payable  without
presentment,  demand,  protest  or other  notice of any  kind,  all of which are
hereby waived by the Borrower.

     Section 6.02. Notice of Default. The Administrative Agent shall give notice
to the Borrower under Section 6.01(c)  promptly upon being requested to do so by
any Requesting Banks and shall thereupon notify all the Banks thereof.



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                                    ARTICLE 7
                            The Administrative Agent

     Section 7.01. Appointment and Authorization. Each Bank irrevocably appoints
and  authorizes  the  Administrative  Agent to take such  action as agent on its
behalf and to exercise  such powers  under this  Agreement  and the Notes as are
delegated to the Administrative  Agent by the terms hereof or thereof,  together
with all such powers as are reasonably incidental thereto.

     Section 7.02.  Administrative Agents and Affiliates.  Morgan shall have the
same rights and powers  under this  Agreement as any other Bank and may exercise
or refrain  from  exercising  the same as though it were not the  Administrative
Agent. Morgan, and each of its affiliates,  may accept deposits from, lend money
to, and  generally  engage in any kind of  business  with,  the  Borrower or any
Subsidiary  or affiliate  of the  Borrower as if it were not the  Administrative
Agent.

     Section 7.03.  Obligations of Administrative  Agent. The obligations of the
Administrative  Agent  hereunder  are only  those  expressly  set forth  herein.
Without limiting the generality of the foregoing, the Administrative Agent shall
not be  required  to take any  action  with  respect to any  Default,  except as
expressly provided in Article 6.

     Section 7.04.  Consultation  with  Experts.  The  Administrative  Agent may
consult with legal  counsel (who may be counsel for the  Borrower),  independent
public  accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in  accordance  with
the advice of such counsel, accountants or experts.

     Section 7.05.  Liability of Agents.  None of the Administrative  Agent, its
affiliates or their respective directors, officers, agents or employees shall be
liable for any action  taken or not taken in  connection  herewith  (i) with the
consent or at the  request of the  Required  Banks or (ii) in the absence of its
own gross negligence or willful  misconduct.  None of the Administrative  Agent,
its  affiliates or their  respective  directors,  officers,  agents or employees
shall be responsible  for or have any duty to ascertain,  inquire into or verify
(i) any  statement,  warranty or  representation  made in  connection  with this
Agreement or any Extension of Credit;  (ii) the performance or observance of any
of the covenants or agreements of the Borrower;  (iii) the  satisfaction  of any
condition  specified  in  Article  3 except,  in the case of the  Administrative
Agent,  receipt of items  required to be delivered to it; or (iv) the  validity,
effectiveness  or  genuineness  of  this  Agreement,  the  Notes  or  any  other
instrument or writing furnished in connection herewith. The Administrative Agent
shall not incur any liability by acting in reliance upon any notice, consent,

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     certificate,  statement, or other writing (which may be a bank wire, telex,
facsimile transmission or similar writing) believed by it to be genuine or to be
signed by the proper party or parties.

     Section 7.06. Indemnification.  The Banks shall, ratably in accordance with
their respective Credit Exposures,  indemnify the  Administrative  Agent and its
affiliates,  directors,  officers,  agents  and  employees  (to the  extent  not
reimbursed by the Borrower) against any cost,  expense  (including  counsel fees
and  disbursements),  claim,  demand,  action, loss or liability (except such as
result from such indemnitees' gross negligence or willful  misconduct) that such
indemnitees  may suffer or incur in connection with this Agreement or any action
taken or omitted by such indemnitees hereunder.

     Section  7.07.  Credit  Decision.  Each  Bank  acknowledges  that  it  has,
independently  and without reliance upon any other Bank Party, and based on such
documents  and  information  as it has deemed  appropriate,  made its own credit
analysis and decision to enter into this Agreement.  Each Bank also acknowledges
that it will,  independently and without reliance upon any other Bank Party, and
based on such  documents and  information  as it shall deem  appropriate  at the
time,  continue  to make its own  credit  decisions  in taking or not taking any
action under this Agreement.

     Section 7.08. Successor  Administrative Agent. The Administrative Agent may
resign at any time by giving notice thereof to the Banks and the Borrower,  such
resignation to be effective when a successor  Administrative  Agent is appointed
pursuant to this Section and accepts such  appointment.  Upon receiving any such
notice of  resignation,  the  Required  Banks  shall have the right to appoint a
successor  Administrative Agent, subject to the approval of the Borrower (unless
an Event of Default  shall have  occurred and be  continuing at the time of such
appointment,  in which case the Borrower's approval will not be required). If no
successor  Administrative  Agent shall have been so  appointed  by the  Required
Banks,  and shall  have  accepted  such  appointment,  within 30 days  after the
retiring  Administrative  Agent gives notice of  resignation,  then the retiring
Administrative  Agent may,  on behalf of the other  Banks,  appoint a  successor
Administrative  Agent,  which shall be a commercial  bank  organized or licensed
under the laws of the  United  States of  America  or of any State  thereof  and
having  a  combined  capital  and  surplus  of at least  $500,000,000.  Upon the
acceptance  of  its  appointment  as the  Administrative  Agent  hereunder  by a
successor  Administrative  Agent,  such  successor  Administrative  Agent  shall
thereupon  succeed  to and become  vested  with all the rights and duties of the
retiring  Administrative  Agent, and the retiring  Administrative Agent shall be
discharged  from its  duties  and  obligations  hereunder.  After  any  retiring
Administrative  Agent's  resignation  hereunder,  the provisions of this Article


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shall inure to its benefit as to any actions  taken or omitted to be taken by it
while it was the Administrative Agent.

     Section 7.09.  Administrative  Agent's Fees.  The Borrower shall pay to the
Administrative  Agent  for its  account,  fees in the  amounts  and at the times
previously agreed upon between the Borrower and the Administrative Agent.



                                    ARTICLE 8
                             Change in Circumstances

     Section 8.01. Basis for Determining  Interest Rate Inadequate or Unfair. If
on or prior to the first day of any Interest Period for any Euro-Dollar Loan:

     (a) the Administrative Agent is advised by the Reference Bank that deposits
in dollars (in the  applicable  amounts) are not being  offered to the Reference
Bank in the London interbank market for such Interest Period, or

     (b)  Banks  having  50% or more of the  aggregate  principal  amount of the
affected  Loans  advise  the  Administrative  Agent  that  the  Adjusted  London
Interbank  Offered  Rate as  determined  by the  Administrative  Agent  will not
adequately  and  fairly  reflect  the  cost  to  such  Banks  of  funding  their
Euro-Dollar Loans for such Interest Period,

the Administrative Agent shall forthwith give notice thereof to the Borrower and
the Banks,  whereupon until the Administrative  Agent notifies the Borrower that
the  circumstances  giving  rise to such  suspension  no longer  exist,  (i) the
obligations of the Banks to make  Euro-Dollar  Loans,  or to continue such Loans
for  an  additional  Interest  Period,  or to  convert  outstanding  Loans  into
Euro-Dollar Loans shall be suspended and (ii) each outstanding  Euro-Dollar Loan
shall be  converted  into a Base Rate  Loan on the last day of the then  current
Interest  Period   applicable   thereto.   Unless  the  Borrower   notifies  the
Administrative  Agent at least two Domestic Business Days before the date of any
affected  Borrowing  for which a Notice of Borrowing has  previously  been given
that it elects not to borrow on such date,  such Borrowing shall instead be made
as a Base Rate Borrowing

     Section 8.02. Illegality.  If, on or after the date of this Agreement,  the
adoption  of any  applicable  law,  rule or  regulation,  or any  change  in any
applicable  law,  rule or  regulation,  or any change in the  interpretation  or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration  thereof, or compliance
by any Bank (or its  Euro-Dollar  Lending  Office) with any request or directive


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(whether or not having the force of law) of any such authority,  central bank or
comparable  agency,  shall make it unlawful or  impossible  for any Bank (or its
Euro-Dollar  Lending Office) to make, maintain or fund its Euro-Dollar Loans and
such Bank shall so notify the  Administrative  Agent, the  Administrative  Agent
shall  forthwith  give  notice  thereof  to the other  Banks  and the  Borrower,
whereupon  until such Bank  notifies the Borrower and the  Administrative  Agent
that the  circumstances  giving rise to such  suspension  no longer  exist,  the
obligation of such Bank to make Euro-Dollar Loans, to continue Euro-Dollar Loans
for  an  additional  Interest  Period  or  to  convert  outstanding  Loans  into
Euro-Dollar  Loans,  shall  be  suspended.  Before  giving  any  notice  to  the
Administrative  Agent  pursuant  to this  Section,  such Bank shall  designate a
different Euro-Dollar Lending Office if such designation will avoid the need for
giving  such notice and will not, in the  judgment  of such Bank,  be  otherwise
disadvantageous  to such Bank. If such notice is given, each Euro-Dollar Loan of
such Bank then outstanding  shall be converted to a Base Rate Loan either (a) on
the last day of the then current Interest Period  applicable to such Euro-Dollar
Loan if such Bank may  lawfully  continue to maintain and fund such Loan to such
day or (b)  immediately  if such Bank shall  determine  that it may not lawfully
continue to maintain and fund such Loan to such day.

     Section 8.03.  Increased  Cost and Reduced  Return.  (a) If on or after the
date hereof,  the adoption of any  applicable  law, rule or  regulation,  or any
change  in  any  applicable  law,  rule  or  regulation,  or any  change  in the
interpretation or administration thereof by any governmental authority,  central
bank or comparable  agency  charged with the  interpretation  or  administration
thereof,  or compliance by any Bank (or its Applicable  Lending Office) with any
request  or  directive  (whether  or not  having  the  force of law) of any such
authority,  central bank or  comparable  agency,  shall  impose,  modify or deem
applicable any reserve  (including,  without  limitation,  any such  requirement
imposed by the Board of Governors of the Federal Reserve  System,  but excluding
with  respect  to any  Euro-Dollar  Loan any  such  requirement  included  in an
applicable   Euro-Dollar  Reserve   Percentage),   special  deposit,   insurance
assessment or similar  requirement  against assets of,  deposits with or for the
account of, or credit  extended by, any Bank (or its Applicable  Lending Office)
or shall  impose on any Bank (or its  Applicable  Lending  Office) or the London
interbank market any other condition  affecting its Euro-Dollar  Loans, its Note
or its  obligation  to  make  Euro-Dollar  Loans  and the  result  of any of the
foregoing  is to  increase  the  cost to such  Bank (or its  Applicable  Lending
Office) of making or maintaining any  Euro-Dollar  Loan, or to reduce the amount
of any sum  received  or  receivable  by such  Bank (or its  Applicable  Lending
Office)  under this  Agreement  or under its Note with  respect  thereto,  by an
amount deemed by such Bank to be material,  then, within 15 days after receiving
a request by such Bank for compensation under this subsection,  accompanied by a
certificate  complying  with  subsection (d) of this Section (with a copy to the
Administrative  Agent),  the Borrower  shall,  subject to subsection (e) of this



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Section,  pay to such Bank such additional  amount or amounts as will compensate
such Bank for such increased cost or reduction.

     (b) If any Bank shall have  determined  that,  after the date  hereof,  the
adoption of any applicable law, rule or regulation  regarding  capital adequacy,
or any  change  in any  such  law,  rule or  regulation,  or any  change  in the
interpretation or administration thereof by any governmental authority,  central
bank or comparable  agency  charged with the  interpretation  or  administration
thereof,  or any request or directive regarding capital adequacy (whether or not
having  the  force of law) of any such  authority,  central  bank or  comparable
agency,  has or would have the effect of reducing  the rate of return on capital
of such Bank (or its Parent) as a consequence of its obligations  hereunder to a
level below that which such Bank (or its  Parent)  could have  achieved  but for
such  adoption,  change,  request or directive  (taking into  consideration  its
policies  with  respect to  capital  adequacy)  by an amount  deemed by it to be
material,  then from time to time,  within 15 days after  receiving a request by
such Bank for compensation  under this subsection,  accompanied by a certificate
complying with subsection (d) of this Section (with a copy to the Administrative
Agent),  the Borrower shall,  subject to subsection (e) of this Section,  pay to
such Bank  such  additional  amount or  amounts  as will  compensate  it (or its
Parent) for such reduction.

     (c) Each Bank will  promptly  notify the  Borrower  and the  Administrative
Agent of any event of which it has knowledge,  occurring  after the date hereof,
which  will  entitle  it to  compensation  pursuant  to this  Section  and  will
designate a different  Applicable  Lending Office if such designation will avoid
the need for,  or reduce the amount of, such  compensation  and will not, in its
judgment,  be  otherwise  disadvantageous  to it. If a Bank  fails to notify the
Borrower of any such event within 180 days after such event occurs, it shall not
be  entitled  to  compensation  under this  Section for any effect of such event
arising more than 180 days before it does notify the Borrower thereof

     (d) Each request by a Bank for  compensation  under this  Section  shall be
accompanied by a certificate, signed by one of its authorized employees, setting
forth in reasonable  detail (i) the basis for claiming such  compensation,  (ii)
the additional amount or amounts to be paid to it hereunder and (iii) the method
of calculating such amount or amounts,  which certificate shall be conclusive in
the absence of manifest error. In determining such amount, such Bank may use any
reasonable averaging and attribution methods.

     (e) Notwithstanding any other provision of this Section,  none of the Banks
shall be entitled to compensation under subsection (a) or (b) of this Section if
it  is  not  then  its  general  practice  to  demand  compensation  in  similar
circumstances under comparable provisions of other credit agreements.



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     Section 8.04.  Taxes.  (a) For purposes of this Section 8.04, the following
terms have the following meanings:

     "Taxes" means any and all present or future taxes, duties, levies, imposts,
deductions,  charges or withholdings with respect to any payment by the Borrower
pursuant to this Agreement or under any Note, and all  liabilities  with respect
thereto,  excluding  (i) in the case of each Bank  Party,  taxes  imposed  on or
measured by its  income,  and  franchise  or similar  taxes  imposed on it, by a
jurisdiction under the laws of which it is organized or qualified to do business
(but only if the taxes are imposed  solely  because such Bank Party is qualified
to do business in such jurisdiction  without regard to any Loan) or in which its
principal  executive office is located or in which its Applicable Lending Office
is located and (ii) in the case of each Bank, any United States  withholding tax
imposed on such payments other than such  withholding tax imposed as a result of
a change in treaty,  law or  regulation  occurring  after a Bank  first  becomes
subject to this Agreement.

     "Other  Taxes" means any present or future stamp,  documentary  or mortgage
recording  taxes and any other excise or property  taxes,  or similar charges or
levies,  which arise from any payment made  pursuant to this  Agreement or under
any Note or from the execution,  delivery or  enforcement  of, or otherwise with
respect to, this Agreement or any Note.

     (b) Any and all  payments by the Borrower to or for the account of any Bank
Party hereunder or under any Note shall be made without  deduction for any Taxes
or Other  Taxes;  provided  that,  if the  Borrower  shall be required by law to
deduct any Taxes or Other  Taxes from any such  payments,  (i) the  sum  payable
shall be increased  as  necessary  so that after making all required  deductions
(including  deductions  applicable to additional sums payable under this Section
8.04) such Bank Party receives an amount equal to the sum it would have received
had no such deductions been made,  (ii) the Borrower shall make such deductions,
(iii) the  Borrower shall pay the full amount deducted to the relevant  taxation
authority or other  authority in  accordance  with  applicable  law and (iv) the
Borrower shall furnish to the  Administrative  Agent, at its address referred to
in Section  9.01,  the  original  or a  certified  copy of a receipt  evidencing
payment thereof.

     (c) The Borrower agrees to indemnify each Bank Party for the full amount of
Taxes or Other Taxes (including,  without  limitation,  any Taxes or Other Taxes
imposed or asserted by any  jurisdiction  on amounts  payable under this Section
8.04) paid by such Bank Party and any liability (including  penalties,  interest
and expenses) arising therefrom or with respect thereto,  provided that Borrower
shall not indemnify any Bank Party for any penalties or interest on any Taxes or




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Other Taxes accrued during the period between the 15th day after such Bank Party
has received a notice from the jurisdiction  asserting such Taxes or Other Taxes
and such later day on which such Bank Party has  informed  the  Borrower  of the
receipt of such notice. This indemnification  shall be paid within 15 days after
such Bank Party makes demand therefor.

     (d) Each Bank Party organized under the laws of a jurisdiction  outside the
United  States,  on or prior to the date of its  execution  and delivery of this
Agreement  in the case of each Bank Party listed on the  signature  pages hereof
and on or prior to the date on which it becomes a Bank Party in the case of each
other Bank Party,  and from time to time  thereafter  if requested in writing by
the Borrower  (but only so long as such Bank Party  remains  lawfully able to do
so), shall provide the Borrower with Internal Revenue Service Form 1001 or 4224,
as  appropriate,  or any  successor  form  prescribed  by the  Internal  Revenue
Service, certifying that such Bank Party is entitled to benefits under an income
tax treaty to which the United  States is a party which  exempts such Bank Party
from United States  withholding  tax or reduces the rate of  withholding  tax on
payments of interest for the account of such Bank Party or  certifying  that the
income receivable  pursuant to this Agreement is effectively  connected with the
conduct of a trade or business in the United States.

     (e) For any period with respect to which a Bank Party has failed to provide
the Borrower with the  appropriate  form as required by Section  8.04(d) (unless
such  failure  is  due to a  change  in  treaty,  law  or  regulation  occurring
subsequent  to the  date on  which  such  form  originally  was  required  to be
provided),  such Bank  Party  shall not be  entitled  to  indemnification  under
Section 8.04(b) or (c) with respect to Taxes (including penalties,  interest and
expenses) imposed by the United States;  provided that if a Bank Party, which is
otherwise  exempt from or subject to a reduced rate of withholding  tax, becomes
subject to Taxes  because of its failure to deliver a form  required  hereunder,
the Borrower shall take such steps as such Bank Party shall  reasonably  request
to assist such Bank Party to recover such Taxes.

     (f) If the  Borrower is required  to pay  additional  amounts to or for the
account of any Bank Party  pursuant to this Section  8.04,  then such Bank Party
will  change  the  jurisdiction  of its  Applicable  Lending  Office  if, in the
judgment of such Bank Party,  such change (i) will  eliminate or reduce any such
additional  payment  which  may  thereafter  accrue  and  (ii) is not  otherwise
disadvantageous to such Bank Party.

     (g) If a Bank Party receives a notice from a taxing authority asserting any
Taxes or Other Taxes for which the Borrower is required to  indemnify  such Bank
Party under  Section  8.04(c),  it shall  furnish to the Borrower a copy of such




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notice no later than 90 days after the receipt  thereof.  If such Bank Party has
failed to  furnish a copy of such  notice to the  Borrower  within  such  90-day
period as required by this Section  8.04(g),  the Borrower shall not be required
to  indemnify  such Bank  Party  for any such  Taxes or Other  Taxes  (including
penalties,  interest and expenses  thereon)  arising  between the 90th day after
such Bank Party has  received  such  notice and the day on which such Bank Party
has furnished to the Borrower a copy of such notice.

     Section 8.05. Base Rate Loans Substituted for Affected  Euro-Dollar  Loans.
If (i) the obligation of any Bank to make or maintain Euro-Dollar Loans has been
suspended  pursuant to Section 8.02 or (ii) any Bank has  demanded  compensation
under  Section  8.03 or 8.04  with  respect  to its  Euro-Dollar  Loans  and the
Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such
Bank through the Administrative  Agent, have elected that the provisions of this
Section shall apply to such Bank, then,  unless and until such Bank notifies the
Borrower  that the  circumstances  giving rise to such  suspension or demand for
compensation  no longer exist,  all Loans which would  otherwise be made by such
Bank as (or continued as or converted into)  Euro-Dollar  Loans shall instead be
Base  Rate   Loans  (on  which   interest   and   principal   shall  be  payable
contemporaneously  with the related  Euro-Dollar  Loans of the other Banks).  If
such Bank  notifies  the  Borrower  that the  circumstances  giving rise to such
notice no longer apply,  the principal  amount of each such Base Rate Loan shall
be converted  into a  Euro-Dollar  Loan on the first day of the next  succeeding
Interest Period applicable to the related Euro-Dollar Loans of the other Banks.

     Section 8.06.  Substitution  of Bank. If (i) the  obligation of any Bank to
make Euro-Dollar  Loans has been suspended  pursuant to Section 8.02 or (ii) any
Bank has demanded  compensation  under Section 8.03 or 8.04,  the Borrower shall
have the right,  with the  assistance  of the  Administrative  Agent,  to seek a
mutually satisfactory  substitute bank or banks (which may be one or more of the
Banks) to replace  such Bank.  Any  substitution  under this Section 8.06 may be
accomplished,  at  the  Borrower's  option,  either  (i) by  the  replaced  Bank
assigning its rights and obligations  hereunder to the replacement bank or banks
pursuant  to  Section  9.06(c)  at a  mutually  agreeable  price  or (ii) by the
Borrower  prepaying all outstanding Loans from the replaced Bank and terminating
its Commitment on a date specified in a notice  delivered to the  Administrative
Agent and the replaced Bank at least three Euro-Dollar  Business Days before the
date so specified (and  compensating  such Bank for any resulting funding losses
as provided in Section  2.14) and  concurrently  the  replacement  bank or banks
assuming a Commitment in an amount equal to the Commitment  being terminated and
making Loans in the same  aggregate  amount and having the same maturity date or
dates,  respectively,  as the Loans being  prepaid,  all  pursuant to  documents
reasonably  satisfactory  to the  Administrative  Agent  (and in the case of any

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document to be signed by the  replaced  Bank,  reasonably  satisfactory  to such
Bank).  No such  substitution  shall  relieve the Borrower of its  obligation to
compensate  and/or  indemnify the replaced Bank as required by Sections 8.03 and
8.04 with  respect to the period  before it is  replaced  and to pay all accrued
interest, accrued fees and other amounts owing to the replaced Bank hereunder.



                                    ARTICLE 9
                                  Miscellaneous

     Section 9.01. Notices.  All notices,  requests and other  communications to
any party hereunder shall be in writing  (including bank wire, telex,  facsimile
transmission  or similar  writing) and shall be given to such party:  (x) in the
case of the Borrower or the  Administrative  Agent,  at its  address,  facsimile
number or telex number set forth on the signature pages hereof,  (y) in the case
of any Bank, at its address,  facsimile  number or telex number set forth in its
Administrative  Questionnaire  or (z) in the  case  of  any  party,  such  other
address,  facsimile  number or telex number as such party may hereafter  specify
for such purpose by notice to the  Administrative  Agent and the Borrower.  Each
such notice,  request or other  communication shall be effective (i) if given by
telex,  when such telex is  transmitted  to the telex  number  specified in this
Section and the appropriate  answerback is received,  (ii) if given by facsimile
transmission, when transmitted to the facsimile number specified in this Section
and confirmation of receipt is received,  (iii) if given by mail, three Domestic
Business  Days after such  communication  is  deposited  in the mails with first
class postage  prepaid,  addressed as  aforesaid,  or (iv) if given by any other
means,  when delivered at the address  specified in this Section;  provided that
notices to the  Administrative  Agent under  Article 2 or Article 8 shall not be
effective until received.

     Section  9.02.  No  Waivers.  No  failure  or delay  by any  Bank  Party in
exercising  any  right,  power or  privilege  hereunder  or under any Note shall
operate as a waiver  thereof  nor shall any single or partial  exercise  thereof
preclude  any other or further  exercise  thereof or the  exercise  of any other
right,  power or privilege.  The rights and remedies  herein  provided  shall be
cumulative and not exclusive of any rights or remedies provided by law.

     Section 9.03. Expenses; Indemnification. (a) The Borrower shall pay (i) all
reasonable   out-of-pocket  expenses  of  the  Administrative  Agent,  including
reasonable  fees and  disbursements  of special  counsel for the  Administrative
Agent,  in connection  with the  negotiation  and preparation of this Agreement,
(ii) all reasonable  out-of-pocket  expenses of the Administrative Agent and the
Administrative Agent, including reasonable fees and disbursements of special



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counsel for the  Administrative  Agent, in connection with the administration of
this Agreement,  any waiver or consent  hereunder or any amendment hereof or any
Default or alleged  Default  hereunder and (iii) if an Event of Default  occurs,
all out-of-pocket  expenses incurred by the  Administrative  Agent and each Bank
Party including  (without  duplication)  the fees and  disbursements  of special
counsel and the  allocated  cost of internal  counsel,  in  connection  with any
collection,  bankruptcy,  insolvency and other enforcement proceedings resulting
therefrom.

     (b) The Borrower  agrees to  indemnify  each Bank Party,  their  respective
affiliates and the respective directors,  officers,  agents and employees of the
foregoing  (each an  "Indemnitee")  and hold each  Indemnitee  harmless from and
against any and all  liabilities,  losses,  damages,  costs and  expenses of any
kind,  including,  without limitation,  the reasonable fees and disbursements of
counsel,  which  may be  incurred  by such  Indemnitee  in  connection  with any
investigative,  administrative  or  judicial  proceeding  (whether  or not  such
Indemnitee shall be designated a party thereto)  brought or threatened  relating
to or arising out of this Agreement or any actual or proposed use of proceeds of
Loans  hereunder;  provided  that no  Indemnitee  shall  have  the  right  to be
indemnified  hereunder  for such  Indemnitee's  own gross  negligence or willful
misconduct as determined by a court of competent jurisdiction.

     Section 9.04.  Sharing of Set-offs.  (a) Each Bank agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive payment
of a  proportion  of the  aggregate  amount of principal  and interest  that has
become  due with  respect  to the  Loans  held by it which is  greater  than the
proportion  received  by any other Bank in respect  of the  aggregate  amount of
principal  and  interest  that has become due with  respect to the Loans held by
such other Bank, the Bank receiving such  proportionately  greater payment shall
purchase  such  participations  in the Loans held by the other  Banks,  and such
other adjustments shall be made, as may be required so that all such payments of
principal  and  interest  with  respect to the Loans held by the Banks  shall be
shared by the Banks pro rata.

     (b) Nothing in this Section  shall impair the right of any Bank to exercise
any right of set-off or counterclaim it may have and to apply the amount subject
to such exercise to the payment of  indebtedness  of the Borrower other than its
indebtedness hereunder.

     (c) The Borrower  agrees,  to the fullest  extent it may  effectively do so
under applicable law, that any holder of a participation  in a Loan,  whether or
not acquired  pursuant to the  foregoing  arrangements,  may exercise  rights of
set-off or counterclaim  and other rights with respect to such  participation as
fully  as if such  holder  of a  participation  were a  direct  creditor  of the
Borrower in the amount of such participation.



(NY) 27009/335/CA/ca.98


                                       44
    50         
     Section 9.05.  Amendments  and Waivers.  Any provision of this Agreement or
the Notes may be amended or waived if, but only if, such  amendment or waiver is
in writing and is signed by the  Borrower and the  Required  Banks (and,  if the
rights or duties  of the  Administrative  Agent  are  affected  thereby,  by the
Administrative  Agent);  provided that no such amendment or waiver shall, unless
signed by all the Banks,  (i)  increase or decrease the  Commitment  of any Bank
(except for a ratable  decrease in the  Commitments of all Banks) or subject any
Bank to any  additional  obligation,  (ii)  reduce the  principal  of or rate of
interest on any Loan or any fees  hereunder,  (iii)  postpone the date fixed for
any payment of principal of or interest on any Loan or any fees hereunder or for
the  termination  of  any  Commitment  or  (iv)  change  the  percentage  of the
Commitments or of the aggregate  unpaid  principal  amount of the Loans,  or the
number of Banks,  which shall be  required  for the Banks or any of them to take
any action under this Section or any other provision of this Agreement.

     Section 9.06.  Successors and Assigns. (a) The provisions of this Agreement
shall be binding  upon and inure to the benefit of the parties  hereto and their
respective  successors  and assigns,  except that the Borrower may not assign or
otherwise  transfer  any of its rights  under this  Agreement  without the prior
written consent of each Bank.

     (b)  Any  Bank  may at  any  time  grant  to one or  more  banks  or  other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its  Loans.  If any Bank  grants  a  participating  interest  to a
Participant,  whether or not upon notice to the Borrower and the  Administrative
Agent, such Bank shall remain responsible for the performance of its obligations
hereunder,  such Bank shall remain the holder of its Loans, and the Borrower and
the  Administrative  Agent shall  continue to deal solely and directly with such
Bank in connection with such Bank's rights and obligations under this Agreement.
Any agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and  responsibility  to
enforce the obligations of the Borrower hereunder including, without limitation,
the right to approve any amendment,  modification  or waiver of any provision of
this Agreement; provided that such participation agreement may provide that such
Bank will not agree to any  modification,  amendment or waiver of this Agreement
described in clause (i), (ii), (iii) or (iv) of Section 9.05 without the consent
of the  Participant.  The Borrower  agrees that each  Participant  shall, to the
extent provided in its participation  agreement,  be entitled to the benefits of
Article VIII with respect to its participating  interest. An assignment or other
transfer  which is not permitted by  subsection  (c) or (d) below shall be given
effect for  purposes  of this  Agreement  only to the extent of a  participating
interest granted in accordance with this subsection (b).





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                                       45
    51

     (c) Any Bank may, in the ordinary  course of its business and in accordance
with  applicable  law,  at any  time  assign  to  one or  more  banks  or  other
institutions  (each an "Assignee") all, or a portion (not less than $10,000,000)
of its Commitment and/or its Loans, and of its rights and obligations under this
Agreement and the Notes with respect  thereto,  and such  Assignee  shall assume
such rights and obligations,  pursuant to an Assignment and Assumption Agreement
in substantially the form of Exhibit E hereto executed by such Assignee and such
transferor  Bank, with (and subject to) the subscribed  consents of the Borrower
and  the  Administrative   Agent  (which  consents  shall  not  be  unreasonably
withheld); provided that (i) such consents shall not be required if the Assignee
is an affiliate of such transferor Bank or was a Bank immediately  prior to such
assignment;  (ii) the minimum amount specified above for a partial assignment of
the transferor Bank's rights and obligations shall not apply if the Assignee was
a Bank immediately  prior to such  assignment;  and (iii) no such consent of the
Borrower shall be required if at the time an Event of Default shall exist.  Upon
execution and delivery of such  instrument  and payment by such Assignee to such
transferor  Bank of an amount  equal to the purchase  price agreed  between such
transferor  Bank and such Assignee,  such Assignee shall be a Bank party to this
Agreement  and  shall  have all the  rights  and  obligations  of a Bank  with a
Commitment as set forth in such  instrument of  assumption,  and the  transferor
Bank shall be released from its obligations  hereunder (and its Commitment shall
be reduced) to a corresponding  extent,  and no further consent or action by any
party shall be required.  Upon the  consummation  of any assignment  pursuant to
this  subsection  (c), the  transferor  Bank, the  Administrative  Agent and the
Borrower shall make appropriate arrangements so that, if required, a new Note is
issued to the Assignee.  In connection with any such assignment,  the transferor
Bank shall pay to the Administrative  Agent an administrative fee for processing
such  assignment in the amount of $2,500;  provided that the Borrower  shall pay
such  administrative fee if such assignment is required by the Borrower pursuant
to Section  8.06.  If the  Assignee  is not  incorporated  under the laws of the
United  States of America or a state  thereof,  it shall deliver to the Borrower
and the  Administrative  Agent  certification  as to exemption from deduction or
withholding of any United States federal income taxes in accordance with Section
8.04.

     (d) Any Bank may at any time assign all or any portion of its rights  under
this Agreement and its Note to a Federal Reserve Bank. No such assignment  shall
release the transferor Bank from its obligations hereunder.

     (e) No Assignee, Participant or other transferee of any Bank's rights shall
be entitled to receive any greater  payment under Section 8.03 or 8.04 than such
Bank would have been entitled to receive with respect to the rights transferred,
unless such transfer is made with the Borrower's prior written consent

(NY) 27009/335/CA/ca.98


                                       46
    52
         
or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank
to designate a different  Applicable Lending Office under certain  circumstances
or at a time when the circumstances  giving rise to such greater payment did not
exist.

     Section 9.07.  No-Reliance on Margin Stock. Each of the Banks represents to
the  Administrative  Agent and each of the other  Banks that it in good faith is
not relying upon any "margin  stock" (as defined in  Regulation U) as collateral
in the extension or maintenance of the credit provided for in this Agreement.

     Section 9.08. Governing Law; Submission to Jurisdiction. (a) THIS AGREEMENT
AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE  WITH THE LAWS OF
THE STATE OF NEW YORK.

     (b) The Borrower  hereby submits to the  nonexclusive  jurisdiction  of the
United States  District  Court for the Southern  District of New York and of any
New York  State  court  sitting  in New  York  City for  purposes  of all  legal
proceedings  arising  out of or  relating  to this  Agreement,  the Notes or the
transactions contemplated hereby or thereby. The Borrower irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such  proceeding  brought in such a court
and any claim that any such proceeding  brought in such a court has been brought
in an inconvenient forum.

     Section 9.09.  Counterparts.  This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

     Section 9.10.  Waiver of Jury Trial.  EACH PARTY HERETO HEREBY  IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY.




(NY) 27009/335/CA/ca.98


                                       47
    53
      
     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly  executed by their  respective  authorized  officers as of the day and year
first above written.


                                       VENATOR GROUP, INC.

                                       By /s/ John H. Cannon
                                          ---------------------------
                                            Name: John H. Cannon
                                            Title: Vice President and Treasurer

                                       233 Broadway
                                       New York, New York  10279-0003
                                       Facsimile number: 212-553-2152


                                       MORGAN GUARANTY TRUST COMPANY
                                          OF NEW YORK,
                                          as Administrative Agent and a Bank

                                       By /s/ Unn Boucher
                                          ---------------------------   
                                            Name: Unn Boucher
                                            Title: Vice President
                                       60 Wall Street
                                       New York, New York 10260-0060
                                       Facsimile number:


(NY) 27009/335/CA/ca.98


                                       48
    54

                               COMMITMENT SCHEDULE





Bank                                                            Commitment
Morgan Guaranty Trust Company
of New York                                                     $250,000,000

Total                                                           $250,000,000


(NY) 27009/335/CA/ca.98


 
    55
                                                                       EXHIBIT A



                                      NOTE


                                                              New York, New York
                                                                       , 19


     For value  received,  Venator  Group,  Inc.,  a New York  corporation  (the
"Borrower"), promises to pay to the order of _____________ (the "Bank"), for the
account of its Applicable  Lending Office,  the unpaid  principal amount of each
Loan made by the Bank to the  Borrower  pursuant  to the Bridge  Loan  Agreement
referred to below on the maturity  date thereof  provided for in the Bridge Loan
Agreement.  The Borrower promises to pay interest on the unpaid principal amount
of each  such Loan on the  dates  and at the rate or rates  provided  for in the
Bridge Loan Agreement. All such payments of principal and interest shall be made
in lawful money of the United States in Federal or other  immediately  available
funds at the  office of  Morgan  Guaranty  Trust  Company  of New York,  60 Wall
Street, New York, New York.

     All Loans made by the Bank, the respective types thereof and all repayments
of the  principal  thereof  shall be  recorded  by the Bank and,  if the Bank so
elects in  connection  with any  transfer  or  enforcement  hereof,  appropriate
notations to evidence the foregoing  information  with respect to each such Loan
then outstanding may be endorsed by the Bank on the schedule attached hereto, or
on a continuation of such schedule attached to and made a part hereof;  provided
that  neither  the  failure  of  the  Bank  to  make  any  such  recordation  or
endorsement, nor any error therein, shall affect the obligations of the Borrower
hereunder or under the Bridge Loan Agreement.

     This note is one of the Notes  referred  to in the  Bridge  Loan  Agreement
dated as of September 25, 1998 among the  Borrower,  the Banks party thereto and
Morgan Guaranty Trust Company of New York, as Administrative  Agent (as the same
may be amended from time to time, the "Bridge Loan Agreement"). Terms defined in
the Bridge Loan Agreement are used herein with the same  meanings.  Reference is
made to the Bridge Loan Agreement for  provisions for the prepayment  hereof and

(NY) 27009/335/CA/ca.98


 
    56

     the acceleration of the maturity hereof. THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.



                                       VENATOR GROUP, INC.





                                       By________________________
                                            Title:

(NY) 27009/335/CA/ca.98


                                        2
    57


                                  Note (cont'd)

                         LOANS AND PAYMENTS OF PRINCIPAL



- --------------------------------------------------------------------------------
                       Amount of            Amount of            Notation
Date                     Loan           Principal Repaid          Made By
- --------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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




(NY) 27009/335/CA/ca.98



                                        3
    58




                                                                       EXHIBIT B


                               OPINION OF SPECIAL
                            COUNSEL FOR THE BORROWER


                                              [Effective Date]


Morgan Guaranty Trust Company of New York,
    as Administrative Agent
60 Wall Street
New York, New York  10260-0060

Ladies and Gentlemen:

     We have  acted as  special  counsel  to  Venator  Group,  Inc.,  a New York
corporation (the "Borrower"), in connection with the preparation,  execution and
delivery  of, the Bridge Loan  Agreement,  dated as of  September  __, 1998 (the
"Bridge Loan  Agreement")  among the Borrower,  the Banks,  and Morgan  Guaranty
Trust  Company  of New York,  as  Administrative  Agent.  This  opinion is being
delivered pursuant to Section 3.01(c) of the Bridge Loan Agreement.  Capitalized
terms used and not otherwise  defined  herein shall have the meanings  herein as
ascribed thereto in the Bridge Loan Agreement.

     In our examination we have assumed the  genuineness of all signatures,  the
legal capacity of natural persons,  the authenticity of all documents  submitted
to us as  originals,  the  conformity  to original  documents  of all  documents
submitted to us as certified or photostatic  copies, and the authenticity of the
originals of such copies.  As to any facts material to this opinion which we did
not  independently  establish  or verify,  we have  relied upon  statements  and
representations of the Borrower and its officers and other  representatives  and
of public officials, including the facts set forth in the Borrower's Certificate
described below.

     In rendering the opinions set forth herein,  we have examined and relied on
originals or copies of the following:

          (a) the Bridge Loan Agreement;

(NY) 27009/335/CA/ca.98

    59



          (b) the Notes delivered to you on the date hereof;

          (c) the certificate of the Borrower  executed by Andrew P. Hines dated
          the date hereof,  a copy of which is attached as Exhibit A hereto (the
          "Borrower's Certificate");

          (d) certified copies of the Certificate of Incorporation  and By- laws
          of the Borrower;

          (e) a certified copy of certain  resolutions of the Board of Directors
          of the Borrower adopted on ____________, 1998; and

          (f) such other documents as we have deemed necessary or appropriate as
          a basis for the opinions set forth below.

The Bridge  Loan  Agreement  and the Notes  shall  hereinafter  be  referred  to
collectively as the "Transaction Documents."

     Members of our firm are  admitted  to the bar of the State of New York.  We
express no opinion as to the laws of any jurisdiction other than (i) the laws of
the State of New York, and (ii) the federal laws of the United States of America
to the extent specifically referred to herein.

     Based on the  foregoing  and  subject to the  limitations,  qualifications,
exceptions and assumptions set forth herein, we are of the opinion that

     1. The Borrower has been duly  incorporated  and is validly existing and in
good standing under the laws of the State of New York.

     2. The Borrower has the  corporate  power and authority to (i) carry on its
business as described in the Borrower's 1997 Form 10-K and (ii) execute, deliver
and perform all of its obligations  under each of the Transaction  Documents and
to borrow  thereunder.  The  execution  and delivery of each of the  Transaction
Documents and the consummation by the Borrower of the transactions  contemplated
thereby have been duly authorized by all requisite  corporate action on the part
of the Borrower.  Each of the  Transaction  Documents has been duly executed and
delivered by the Borrower.


(NY) 27009/335/CA/ca.98

                                       2

    60

     3.  Each of the  Transaction  Documents  constitutes  a valid  and  binding
obligation of the Borrower  enforceable  against the Borrower in accordance with
its terms, subject to the following qualifications:

          (a) enforcement may be limited by applicable  bankruptcy,  insolvency,
          reorganization,  moratorium or other similar laws affecting creditors'
          rights  generally and by general  principles of equity  (regardless of
          whether enforcement is sought in equity or at law);

          (b) we express no  opinion as to the  enforceability  of any rights to
          contribution  or  indemnification  provided  for  in  the  Transaction
          Documents which are violative of the public policy underlying any law,
          rule or regulation  (including  any federal or state  securities  law,
          rule or regulation); and

          (c) we  express no  opinion  as to  Section  9.04 of the  Bridge  Loan
          Agreement  to the extent it  authorizes  or  permits  any party to any
          Transaction Document or any purchaser of a participation  interest for
          any  such  party  to  set  off  or  apply  any  deposit,  property  or
          indebtedness with respect to any participation interest.

     4. The  execution  and delivery by the Borrower of each of the  Transaction
Documents and the performance by the Borrower of its  obligations  under each of
the  Transaction  Documents,  each in accordance with its terms, do not conflict
with the Certificate of Incorporation or By-laws of the Borrower.

     5. Neither the  execution,  delivery or  performance by the Borrower of the
Transaction  Documents  nor the  compliance  by the Borrower  with the terms and
provisions  thereof will  contravene  any  provision of any  Applicable  Law (as
hereinafter  defined).  "Applicable  Laws"  shall  mean  those  laws,  rules and
regulations  of the  State of New  York  and of the  United  States  of  America
(including,  without  limitation,  Regulations  U and X of the  Federal  Reserve
Board) which, in our experience,  are normally applicable to transactions of the
type contemplated by the Transaction Documents.

     6. No Governmental  Approval (as hereinafter  defined),  which has not been
obtained or taken and is not in full force and effect,  is required to authorize
or is required in connection with the execution,  delivery or performance of any
of the Transaction Documents by the Borrower.  "Governmental Approval" means any
consent, approval, license, authorization or validation of, or filing, recording
 

(NY) 27009/335/CA/ca.98


                                       3
    61

or  registration  with,  any  Governmental  Authority (as  hereinafter  defined)
pursuant to  Applicable  Laws.  "Governmental  Authority"  means any New York or
federal legislative, judicial, administrative or regulatory body.

     7. Neither the  execution,  delivery or  performance by the Borrower of its
obligations under the Transaction  Documents nor compliance by the Borrower with
the terms thereof will contravene any Applicable Order (as hereinafter  defined)
against the  Borrower.  "Applicable  Orders"  means those  orders,  judgments or
decrees of Governmental  Authorities identified in paragraph 2 of the Borrower's
Certificate.

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

     In rendering the foregoing  opinions,  we have assumed,  with your consent,
that:

               (a)  the  execution,  delivery  and  performance  of  any  of the
          Borrower's  obligations  under the Transaction  Documents does not and
          will not conflict  with,  contravene,  violate or constitute a default
          under (i) to your knowledge, any lease, indenture, instrument or other
          agreement to which the  Borrower or its property is subject,  (ii) any
          rule,  law or regulation to which the Borrower is subject  (other than
          Applicable  Laws as to which we express  our  opinion in  paragraph  5
          herein) or (iii) any judicial or administrative order or decree of any
          governmental  authority  (other than Applicable  Orders as to which we
          express our opinion in paragraph 7 herein); and


(NY) 27009/335/CA/ca.98

                                       4

    62

               (b) no authorization,  consent or other approval of, notice to or
          filing  with any court,  governmental  authority  or  regulatory  body
          (other than Governmental  Approvals as to which we express our opinion
          in  paragraph  6 herein) is required  to  authorize  or is required in
          connection with the execution, delivery or performance by the Borrower
          of the Transaction Documents or the transactions contemplated thereby.

          We understand that you are separately  receiving an opinion,  dated as
     of the date hereof,  with respect to the foregoing from Gary M. Bahler (the
     "General  Counsel  Opinion") and we are advised that such opinion  contains
     qualifications.  Our opinions  herein  stated are based on the  assumptions
     specified  above and we express no opinion as to the effect on the opinions
     herein  stated  of the  qualifications  contained  in the  General  Counsel
     Opinion.

          Our  opinions  are  also  subject  to the  following  assumptions  and
     qualifications:

               (a) we have assumed each of the Transaction Documents constitutes
          the  legal,  valid  and  binding  obligation  of  each  party  to such
          Transaction  Document  (other than the Borrower)  enforceable  against
          such party (other than the Borrower) in accordance with its terms; and

               (b) we  express  no  opinion  as to  the  effect  on the  opinion
          expressed herein of (i) the compliance or  non-compliance of any party
          (other than the Borrower) to the Transaction Documents with any state,
          federal  or other  laws or  regulations  applicable  to it or (ii) the
          legal or regulatory  status or the nature of the business of any party
          (other than the Borrower) to the Transaction Documents.

          In rendering the opinions  herein  stated,  we have taken into account
     the fact that you have asked the  Borrower to make,  and the  Borrower  has
     made,  the  representation  set forth in Section  4.02 of the  Bridge  Loan
     Agreement.



(NY) 27009/335/CA/ca.98


                                       5
    63

     This opinion is being  furnished only to you and is solely for your benefit
and is not to be  relied  upon by any  other  Person  or for any  other  purpose
without our prior written  consent,  provided,  however,  that any Assignee that
becomes a Bank pursuant to Section 9.06(c) of the Bridge Loan Agreement may rely
on this opinion as if it were  addressed to such  Assignee and  delivered on the
date hereof.

                                       Very truly yours,




                                       6

(NY) 27009/335/CA/ca.98



    64


                                   Schedule I
                                to SASM&F Opinion


                                     Lenders



          Morgan Guaranty Trust Company of New York













(NY) 27009/335/CA/ca.98


                                       

    65
                                                                      Exhibit C



                 [Form of Opinion of Borrower's General Counsel]


                              [Venator letterhead]

                                            September __, 1998


Morgan Guaranty Trust Company
 of New York,
   as Administrative Agent
60 Wall Street
New York, New York  10260-0060

Ladies and Gentlemen:

     I am General Counsel of Venator Group,  Inc., a New York  corporation  (the
"Borrower"),  and  have  acted  as  such in  connection  with  the  preparation,
execution and delivery of, the Bridge Loan Agreement,  dated as of September __,
1998 (the "Bridge Loan  Agreement'),  among the  Borrower,  the Banks and Morgan
Guaranty  Trust Company of New York, as  Administrative  Agent.  This opinion is
being  delivered  pursuant  to Section  3.01(d) of the  Bridge  Loan  Agreement.
Capitalized  terms used and not  otherwise  defined  herein  shall have the same
meanings herein as ascribed thereto in the Bridge Loan Agreement.

     In my  examination I have assumed the  genuineness of all  signatures,  the
legal capacity of natural persons,  the authenticity of all documents  submitted
to me as  originals,  the  conformity  to original  documents  of all  documents
submitted to me as certified or photostatic  copies, and the authenticity of the
originals of such copies.  As to any facts  material to this opinion which I did
not  independently  establish  or verify,  I have  relied  upon  statements  and
representations of the Borrower and its officers and other  representatives  and
of public officials.

     
(NY) 27009/335/CA/ca.98



    66

In rendering the opinions set forth herein,  I, or a lawyer acting under my
general  supervision,  have  examined  and relied on  originals or copies of the
following:

          (a) the Bridge Loan Agreement;

          (b) the Notes delivered to you on the date hereof;

          (c) certified copies of the Certificate of  Incorporation  and By-laws
     of the Borrower;

          (d) a copy of certain  resolutions  of the Board of  Directors  of the
     Borrower adopted on __________, 1998; and

          (e) such other documents as I have deemed  necessary or appropriate as
     a basis for the opinions set forth below.

          The Bridge Loan Agreement and the Notes shall  hereinafter be referred
     to collectively as the "Transaction Documents."

          I am a member of the bar of the State of New York and I do not express
     any opinion  herein  concerning any law other than the laws of the State of
     New York.

          Based   upon  the   foregoing   and   subject   to  the   limitations,
     qualifications,  exceptions and assumptions  set forth herein,  I am of the
     opinion that:

          1.  Each of the  Transaction  Documents  has been  duly  executed  and
     delivered by the Borrower.

          2.  The  execution  and  delivery  by  the  Borrower  of  each  of the
     Transaction   Documents  and  the   performance  by  the  Borrower  of  its
     obligations  under each of the  Transaction  Documents,  each in accordance
     with its terms, do not (i) constitute a violation of or a default under any
     Applicable Contracts (as hereinafter defined) or (ii) cause the creation of
     any  security  interest or lien upon any of the  property  of the  Borrower
     pursuant  to any  Applicable  Contracts.  I do  not  express  any  opinion,
     however,  as to whether  the  execution,  delivery  or  performance  by the
     Borrower of the  Transaction  Documents will constitute a violation of or a
     default  under any  covenant,  restriction  or  provision  with  respect to
     financial  ratios or tests or any  aspect  of the  financial  condition  or
     results  of  operations  of the  Borrower  as set forth in the  Transaction
     Documents or otherwise.  "Applicable  Contracts"  mean those  agreements or
     instruments  which are material to the  business or financial  condition of
     the Borrower.


(NY) 27009/335/CA/ca.98

                                       2

    67

          3. There is no action,  suit or proceeding pending against,  or to the
     best of my knowledge  threatened against or affecting,  the Borrower or any
     of its  Subsidiaries  before any court or  arbitrator  or any  governmental
     body,  agency or official which could reasonably be expected to result in a
     Material Adverse Effect.

          This  opinion  is being  furnished  only to you and is solely for your
     benefit and is not to be relied  upon by any other  Person or for any other
     purpose  without my prior  written  consent,  provided,  however,  that any
     Assignee that becomes a Bank pursuant to Section 9.06(c) of the Bridge Loan
     Agreement may rely on this opinion as if it were addressed to such Assignee
     and delivered on the date hereof.

                                       Very truly yours,

(NY) 27009/335/CA/ca.98

                                       3

    68
                                   Schedule I
                               to Venator Opinion



                                     Lenders


          Morgan Guaranty Trust Company of New York













(NY) 27009/335/CA/ca.98



    69
                                                                       EXHIBIT D



                                   OPINION OF
                     DAVIS POLK & WARDWELL, SPECIAL COUNSEL
                          FOR THE ADMINISTRATIVE AGENT






To the Banks and the
   Administrative Agent Referred to Below
c/o Morgan Guaranty Trust Company
            of New York,
   as Administrative Agent
60 Wall Street
New York, New York  10260-0060

Dear Sirs:

     We have  participated  in the preparation of the Bridge Loan Agreement (the
"Bridge Loan  Agreement")  dated as of September __, 1998 among  Venator  Group,
Inc. a New York  corporation  (the  "Borrower"),  the Banks (the  "Banks"),  and
Morgan  Guaranty Trust Company of New York, as  Administrative  Agent,  and have
acted as special counsel for the Arranger and Syndication  Agent for the purpose
of  rendering  this  opinion  pursuant  to Section  3.01(e)  of the Bridge  Loan
Agreement. Terms defined in the Bridge Loan Agreement are used herein as therein
defined.

     We have examined originals or copies,  certified or otherwise identified to
our satisfaction,  of such documents,  corporate records, certificates of public
officials and other instruments and have conducted such other  investigations of
fact and law as we have  deemed  necessary  or  advisable  for  purposes of this
opinion.

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

(NY) 27009/335/CA/ca.98


    70

     1. The  execution,  delivery and  performance by the Borrower of the Bridge
Loan Agreement and the Notes are within the Borrower's corporate powers and have
been duly authorized by all necessary corporate action.

     2. The Bridge Loan Agreement  constitutes a valid and binding  agreement of
the  Borrower  and each  Note  delivered  to you today  constitutes  a valid and
binding obligation of the Borrower,  in each case enforceable in accordance with
its  terms,  except as the same may be  limited  by  bankruptcy,  insolvency  or
similar laws affecting  creditors' rights generally and by general principles of
equity.

     We are  members  of the Bar of the  State  of New  York  and the  foregoing
opinion is limited to the laws of the State of New York and the federal  laws of
the United  States of America.  In giving the foregoing  opinion,  we express no
opinion  as to the effect (if any) of any law of any  jurisdiction  (except  the
State of New  York)  in  which  any Bank is  located  which  limits  the rate of
interest that such Bank may charge or collect.

     This opinion is rendered solely to you in connection with the above matter.
This opinion may not be relied upon by you for any other  purpose or relied upon
by any  other  person  without  our prior  written  consent;  provided  that any
Assignee  that  becomes a Bank  pursuant  to Section  9.06(c) of the Bridge Loan
Agreement may rely on this opinion as if it were  addressed to such Assignee and
delivered on the date hereof.

                                       Very truly yours,

(NY) 27009/335/CA/ca.98
                                       2

    1     




                                                                    Exhibit 10.4
          
                                     WAIVER


     WAIVER  dated as of  November 6, 1998 to the Credit  Agreement  dated as of
April 9, 1997,  as  heretofore  amended (the "Credit  Agreement")  among VENATOR
GROUP, INC. (formerly named Woolworth Corporation), the BANKS party thereto, the
CO-AGENTS party thereto, NATIONSBANK, N.A., as Documentation Agent, and THE BANK
OF NEW YORK, as LC Agent, Administrative Agent and Swingline Bank.

                              W I T N E S S E T H :

     WHEREAS, the Borrower has requested that the Banks waive any failure by the
Borrower to comply with the  provisions of Sections  5.07 (Minimum  Consolidated
Tangible  Net  Worth)  and 5.10  (Fixed  Charge  Coverage  Ratio) of the  Credit
Agreement during the period from and including October 31, 1998 to and including
March 19, 1999 (the "Waiver Period");

     WHEREAS, the undersigned Banks are willing to grant such waiver, subject to
the terms and conditions set forth herein,  if (i) the Borrower agrees that with
respect to  interest  and fees  accrued  during the Waiver  Period,  the Pricing
Schedule  referred to in the Credit  Agreement  shall mean the Pricing  Schedule
attached  hereto and (ii) the Borrower agrees to limit  Restricted  Payments (as
defined below) as set forth in Section 5 hereto;

     NOW, THEREFORE, the parties hereto agree as follows:

     Section 1. Defined Terms; References. Unless otherwise specifically defined
herein,  each term used herein which is defined in the Credit  Agreement has the
meaning assigned to such term in the Credit Agreement.

     Section 2. Minimum  Consolidated  Tangible Net Worth. The undersigned Banks
hereby  waive any  failure by the  Borrower  to comply  with the  provisions  of
Section 5.07 of the Credit Agreement  during the Waiver Period,  but only if and
so long as Consolidated  Tangible Net Worth at any time during the Waiver Period
is not less than (i)  $750,000,000 at any time prior to January 30, 1999 or (ii)
$850,000,000 at any time on or after January 30, 1999.

     Section 3. Fixed Charge Coverage Ratio. The undersigned  Banks hereby waive
any failure by the Borrower to comply with the provisions of Section 5.10 of

(NY) 27009/335/WAIVERS/waiver1.wpd



    2

the Credit  Agreement  at the end of the third and  fourth  Fiscal  Quarters  of
Fiscal  Year 1998,  but only if the ratio set forth in said  Section is not less
than (i) 0.90 to 1 at the end of the third Fiscal Quarter of Fiscal Year 1998 or
(ii) 0.50 to 1 at the end of the fourth Fiscal Quarter of Fiscal Year 1998.

     Section 4.  Increase in Pricing.  The Borrower  agrees that for purposes of
calculating  any  interest  and fees for any day during the Waiver  Period,  the
Pricing  Schedule  attached hereto shall be used instead of the Pricing Schedule
referred to in the Credit Agreement.

     Section 5. Restricted Payments.  The Borrower agrees that during the Waiver
Period,  neither  the  Borrower  nor any  Subsidiary  will  declare  or make any
Restricted Payment. As used herein,  "Restricted Payment" means (i) any dividend
or other  distribution  on any shares of the  Borrower's  capital  stock (except
dividends  payable  solely in shares of its capital  stock of the same class) or
(ii)  any  payment  on  account  of  the  purchase,  redemption,  retirement  or
acquisition of (a) any shares of the Borrower's capital stock or (b) any option,
warrant or other rights to acquire shares of the  Borrower's  capital stock (but
not including payments of principal,  premium (if any) or interest made pursuant
to the terms of convertible debt securities  prior to conversion).  The Borrower
agrees that failure to comply with this Section 5 shall  constitute  an Event of
Default under the Credit Agreement.

     Section 6. Governing Law. This Waiver shall be governed by and construed in
accordance with the laws of the State of New York.

     Section  7.  Counterparts.  This  Waiver  may be  signed  in any  number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

     Section 8. Effectiveness. This Waiver shall become effective as of the date
hereof  when the  Administrative  Agent  shall  have  received  from each of the
Borrower and the Required  Banks a  counterpart  hereof  signed by such party or
facsimile  or  other  written   confirmation   (in  form   satisfactory  to  the
Administrative  Agent) that such party has signed a counterpart  hereof.  On the
later of  November  6,  1998 and the date this  Waiver  becomes  effective,  the
Borrower agrees to pay to the Administrative  Agent for the account of the Banks
who  deliver a  counterpart  of this  Waiver to the  Administrative  Agent on or
before the later of 1:00 P.M.  (New York City time) on (i)  November 6, 1998 and
(ii) the date this Waiver becomes effective,  a fee in an aggregate amount equal
to  0.10% of the  aggregate  amount  of the  Commitments  of such  Banks on such
effective  date.  The Borrower  agrees that the failure to pay such fee when due
shall be an Event of Default.



(NY) 27009/335/WAIVERS/waiver1.wpd



    3

     IN WITNESS  WHEREOF,  the parties hereto have caused this Waiver to be duly
executed as of the date first above written.


                                         VENATOR GROUP, INC.


                                         By:/s/ John H. Cannon 
                                            --------------------------------  
                                            Title: Vice President - Treasurer


                                         MORGAN GUARANTY TRUST COMPANY
                                            OF NEW YORK


                                         By:/s/ Unn Boucher
                                            -------------------------------- 
                                            Title: Vice President


                                         NATIONSBANK, N.A.


                                         By:/s/ Bill Manley, Sr.
                                            --------------------------------   
                                            Title: Senior Vice President


                                         THE BANK OF NEW YORK


                                         By:/s/ Howard F. Bascom
                                            -------------------------------- 
                                            Title: Vice President


                                         THE BANK OF NOVA SCOTIA


                                         By:/s/ J. Alan Edwards
                                            -------------------------------- 
                                            Title: Authorized Signatory






(NY) 27009/335/WAIVERS/waiver1.wpd


    4

                                         BANK OF TOKYO-MITSUBISHI TRUST
                                             COMPANY


                                         By:/s/ N. Saffra
                                            --------------------------------  
                                            Title: Vice President


                                         TORONTO DOMINION (NEW YORK), INC.


                                         By:/s/ Jorge A. Garcia
                                            -------------------------------- 
                                            Title: Vice President


                                         BANK OF AMERICA NATIONAL TRUST
                                               AND SAVINGS ASSOCIATION


                                         By:/s/ Bill Manley, Sr.
                                            --------------------------------  
                                            Title: Senior Vice President

 
                                         COMMERZANK AG, NEW YORK AND/OR
                                              GRAND CAYMAN BRANCHES


                                         By:/s/ David T. Whitworth
                                            --------------------------------  
                                            Title: Senior Vice President


                                         By:/s/ A. Oliver Welsch-Lehmann
                                            -------------------------------- 
                                            Title: Assistant Vice President



                                         CREDIT LYONNAIS NEW YORK BRANCH
 

                                         By:/s/ Vladimir Labon
                                            -------------------------------- 
                                            Title: First Vice President-Manager



(NY) 27009/335/WAIVERS/waiver1.wpd


    5


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

                                         By:/s/ Susan M. O'Connor
                                            --------------------------------    
                                            Title: Director


                                         By: /s/ Stephen A. Wiedeman
                                             ------------------------------- 
                                            Title: Director


                                         KEYBANK NATIONAL ASSOCIATION


                                         By:_______________________________ 
                                            Title:


                                         WELLS FARGO BANK, N.A.


                                         By: /s/ Razia Damji
                                             -------------------------------
                                            Title: Vice President

                                         By:_______________________________    
                                            Title:


                                         UNION BANK OF CALIFORNIA, N.A.


                                         By:/s/ Corinne Heyning
                                            -------------------------------
                                            Title: Vice President

(NY) 27009/335/WAIVERS/waiver1.wpd


    6

                                PRICING SCHEDULE


     The  "Euro-Dollar  Margin",  "Non-Trade  LC  Fee  Rate",  "CD  Margin"  and
"Facility  Fee Rate" for any day are the  respective  percentages  per annum set
forth below in the applicable row under the column  corresponding to the Pricing
Level that applies on such day:
================================================================================ Level Level Level Level Level Level Level Level I II III IV V VI VII VIII ================================================================================ Pricing Level Euro-Dollar Margin and Non-Trade LC Fee Rate If Utiliza- .1700 .2750 .3500 .6250 .7000 1.0250 1.3750 1.7500 tion is 50% or less If Utiliza- .1700 .3750 .4750 .8750 .9500 1.2750 1.6250 2.0000 tion exceeds 50% ================================================================================ CD Margin If Utiliza- .2950 .4000 .4750 .7500 .8250 1.1500 1.5000 1.8750 tion is 50% or less If Utiliza- .2950 .5000 .6000 1.0000 1.0750 1.4000 1.7500 2.1250 tion exceeds 50% ================================================================================ Facility Fee Rate .0800 .1250 .1500 .2500 .3000 .3500 .3750 .5000 ================================================================================
For purposes of this Schedule, the following terms have the following meanings: "Level I Pricing" applies on any day on which (i) the Borrower's commercial paper is rated A2 or higher by S&P and P2 or higher by Moody's and (ii) the Borrower's long-term debt is rated A- or higher by S&P and A3 or higher by Moody's. "Level II Pricing" applies on any day on which (i) the Borrower's commercial paper is rated A2 or higher by S&P and P2 or higher by Moody's and (ii) the Borrower's long-term debt is rated BBB+ or higher by S&P and Baa1 or higher by Moody's. (NY) 27009/335/WAIVERS/waiver1.wpd 7 "Level III Pricing' applies on any day on which (i) the Borrower's commercial paper is rated A2 or higher by S&P and P2 or higher by Moody's and (ii) the Borrower's long-term debt is rated BBB or higher by S&P and Baa2 or higher by Moody's. "Level IV Pricing" applies on any day on which (i) the Borrower's commercial paper is rated A3 or higher by S&P and P3 or higher by Moody's and (ii) the Borrower's long-term debt is rated BBB- or higher by S&P and Baa3 or higher by Moody's. "Level V Pricing" applies on any day on which (i) the Borrower's commercial paper is rated A3 or higher by S&P and P3 or higher by Moody's and (ii) the Borrower's long-term debt is rated (A) BB+ or higher by S&P and Baa3 or higher by Moody's or (B) BBB- or higher by S&P and Ba1 or higher by Moody's. "Level VI Pricing" applies on any day on which the Borrower's long-term debt is rated BB+ or higher by S&P and Ba1 or higher by Moody's. "Level VII Pricing" applies on any day on which the Borrower's long-term debt is rated BB or higher by S&P and Ba2 or higher by Moody's. "Level VIII Pricing" applies on any day if no other Pricing Level applies on such day. 'Moody's" means Moody's Investors Service, Inc. "Pricing Level" refers to the determination of which of Level I Pricing, Level II Pricing, Level III Pricing, Level IV Pricing, Level V Pricing, Level VI Pricing, Level VII Pricing or Level VIII Pricing applies on any day. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw- Hill Companies, Inc. "Utilization" means at any date the percentage equivalent of a fraction (i) the numerator of which is the Total Usage at such date, after giving effect to any borrowing or repayment on such date, and (ii) the denominator of which is the Total Commitments at such date, after giving effect to any reduction of the Commitments on such date. For purposes of this Schedule, if for any reason any Bank has any Credit Exposure after the Commitments terminate, the Utilization on and after the date of such termination shall be deemed to exceed 50%. The credit ratings to be utilized for purposes of this Schedule are those assigned to the unsecured commercial paper of the Borrower without third-party credit enhancement or to the senior unsecured long-term debt securities of the Borrower without third-party credit enhancement, as the case may be. Any rating assigned to any other commercial paper or debt security of the Borrower shall be disregarded. The rating in effect at any date is that in effect at the close of business on such date. (NY) 27009/335/WAIVERS/waiver1.wpd

    1



                                                                    Exhibit 10.5

November 10, 1998


Samuel Gaston
496 N. Ferndale Drive
Bigfork, Mt.  59911


Dear Ron:


This will confirm our recent discussions  regarding our offer of employment that
was extended to you to join the Venator Group as Senior Vice President and Chief
Information Officer reporting to me.

The terms of our offer as discussed are outlined below:

         Annual Base Salary:            $400,000  ($33,333.34 paid monthly)
 
         Annual Bonus Program:          Participation in the  annual bonus plan 
                                        50% of base salary at target. Bonus will
                                        be  pro-rated  from date of hire to the 
                                        end of the fiscal year.
 
         Fiscal Year                    Fiscal year 1998-1999
         Bonus Guarantee:               $50,000 (Payable in April 1999)
                                        Fiscal year 1999 - 2000
                                        $100,000 (Payable in April 2000)
 
         Cash Sign-On Bonus:            $50,000

         Stock options:                 We will  recommend a stock option grant 
                                        of 30,000 shares of the company's common
                                        stock   be  awarded   to    you  by  the
                                        Compensation  Committee of the Board of 
                                        Directors  as  part  of  your  sign  on 
                                        package.  You   will  be  eligible   to
                                        participate  in the annual share option
                                        grant  program at a level determined by 
                                        the Compensation Committee of the Board 
                                        of   Directors commensurate  with  your 
                                        position  in the organization.


    2


         Long-Term Incentive Program:   Prorated participation in the 1998-2000
                                        and 2000 - 2001 periods,  based on date
                                        of employment.
 
         Life Insurance:                Company-paid 1x base salary.

         Medical:                       $5,000 reimbursement - no gross-up.

         Vacation:                      Four (4) weeks, plus 13 Company-paid
                                        Holidays and two (2) personal days.

         Severance:                     You will be a participant in the Senior
                                        Executive  Severance Agreement of which
                                        we will provide a copy for you.  If you 
                                        are  discharged for  any reason (except
                                        cause)  you  will receive  a  lump  sum 
                                        payment  equal  to  a minimum of one (1)
                                        years base salary less applicable taxes 
                                        (no other offsets  allowable).  You will
                                        also  receive  full settlement  of  any 
                                        outstanding  gross up benefits relating
                                        to your relocation. Additional benefits
                                        available   in   our  Senior  Executive 
                                        Severance  Policy  will also   be  made 
                                        available to you.
 
         Financial Planning:            Company-paid up to $10,000 for the first
                                        year, $6,000 thereafter.

         Relocation:                    In  accordance  with   the  policy  for 
                                        homeowners, which includes  moving  your
                                        household goods, three months temporary
                                        living-including  reasonable  meals, two
                                        trips  a  month to  unite  family,  and 
                                        real estate  locator  fees  related  to 
                                        searching for a new residence.

Should you voluntarily choose to terminate your employment with the company,  on
your own initiative,  excluding  catastrophic or serious health reasons,  during
the first twelve (12) months of  employment,  you agree to  reimburse  the total
amount  of the  expenses  incurred  by  the  Company  in  connection  with  your
relocation expenses and signing bonus (gain net of taxes).


    3

We  have  agreed  that  your  service  as a  director  on the  Boards  of  other
non-competing companies (retailers included) is desirable and authorized.

We are very  enthusiastic  about your joining our dynamic team. We know you will
grow personally and professionally in our exciting environment.

Please indicate your acceptance of the above noted terms by faxing a signed copy
of this letter to Connie  Williams at (212) 553-2475 then returning the enclosed
original signed copy of this letter.

If you have any questions, please feel free to contact me directly.

We look forward to your joining us.

                                        Very truly yours,





/s/ Samuel Gaston                            /s/ Dale Hilpert
- ------------------------                -------------------------
     Samuel Gaston                             Dale Hilpert



       11/10/98                                11/10/98
- ------------------------                ------------------------
         Date                                     Date                      




    1

                                                                    Exhibit 10.6
                                    AGREEMENT

     THIS AGREEMENT made as of September 17, 1998 by and between  VENATOR GROUP,
INC., a New York  corporation  with its principal  office at 233  Broadway,  New
York, New York 10279 (the  "Company") and Reid Johnson,  residing at 200 Central
Park South, New York, New York 10019 (the "Executive").

                              W I T N E S S E T H:

     WHEREAS,  the Company believes that the  establishment and maintenance of a
sound and vital  management  of the Company is essential to the  protection  and
enhancement of the interests of the Company and its shareholders; and

     WHEREAS, the Company wishes to offer a form of protection to the Executive,
as one of a select  group of officers  and key  employees of the Company and its
Affiliates,  in the event the  Executive's  employment  with the  Control  Group
terminates; and

     WHEREAS,  the Company also  recognizes  that the possibility of a Change in
Control of the Company, with the attendant uncertainties and risks, might result
in the  departure  or  distraction  of the  Executive  to the  detriment  of the
Company; and

     WHEREAS,  the  Company  wishes to induce the  Executive  to remain with the
Control  Group,  and  to  reinforce  and  encourage  the  Executive's  continued
attention and dedication, when faced with the possibility of a Change in Control
of the Company; and

     WHEREAS,  this Agreement  amends and  supersedes any employment  agreement,
severance  plan,  policy  and/or  practice  of the  Company  in  effect  for the
Executive.

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

     1.  Definitions.  The following  terms shall have the meanings set forth in
this section as follows:

     (a) "Affiliate"  shall mean the Company and any entity  affiliated with the
Company  within the meaning of Code Section  414(b) with respect to a controlled
group of corporations,  Code Section 414(c) with respect to trades or businesses
under  common  control with the  Company,  Code  Section  414(m) with respect to
affiliated  service groups and any other entity  required to be aggregated  with
the Company under  Section  414(o) of the Code. No entity shall be treated as an
Affiliate  for any period during which it is not part of the  controlled  group,
under common control or otherwise  required to be aggregated  under Code Section
414.

     (b) "Beneficiary" shall mean the individual designated by the Executive, on
a form  acceptable  by the  Committee,  to receive  benefits  payable under this
Agreement  in  the  event  of  the  Executive's  death.  If  no  Beneficiary  is
designated,  the Executive's  Beneficiary  shall be his or her spouse, or if the
Executive is not survived by a spouse, the Executive's estate.

     (c) "Board" shall mean the Board of Directors of the Company.

                                        1
    2

     (d) "Bonus"  shall mean an amount equal to the target bonus  expected to be
earned by the Executive under the Company's Annual Incentive  Compensation  Plan
or such other annual bonus plan or program  that may then be  applicable  to the
Executive  in a  fiscal  year,  if the  applicable  target  performance  goal is
satisfied.

     (e)  "Cause"  shall mean (with  regard to the  Executive's  termination  of
employment  with the Control  Group):  (i) the refusal or willful failure by the
Executive to  substantially  perform his or her duties,  (ii) with regard to the
Control Group or any of their assets or businesses,  the Executive's dishonesty,
willful  misconduct,  misappropriation,  breach of fiduciary  duty or fraud,  or
(iii) the Executive's conviction of a felony (other than a traffic violation) or
any other  crime  involving,  in the sole  discretion  of the  Committee,  moral
turpitude.

     (f)  "Change in  Control"  shall have the  meaning  set forth in Appendix A
attached hereto.

     (g) "Code" shall mean the Internal  Revenue Code of 1986, as amended and as
hereafter amended from time to time.

     (h) "Committee"  shall mean the  Compensation  Committee of the Board or an
administrative committee appointed by the Compensation Committee.

     (i) "Competition" shall mean the (i) participating, directly or indirectly,
as an individual proprietor,  stockholder,  officer,  employee,  director, joint
venturer,  investor,  lender, or in any capacity  whatsoever  (within the United
States  of  America,  or in any  country  where  any of the  Executive's  former
employing  members  of  the  Control  Group  does  business)  in a  business  in
competition  with any business  conducted by any member of the Control Group for
which  the  Executive  worked  at  any  time,  provided,   however,   that  such
participation  shall  not  include  (A) the mere  ownership  of not more  than 1
percent of the total  outstanding  stock of a  publicly  held  company;  (B) the
performance  of services for any  enterprise to the extent such services are not
performed, directly or indirectly, for a business in which any of the Employee's
employing  members of the Control Group is engaged;  or (C) any activity engaged
in with the  prior  written  approval  of the  Board or the  Committee;  or (ii)
intentional recruiting,  soliciting or inducing, of any employee or employees of
the Control Group to terminate their  employment  with, or otherwise cease their
relationship  with the former employing  members of the Control Group where such
employee or employees do in fact so terminate their employment.

     (j) "Control Group" shall mean the Company and its Affiliates.

     (k) "Good Reason" shall mean (with respect to an Executive's termination of
employment with the Control Group):  (i) any material  demotion of the Executive
or any material reduction in the Executive's authority or responsibility, except
in each case in connection with the  termination of the  Executive's  employment
for Cause or disability or as a result of the Executive's  death, or temporarily
as a result of the Executive's illness or other absence;  (ii) prior to a Change
in Control,  a reduction in the Executive's  rate of base salary as payable from
time to time,  other than a reduction that occurs in connection with, and in the
same percentage as, an across-the-board  reduction over any three-year period in
the base salaries of all executives of the Company of a similar

                                        2
    3

level and where the  reduction is less than 20 percent of the  Executive's  base
salary measured from the beginning of such three-year period;  (iii) on or after
a Change in Control,  any  reduction in the  Executive's  rate of base salary as
payable  from time to time;  (iv) a reduction  in the  Executive's  annual bonus
classification  level other than in connection with a redesign of the applicable
bonus plan that affects all  employees  at the  Executive's  bonus level;  (v) a
failure of the Company to continue in effect the benefits  applicable to, or the
Company's  reduction  of the benefits  applicable  to, the  Executive  under any
benefit plan or arrangement  (including without  limitation,  any pension,  life
insurance,  health or disability plan) in which the Executive participates as of
the date of the Change in Control without implementation of a substitute plan(s)
providing  materially similar benefits in the aggregate to those discontinued or
reduced,  except for a  discontinuance  of, or reduction under, any such plan or
arrangement that is legally required and/or generally  applies to all executives
of the  Company  of a similar  level,  provided  that in either  such  event the
Company  provides  similar  benefits  (or the  economic  effect  thereof) to the
Executive  in any  manner  determined  by the  Company;  or (vi)  failure of any
successor to the Company to assume in writing the obligations hereunder.

     (l) "Salary" shall mean an Executive's base monthly cash  compensation rate
for services paid to the Executive by the Company or an Affiliate at the time of
his or her  termination of employment  from the Control Group.  Salary shall not
include commissions,  bonuses,  overtime pay, incentive  compensation,  benefits
paid  under any  qualified  plan,  any group  medical,  dental or other  welfare
benefit plan,  noncash  compensation or any other  additional  compensation  but
shall  include  amounts  reduced  pursuant to an  Executive's  salary  reduction
agreement  under  Sections 125 or 401(k) of the Code (if any) or a  nonqualified
elective deferred compensation  arrangement to the extent that in each such case
the reduction is to base salary.

     (m)  "Severance  Benefit"  shall  mean (i) in the  case of the  Executive's
termination  of  employment  that  does not  occur  within  the 12 month  period
following a Change in Control,  two weeks' Salary plus prorated Bonus multiplied
by the Executive's Years of Service,  with a minimum of 26 weeks; or (ii) in the
case of an  Executive's  termination  of  employment  within the 12 month period
following a Change in Control,  two weeks' Salary plus prorated Bonus multiplied
by the Executive's Years of Service, with a minimum of 78 weeks. The Executive's
prorated Bonus for one week shall equal the Executive's  Bonus divided by 52. In
no event, however, shall the Severance Benefit payable to an Executive hereunder
be less than 12 months' Salary.

     (n)  "Severance  Period"  shall  mean  (i) in the  case of the  Executive's
termination  of  employment  that  does not  occur  within  the 12 month  period
following a Change in Control,  two weeks multiplied by the Executive's Years of
Service,  with a  minimum  of 52  weeks;  or (ii) in the case of an  Executive's
termination  of  employment  within the 12 month  period  following  a Change in
Control,  two weeks  multiplied  by the  Executive's  Years of  Service,  with a
minimum of 78 weeks.

     (o)  "Year  of  Service"  shall  mean  each  12  consecutive  month  period
commencing  on the  Executive's  date of hire by the Company or an Affiliate and
each  anniversary  thereof in which the  Executive  is paid by the Company or an
Affiliate  for the  performance  of  full-time  services  as an  Executive.  For
purposes of this  section,  full-time  services  shall mean that the Employee is
employed  for at least 30 hours per week.  A Year of Service  shall  include any
period  during  which an Employee is not  working  due to  disability,  leave of
absence or layoff so long as he or she is being paid by the

                                        3
    4

Employer (other than through any employee  benefit plan). A Year of Service also
shall include  service in any branch of the armed forces of the United States by
any person who is an Executive on the date such service  commenced,  but only to
the extent required by applicable law.

     2. Term. The initial term of this Agreement shall end on December 31 of the
year  following the year in which this Agreement is entered into. On December 31
of each year, the term shall be automatically renewed for an additional one year
so that the term shall then be for two years,  unless the Committee notifies the
Executive  prior  to any  December  31  that  the  term  shall  not be  renewed.
Notwithstanding  anything  in this  Agreement  to the  contrary,  if the Company
becomes  obligated  to make any payment to the  Executive  pursuant to the terms
hereof at or prior to the  expiration  of this  Agreement,  then this  Agreement
shall  remain in effect until all of the  Company's  obligations  hereunder  are
fulfilled.

     3. Benefits Upon Termination.  In the event the Executive's employment with
the  Control  Group is  terminated  without  Cause or the  Executive  terminates
employment  with the Control Group within 60 days after the occurrence of a Good
Reason event with regard to the Executive,  the Executive shall be entitled to a
Severance Benefit as set forth below.

     (a) The Executive shall receive 50 percent of his or her Severance  Benefit
in the form of a lump  sum cash  payment  as soon as  administratively  feasible
following his or her termination of employment with the Control Group, provided,
however,  that  interest  shall be payable  beginning on the tenth day following
such  termination  of  employment at the prime rate of interest as stated in The
Wall Street Journal.

     (b) The  Executive  shall  receive the  remaining  50 percent of his or her
Severance  Benefit  in  the  form  of  a  lump  sum  cash  payment  as  soon  as
administratively  feasible following the one year anniversary of the Executive's
termination  of  employment  with  the  Control  Group,  subject  to (c)  below,
provided,  however,  that interest  shall be payable  beginning on the tenth day
following such termination of employment at the prime rate of interest as stated
in The Wall  Street  Journal.  Notwithstanding  the  foregoing,  if a Change  in
Control occurs prior to the  Executive's  receipt of the remaining 50 percent of
his or her  Severance  Benefit,  the Executive  shall receive such  remaining 50
percent  within 10 days following the Change in Control (and, if not paid within
such 10 day period,  with interest payable  beginning on the tenth day following
the Change in Control at the prime rate of interest as stated in The Wall Street
Journal).

     (c) The  Executive  shall  only be  entitled  to the  portion of his or her
Severance  Benefit  described in (b) above if the  Executive  does not engage in
Competition  during the one year  period  following  his or her  termination  of
employment  with the  Control  Group  and if the  Executive  has not  materially
violated the  provisions of Section 14 hereof.  If the Executive  does engage in
Competition  or  violates  the  provisions  of Section  14 during  such one year
period, the portion of the Executive's  Severance Benefit described in (b) above
shall be forfeited.  If the restriction set forth in this subsection is found by
any court of competent  jurisdiction to be unenforceable  because it extends for
too long a  period  of time or over too  great a range of  activities  or in too
broad a  geographic  area,  it shall be  interpreted  to extend over the maximum
period of time,  range of activities  or  geographic  area as to which it may be
enforceable.

                                        4
    5

     (d)  Notwithstanding  anything to the  contrary  contained  herein,  if the
Executive's  employment with the Control Group is terminated as described in the
introductory  paragraph to this Section 3 following a Change in Control, (i) the
Executive shall receive 100 percent of his or her Severance  Benefit in the form
of a lump sum cash payment  within 10 days  following his or her  termination of
employment  with the Control  Group (and, if not paid within such 10 day period,
with interest  payable  beginning on the tenth day following such termination of
employment at the prime rate of interest as stated in The Wall Street  Journal),
and (ii) the  restriction  on  competition  contained  in Section 3(c) shall not
apply.

     (e) The Executive shall continue,  to the extent  permitted under legal and
underwriting  requirements (if any), to participate  during his or her Severance
Period  in  any  group  medical,  dental  or  life  insurance  plan  he  or  she
participated  in  prior  to  his  or  her   termination  of  employment,   under
substantially  similar  terms and  conditions  as an active  Employee;  provided
participation  in such group medical,  dental and life insurance  benefits shall
correspondingly  cease at such  time as the  Executive  becomes  eligible  for a
future  employer's  medical,  dental  and/or life  insurance  coverage (or would
become eligible if the Executive did not waive  coverage).  Notwithstanding  the
foregoing,  the  Executive  may not continue to  participate  in such plans on a
pre-tax  or  tax-favored  basis.   Notwithstanding  anything  else  herein,  the
Executive  shall not be entitled to any  benefits  during the  Severance  Period
other than the benefits  provided in Section 3  herein and, without limiting the
generality of the foregoing, the Executive specifically shall not be entitled to
continue to participate in any group disability or voluntary accidental death or
dismemberment  insurance  plan he or she  participated  in  prior  to his or her
termination of employment. Without limiting the generality of the foregoing, the
Executive  shall not accrue  additional  benefits  under any pension plan of the
Employer  (whether or not qualified under Section 401(a) of the Code) during the
Severance Period, provided, however, that payment of any Severance Benefit shall
be  included  in the  Executive's  earnings  for  purposes  of  calculating  the
Executive's  benefit  under the Venator  Group  Retirement  Plan,  Venator Group
401(k) Plan, and Venator Group Excess Cash Balance Plan.

     (f) In the event of the Executive's  death after becoming  eligible for the
portion of the Severance  Benefit described in (a) above and prior to payment of
such  amount,  such  portion  of the  Severance  Benefit  shall  be  paid to the
Executive's  Beneficiary.  In  addition  to the  foregoing,  in the event of the
Executive's  death  prior to payment of the  portion  of the  Severance  Benefit
described  in  (b)  above,   such  amount  shall  be  paid  to  the  Executive's
Beneficiary,  but only to the extent that the Executive satisfied the provisions
set forth in (c) above for the period  following the Executive's  termination of
employment with the Control Group and prior to his or her death.

     (g) Notwithstanding anything else herein, to the extent the Executive would
be subject to the excise tax under  Section  4999 of the Code on the  amounts in
(a) or (b) above and such other  amounts or benefits he or she received from the
Company  and its  Affiliates  required  to be  included  in the  calculation  of
parachute  payments  for  purposes  of Sections  280G and 4999 of the Code,  the
amounts  provided  under this  Agreement  shall be  automatically  reduced to an
amount one dollar  less than that,  when  combined  with such other  amounts and
benefits  required to be so included,  would subject the Executive to the excise
tax under Section 4999 of the Code, if, and only if, the reduced amount received
by the Executive,  would be greater than the unreduced  amount to be received by
the  Executive  minus the excise tax payable  under  Section 4999 of the Code on
such amount and the

                                        5
    6

other amounts and benefits received by the Executive and required to be included
in the calculation of a parachute payment for purposes of Sections 280G and 4999
of the Code.

     4. No Duty to Mitigate/Set-off.  The Company agrees that if the Executive's
employment with the Company is terminated during the term of this Agreement, the
Executive  shall not be required to seek other  employment  or to attempt in any
way to reduce any amounts  payable to the  Executive by the Company  pursuant to
this Agreement.  Further, except to the extent provided for in Section 3(c), the
amount of the  Severance  Benefit  provided for in this  Agreement  shall not be
reduced by any  compensation  earned by the Executive or benefit provided to the
Executive as the result of employment by another  employer or otherwise.  Except
as otherwise  provided  herein,  the Company's  obligations to make the payments
provided  for in  this  Agreement  and  otherwise  to  perform  its  obligations
hereunder  shall  not  be  affected  by  any  circumstances,  including  without
limitation, any set-off, counterclaim,  recoupment, defense or other right which
the Company may have against the Executive.  The Executive  shall retain any and
all rights under all pension plans, welfare plans, equity plans and other plans,
including  other severance  plans,  under which the Executive would otherwise be
entitled to benefits.

     5. Funding. Severance Benefits shall be funded out of the general assets of
the Company as and when they are payable  under this  Agreement.  The  Executive
shall be solely a general  creditor of the  Company.  If the Company  decides to
establish any advance accrued reserve on its books against the future expense of
benefits payable hereunder,  or if the Company is required to fund a trust under
this  Agreement,  such  reserve or trust  shall not under any  circumstances  be
deemed to be an asset of this Agreement.

     6.  Administration.  This Agreement shall be administered by the Committee.
The Committee  (or its delegate)  shall have the  exclusive  right,  power,  and
authority,  in its  sole and  absolute  discretion,  to  administer,  apply  and
interpret the Agreement and to decide all matters arising in connection with the
operation or administration of the Agreement. Without limiting the generality of
the  foregoing,  the  Committee  shall have the sole and absolute  discretionary
authority:  (a) to take all actions and make all  decisions  with respect to the
eligibility for, and the amount of, benefits payable under the Agreement; (b) to
formulate,  interpret  and apply rules,  regulations  and policies  necessary to
administer the Agreement in accordance with its terms; (c) to decide  questions,
including legal or factual questions, relating to the calculation and payment of
benefits  under the Agreement;  (d) to resolve  and/or clarify any  ambiguities,
inconsistencies  and omissions  arising under the  Agreement;  (e) to decide for
purposes  of  paying  benefits  hereunder,  whether,  based on the terms of this
Agreement,  a termination of employment is for Good Reason or for Cause; and (f)
except as specifically  provided to the contrary herein,  to process and approve
or deny benefit claims and rule on any benefit  exclusions.  All  determinations
made by the Committee (or any delegate) with respect to any matter arising under
the Agreement shall be final, binding and conclusive on all parties.

     Decisions  of the  Committee  shall be made by a  majority  of its  members
attending  a meeting at which a quorum is  present  (which  meeting  may be held
telephonically),  or by written action in accordance  with  applicable  law. All
decisions of the Committee on any question  concerning  the  interpretation  and
administration of the Agreement shall be final,  conclusive and binding upon all
parties.

                                        6
    7


     No member of the  Committee  and no  officer,  director  or employee of the
Company or any other  Affiliate  shall be liable for any action or inaction with
respect to his or her  functions  under this  Agreement  unless  such  action or
inaction is adjudged to be due to gross negligence, willful misconduct or fraud.
Further,  no such  person  shall be  personally  liable  merely by virtue of any
instrument  executed  by him or her or on his or her behalf in  connection  with
this Agreement.

     The Company shall  indemnify,  to the full extent  permitted by law and its
Certificate of Incorporation  and By-laws (but only to the extent not covered by
insurance) its officers and directors (and any employee involved in carrying out
the  functions  of the  Company  under  the  Agreement)  and each  member of the
Committee  against any  expenses,  including  amounts  paid in  settlement  of a
liability,  which are reasonably incurred in connection with any legal action to
which such person is a party by reason of his or her duties or  responsibilities
with respect to the  Agreement,  except with regard to matters as to which he or
she shall be adjudged in such action to be liable for gross negligence,  willful
misconduct or fraud in the performance of his or her duties.

     7.  Claims   Procedures.   Any  claim  by  the  Executive  or   Beneficiary
("Claimant")  with respect to  participation,  contributions,  benefits or other
aspects  of the  operation  of the  Agreement  shall be made in  writing  to the
Secretary of the Company or such other person  designated by the Committee  from
time to time  for such  purpose.  If the  designated  person  receiving  a claim
believes,  following  consultation with the Chairman of the Committee,  that the
claim  should be denied,  he or she shall  notify the Claimant in writing of the
denial of the claim within 90 days after his or her receipt thereof (this period
may be  extended an  additional  90 days in special  circumstances  and, in such
event, the Claimant shall be notified in writing of the extension).  Such notice
shall  (a) set forth  the  specific  reason or  reasons  for the  denial  making
reference to the  pertinent  provisions  of the Agreement on which the denial is
based, (b) describe any additional material or information  necessary to perfect
the claim,  and explain why such material or information,  if any, is necessary,
and (c) inform the  Claimant  of his or her right  pursuant  to this  section to
request review of the decision.

     A Claimant may appeal the denial of a claim by submitting a written request
for review to the Committee,  within 60 days after the date on which such denial
is received.  Such period may be extended by the Committee for good cause shown.
The claim will then be reviewed by the Committee.  A Claimant or his or her duly
authorized  representative  may  discuss any issues  relevant to the claim,  may
review pertinent documents and may submit issues and comments in writing. If the
Committee  deems it  appropriate,  it may  hold a  hearing  as to a claim.  If a
hearing is held,  the Claimant  shall be entitled to be  represented by counsel.
The  Committee  shall  decide  whether or not to grant the claim  within 60 days
after receipt of the request for review,  but this period may be extended by the
Committee  for up to an  additional  60 days in special  circumstances.  Written
notice of any such  special  circumstances  shall be sent to the  Claimant.  Any
claim not decided upon in the required time period shall be deemed  denied.  All
interpretations,  determinations  and decisions of the Committee with respect to
any claim shall be made in its sole discretion  based on the Agreement and other
relevant documents and shall be final, conclusive and binding on all persons.

     8. Incompetency;  Payments to Minors. In the event that the Committee finds
that a Participant  is unable to care for his or her affairs  because of illness
or  accident,  then  benefits  payable  hereunder,  unless  claim  has been made
therefor by a duly appointed guardian, committee, or other

                                        7
    8

legal  representative,  may be  paid  in  such  manner  as the  Committee  shall
determine,  and the  application  thereof  shall be a complete  discharge of all
liability  for any payments or benefits to which such  Participant  was or would
have been  otherwise  entitled  under this  Agreement.  Any  payments to a minor
pursuant to this Agreement may be paid by the Committee in its sole and absolute
discretion  (a) directly to such minor;  (b) to the legal or natural guardian of
such minor; or (c) to any other person, whether or not appointed guardian of the
minor,  who shall have the care and custody of such  minor.  The receipt by such
individual  shall be a complete  discharge of all liability  under the Agreement
therefor.

     9. Withholding. The Company shall have the right to make such provisions as
it deems  necessary or  appropriate  to satisfy any  obligations  it may have to
withhold  federal,  state or local  income or other taxes  incurred by reason of
payments  pursuant to this Agreement.  In lieu thereof,  the Employer shall have
the right to  withhold  the  amount of such  taxes from any other sums due or to
become due from the Employer to the Executive  upon such terms and conditions as
the Committee may prescribe.

     10.  Assignment and  Alienation.  Except as provided  herein,  the benefits
payable  under this  Agreement  shall not be subject  to  alienation,  transfer,
assignment, garnishment, execution or levy of any kind, and any attempt to cause
any benefits to be so subjected shall not be recognized.

     11. Successors;  Binding Agreement.  In addition to any obligations imposed
by law upon any successor to the Company, the Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or  substantially  all of the  business  and/or  assets  of the  Company  to
expressly  assume and agree in writing to  perform  this  Agreement  in the same
manner and to the same extent  that the Company  would be required to perform it
if no such succession had taken place. This Agreement shall inure to the benefit
of and be  enforceable  by the  Executive's  personal or legal  representatives,
executors,   administrators,   successors,  heirs,  distributees,  devisees  and
legatees.  If the Executive shall die while any amount would still be payable to
the  Executive  hereunder  if the  Executive  had  continued  to live,  all such
amounts,  unless otherwise provided herein, shall be paid in accordance with the
terms  of this  Agreement  to the  Executive's  Beneficiary,  or the  executors,
personal representatives or administrators of the Executive's estate.

     12. Miscellaneous.  No provisions of this Agreement may be modified, waived
or  discharged  unless such  waiver,  modification  or discharge is agreed to in
writing  and signed by the  Executive  and such  officer as may be  specifically
designated  by the Board.  No waiver by either  party  hereto at any time of any
breach by the other  party  hereto of, or  compliance  with,  any  condition  or
provision  shall be deemed a waiver  of  similar  or  dissimilar  provisions  or
conditions  at the same or at any prior or  subsequent  time.  No  agreements or
representations,  oral or  otherwise,  express or implied,  with  respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement. All references to sections of the Code or any other law
shall be deemed also to refer to any  successor  provisions to such sections and
laws.

     13. Counterparts.  This Agreement may be executed in several  counterparts,
each of which shall be deemed to be an original but all of which  together  will
constitute one and the same instrument.

                                        8
    9


     14. Confidentiality. The Executive shall not at any time during the term of
this  Agreement,  or  thereafter,  communicate  or disclose to any  unauthorized
person,  or use for the  Executive's  own  account,  without  the prior  written
consent  of  the  Board,  any  proprietary  processes,   or  other  confidential
information  of the  Company or any  subsidiary  concerning  their  business  or
affairs,  accounts  or  customers,  it  being  understood,   however,  that  the
obligations  of this  section  shall not apply to the extent that the  aforesaid
matters (a) are  disclosed in  circumstances  in which the  Executive is legally
required to do so, or (b) become generally known to and available for use by the
public other than by the Executive's wrongful act or omission.

     15.  Special  Provisions.  Notwithstanding  any  other  provision  of  this
agreement to the contrary,  the Severance  Benefit payable hereunder shall be no
less than one year's Salary and Bonus.

     16. Severability.  If any provisions of this Agreement shall be declared to
be  invalid  or  unenforceable,   in  whole  or  in  part,  such  invalidity  or
unenforceability  shall not affect the remaining  provisions  hereof which shall
remain in full force and effect.

     17. Arbitration.  Any dispute or controversy arising under or in connection
with this  Agreement  shall be settled  exclusively  by  arbitration,  conducted
before a panel of three arbitrators in New York, New York, or in such other city
in which the  Executive is then  located,  in  accordance  with the rules of the
American  Arbitration  Association  then in  effect.  The  determination  of the
arbitrators,  which  shall  be  based  upon a de  novo  interpretation  of  this
Agreement,  shall be final  and  binding  and  judgment  may be  entered  on the
arbitrators' award in any court having  jurisdiction.  The Company shall pay all
costs of the American Arbitration Association and the arbitrator.

     18.  Non-Exclusivity of Rights.  Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit,  bonus,
incentive  or  other  plan or  program  provided  by the  Company  or any of its
subsidiary companies and for which the Executive may qualify.

     19.  Governing Law. This  Agreement  shall be construed,  interpreted,  and
governed by the Employee  Retirement Income Security Act of 1974, as amended. To
the extent not so governed, it shall be governed by the laws of the State of New
York (without reference to rules relating to conflicts of law).

     20. Top-hat Plan. This Agreement is intended to be a "top-hat" welfare plan
within the meaning of Department of Labor Regulation Section 2520.104-24.




                                        9

    10

     IN WITNESS  WHEREOF,  the  Company  has caused  this  Agreement  to be duly
executed and the Executive's hand has hereunto been set as of the date first set
forth above.

                                                     VENATOR GROUP, INC.
                                                    

                                                     By:/s/ John F. Gillespie
                                                     ------------------------

                                                     /s/ Reid Johnson
                                                     ------------------------  
                                                     Reid Johnson

                                       10
    11


                                   APPENDIX A
                                   ----------

                                Change in Control
                                -----------------

     A Change in Control shall mean any of the following:  (i) (A) the making of
a tender or  exchange  offer by any  person  or  entity  or group of  associated
persons or entities  (within the meaning of Section  13(d)(3) or 14(d)(2) of the
Securities  Exchange  Act of 1934 (a  "Person")  (other  than the Company or its
Affiliates)  for  shares  of  common  stock  of the  Company  pursuant  to which
purchases are made of securities  representing  at least twenty percent (20%) of
the total  combined  voting power of the Company's  then issued and  outstanding
voting  securities;  (B) the merger or consolidation of the Company with, or the
sale or disposition of all or substantially all of the assets of the Company to,
any Person  other than (a) a merger or  consolidation  which would result in the
voting  securities  of  the  Company   outstanding   immediately  prior  thereto
continuing to represent  (either by remaining  outstanding or by being converted
into voting securities of the surviving or parent entity) fifty percent (50%) or
more of the  combined  voting power of the voting  securities  of the Company or
such  surviving or parent entity  outstanding  immediately  after such merger or
consolidation;  or (b) a  merger  or  capitalization  effected  to  implement  a
recapitalization  of the Company (or similar  transaction) in which no Person is
or becomes the beneficial  owner,  directly or indirectly  (as determined  under
Rule 13d-3 promulgated under the Securities Exchange Act of 1934), of securities
representing  more than the amounts set forth in (C) below;  (C) the acquisition
of direct or  indirect  beneficial  ownership  (as  determined  under Rule 13d-3
promulgated  under the Securities  Exchange Act of 1934),  in the aggregate,  of
securities of the Company representing twenty percent (20%) or more of the total
combined  voting  power of the  Company's  then  issued and  outstanding  voting
securities  by any Person  acting in  concert as of the date of this  Agreement;
provided,  however,  that the Board may at any time and from time to time and in
the sole  discretion  of the  Board,  as the case may be,  increase  the  voting
security  ownership  percentage  threshold  of this  item (C) to an  amount  not
exceeding  forty percent (40%); or (D) the  approval by the  shareholders of the
Company of any plan or proposal for the complete  liquidation  or dissolution of
the  Company  or for the sale of all or  substantially  all of the assets of the
Company;  or (ii) during any period of not more than two (2) consecutive  years,
individuals  who at the beginning of such period  constitute the Board,  and any
new director (other than a director  designated by a person who has entered into
agreement  with the  Company to effect a  transaction  described  in clause (i))
whose  election  by the  Board  or  nomination  for  election  by the  Company's
stockholders  was  approved  by a  vote  of at  least  two-thirds  (2/3)  of the
directors then still in office who either were directors at the beginning of the
period or whose  election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof.







a:reidsev

                                       11


    1
                                                                    Exhibit 10.7
CONFIDENTIAL  






                           PURCHASE AND SALE AGREEMENT


                                     between


                               233 BROADWAY, INC.,
                                   as Seller,


                                       and


                            233 BROADWAY OWNERS, LLC,
                                  as Purchaser




                              Dated: June 20, 1998




                                    Premises:

                                227-237 Broadway
                                21 Barclay Street
                                       and
                                  22 Park Place
                               New York, New York

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                                TABLE OF CONTENTS

                                                                       Page

                                   ARTICLE I.

         Sale of Property...............................................1
         1.1.  Sale.  ..................................................1
         1.2.  Excluded Property.  .....................................3
         1.3.  Like Kind Exchange.......................................4
         1.4.  License Agreement.  .....................................4

                                   ARTICLE II.

         Purchase Price.................................................4
         2.1.  Purchase Price.  ........................................4

                                  ARTICLE III.

         Deposit........................................................5
         3.1.  Deposit. ................................................5
         3.2.  Application of Deposit. .................................6
         3.3.  Escrow Agent.............................................6

                                   ARTICLE IV.

         Closing, Prorations and Closing Costs..........................9
         4.1.  Closing..................................................9
         4.2.  Prorations...............................................9
         4.3.  Transfer Taxes...........................................15
         4.4.  Closing Costs............................................15

                                   ARTICLE V.

         Title and Survey Matters.......................................16
         5.1.  Title....................................................16
         5.2.  Seller's Inability to Convey Title.......................18
         5.3.  Violations...............................................18


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                                   ARTICLE VI.

         Representations and Warranties of Seller.......................19
         6.1.  Seller's Representations.................................19
         6.2.  Seller's Knowledge.......................................23
         6.3.  Change in Representation/Waiver..........................23
         6.4.  Survival.................................................24
         6.5.  Limitation of Liability..................................24
         6.6.  "AS IS" Sale.............................................25

                                  ARTICLE VII.

         Representations and Warranties of Purchaser....................25
         7.1.  Authority................................................25
         7.2.  Bankruptcy or Debt of Purchaser..........................25
         7.3.  No Financing Contingency.................................26
         7.4.  Purchaser's Acknowledgment...............................26
         7.5.  Survival.................................................27

                                  ARTICLE VIII.

         Seller's Interim Operating Covenants...........................27
         8.1.  Operations...............................................27
         8.2.  Maintain Insurance.......................................28
         8.3.  Personal Property........................................28
         8.4.  No Sales.................................................28
         8.5.  Tenant Leases............................................28
         8.6.  Reserved.................................................29
         8.7.  Tenant Estoppels.........................................29
         8.8.  Contracts................................................29
         8.9.  Tax Appeal Proceedings...................................30
         8.10. Notices of Violation.....................................30
         8.11. Access...................................................30


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                                   ARTICLE IX.

         Closing Conditions..............................................31
         9.1.  Conditions to Obligations of Seller.......................31
         9.2.  Conditions to Obligations of Purchaser....................32

                                   ARTICLE X.

         Closing.........................................................33
         10.1.  Seller's Closing Obligations.............................33
         10.2.  Purchaser's Closing Obligations..........................36

                                   ARTICLE XI.

         Risk of Loss....................................................38
         11.1.  Condemnation and Casualty................................38
         11.2.  Condemnation not Material................................38
         11.3.  Casualty not Material....................................38
         11.4.  Materiality..............................................39
         11.5.  General Obligations Law..................................39

                                  ARTICLE XII.

         Default.........................................................39
         12.1.  Default by Seller........................................39
         12.2.  Default by Purchaser.  ..................................40

                                  ARTICLE XIII.

         Brokers.........................................................40
         13.1.  Brokerage Indemnity......................................40

                                  ARTICLE XIV.

         Confidentiality.................................................41
         14.1.  Publication..............................................41

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                                   ARTICLE XV.

         15.1.  Employment Responsibilities..............................41
         15.2.  Collective Bargaining Agreements.........................43
         15.3.  Survival.................................................43

                                  ARTICLE XVI.

         Miscellaneous...................................................43
         16.1.  Notices..................................................43
         16.2.  Governing Law; Venue.....................................45
         16.3.  Headings.................................................45
         16.4.  Business Days............................................45
         16.5.  Counterpart Copies.......................................45
         16.6.  Binding Effect...........................................46
         16.7.  Successors and Assigns...................................46
         16.8.  Assignment...............................................46
         16.9.  Interpretation...........................................46
         16.10.  Entire Agreement........................................46
         16.11.  Severability............................................47
         16.12.  Survival................................................47
         16.13.  Exhibits................................................47
         16.14.  Limitation of Liability.................................47
         16.15.  Prevailing Party........................................47
         16.16.  Real Estate Reporting Person............................48
         16.17.  No Recording............................................48
         16.18.  No Other Parties........................................48
         16.19.  Waiver of Trial by Jury.................................48
         16.20.  Rule 314................................................48

                                  ARTICLE XVII.

         Purchaser Guaranty..............................................49
         17.1.  Purchaser Guaranty.......................................49
         17.2.  Waivers..................................................49

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         17.3.  Absolute Obligation......................................49
         17.4.  Enforcement Costs........................................50
         17.5.  Waiver of Subrogation....................................50
         17.6.  Waiver of Defenses.......................................50

                                 ARTICLE XVIII.

         Venator Lease...................................................50
         18.1.  Venator Lease............................................50
         18.2.  Disputes.................................................51
         18.3.  Alterations..............................................52

                                  ARTICLE XIX.

         Seller Guaranty.................................................52
         19.1.  Seller Guaranty..........................................52
         19.2.  Waivers..................................................52
         19.3.  Absolute Obligation......................................52
         19.4.  Enforcement Costs........................................53
         19.5.  Waiver of Subrogation....................................53
         19.6.  Waiver of Defenses.......................................53



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                         LIST OF EXHIBITS AND SCHEDULES

Exhibits:

Exhibit A-1                -      Broadway Parcel

Exhibit A-2                -      Barclay Parcel

Exhibit A-3                -      Park Place Parcel

Exhibit B                  -      Form of License Agreement

Exhibit C                  -      Permitted Exceptions

Exhibit D                  -      Leases

Exhibit E                  -      Rent Roll

Exhibit F                  -      Term Sheet for Venator Lease

Exhibit G                  -      Form of Deed
 
Exhibit H                  -      Form of  Assignment and Assumption of Leases

Exhibit I                  -      Form of Assignment and Assumption of Contracts

Exhibit J                  -      Form of Seller's Letter to Tenants

Exhibit K                  -      Form of Seller's Bring-Down Certificate

Exhibit L                  -      Form of Bill of Sale

Exhibit M                  -      Form of FIRPTA Certificate

Exhibit N                  -      Form of Non-Multiple Dwelling Affidavit
 
Exhibit O                  -      Form of Venator SNDA

Exhibit P                  -      Form of Purchaser's Bring-Down Certificate

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Exhibit Q                  -      Memorandum Regarding Alterations in Venator 
                                  Premises

Exhibit R                  -      Intentionally Omitted

Exhibit S                  -      Form of Landlord's Estoppel Certificate

Schedules:

Schedule 1                 -      Excluded Assets

Schedule 2                 -      Lease Defaults

Schedule 3                 -      Intentionally Omitted

Schedule 4                 -      Contracts

Schedule 5                 -      Tax Appeals

Schedule 6                 -      Insurance Policies

Schedule 7                 -      Litigation

Schedule 8                 -      Employees

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CONFIDENTIAL

                           PURCHASE AND SALE AGREEMENT


     THIS PURCHASE AND SALE  AGREEMENT  (this  "Agreement")  is made and entered
into as of the 20th day of June, 1998, by and between 233 BROADWAY,  INC., a New
York corporation  ("Seller"),  and 233 BROADWAY OWNERS,  LLC, a New York limited
liability company ("Purchaser").

     In  consideration   of  the  mutual  promises,   covenants  and  agreements
hereinafter set forth and of other good and valuable consideration,  the receipt
and sufficiency of which are hereby acknowledged,  Seller and Purchaser agree as
follows:


                                   ARTICLE I.

                                Sale of Property

     1.1. Sale. Seller hereby agrees to sell, assign and convey to Purchaser and
Purchaser agrees to purchase from Seller, the following:

     1.1.1.  Those certain  parcels of real property lying and being situated in
the City, County and State of New York and being more particularly described (i)
on Exhibit A-1  attached  hereto (the  "Broadway  Parcel"),  (ii) on Exhibit A-2
attached hereto (the "Barclay  Parcel") and (iii) on Exhibit A-3 attached hereto
(the "Park Place  Parcel")(the  Broadway Parcel, the Barclay Parcel and the Park
Place Parcel are hereinafter collectively referred to as the "Land");

     1.1.2. All buildings,  structures and improvements now or hereafter erected
or situate on the Land or any portion thereof (the "Improvements");

     1.1.3. All rights of Seller, if any, in and to any land lying in the bed of
any street,  road or avenue,  opened or proposed,  in front of or adjoining  the
Land or any  portion  thereof,  to the center line  thereof,  and any strips and
gores  adjacent to the Land or any  portion  thereof,  and all right,  title and
interest of Seller in and to any award made or to be made in lieu thereof and in
and to any unpaid award for damage to the Land and  Improvements  or any portion
thereof by reason of any change of grade of any street;


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CONFIDENTIAL

     1.1.4. All rights, privileges, grants and easements appurtenant to Seller's
interest  in  the  Land  and  the  Improvements,   if  any,  including,  without
limitation,  all of Seller's  right,  title and interest,  if any, in and to all
easements,  licenses,  covenants and other  rights-of-way or other appurtenances
used in  connection  with the  beneficial  use and enjoyment of the Land and the
Improvements (the Land, the Improvements,  all rights and interests described in
Section 1.1.3 and all such  easements,  grants and  appurtenances  are sometimes
collectively referred to herein as the "Real Property");

     1.1.5.  All  leases,  licenses  and  other  occupancy  agreements  covering
offices,  stores and other spaces at or within the  Improvements  (together with
any and all amendments,  modifications or supplements thereto, collectively, the
"Leases") and, subject to Section 4.2.6 below, the security  deposits under such
Leases (the "Security  Deposits") which have not been applied in accordance with
the provisions of such Leases;

     1.1.6. All fixtures,  equipment,  castings and personal  property,  if any,
used  solely  in  connection  with the  ownership,  management,  maintenance  or
operation of the  Improvements  and located at the Real  Property as of the date
hereof,  and all  inventory  used  solely  in  connection  with  the  ownership,
management, maintenance or operation of the Improvements and located on the Real
Property on the date of Closing (the "Per sonal Property"); and

     1.1.7.  All (i)  service,  utility,  maintenance  and  other  contracts  or
agreements  to which  Seller is a party or which  otherwise  would be binding on
Purchaser  or the  Property  (as  hereinafter  defined),  and all union or other
collective bargaining contracts  (collectively,  the "Contracts") in effect with
respect to the Property (as hereinafter  defined) as of the Closing Date and not
terminated by Seller under Section 8.8 and (ii) guarantees, licenses, approvals,
certificates, permits and warranties relating to the Property (collectively, the
"Permits and  Licenses"),  all to the extent  assignable  (the Contracts and the
Permits and Licenses are sometimes  hereinafter  collectively referred to as the
"Intangible Property").

     (The Real  Property,  the  Leases,  the  Security  Deposits,  the  Personal
Property,  the Intangible  Property and the foregoing  other property  interests
held by Seller in connection  with the  ownership,  management,  maintenance  or
operation of the Real Property are sometimes  collectively  hereinafter referred
to as the "Property").


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CONFIDENTIAL

     1.2.  Excluded  Property.  Notwithstanding  the  provisions of Section 1.1,
Seller shall not sell,  assign,  transfer or deliver to Purchaser  and Purchaser
shall not purchase, acquire or accept from Seller:

     1.2.1. Except as provided in Section 1.4, all trademarks and tradenames, if
any,  of  Seller  or any of  Seller's  affiliated  companies  used or  useful in
connection  with the Real  Property  (including,  without  limitation,  the name
"Woolworth" and all moveable artwork and memorabilia relating to Frank Woolworth
and/or F.W. Wool worth Co.).

     1.2.2.  All  fixtures,  equipment  and personal  property of Seller and its
affiliates  used solely in connection with the ownership and operation of its or
their busi nesses (other than the business of owning,  managing,  maintaining or
operating  the Prop erty)  and/or the  premises  currently  occupied  by Venator
Group,  Inc. or any of its  affiliates  or to be demised under the Venator Lease
(as hereinafter defined)  (collectively,  the "Venator Premises") and located in
the Venator Premises as of the date hereof, and all inventory used in connection
with the  ownership  and  operation of its or their  businesses  (other than the
business of owning, managing,  maintaining or operating the Property) and/or the
Venator Premises and located at the Venator Premises on the Closing Date.

     1.2.3.  Any other assets of Seller  described on Schedule 1 attached hereto
(all of the  foregoing  being  collectively  referred to herein as the "Excluded
Assets").

     1.2.4.  Notwithstanding  the foregoing,  any Excluded Assets remaining in a
portion of the Property not leased to Seller or any of its  affiliates as of the
Closing Date shall be deemed  abandoned and shall be  Purchaser's  property from
and after the Closing Date.

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CONFIDENTIAL


     1.3. Like Kind Exchange.

     1.3.1.  Purchaser  acknowledges  that Seller  intends to exchange  the Real
Property for other  property to be held by Seller for productive use in trade or
business, or for investment,  in an exchange (the "Exchange") which will qualify
for  non-recognition  of gain under Section 1031 of the Internal Revenue Code of
1986,  as  amended  (the  "Code"),  and  the  Treasury  Regulations  promulgated
thereunder (the "Treasury Regula tions").  Purchaser further  acknowledges that,
in  connection  with such  Exchange,  Seller  may at any time  assign all of its
rights,  title and  interest  in, to and under this  Agreement  to a  "qualified
intermediary" (as such term is defined in Treasury Regulation 1.1031(k)-1(g)(4))
(the  "Qualified  Intermediary")  and that in the event of such  assignment  the
Purchaser  shall pay the Purchase  Price to the Qualified  Intermediary.  Seller
shall remain liable to Purchaser for its  obligation  hereunder  notwithstanding
any such assignment.

     1.3.2.  Purchaser hereby covenants and agrees that it shall cooperate fully
with Seller and the  Qualified  Intermediary  in  connection  with any Exchange,
including,  without  limitation,  by taking  such  actions  and  executing  such
documents as may reasonably be required in connection with an Exchange, provided
that  Purchaser  shall not be required to incur any additional  expenses  (other
than nominal  expenses)  or  additional  liabilities,  unless  Seller  agrees to
reimburse or indemnify Purchaser with respect to the same.

     1.4. License Agreement. On the Closing Date, Seller shall license (or cause
to be licensed  by the party  authorized  to do so) to  Purchaser  the  limited,
non-exclusive  right to use the name  "Woolworth"  solely in connection with the
ownership  of the  Improvements  upon  the  Broadway  Parcel  and  otherwise  in
accordance  with the  conditions  set forth in the license  agreement  ("License
Agreement") attached hereto as Exhibit B.


                                   ARTICLE II.

                                 Purchase Price

     2.1.  Purchase  Price.  The purchase  price for the  Property  shall be One
Hundred  Forty Six Million Five Hundred  Thousand  Dollars  ($146,500,000)  (the
"Purchase  Price").  No portion of the  Purchase  Price is  attributable  to the
Personal Property or the

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CONFIDENTIAL

Leases. The Purchase Price, net of all prorations as provided for herein,  shall
be paid by Purchaser as follows:

          (i)  Ten Million Dollars ($10,000,000) (together with all interest, if
               any,  earned  thereon,  the "Initial  Deposit")  shall be paid to
               Skadden,  Arps, Slate, Meagher & Flom LLP (the "Escrow Agent") by
               wire   transfer   of   immediately    available   federal   funds
               simultaneously  with the execution and delivery of this Agreement
               by Purchaser;

          (ii) Five Million Dollars ($5,000,000) (together with all interest, if
               any,  earned  thereon,  the  "Additional  Deposit";  the  Initial
               Deposit and the Additional Deposit are, together, the "Deposit" )
               shall be paid to the Escrow Agent by wire transfer of immediately
               available  federal  funds on or before  3:00 p.m.  on November 2,
               1998 (the  "Additional  Deposit Payment Date") (time being of the
               essence with respect thereto). In the event that Pur chaser shall
               fail for any reason to so pay the Additional Deposit, then Seller
               shall have the immediate right to terminate this Agreement and to
               collect and retain the Deposit. Payment of the Additional Deposit
               is being  guaranteed  by Steven C. Witkoff (the  "Guarantor")  in
               accordance  with the  provisions  of  Article  XVII  hereof.  The
               Deposit  shall  be  held  in  escrow  and  shall  be  payable  in
               accordance with Article III hereof; and

          (iii)The balance of the Purchase  Price (the  "Balance of the Purchase
               Price")  shall be paid on the  Closing  Date by wire  transfer of
               immediately available federal funds to or as directed by Seller.


                                  ARTICLE III.

                                     Deposit

     3.1. Deposit.  Concurrently with the execution of this Agreement,  and as a
condition precedent to the formation of this Agreement,  Purchaser shall deposit
with the  Escrow  Agent the  Initial  Deposit,  the  receipt  of which is hereby
acknowledged by Escrow Agent's execution hereof.  The Initial Deposit (and, when
received,  the Additional Deposit) shall be held in escrow, and not in trust, by
the Escrow Agent in an interest bearing account at Citibank,  N.A, provided that
Purchaser  provides  Escrow  Agent  with Pur  chaser's  taxpayer  identification
number.  The Escrow  Agent  shall pay the  Deposit  to Seller at the  Closing or
otherwise in accordance with this  Agreement.  All interest on the Deposit shall
belong to the party  entitled  to the  Deposit  hereunder,  unless  the  Closing
occurs,  in which  case such  interest  shall  belong  50% to Seller  and 50% to
Purchaser.

     3.2. Application of Deposit.

     3.2.1.  If the Closing occurs as contemplated  hereunder,  then the Deposit
shall be paid to  Seller  (or,  in the  case of an  Exchange,  to the  Qualified
Intermediary).

     3.2.2.  In the  event  that  the  Closing  does not  occur as  contemplated
hereunder  because of a default by Purchaser under this  Agreement,  the Deposit
shall be paid to and retained by Seller.

     3.2.3.  In the  event  that  the  Closing  does not  occur as  contemplated
hereunder because of a default by Seller under this Agreement, the Deposit shall
be paid to and retained by Purchaser.

     3.2.4. If either party makes a demand upon the Escrow Agent for delivery of
the  Deposit,  the Escrow  Agent  shall give  notice to the other  party of such
demand.  If a notice of objection to the proposed  payment is not received  from
the other party  within  seven (7) days after the giving of notice by the Escrow
Agent, the Escrow Agent is hereby authorized to deliver the Deposit to the party
who made the demand.  If the Escrow Agent receives a notice of objection  within
said seven (7) day period,  or if for any other  reason the Escrow Agent in good
faith elects not to deliver the Deposit, then the Escrow Agent shall continue to
hold the Deposit and thereafter  pay it to the party  entitled  thereto when the
Escrow Agent  receives (i) a notice from the  objecting  party  withdrawing  the
objection,  (ii) a notice signed by both parties  directing  disposition  of the
Deposit or (iii) a final judgment or order of a court of competent jurisdiction.

     3.3. Escrow Agent. The parties further agree that:

     3.3.1.  Escrow Agent shall accept the Deposit with the understanding of the
parties that Escrow Agent is not a party to this Agreement  except to the extent
of its  specific  responsibilities  hereunder,  and does not  assume or have any
liability  for  the  performance  or  non-performance  of  Purchaser  or  Seller
hereunder to either of them;


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CONFIDENTIAL

     3.3.2.  The Escrow Agent shall be  protected in relying upon the  accuracy,
acting in reliance  upon the  contents,  and  assuming  the  genuineness  of any
notice, demand,  certificate,  signature,  instrument or other document which is
given to the Escrow Agent  without  verifying  the truth or accuracy of any such
notice, demand, certificate, signature, instrument or other document;

     3.3.3.  The  Escrow  Agent  shall  not be  bound  in any  way by any  other
agreement or understanding between the parties hereto, whether or not the Escrow
Agent has knowledge  thereof or consents thereto unless such consent is given in
writing;

     3.3.4. The Escrow Agent's sole duties and responsibilities shall be to hold
and disburse the Deposit in accordance with this Agreement;

     3.3.5. The Escrow Agent shall not be liable for any action taken or omitted
by the Escrow  Agent in good  faith and  believed  by the Escrow  Agent to be au
thorized  or within its rights or powers  conferred  upon it by this  Agreement,
except for damage caused by the gross negligence, bad faith or wilful misconduct
of the Escrow Agent;

     3.3.6.  Upon the  disbursement  of the  Deposit  in  accordance  with  this
Agreement,  the Escrow Agent shall be relieved and released  from any  liability
under this Agreement;

     3.3.7.  The Escrow Agent may resign at any time upon at least ten (10) days
prior written notice to the parties  hereto.  If, prior to the effective date of
such  resignation,  the parties  hereto shall all have approved,  in writing,  a
successor  escrow agent,  then upon the  resignation  of the Escrow  Agent,  the
Escrow  Agent shall  deliver the Deposit to such  successor  escrow  agent.  The
parties  hereby  acknowledge  that  Chicago  Title  Insurance  Company  (or  any
subsidiary thereof that is a Qualified  Intermediary) is an acceptable successor
escrow agent.  Purchaser agrees to approve as a successor escrow agent any other
Qualified  Intermediary  proposed by Seller  that is  reasonably  acceptable  to
Purchaser.  From and after such  resignation  and the delivery of the Deposit to
such successor  escrow agent, the Escrow Agent shall be fully relieved of all of
its duties,  responsibilities and obligations under this Agreement, all of which
duties,  responsibilities  and  obligations  shall be performed by the appointed
successor escrow agent. If for any reason the parties hereto shall not approve a
successor  escrow  agent  within  such  period,  the Escrow  Agent may bring any
appropriate action or proceeding for leave to deposit the

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CONFIDENTIAL

Deposit  with a court of  competent  jurisdiction,  pending  the  approval  of a
successor  es crow agent,  and upon such deposit the Escrow Agent shall be fully
relieved  of all of its  duties,  responsibilities  and  obligations  under this
Agreement;

     3.3.8.  Seller  and  Purchaser  hereby  agree to,  jointly  and  severally,
indemnify,  defend and hold the  Escrow  Agent  harmless  from and  against  any
liabilities,  damages,  losses,  costs or  expenses  incurred  by,  or claims or
charges made against, the Escrow Agent (including  attorneys' fees, expenses and
court  costs) by reason  of the  Escrow  Agent's  acting  or  failing  to act in
connection with any of the matters contemplated by this Agreement or in carrying
out the terms of this Agreement,  except as a result of the Escrow Agent's gross
negligence, bad faith or willful misconduct;

     3.3.9.  In the event that a dispute  shall  arise in  connection  with this
Agreement,  or as to  the  rights  of  any of the  parties  in  and  to,  or the
disposition  of, the Deposit,  the Escrow Agent shall have the right to (w) hold
and  retain  all or any part of the  Deposit  until  such  dispute is settled or
finally determined by litigation,  arbitration or otherwise,  or (x) deposit the
Deposit in an appropriate  court of law,  following which the Escrow Agent shall
thereby and thereafter be relieved and released from any liability or obligation
under  this  Agreement,  or (y)  institute  an action in  interpleader  or other
similar  action  permitted  by  stakeholders  in the State of New  York,  or (z)
interplead  any of the parties in any action or proceeding  which may be brought
to determine the rights of the parties to all or any part of the Deposit;

     3.3.10.  The Escrow Agent shall not have any  liability or  obligation  for
loss of all or any portion of the Deposit by reason of the insolvency or failure
of the institution of depository with whom the escrow account is maintained; and

     3.3.11.  The parties  hereto  represent that prior to the  negotiation  and
execution  of this  Agreement  they  were  advised  that the  Escrow  Agent  was
representing  Seller as such party's  attorney in connection with this Agreement
and the transaction referred to herein and the parties hereto covenant that they
shall not object,  on the grounds of conflict of interest or  otherwise,  to the
Escrow Agent  continuing  to act as the attorney for Seller in  connection  with
this Agreement and the transaction  contemplated  herein,  or to act as Seller's
attorney  in  connection  with any dispute in  connection  herewith or any other
matter, as well as act as the Escrow Agent hereunder;  provided,  however,  that
the Escrow Agent deposits the Deposit with a court of competent  jurisdiction or
transfers the Deposit and all accrued interest  thereon to a mutually  agreeable
substitute escrow agent.

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CONFIDENTIAL



                                   ARTICLE IV.

                      Closing, Prorations and Closing Costs

     4.1. Closing.
 
     4.1.1.  The closing of the  purchase  and sale of the  Property  (the "Clos
ing") shall be held at the offices of Skadden,  Arps, Slate, Meagher & Flom LLP,
919 Third Avenue,  New York, New York or at the offices of Purchaser's  lender's
counsel,  if  requested  by  Purchaser's  lender,  at 10:00  a.m.  local time on
December 31, 1998.  The date of Closing is referred to in this  Agreement as the
"Closing  Date".  In addition to any other  adjournment  rights  afforded to the
Seller  hereunder,  Seller shall have the right,  exercisable by giving not less
than ten (10) days prior written  notice to Purchaser on any number of occasions
prior to the then scheduled Closing Date, to adjourn the Closing to any business
day  designated  by Seller in the period  December 31, 1998 through  January 28,
1999,  both dates  inclusive (time being of the essence with respect to any date
between  January 15, 1998 and January 28, 1998, both dates  inclusive,  which is
designated by Seller upon not less than thirty (30) days prior written notice to
Purchaser).

     4.1.2.  Notwithstanding  the provisions of Section 4.1.1, Seller shall have
the  right,  on thirty  (30) days  prior  written  notice to the  Purchaser,  to
accelerate the Closing Date to any business day occurring on or after  September
14,  1998,  and, in such event,  Purchaser  shall have the right to adjourn such
accelerated Closing Date one or more times for up to an aggregate of thirty (30)
days (time being of the essence with respect to such thirtieth (30th) day).

     4.2. Prorations. All matters involving prorations or adjustments to be made
in connection with Closing and not specifically  provided for in another Section
of this Agreement  shall be adjusted in accordance with this Section 4.2. Except
as otherwise set forth herein, all items to be prorated pursuant to this Section
4.2 shall be prorated as of 12:01 A.M. on the Closing Date, with Purchaser to be
treated as the owner of the  Property,  for purposes of prorations of income and
expenses, on and after the Closing Date.  Notwithstanding the foregoing,  in the
event that the Purchase  Price is not disbursed to or as directed by Seller (or,
in the case of an Exchange, to or as directed by the Qualified  Intermediary) on
or before 3:00 p.m.  (eastern time) on the Closing Date,  then the Closing shall
be deemed to have occurred on the next business day and all adjustments

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shall be  recomputed  accordingly.  Except as otherwise  set forth  herein,  all
prorations  shall be done in  accordance  with the customs with respect to title
closings recommended by The Real Estate Board of New York, Inc.

     The following items shall be prorated:

     4.2.1.  Real Estate and Property Taxes.  Real estate and personal  property
taxes, business improvement district assessments and charges,  vault charges and
special  assessments,  if any.  Seller  shall pay all real  estate and  personal
property taxes,  business improvement  district  assessments and charges,  vault
charges and special assess ments  attributable to the Property through,  but not
including,  the Closing Date. If the tax rate,  assessment and/or assessed value
for any of the foregoing  items has not been set for the tax period in which the
Closing  occurs,  then the proration of such items shall be based upon the rate,
assessment  and/or assessed value for the  immediately  preceding tax period and
such  proration  shall be adjusted in cash  between  Seller and  Purchaser  upon
presen tation of written evidence that the actual amount paid for the tax period
in which the Closing  occurs  differs  from the  amounts  used in the Closing in
accordance with the provi sions of Section 4.2.13 hereof.  Any discount received
for an early payment shall be prorated between Seller and Purchaser.

     4.2.2.  Insurance  Premiums.  There  shall  be  no  proration  of  Seller's
insurance  premiums or assignment of Seller's insurance policies with respect to
the Property and Seller shall cancel all of its existing  policies  with respect
to the Property as of the Closing Date, except as provided in Article XI.

     4.2.3. Utilities and Services. Purchaser and Seller hereby acknowl edge and
agree that the amounts of all telephone,  electric, sewer, water, gas, steam and
other utility bills,  trash removal bills,  janitorial and  maintenance  service
bills  and all other  operating  and  administrative  expenses  relating  to the
Property and  allocable to the period prior to the Closing Date (other than such
items which are the  obligation of a Tenant under its Lease) shall be determined
and paid by Seller before Closing,  if possible,  or shall be paid thereafter by
Seller or adjusted between Purchaser and Seller  immediately after the same have
been  determined.  Seller shall have all base building meters read not more than
fifteen (15) days prior to the Closing Date.  Purchaser  shall cause all utility
services  Purchaser  desires to be placed in Purchaser's  name as of the Closing
Date. All deposits,  if any, furnished by Seller to any utility company or other
service provider shall continue to be owned by Seller.

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     4.2.4.  Base Rents.  Base or fixed rents due under Leases shall be adjusted
on an if, as and when collected basis. If, on the Closing Date, any tenant under
a Lease (a "Tenant") (other than Venator Group,  Inc. and its affiliates,  which
for all  purposes  under this  Agreement  shall be deemed to be current in their
obligations  under all of their Leases through the end of the month in which the
Closing Date occurs) is in arrears in the payment of such rent, then any amounts
received  by Seller or  Purchaser  from any such  Tenant  after the  Closing  on
account  of such  rent  (net of  reasonable  costs  of  collec  tion,  including
reasonable  attorneys fees and disbursements)  shall be applied in the following
order of priority:  (i) first  apportioned  between Purchaser and Seller for the
month in which the Closing occurred, (ii) then to Purchaser for any amounts then
due to Pur  chaser  for any  month or  months  following  the month in which the
Closing  occurred,  and (iii) then to Seller  for the period  prior to the month
preceding  the  month in which the  Closing  occurred.  If rents or any  portion
thereof  received  by Seller or  Purchaser  after the Closing are payable to the
other  party  by  reason  of  this  allocation,  the  appropriate  sum,  less  a
proportionate share of any reasonable  attorneys' fees and costs and expenses of
collection thereof, shall be promptly paid to the other party. Seller shall have
the right,  after  Closing,  to proceed  against  Tenants for  delinquent  rents
allocable solely to the period of Seller's ownership of the Property.  Purchaser
agrees  that it shall use  commercially  reasonable  efforts to collect any such
delinquent rents allocable to the period of Seller's  ownership of the Property,
but Purchaser  shall not be obligated to commence any actions to dispossess  any
of the Tenants (except that Purchaser shall continue any  dispossession  actions
against any Tenant  currently in monetary  default under its Lease (as set forth
on Schedule 2) if same was  initiated  by Seller prior to Closing for so long as
Seller continues to pay for the costs and expenses relating to such action). For
a one (1) year period  subsequent  to the Closing,  Seller shall have the right,
from time to time, on prior written notice to Purchaser,  to review  Purchaser's
books and records with respect to the Property during  ordinary  business hours,
to ascertain the status of Purchaser's  billing and collection of base and fixed
rents.  No action which  results in the  compromising  of any claim  against any
Tenant with respect to base or fixed rents due under such Tenant's Lease for the
period  prior  to the  Closing  shall be made  without  Seller's  prior  written
approval,  but Purchaser  shall not be obligated to continue any actions against
any Tenant  after  Seller has  rejected  any good  faith  compromise  reached by
Purchaser  with any such Tenant  which does not  unfairly  discriminate  against
Seller's claims against such Tenant.

     4.2.5.  Additional  Rents.  If any Tenants are  required to pay  percentage
rents,  escalation  charges  for  increases  in real estate  taxes or  operating
expenses,  porter's  wage  increases,   cost-of-living  increases,  charges  for
electricity, water, cleaning or overtime

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services,  "sundry  charges" or other charges of a similar  nature  ("Additional
Rents"),  the same shall be adjusted on an if, as and when collected  basis.  If
any Additional Rents are collected by Purchaser after the Closing Date which are
attributable  in  whole or in part to any  period  prior  to the  Closing,  then
Purchaser shall promptly pay to Seller its proportion ate share thereof,  less a
proportionate share of any reasonable  attorneys' fees and costs and expenses of
collection  thereof.  With  respect to any  estimated  Additional  Rents paid or
payable by Tenants for any period  prior to the Closing  which,  pursuant to the
applicable  Lease,  are to be  recalculated  after the Closing based upon actual
expenses and other relevant  factors,  (i) Seller  agrees,  with respect to such
adjustments  which  are in favor of any such  Tenant,  to  reimburse  Purchaser,
within  fifteen (15) days after  written  demand and  presentation  to Seller of
documentation in support of such adjustments, for the amount of such adjustments
which  Purchaser has paid or credited to such Tenant and (ii) Purchaser  agrees,
with  respect  to such  adjustments  which are in favor of  landlord,  to pay to
Seller the amount of such adjustments which the Tenant pays to Purchaser, within
ten (10) days after receipt  thereof by Purchaser.  Purchaser  shall  indemnify,
defend and hold Seller  harmless  from and against any and all losses,  damages,
costs and  expenses  (including  reasonable  attorneys  fees and  disbursements)
incurred  by Seller as a result of any  claims  brought  by any  Tenant  against
Seller with  respect to  adjustments  for which  Seller has made full payment to
Purchaser  under  clause (i) of the  preceding  sentence.  Seller shall have the
right, after Closing, to proceed against Tenants for delinquent  Additional Rent
allocable solely to the period of Seller's ownership of the Property.  Purchaser
agrees  that it shall use  commercially  reasonable  efforts to collect any such
delinquent Additional Rents allocable to the period of Seller's ownership of the
Property  but  Purchaser  shall not be  obligated  to  commence  any  actions to
dispossess  any of  the  Tenants  (except  that  Purchaser  shall  continue  any
dispossess  actions against any Tenant  currently in monetary  default under its
Lease (as set forth on Schedule 2) if same was  initiated by Seller prior to the
Closing  for so long as  Seller  continues  to pay for the  costs  and  expenses
relating to such action.  For a one (1) year period  subsequent  to the Closing,
Seller  shall  have the right,  from time to time,  on prior  written  notice to
Purchaser,  to review Purchaser's books and records with respect to the Property
during ordinary  business hours, to ascertain the status of Purchaser's  billing
and collection of Additional  Rents. No action which results in the compromising
of any claim against any Tenant with respect to  Additional  Rent due under such
Tenant's  Lease  for the  period  prior to the  Closing  shall  be made  without
Seller's  prior  written  approval,  but  Purchaser  shall not be  obligated  to
continue any actions against any Tenant after Seller has rejected any good faith
compromise  reached by Purchaser  with any such Tenant.  The  calculation of the
proration of Additional  Rents  hereunder  shall be computed on a straight- line
basis for the calendar year in which the Closing  occurs  (except for Additional
Rents arising from submetered electric charges, which shall be computed based on
actual usage).

     4.2.6.  Tenant Security Deposits.  Security Deposits held by Seller (to the
extent,  subject to the provision of this Section  4.2.6,  not applied by Seller
pursuant  to any  Lease)  shall be turned  over by Seller  to  Purchaser  at the
Closing  by  crediting   such  amount  (less  the  amount  of  any  interest  or
administrative  charges for the period  prior to the Closing  which the landlord
under such Lease would be entitled to retain) to Purchaser.  No allocation shall
be made of Security Deposits applied by Seller pursuant to any Lease, and Seller
may retain such  amounts;  provided,  however,  that Seller  shall not apply any
Security  Deposits  during the thirty  (30) days prior to the Closing or to cure
any non-monetary  Tenant defaults.  Security Deposits (net the reasonable costs,
if any, of realizing  upon the same,  including  reasonable  attorneys  fees and
disbursements)  applied after the Closing Date shall be applied in the following
order of priority: (i) first apportioned between Purchaser and Seller on account
of amounts  due under the  applicable  Lease for the month in which the  Closing
occurred,  (ii) then to  Purchaser  for any  amounts  then due to Pur  chaser on
account  of  amounts  due  under  the  applicable  Lease for any month or months
following the month in which the Closing  occurred,  and (iii) then to Seller on
account of amounts due under the  applicable  Lease for the period  prior to the
month preceding the month in which the Closing occurred.  At Closing,  Purchaser
shall  deliver to Seller a receipt  for any  Security  Deposits  turned  over by
Seller to Purchaser and Purchaser  shall  indemnify  Seller with respect thereto
pursuant to, and in accordance with, the Assignment and Assumption of Leases (as
hereinafter defined).

     

     
     
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     4.2.7. Brokerage Commissions/Tenant Improvements

     (i) Except as set forth below,  Seller shall be responsible for all leasing
and  brokerage  commissions,  tenant  improvement  costs and expenses and tenant
"buy-out" or lease  surrender costs with respect to the Leases executed prior to
the date hereof (the "Leasing Cut-off Date");

     (ii) With respect to the Leases executed prior to the Leasing Cut-off Date,
and only to the extent that such costs are  attributable to the exercise,  after
the Leasing  Cut-off  Date,  of a lease  renewal or  expansion  option  which is
contained in the  applicable  Lease on the date hereof,  (a) Purchaser  shall be
responsible for all tenant  improvement  costs and expenses and tenant "buy-out"
or lease  surrender  costs,  (b) Purchaser  shall be  responsible  for the first
$400,000, and any amounts exceeding

$650,000, with respect to any leasing and brokerage commissions,  and (c) Seller
shall be  responsible  for any  amounts  exceeding  $400,000,  to a  maximum  of
$250,000,  with  respect to any  leasing  and  brokerage  commissions.  Any such
brokerage commissions or tenant improvement costs and expenses payable by Seller
or  Purchaser  pursuant  to this  Section  4.2.7  shall be  payable by Seller or
Purchaser only when such commissions,  costs and expenses become due and payable
pursuant to the terms of the respective brokerage agreements or Leases.

     (iii) Purchaser  shall be responsible for all leasing and brokerage  commis
sions,  tenant  improvement  costs and  expenses  and tenant  "buy-out" or lease
surrender  costs with  respect to all Leases  executed  on or after the  Leasing
Cut-off Date in accor dance with Section 8.5.

     4.2.8.  Employees.  Salaries,  wages,  vacation pay,  bonuses and any other
fringe benefits (including,  without limitation,  social security,  unemployment
compensation,  employee disability insurance, sick pay, welfare and pension fund
contributions,  payments and deposits,  if any) of all Employees (as hereinafter
defined) shall be the sole obligation of Seller,  except as set forth in Article
XV hereof.

     4.2.9. Fuel. The value of fuel stored on the Property by Seller, if any, at
Seller's most recent cost,  including any taxes,  on the basis of a reading made
within ten (10) days prior to the  Closing by Seller's  supplier,  shall be paid
for by Purchaser.

     4.2.10.  Contracts.  Charges and payments under  transferable  Contracts or
permitted  renewals  or  replacements  thereof,  but  only  to the  extent  such
Contracts are assignable and are actually assigned to Purchaser at Closing.

     4.2.11.  Permit Fees. Fees and other amounts payable under the Licenses and
Permits, but only to the extent same are assignable and are actually assigned to
Purchaser at Closing pursuant to this Agreement.

     4.2.12.  Inventory.  The value of all  inventory  and  supplies in unopened
containers usable in connection with the management, maintenance or operation of
the  Improvements  and located on the Real  Property on the date of Closing,  if
any, at Seller's  most recent cost,  including  any taxes,  shall be paid for by
Purchaser.


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     4.2.13.  Method of  Calculation.  For purposes of  calculating  prorations,
Purchaser  shall be  deemed  to be the  owner  of the  Property,  and  therefore
entitled to the income  therefrom and responsible  for the expenses  thereof for
the entire day upon which the Closing occurs.  All such prorations shall be made
on the basis of the actual  number of days of the month which shall have elapsed
as of the day of the  Closing  and based upon the  actual  number of days in the
month  and a three  hundred  sixty  five  (365)  day  year.  The  amount of such
prorations  shall be  initially  performed  at  Closing  but shall be subject to
adjustment  in  cash  after  the  Closing  as and  when  complete  and  accurate
information  becomes  available,  if such  information  is not  available at the
Closing.  Seller and Purchaser  agree to cooperate and use their best efforts to
make such  adjustments  within sixty (60) days after the Closing.  Except as set
forth in this Section 4.2, all items of income and expense  which accrue for the
period  prior to the Closing  will be for the account of Seller and all items of
income and expense  which accrue for the period on and after the Closing will be
for the account of Purchaser.

     4.2.14.  Survival.  The  provisions  of this Section 4.2 shall  survive the
Closing.

     4.3.  Transfer Taxes.  Seller shall pay (or shall credit Purchaser for) all
transfer  taxes  imposed  upon the  conveyance  of the Real  Property  hereunder
pursuant  to Section  1402 of the New York State Tax Law and Title 11 of Chapter
21 of the  Administrative  Code of the City of New York (the "Transfer  Taxes").
Purchaser  shall  file all  neces  sary tax  returns  with  respect  to all such
Transfer Taxes and, to the extent  required by applicable  law, Seller will join
in the execution of any such Tax Returns.

     4.4.  Closing  Costs.  Purchaser  shall pay all recording  fees and charges
associ ated with the  recordation  of the Deed,  other than the Transfer  Taxes,
which are payable by Seller  under  Section  4.3.  Seller shall pay all fees and
commissions due to the Broker in accordance  with Section 13.1.  Purchaser shall
pay all title  insurance  premiums,  title  examination  fees and  survey  costs
incurred by Purchaser.  All other costs, fees,  expenses and charges of any kind
incident to the sale and  conveyance  of the Property  from Seller to Purchaser,
including  attorneys' fees and  consultants'  fees,  shall be borne by the party
incurring the same.



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                                   ARTICLE V.

                            Title and Survey Matters

     5.1. Title.

     5.1.1. Updated Commitment and Survey. Purchaser shall, at its sole cost and
expense,  within  five (5)  business  days from the date  hereof,  order a title
insurance  commitment  for an  owner's  policy of title  insurance  for the Real
Property (the "Pur chaser's Title  Commitment")  from  TitleServe  Agency of New
York City, Inc. (the "Title  Company") and such other title insurance  companies
as co-insurer or re-insurer as Purchaser may elect,  setting forth the status of
title to the Real  Property and any defects in or  objections  or  exceptions to
title  to the Real  Property,  together  with  true and  correct  copies  of all
instruments  giving rise to such defects,  objections or  exceptions.  Purchaser
shall  cause the  Title  Company  to  forward  a copy of the  Purchaser's  Title
Commitment and any updates thereof to Seller's attorney  simultaneously with the
issuance thereof to Purchaser. Seller has delivered to Purchaser copies of three
surveys of the parcels  comprising  the Real Property  initially  prepared by J.
George Hollerith  (collectively,  the "Survey"),  dated July 13, 1906, March 24,
1911 and June 19, 1920,  respectively,  all most recently updated as of June 12,
1998, by Manhattan Surveying, P.C.

     5.1.2. Title Objections.  If the Purchaser's Title Commitment,  any updates
to the Survey or any  further  update of either  shall  reveal or  disclose  any
defects,  objections  or  exceptions  in the  title to the Real  Property  which
Purchaser is not required to accept or have been deemed to have  accepted  under
the terms of this Agreement ("Title Objections"),  then, within 20 business days
after Purchaser's receipt of the Purchaser's Title Commitment, updated Survey or
any further update of either first revealing any such Title Objection, but in no
event later than  fifteen (15) days prior to the Closing Date (unless such Title
Objection is first disclosed by an update to the Purchaser's Title Commitment or
Survey  first  delivered to  Purchaser  within such fifteen (15) day period,  in
which case  Purchaser  shall  notify  Seller of such Title  Objection as soon as
reasonably practicable),  Purchaser shall notify Seller of such Title Objections
in writing.  If Purchaser  does not timely  notify Seller in writing of any such
Title  Objections,  then Purchaser shall be deemed to have accepted the state of
title to the Real Property  reflected in the Purchaser's Title  Commitment,  the
updated  Survey or any further  updates of either  received by Purchaser  and to
have  waived any claims or defects  which it might  otherwise  have  raised with
respect

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to the matters reflected therein and the same shall be and shall be deemed to be
Permitted Exceptions for all purposes of this Agreement.

     5.1.3.  Elimination  of  Liens.  If  any  Title  Objections  appear  in the
Purchaser's  Title  Commitment,  the Survey or any updates thereof,  then Seller
may, at its election,  undertake to eliminate  such Title  Objections,  it being
agreed that Seller shall have no  obligation  to incur any expense in connection
with curing such Title  Objections,  except that Seller shall cure and eliminate
all Title  Objections  which were caused by,  resulted  from or arose out of (1)
judgments against Seller,  (2) a grant by Seller of a mortgage or other security
interest,  (3) items which can be satisfied by payment of a liquidated amount or
(4) Seller's  affirmative acts after the date hereof;  provided,  however,  that
Seller's obligation to cure such judgments as described in clause 1 or 3 of this
sentence  shall be limited to judgments in an amount not to exceed  $10,000,000.
Seller, in its discretion,  may adjourn the Closing for up to sixty (60) days in
the  aggregate  in  order  to  eliminate  such  Title  Objections.  In  lieu  of
eliminating  any Title  Objections  which  Seller  may  elect,  or be  required,
pursuant to the express terms hereof, to eliminate under this Agreement,  Seller
may deposit with the Title  Company such amount of money as may be determined by
the Title Company as being  sufficient to induce the Title Company,  without the
payment of any additional  premium by Purchaser,  to omit such Title  Objections
from Purchaser's  title insurance policy. If Seller is unable to so eliminate or
omit all such Title Objections in accordance with the terms of this Agreement on
or before such adjourned date for the Closing, then Purchaser shall elect either
to (i) terminate  this  Agreement by notice given to Seller,  in which event the
provisions  of Section 5.2 shall  apply,  or (ii) accept  title to the  Property
subject to such Title  Objections  and receive no credit against or reduction of
the Purchase Price,  except that Purchaser shall be entitled to a credit against
the Purchase Price in an amount equal to $10,000,000.

     5.1.4.  Payment from Balance of Purchase  Price.  Any unpaid  taxes,  water
charges,  sewer rents and assessments,  together with the interest and penalties
thereon to a date not more than five (5)  business  days  following  the Closing
Date (in each case subject to any applicable  apportionment),  and any mortgages
or other  liens  created  by  Seller  which can be  satisfied  by  payment  of a
liquidated amount and judgments against Seller, which Seller is obligated to pay
and discharge  pursuant to the terms of this Agree ment,  together with the cost
of recording  or filing any  instruments  necessary to discharge  such liens and
such judgments, may be paid out of the Balance of the Purchase Price pay able at
the Closing.  Seller hereby agrees to deliver to Purchaser, on the Closing Date,
instruments  in recordable  form  sufficient to discharge any such  mortgages or
other liens

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which can be satisfied by payment of a liquidated  amount and  judgments,  which
Seller  is  obligated  to pay  and  discharge  pursuant  to the  terms  of  this
Agreement.  Upon request of Seller, delivered to Purchaser no later than two (2)
business  days prior to the  Closing,  Purchaser  shall  provide at the  Closing
separate certified checks, or bank checks for the foregoing payable to the order
of the holder of any such lien,  charge,  or  judgment,  or a wire  transfer  of
federal funds as Seller shall direct,  in an aggregate  amount not to exceed the
Balance of the Purchase  Price,  as adjusted for  apportionments  required under
this Agreement, payable at the Closing.

     5.1.5. Affidavits. If the Purchaser's Title Commitment discloses judgments,
bankruptcies  or other returns against other persons having names the same as or
similar  to that of  Seller,  Seller,  on  request,  shall  deliver to the Title
Company  affidavits  showing that such judgments,  bankruptcies or other returns
are not against  Seller,  or any affiliates.  Upon request by Purchaser,  Seller
shall deliver any such  affidavits  and documen tary evidence as are  reasonably
required  by the Title  Company  in order to issue its  owner's  policy of title
insurance  to  Purchaser  free and clear of  matters  other  than the  Permitted
Exceptions.

     5.1.6. Permitted Exceptions. Seller shall convey and Purchaser shall accept
fee simple title to the Real Property subject only to those matters set forth on
Exhibit C attached hereto  (collectively,  the "Permitted  Exceptions") and such
other matters as may be deemed Permitted Exceptions under Section 5.1.2.

     5.2.  Seller's  Inability  to Convey  Title.  If Seller is unable to convey
title in accordance  with the terms of this Agreement  and,  pursuant to Section
5.1.3,  Purchaser  elects to  terminate  this  Agreement,  the Deposit  shall be
returned to Purchaser,  and this Agreement  shall terminate and neither party to
this Agreement shall have any further rights or obligations hereunder other than
the Surviving Termination Obligations.

     5.3.  Violations.  Purchaser agrees to purchase the Property subject to any
and all notes or notices of violations of law, or municipal ordinances,  orders,
designations  or  requirements  whatsoever  noted in or issued  by any  federal,
state, municipal or other governmental department, agency or bureau or any other
governmental  authority  having  jurisdiction  over the Property  (collectively,
"Violations"),  or any lien imposed in connec tion with any of the foregoing, or
any condition or state of repair or disrepair or other matter or thing,  whether
or not noted,  which, if noted,  would result in a violation being placed on the
Property provided the same do not arise from a default by Seller in the

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performance  or observance of its  obligations  under Section 8.1.  Seller shall
have no duty to remove or comply with or repair any condition,  matter or thing,
whether or not noted,  which, if noted, would result in a violation being placed
on the  Property  provided the same do not arise from a default by Seller in the
performance  or observance of its  obligations  under Section 8.1.  Provided the
same do not arise from a default by Seller in the perfor mance or  observance of
its obligations under Section 8.1, Seller shall have no duty to remove or comply
with or repair any of the aforementioned Violations,  liens or other conditions,
and  Purchaser  shall accept the  Property  subject to all such  Violations  and
liens,  the existence of any conditions at the Property which would give rise to
such Violations or liens, if any, and any  governmental  claims arising from the
existence of such Violations and liens, in each case without any abatement of or
credit against the Purchase Price.  Notwith standing the foregoing,  but subject
to Section 5.1.3, to the extent that any Violations shall constitute a lien upon
the  Property,  Seller shall either  satisfy or discharge  the same or cause the
Title  Company  to omit  the  same  from  Purchaser's  title  insurance  policy.
Notwithstand ing anything to the contrary, if the cost to cure the Violations on
the Closing Date shall exceed  $10,000,000,  then Purchaser shall have the right
to terminate  this  Agreement by giving notice  thereof to Seller on or prior to
the Closing Date and,  unless Seller agrees (by notice to Purchaser given within
ten (10) days of Purchaser's  termination notice) to pay to Purchaser the amount
in excess of $10,000,000 necessary to cure such Violations, the Deposit shall be
returned to Purchaser,  this Agreement shall terminate and neither party to this
Agreement shall have any further rights or obligations  other than the surviving
Termina tion Obligations.


                                   ARTICLE VI.

                    Representations and Warranties of Seller

     6.1.  Seller's  Representations.  Seller  represents  and warrants that the
following matters are true and correct as of the date hereof with respect to the
Property:

     6.1.1. Authority.  Seller is a corporation duly organized and validly exist
ing  under  the laws of the  State of New  York.  This  Agreement  has been duly
authorized,  executed and delivered by Seller,  is the legal,  valid and binding
obligation  of Seller,  and does not violate any  provision of any  agreement or
judicial  order to which  Seller is a party or to which  Seller is subject.  All
documents to be executed by Seller which are to be delivered at Closing will, at
the time of Closing, be duly authorized, executed and delivered

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by Seller,  be legal,  valid and  binding  obligations  of Seller,  and will not
violate any  provision of any  agreement or judicial  order to which Seller is a
party or to which Seller is subject.

     6.1.2.  Bankruptcy  or Debt of  Seller.  Seller  has not made a general  as
signment  for  the  benefit  of  creditors,  filed  any  voluntary  petition  in
bankruptcy  or  suffered  the  filing of an  involuntary  petition  by  Seller's
creditors,  suffered the appointment of a receiver to take possession of all, or
substantially all, of Seller's assets, suffered the attachment or other judicial
seizure of all, or substantially  all, of Seller's  assets,  admitted in writing
its inability to pay its debts as they come due or made an offer of  settlement,
extension or composition to it creditors generally.

     6.1.3. Foreign Person. Seller is not a foreign person within the meaning of
Section  1445(f) of the Code, and Seller agrees to execute any and all documents
necessary or reasonably required by the Internal Revenue Service or Purchaser in
connection with such declaration.

     6.1.4. Leases; Brokerage Commissions.

     (i) Seller has  delivered or made  available to Purchaser  true and correct
copies of the Leases.  Exhibit D attached  hereto  contains a description of all
Leases and tenancies and all  amendments  or  extensions  thereto  affecting the
Property  as of the date of this  Agreement  and to which  Seller  is a party or
bound. Except as set forth on Exhibit D, there are no leases,  licenses or other
occupancy agreements affecting the Property to which Seller is a party or bound.
Except with respect to the Venator  Lease or any other Lease with any  affiliate
of Seller, no  representation  is made as to (a) possible  assignments of any of
the Leases not  consented  to by Seller or (b) any  subleases  or  underlettings
under any of the Leases not consented to by Seller.

     (ii) To Seller's knowledge, Seller has not received any written notice of a
default on the part of Seller under any of the Leases and to Seller's knowledge,
Seller is not in material  default under any of the Leases.  Except as set forth
on Schedule 2 attached hereto, Seller has not sent any notices of default (which
remain  outstanding)  to any Tenant  and,  to  Seller's  knowledge,  no material
default by any Tenant exists, except as set forth on Schedule 2.

     (iii) Except with respect to the Venator  Lease or any other Lease with any
affiliate of Seller,  Seller does not warrant that any particular  Lease will be
in force or effect

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at the  Closing  or that the  Tenants  will  have  performed  their  obligations
thereunder.  Except for the Venator  Lease or any other Lease with any affiliate
of Seller,  the  termination  of any Lease prior to the Closing shall not affect
the obligations of Purchaser  under this Agree ment, or entitle  Purchaser to an
abatement of or credit  against the Purchase  Price or give rise to any claim on
the part of  Purchaser  against  Seller,  unless such  termination  results from
Seller's breach of such Lease or the terms of this Agreement.

     (iv) Commissions  payable under any brokerage  agreements shall be adjusted
and prorated as set forth in Section 4.2.7.

     6.1.5. Contracts.  Seller has delivered or made available to Purchaser true
and  complete  copies of the  Contracts.  To  Seller's  knowledge,  there are no
contracts  or  agreements  other  than those  listed on  Schedule 4 to which the
Property is subject and which would remain in effect after the Closing Date.

     6.1.6.  Condemnation.  Seller has not  received  any written  notice of any
existing,  pending  or  contemplated  condemnation,  eminent  domain or  similar
proceeding with respect to the Real Property, or any portion thereof.

     6.1.7. Tax Appeal  Proceedings.  Except as set forth on Schedule 5 attached
hereto,  Seller has not filed,  and has not retained anyone to file,  notices of
protest against, or to commence actions to review, real property tax assessments
against the Real Property.

     6.1.8.  Permits and  Licenses.  Seller has  delivered or made  available to
Purchaser  true and  complete  copies of the Permits and Licenses (to the extent
the same are in Seller's possession). To Seller's knowledge, Seller has received
no written  notice  (other  than  written  notices  that have been  subsequently
rescinded)  and Seller has no knowledge that any of the Permits and Licenses are
not in full force and effect or that there is a  violation  of such  Permits and
Licenses.  Seller will pay all fees which are due in connection with the Permits
and Licenses for the period prior to the Closing.  Purchaser  acknowledges  that
the Improvements located on the Broadway Parcel are not covered by a certificate
of occupancy.

     6.1.9. Insurance Policies. Schedule 6 annexed hereto and made a part hereof
is a true, correct and complete schedule of all insurance policies maintained by
Seller with respect to the Property and the amount of coverage  afforded by each
such

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policy.  All  premiums  due (or in the event that such  premiums  are payable in
installments,  all  installments of such premium payments due) on such insurance
policies  have been fully paid. To Seller's  knowledge,  Seller has not received
any  written  notice nor does Seller  have any  knowledge  that it is in default
under any insurance policy and to the best of Seller's knowledge, Seller has not
received any written  request for the performance of any work or alteration with
respect  to  the  Property  from  any   insurance   company  or  Board  of  Fire
Underwriters.

     6.1.10.  Legal  Action  Against  Seller.  Except for matters  which  Seller
anticipates are fully covered by insurance and/or noted on Schedule 7, there are
no  judgments,  orders,  or  decrees  of  any  kind  against  Seller  unpaid  or
unsatisfied of record or otherwise.  There is no action,  suit or other legal or
administrative  agency  action  relating to the Property  which would  adversely
affect the  Property for its present use or affect  Seller's  ability to perform
its obligations under this Agreement, nor does Seller have any knowl edge of any
threatened  legal  action,  suit or  other  legal or  administrative  proceeding
relating to the Property.

     6.1.11.  Rent  Roll.  Attached  hereto as  Exhibit E is a rent roll for the
Property (the "Rent Roll") listing:  all Tenants as of the date hereof, the base
rent and  Additional  Rent billed to Tenants during the months of June and July,
1998 and the  Security  Deposit  held  (which is the amount  required to be held
pursuant to the  applicable  Leases) by Seller with respect to each Tenant as of
the date hereof.  The information set forth in the Rent Roll is true and correct
in all material respects.  With respect to any monetary amounts described in the
Rent Roll  (other  than  Security  Deposits),  the term "true and correct in all
material  respects" shall be construed to mean that, to the extent that the Rent
Roll overstates or understates the actual amounts of such items,  the net annual
adverse economic effect on Purchaser of such  overstatements or  understatements
in the  aggregate  does not exceed an amount equal to $250,000  (the  "Threshold
Economic  Effect").  The  representations  and warranties and provisions of this
Section 6.1.11 (other than with respect to Security  Deposits) shall expire upon
the close of business on June 24, 1998,  and shall  thereafter  be of no further
force or effect,  provided,  however,  that in the event that Seller  receives a
notice  from  Purchaser  prior to such date as a result of inaccu  racies in the
representations  contained  in this Section  which  create a Threshold  Economic
Effect,  Seller shall pay to Purchaser  monthly (from and after the Closing) one
twelfth  (1/12) of the  annual  amount  over the five (5) period  following  the
Closing  Date by which the actual  annual  overstatement  exceeds the  Threshold
Economic  Effect.  The  calculation  of the annual  payment due  pursuant to the
preceding sentence shall be based upon the terms

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of the Leases  with  respect to which the  overstatement  relates on the Closing
Date. In addition,  any increases in rent pursuant to the applicable Lease after
the date hereof shall be excluded in calculating overstatements. For example, if
a portion of the overstatement relates to a Lease which by its terms expires two
years from the Closing Date,  the  overstatement  shall not include the economic
effect of such lease in calculating the annual payment due in the third,  fourth
and fifth years from the Closing Date.

     6.1.12.  Employees.  Attached  hereto as  Schedule  8 is a  listing  of all
employees  employed  by Seller at the Real  Property  on the date  hereof  whose
duties  are  restricted  to the  management,  maintenance  or  operation  of the
Improvements  and the other  Property  the  "Employees"),  together  with  their
respective salaries, wages, vacation pay and other fringe benefits.

     6.1.13.  Transfer to Seller. The Property has been transferred to Seller by
the immediately prior owner of the Property prior to the date hereof.

     6.2.  Seller's  Knowledge.  For purposes of this Agreement and any document
delivered  at Closing,  whenever the phrases "to  Seller's  knowledge",  "to the
current, actual knowledge of Seller" or the "knowledge" of Seller and/or Venator
Group,  Inc. or words of similar import are used,  they shall be deemed to refer
to the  actual  knowledge  only of  Seller,  Venator  Group,  Inc.,  and/or  any
affiliate or predecessor  of Seller or Venator Group,  Inc. and not any implied,
imputed or constructive knowledge, without any inde pendent investigation having
been made or any implied duty to investigate.

     6.3.  Change  in  Representation/Waiver.  Notwithstanding  anything  to the
contrary  contained herein,  Purchaser  acknowledges that Purchaser shall not be
entitled to bring any action after the Closing Date based on any  representation
made by  Seller  in this  Article  VI to the  extent  that,  prior  to  Closing,
Purchaser  shall  have or shall  obtain  actual  knowledge  (and not  merely any
implied,   imputed  or   constructive   knowledge,   without   any   independent
investigation  having  been  made or any  implied  duty to  investigate)  of any
information  that was  contradictory  to such  representation  or  warranty.  In
furtherance thereof, Purchaser and Seller expressly agree that Seller shall have
no liability with respect to any of the foregoing representations and warranties
to the extent that,  prior to the Closing,  Purchaser  obtains actual  knowledge
(and not merely any  implied,  imputed or  constructive  knowledge,  without any
independent  investigation  having been made or any implied duty to investigate)
(from whatever source, including,  without limitation, any property manager, any
materials furnished to Purchaser, the Estoppel Certificates,

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Purchaser's due diligence tests, investigations and inspections of the Property,
or written  disclosure by Seller or Seller's  agents and employees) that renders
any of the foregoing  representations  and warranties  untrue or incorrect,  and
Purchaser  nevertheless  consum  mates  the  transaction  contemplated  by  this
Agreement.

     6.4.  Survival.  The express  representations  and warranties  made in this
Agree ment by Seller shall not merge into any instrument of conveyance delivered
at the  Closing  and  all of the  representations  and  warranties  made in this
Agreement by Seller (other than those set forth in Section  6.1.11,  which shall
expire upon the close of business on June 24, 1998 and be of no further force or
effect  thereafter  except as provided  therein) shall survive the Closing for a
period of six (6) months; provided, however, that any action, suit or proceeding
with respect to the truth,  accuracy or completeness of such representations and
warranties  shall be commenced,  if at all, on or before the date which is seven
(7) months after the date of the Closing and, if not commenced on or before such
date,  thereafter  shall  be void  and of no  force or  effect.  The  terms  and
provisions of this Section 6.4 shall survive the Closing.

     6.5. Limitation of Liability.  Notwithstanding  anything to the contrary or
incon sistent in this  Agreement or in any of the  agreements,  certificates  or
affidavits  delivered by Seller pursuant to this Agreement,  except with respect
to the matters  covered  under  Section  4.2.7  hereof (i) Seller  shall have no
liability for any particular loss,  claim,  cost or expense suffered or incurred
by  Purchaser as a result of the  inaccuracy  of any of the  representations  or
warranties of Seller hereunder and/or under any of the agreements,  certificates
or affidavits of Seller set forth in or delivered  pursuant to this Agreement if
the same shall have a monetary  value (or be in a monetary  amount  claimed)  of
less  than  Twenty-Five  Thousand  Dollars  ($25,000)  and  (ii)  the  aggregate
liability   of  Seller   arising   pursuant  to  or  in   connection   with  the
representations  and warranties of Seller and/or the agreements or  certificates
or  affidavits  of Seller set forth in or delivered  pursuant to this  Agreement
shall not exceed Ten Million Dollars ($10,000,000).  Purchaser expressly waives,
relinquishes  and releases any right of  rescission  it may have against  Seller
after the Closing as a result of Seller's breach of  representation or warranty.
Notwithstanding  anything to the contrary,  Seller shall indemnify Purchaser and
Purchaser shall indemnify  Seller for any and all leasing  commissions  that are
due with  respect  to any lease  renewal  or  expansion  and are not paid by the
indemnifying party in accordance with Section 4.2.7. The terms and provisions of
this Section 6.5 shall survive Closing and/or termination of this Agreement.


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     6.6.  "AS IS" Sale.  Subject only to Seller's  covenants,  representations,
warranties and indemnifications in this Agreement,  Purchaser shall purchase the
Property in its "AS IS" condition at the Closing Date, subject to all latent and
patent defects (whether physical,  financial or legal, including title defects),
based solely on  Purchaser's  own inspec tion,  analysis and  evaluation  of the
Property and not in reliance on any records or other  information  obtained from
Seller or on Seller's behalf.  Purchaser  acknowledges that it is not relying on
any  statement  or  representation  (other  than  representations,   warranties,
covenants and  indemnifications  contained in this Agreement) that has been made
or  that in the  future  may be made by  Seller  or any of  Seller's  employees,
agents,  attorneys or repre sentatives  concerning the condition of the Property
(whether relating to physical conditions, operation performance, title, or legal
matters).


                                  ARTICLE VII.

                   Representations and Warranties of Purchaser

     Purchaser represents and warrants to Seller that the following matters are
true and correct as of the date hereof.

     7.1. Authority. Purchaser is a limited liability company duly organized and
validly  existing  under the laws of the State of New York.  This  Agreement has
been duly autho rized, executed and delivered by Purchaser,  is the legal, valid
and binding  obligation of Purchaser,  and does not violate any provision of any
agreement or judicial order to which  Purchaser is a party or to which Purchaser
is subject.  All documents to be executed by Purchaser which are to be delivered
at Closing  will,  at the time of  Closing,  be duly  authorized,  executed  and
delivered by Purchaser,  be legal,  valid and binding  obligations of Purchaser,
and will not violate any provision of any  agreement or judicial  order to which
Purchaser is a party or to which Purchaser is subject.

     7.2. Bankruptcy or Debt of Purchaser.  Purchaser represents and warrants to
Seller  that  Purchaser  has not made a general  assignment  for the  benefit of
creditors,  filed any voluntary petition in bankruptcy or suffered the filing of
an involuntary petition by Purchaser's creditors,  suffered the appointment of a
receiver to take possession of all, or substantially all, of Purchaser's assets,
suffered the attachment or other judicial seizure of all, or substantially  all,
of Purchaser's assets, admitted in writing its inability to pay its debts

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as they come due or made an offer of settlement, extension or composition to its
creditors generally.

     7.3. No Financing  Contingency.  It is expressly  acknowledged by Purchaser
that this  transaction is not subject to any financing  contingency  and that no
financing  for this  transaction  shall be provided by Seller.  Purchaser has or
will have at the Closing Date,  sufficient  cash,  available  lines of credit or
other  sources of  immediately  good  funds to enable it to make  payment of the
Purchase Price and any other amounts to be paid by it hereunder.

     7.4. Purchaser's  Acknowledgment.  Purchaser  acknowledges and agrees that,
except as expressly  provided in this  Agreement,  Seller has not made, does not
make and  specifically  disclaims  any  representations,  warranties,  promises,
covenants, agreements or guaranties of any kind or character whatsoever, whether
express or implied,  oral or written,  of, as to,  concerning or with respect to
(a) the  nature,  quality  or  condition  of the  Property,  including,  without
limitation,  the water, soil and geology,  (b) the income to be derived from the
Property,  (c) the  suitability  of the Property for any and all  activities and
uses which  Purchaser  may  conduct  thereon,  (d) the  compliance  of or by the
Property or its operation  with any laws,  rules,  ordinances,  designations  or
regulations of any applicable governmental authority or body, including, without
limitation,  the Americans with Disabili ties Act, any applicable federal, state
or local landmark designations,  and any rules and regulations promulgated under
or  in  connection   with  any  of  the   foregoing,   (e)  the  habit  ability,
merchantability  or fitness for a particular  purpose of the  Property,  (f) the
current or future real estate tax  liability,  assessment  or  valuation  of the
Property,  (g) the availability or  non-availability or withdrawal or revocation
of any  benefits or  incentives  conferred  by any  federal,  state or municipal
authorities,  or  (h)  any  other  matter  with  respect  to the  Property,  and
specifically that Seller has not made, does not make and specifically  disclaims
any representations  regarding solid waste, as defined by the U.S. Environmental
Protection  Agency  regulations  at 40  C.F.R.,  Part 261,  or the  disposal  or
existence,  in or on the Property, of any hazardous substance, as defined by the
Comprehensive  Environmental Response Compensation and Liability Act of 1980, as
amended,  and applicable  state laws, and  regulations  promulgated  thereunder.
Purchaser further  acknowledges and agrees that, except as expressly provided in
this  Agreement,  having been given the oppor  tunity to inspect  the  Property,
Purchaser is relying solely on its own  investigation of the Property and not on
any  information  provided  or to  be  provided  by  Seller.  Purchaser  further
acknowledges  and agrees that any  information  provided or to be provided  with
respect to the Property was obtained  from a variety of sources and that Seller,
except as

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otherwise  provided  herein,  has not  made  any  independent  investigation  or
verification of such  information.  Purchaser  further  acknowledges  and agrees
that,  except  as  expressly  provided  in  this  Agreement,  and as a  material
inducement to the Seller's execution and delivery of this Agreement, the sale of
the Property as provided for herein is and on an "as is, where is" condition and
basis. Purchaser acknowledges,  represents and warrants that Purchaser is not in
a  significantly  disparate  bargaining  position  with  respect  to  Seller  in
connection with the transaction  contemplated by this Agreement;  that Purchaser
freely  and fairly  agreed to this  waiver as part of the  negotiations  for the
transaction contemplated by this Agreement; and that Purchaser is represented by
legal counsel in connection  with this  transaction  and Purchaser has conferred
with such legal counsel concerning this waiver. The terms and provisions of this
Section 7.4 shall survive the Closing and/or termination of this Agreement.

     7.5.  Survival.  The express  representations  and warranties  made in this
Agree  ment by  Purchaser  shall not merge  into any  instrument  or  conveyance
delivered at the Closing and all of the  representations  and warranties made in
this  Agreement by Purchaser  shall  survive the Closing for a period of six (6)
months;  provided,  however, that any action, suit or proceeding with respect to
the truth,  accuracy or completeness of all such represen tations and warranties
shall be  commenced,  if at all,  on or before  the date which is six (6) months
after the date of the  Closing  and,  if not  commenced  on or before such date,
thereafter shall be void and of no force or effect.  The terms and provisions of
this Section 7.5 shall survive the Closing.


                                  ARTICLE VIII.

                      Seller's Interim Operating Covenants

     8.1. Operations.  Seller agrees to continue to operate, manage and maintain
the  Improvements  through the Closing Date or the termination of this Agreement
in the ordinary course of Seller's business and substantially in accordance with
Seller's present practice, subject to ordinary wear and tear and further subject
to Article XI of this  Agreement.  Notwithstanding  the foregoing,  Seller shall
only be responsible  for one-half (1/2) of the cost of the facade repairs to the
Improvements,  up to a maximum of $450,000  ("Seller's  Share"),  and  Purchaser
agrees  on the  Closing  Date to assume  and  reimburse  Seller  for any and all
liabilities  and  obligations  of Seller  with  respect  to such  repairs  above
Seller's  Share under any  contract  with  respect to such  repairs  approved by
Seller and

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Purchaser,  whether  arising  prior to or after the Closing  Date.  Seller's and
Purchaser's  consent shall be required to approve any contractors and agreements
necessary  for the  completion  of such  repairs,  which  consent  shall  not be
unreasonably withheld.

     8.2. Maintain  Insurance.  Seller agrees to maintain until the Closing Date
or the  termination  of this Agreement the insurance on the Property which is at
least equivalent in all material respects to the insurance  policies  identified
in Schedule 6.

     8.3. Personal Property. Seller agrees not to transfer to any third party or
remove any Personal Property from the Improvements after the date hereof, except
for repair or replacement  thereof and except in the case of any  termination of
this Agreement.  Any items of Personal  Property  replaced after the date hereof
shall be  promptly  installed  prior to  Closing  and shall be of  substantially
similar  quality to the item of Personal  Property  being  replaced,  subject to
Section 8.1.

     8.4.  No Sales.  Except for the  execution  of tenant  leases  pursuant  to
Section 8.5 and except in the case of any termination of this Agreement,  Seller
agrees that it shall not convey any interest in the Property to any third party.

     8.5.  Tenant  Leases.  Seller shall not, from and after the date hereof and
until the termination of this Agreement, (i) modify, renew or waive any material
rights under the Leases or grant any consent  under the Leases,  (ii)  terminate
any Lease except by reason of a default by the Tenant  thereunder or as required
by law,  (iii)  enter  into a new  tenant  lease,  or (iv)  accept a  surrender,
termination or  cancellation  of any Lease by the Tenant thereun der,  except if
Seller's  consent is not required in accordance  with the terms of such Lease or
as  required  by law,  in each  case  without  the  prior  written  approval  of
Purchaser.  If Purchaser  approves of Seller's entering into a new tenant lease,
then  Purchaser  shall pay to Seller on the Closing  Date, in the same manner as
the Purchase Price the following,  to the extent actually approved by Purchaser:
(i) the amount of the brokerage  commission  due in connection  with such lease,
(ii) the cost of any tenant  improvements  to be performed by the landlord under
the  terms of such  lease,  and (iii) the  amount of any cash work  allow  ances
required to be given by the landlord to the tenant under the terms of such lease
(the "Letting Expenses"), to the extent actually paid by Seller on or before the
Closing Date in accordance with agreements approved by Purchaser.  Except as set
forth in Section 10.2.1,  Purchaser and Seller  acknowledge that Seller shall be
required  to pay all  Letting  Expenses  relating  to the  Venator  Lease.  Upon
Seller's  execution  and  delivery  of any  such  lease  approved  by  Purchaser
(including, without limitation, the Venator Lease), the same

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shall be and be deemed  to be a Lease for all  purposes  under  this  Agreement.
Seller shall deliver to Purchaser copies of all default notices  delivered to or
received from Tenants promptly after such delivery or receipt.

     8.6. Reserved.

     8.7.  Tenant  Estoppels.  Seller shall promptly  deliver to each Tenant for
such Tenant's execution an estoppel certificate certified to Purchaser (each, an
"Estoppel  Certificate")  substantially in the form of the estoppel  certificate
attached to each such  Tenant's  Lease,  or, with respect to any Lease that does
not  include a form of  estoppel  certificate,  an  estoppel  certificate  which
substantially  incorporates the estoppel  provisions  expressly contained in any
such  Lease.  Seller  shall  cause  all of its  affiliates,  including,  without
limitation,  Venator Group, Inc., to execute and return an Estoppel  Certificate
to Seller and Seller shall use reasonable  efforts to cause all other Tenants to
execute and return the Estoppel  Certificates  to Seller not later than five (5)
business  days prior to Closing,  but Seller shall not be required to expend any
money  (other than  nominal  sums),  provide  any  financial  accommodations  or
commence  any  litigation.  Seller  shall use  reasonable  efforts to deliver to
Purchaser a copy of each Estoppel  Certificate  promptly after Seller's  receipt
thereof. Subject to Section 9.2.3, in no event shall Purchaser have any right to
terminate this Agreement,  nor shall Purchaser be entitled to a reduction of the
Purchase  Price or  otherwise  be relieved  from its  obligations  hereunder  on
account  of  any  statement  made  or  information  contained  in  any  Estoppel
Certificate,   but  Purchaser's   rights  hereunder  with  respect  to  Seller's
representations and warranties shall,  subject to Section 6.3, remain unimpaired
thereby.  To the extent that Seller  delivers  an  Estoppel  Certificate  from a
Tenant subsequent to Seller's delivery of an Estoppel Certificate in the form of
Exhibit S executed  by Seller  with  respect  to such  Tenant,  Seller  shall be
released  from  any  liability  in  connection  with  Seller's   representations
contained therein.

     8.8.  Contracts.  Seller  may,  between  the date  hereof and the  Closing,
extend,  renew, replace or modify any Contract or enter into any new Contract if
the terms thereof are on commercially  reasonable and competitive  terms and the
term  thereof is  cancellable  upon no more than thirty (30) days prior  written
notice,  without premium or penalty. At Purchaser's option exercisable by giving
written  notice to Seller at least ten (10)  business days prior to the Closing,
Seller shall use its best  efforts to terminate  all  Contracts  (and  Purchaser
shall  cooperate  with Seller in connection  therewith) by giving written notice
thereof  to the  parties  to  each  of  the  Contracts.  Seller  shall  pay  the
termination fees due

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under the property management agreement with Park Tower Management and all other
termination fees.

     8.9. Tax Appeal Proceedings.  Purchaser hereby agrees and acknowledges that
Seller  shall  have the right to  continue  to  prosecute  any tax appeal or tax
abatement proceeding with respect to the Property for the tax years prior to the
1998/1999  tax year which was  commenced by Seller prior to the date hereof.  If
any such tax  appeals  or tax  abatement  proceedings  result in tax  refunds or
rebates from the  applicable  taxing  authori ties,  then,  after  deduction for
Seller's  reasonable costs and expenses (including  reasonable  attorneys' fees)
incurred in connection with such tax appeal or abatement proceedings and subject
to the rights,  if any, of Tenants  under their Leases with respect  thereto (i)
Seller  shall be entitled  to receive any such refund or rebate with  respect to
the period prior to the Closing and (ii) Purchaser  shall be entitled to receive
any such refund or rebate with respect to the period from and after the Closing.
The party which  actually  receives  such tax refunds or rebates from the taxing
authorities  shall promptly notify the other party thereof and pay to such party
the amounts  due to such party  pursuant to the terms  hereof.  At the  Closing,
Seller shall assign to Purchaser all tax appeals and tax abatement  proceed ings
pending  with  respect  to the  Property  for the  1998/1999  tax  year  and any
subsequent tax years.  Seller agrees that it will not commence any tax appeal or
tax abatement  proceeding after the date hereof without  Purchaser's consent and
shall commence any such action (at Purchaser's  sole cost and expense)  promptly
upon  Purchaser's  request.  The terms and  provisions of this Section 8.9 shall
survive the Closing.

     8.10. Notices of Violation.  Seller shall promptly notify Purchaser of, and
shall promptly deliver to Purchaser a copy of any notice Seller may receive,  on
or before the Closing, from any governmental  authority,  concerning a violation
of laws at or a discharge of hazardous substances from or upon the Property.

     8.11. Access. Seller agrees to afford Purchaser and its employees and autho
rized agents with access to the Property  prior to the  Closing,  at  reasonable
times and upon reasonable  advance notice,  provided that neither  Purchaser nor
any of its  employees or agents  shall enter any portion of the Property  unless
accompanied by a representative  of Seller and that Seller shall not be required
to incur any cost or expense or  commence  any action to afford  Purchaser  with
such  access.  Purchaser  specifically  agrees  that  neither  it nor any of its
employees or agents shall  communicate  directly  with any  Employees or Tenants
unless such  communication  shall have been approved by Veronica Hackett (or any
other  representative of Seller  designated by Seller for such purposes),  which
approval

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shall  not  be  unreasonably  withheld.  Seller  shall  be  entitled  to  have a
representative  present during any  communications  between Purchaser and any of
the Employees or Tenants.


                                   ARTICLE IX.

                               Closing Conditions

     9.1.  Conditions to Obligations of Seller.  The obligations of Seller under
this  Agreement  to sell the  Property  and  consummate  the other  transactions
contemplated  hereby  shall be  subject  to the  satisfaction  of the  following
conditions on or before the Closing Date,  except to the extent that any of such
conditions  may be waived by Seller in writing at Closing in the  Seller's  sole
and absolute discretion.

     9.1.1.   Representations,   Warranties  and  Covenants  of  Purchaser.  All
representations  and warranties of Purchaser in this Agreement shall be true and
correct in all material respects as of the Closing Date, with the same force and
effect  as if such  representations  and  warranties  were  made  anew as of the
Closing Date,  and Purchaser  shall have  performed and complied in all material
respects  with all covenants  and agree ments  required by this  Agreement to be
performed  or  complied  with by  Purchaser  on or  prior to the  Closing  Date.
Notwithstanding  the foregoing,  Purchaser may cure any breach of representation
or warranty and otherwise satisfy all conditions to Seller's obligation to close
set forth in this Section 9.1.1 by paying the Balance of the Purchase  Price and
performing all other obligations of Purchaser  hereunder of a monetary nature on
the Closing Date.

     9.1.2.  No Orders.  No order,  writ,  injunction  or decree shall have been
entered  and  be in  effect  by  any  court  of  competent  jurisdiction  or any
authority,  and  no  statute,  rule,  regulation  or  other  requirement  of any
governmental  authority shall have been promulgated or enacted and be in effect,
that restrains, enjoins or invalidates the transac tions contemplated hereby.

     9.1.3. Termination. Subject to Article XII, in the event Seller shall elect
not to close due to the failure of any one or more of the  conditions  precedent
to Seller's  obligation to sell set forth in this Section 9.1 which has not been
waived by Seller in writing in Seller's  sole and  absolute  discretion,  Seller
shall so notify  Purchaser  on the day of  Closing  in  writing  specifying  the
unfulfilled conditions, Seller shall direct the Escrow Agent

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to return the Deposit to  Purchaser  and this  Agreement  shall  terminate,  and
neither party shall have any further obligation under this Agreement (except the
Surviving  Termination  Obligations).  Notwithstanding  anything to the contrary
contained  herein,  in the event that Seller  delivers a  termination  notice to
Purchaser  pursuant  to this  Section  9.1.3,  Purchaser  shall  have the  right
(provided  that it delivers a notice to Seller  within five (5) business days of
its receipt of Seller's  termination  notice),  to extend the scheduled  Closing
Date for a period  of up to  thirty  (30)  business  days in order to allow  the
satisfaction  of  the  unfulfilled  conditions  to  the  obligations  of  Seller
specified in Seller's termination notice.

     9.2.  Conditions to Obligations of Purchaser.  The obligations of Purchaser
under  this  Agreement  to  purchase  the  Property  and  consummate  the  other
transactions  contemplated  hereby shall be subject to the  satisfaction  of the
following  conditions on or before the Closing  Date,  except to the extent that
any of such  conditions  may be waived by Purchaser in writing at Closing in the
Purchaser's sole and absolute discretion.

     9.2.1.   Representations,   Warranties   and   Covenants  of  Seller.   All
representations  and  warranties of Seller in this  Agreement  shall be true and
correct in all material respects as of the Closing Date, with the same force and
effect  as if such  repre  sentations  and  warranties  were made anew as of the
Closing Date, any changes to such  representations  disclosed by Seller pursuant
to Section 10.1.9 shall be acceptable to Pur chaser in its sole discretion,  and
Seller  shall have  performed  and complied in all  material  respects  with all
covenants and agreements  required by this Agreement to be performed or complied
with by Seller prior to the Closing Date.

     9.2.2.  No Orders.  No order,  writ,  injunction  or decree shall have been
entered  and  be in  effect  by  any  court  of  competent  jurisdiction  or any
authority, and no statute, rule, regulation or other requirement shall have been
promulgated or enacted and be in effect, that restrains,  enjoins or invalidates
the transactions contemplated hereby.

     9.2.3. Estoppels.  Purchaser shall not have received Estoppel Certifi cates
dated not earlier  than  thirty (30) days prior to the Closing  Date in the form
required by this Agreement  from (i) all  affiliates of Seller  occupying all or
any portion of the  Property  and (ii)  Tenants  (other than those  described in
clause (i) of this  sentence)  occupying an aggregate of 175,000  square feet of
the Improvements; provided, however, the condition set forth in this clause (ii)
shall be deemed  satisfied if Seller  delivers a Seller's  Estoppel  Certificate
executed by Seller and Seller's  Affiliate  (in the form set forth on Exhibit S)
with respect to Leases for Tenants (other than those described in clause (i) of

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this sentence)  occupying the balance of the required 175,000 square feet of the
Improve ments not satisfied by direct Estoppel Certificates from Tenants. Seller
may supplement a Tenant's Estoppel  Certificate dated more than thirty (30) days
prior to the Closing Date by delivering a Seller's Estoppel  Certificate limited
to the  period  between  the date of the  Tenant  Estoppel  Certificate  and the
Closing Date.

     9.2.4.  Title.  At the time of Closing,  title to the Property  shall be as
provided in this Agreement.

     9.2.5.  Termination.  Subject to Article XII, in the event  Purchaser shall
elect  not to  close  due to the  failure  of any one or more of the  conditions
precedent to Purchaser's  obligation to consummate this transaction set forth in
this  Section  9.2  which  has not  been  waived  by  Purchaser  in  writing  in
Purchaser's  sole and absolute  discretion,  Purchaser shall so notify Seller on
the day of Closing in writing  specifying  the  unfulfilled  conditions,  Seller
shall  direct the  Escrow  Agent to return the  Deposit  to  Purchaser  and this
Agreement shall terminate,  and neither party shall have any further  obligation
under  this   Agreement   (except  the   Surviving   Termination   Obligations).
Notwithstanding  anything to the contrary  contained  herein,  in the event that
Purchaser  delivers a  termination  notice to Seller  pursuant  to this  Section
9.2.4,  Seller  shall  have the right  (provided  that it  delivers  a notice to
Purchaser within two (2) business days of its receipt of Purchaser's termination
notice),  to extend the  scheduled  Closing  Date for a period of up to ten (10)
business days in order to allow the  satisfaction of the unfulfilled  conditions
to the obligations of Purchaser specified in Purchaser's termination notice.


                                   ARTICLE X.

                                     Closing

     10.1.  Seller's  Closing  Obligations.  Seller shall,  at its sole cost and
expense,  execute,  acknowledge  (where  applicable)  and deliver or cause to be
delivered to Pur chaser at Closing the following:

     10.1.1.  A bargain and sale deed without  covenant  against  grantor's acts
(the "Deed")  substantially  in the form attached hereto as Exhibit G, conveying
to  Purchaser  the Land and  Improvements  in fee  simple,  subject  only to the
Permitted Excep tions.

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     10.1.2.  An "Assignment  and Assumption of Leases" in the form of Exhibit H
attached hereto, with respect to the Leases and the Security Deposits.

     10.1.3.  An "Assignment and Assumption of Contracts" in the form of Exhibit
I attached hereto.

     10.1.4. A list of Security Deposits required to be held pursuant to the
applicable Leases.

     10.1.5.  Copies  of  the  Contracts,  the  Licenses  and  Permits  and  the
warranties and guarantees (originals will be provided if available).

     10.1.6.  Originals  (to the  extent  in  Seller's  possession  or  control,
otherwise  photostatic  copies thereof) of all Leases in effect on such date and
all other  documents  in the  possession  of  Seller  relating  to the  Tenants,
including any Estoppel Certificates received by Seller from any of the Tenants.

     10.1.7. Written notices executed by Seller and addressed to each Tenant (i)
advising  each such Tenant of the sale of the  Property  and the transfer of the
unapplied  amount of its security  deposit (if any) to  Purchaser in  accordance
with New York General  Obligations  Law Section 7-105 and (ii)  indicating  that
rent should  thereafter be paid to Purchaser and giving  instructions  therefor,
substantially  in the form of Exhibit J  attached  hereto.  Purchaser  agrees to
deliver such notices to the Tenants,  by  registered or certified  mail,  within
five (5) days after the Closing  Date and hereby  agrees to  indemnify  and hold
Seller harmless from and against all loss,  cost and expense  incurred by Seller
as a result of  Purchaser's  failure to so deliver  such notices to the Tenants.
Purchaser's obligations under this Section 10.1.7 shall survive the Closing.

     10.1.8.  Written  notices  executed  by  Seller,  addressed  to each  party
performing services pursuant to a Contract indicating that the Property has been
sold to Purchaser and that either (i) all rights of Seller  thereunder have been
assigned to Purchaser or (ii) if  requested  by  Purchaser  in  accordance  with
Section 8.8, Seller has terminated such Contract.

     10.1.9. A certificate in the form of Exhibit K attached hereto,  indicating
that the  representations  and  warranties of Seller set forth in Article VI are
true and correct on the Closing Date, or, if there have been changes, describing
such changes.

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     10.1.10.  A bill of sale in the form  attached  hereto as  Exhibit L convey
ing, transferring and selling to Purchaser (with no value separate from the Real
Property)  all  right,  title and  interest  of  Seller  in and to the  Personal
Property.

     10.1.11. The License Agreement.

     10.1.12. A certificate substantially in the form attached hereto as Exhibit
M certifying that Seller is not a "foreign person" as defined in Section 1445 of
the Code.

     10.1.13.  A New York City Real  Property  Transfer  Tax Return and New York
State  Combined  Real  Estate  Transfer  Tax  Return and  Credit  Line  Mortgage
Certificate  (Form TP-584)  (together,  the "Transfer Tax  Returns"),  each duly
signed by Seller, together with the payment of the amount of the Transfer Taxes,
if any, due in connection with the transactions  contemplated hereunder, in each
case by delivery to the Title Company of a certified  check payable to the order
of the Commissioner of Finance in the amount of the Transfer Tax due to New York
City and a certified check payable to the order of the New York State Department
of Taxation  and Finance in the amount of the Transfer Tax due to New York State
(unless Seller elects to have Purchaser make such payments with a credit against
the Purchase Price, in which case such payments shall be so made by Purchaser).

     10.1.14.  The following items to the extent in Seller's possession or under
Seller's control: (i) keys for all entrance doors in the Improvements,  (ii) all
original (or copies if  originals  are not  available)  books,  records,  tenant
files,  operating  reports,  files, plans and specifications and other materials
related to the operation of the  Property;  (iii) the originals (or copies where
originals are not available) of the Contracts and the Licenses and Permits,  and
(iv) a revised Rent Roll certified by an authorized  officer of Seller,  updated
to within ten (10) business days of the Closing.

     10.1.15.  Evidence  reasonably  satisfactory  to  Purchaser  and the  Title
Company that the person executing the Closing  documents on behalf of Seller has
full right, power and authority to do so.

     10.1.16. An affidavit in lieu of registration as required by Chapter 664 of
the Laws of 1978 in the form of Exhibit N.


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     10.1.17.  Affidavits and other matters as are  reasonably  requested by the
Title Company pursuant to Section 5.1.5 of this Agreement.

     10.1.18. At Closing, Seller shall have delivered possession of the Property
to  Purchaser,  subject to the  Permitted  Exceptions  and the rights of Tenants
under the Leases.

     10.1.19. The Venator SNDA.

     10.1.20. Such other documents as may be reasonably necessary or appropriate
to effect the  consummation  of the  transactions  which are the subject of this
Agreement.

     10.2.  Purchaser's  Closing  Obligations.  Purchaser,  at its sole cost and
expense, shall deliver or cause to be delivered to Seller (or, in the case of an
Exchange, to the Qualified  Intermediary) or the Tenant under the Venator Lease,
as applicable, at Closing the following:

     10.2.1.  The Balance of the Purchase Price,  after all adjustments are made
at the Closing as herein  provided to Seller,  and a payment to the tenant under
the  Venator  Lease in  respect of such  tenant's  initial  improvements  to the
Venator  Premises  that  were  completed  prior  to  the  Closing  Date,  up  to
$11,000,000,  in each case by  Federal  Reserve  wire  transfer  of  immediately
available  funds.  To the extent that such  initial  improvements  have not been
completed  prior to the  Closing  Date,  then,  in order to  secure  Purchaser's
obligation to pay  $11,000,000  (minus amounts paid pursuant to the  immediately
preceding  sentence) to the tenant under the Venator Lease,  Purchaser shall pay
to the Escrow  Agent,  at the  Closing,  by Federal  Reserve  wire  transfer  of
immediately  available  funds,  the balance thereof  remaining to be paid to the
tenant  under  the  Venator  Lease  so that  Purchaser's  total  payment  equals
$11,000,000  and the  tenant  under the  Venator  Lease,  the  Escrow  Agent and
Purchaser shall enter into an escrow agreement, in form and substance reasonably
satisfactory to the parties thereto,  governing disbursement of said $11,000,000
(minus  amounts  paid  pursuant  to  the  immediately   preceding  sentence)  in
accordance with the terms of the Venator Lease, provided, however, that the only
condition to the disbursement of the $11,000,000 (minus amounts paid pursuant to
the  immediately   preceding   sentence)  shall  be  Purchaser's  receipt  of  a
certification  from the tenant under the Venator  Lease that the initial  tenant
improvements have been completed.


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     10.2.2. Purchaser shall duly execute, acknowledge (as appropriate) and
deliver:

          (i)  the Assignment and Assumption of Leases;

          (ii) the Assignment and Assumption of Contracts;

          (iii) receipt for delivery and acceptance of the Security Deposits;

          (iv) the License Agreement; and

          (v)  the Transfer Tax Returns.

     10.2.3.  A  non-disturbance  agreement (the "Venator SNDA") in favor of the
tenant under the Venator Lease, duly executed, acknowledged and delivered by the
holder of any mortgage granted by Purchaser with respect to the Real Property or
any portion thereof, in the form of Exhibit O attached hereto.

     10.2.4.  Evidence  reasonably  satisfactory to Seller and the Title Company
that the person executing the Closing  documents on behalf of Purchaser has full
right, power and authority to do so.

     10.2.5. A certificate in the form of Exhibit P attached hereto,  indicating
that the  representations  and  warranties of Purchaser set forth in Article VII
are true and  correct  on the  Closing  Date,  or, if there  have been  changes,
describing such changes.

     10.2.6. Such other documents as may be reasonably  necessary or appropriate
to effect the  consummation  of the  transactions  which are the subject of this
Agreement.



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                                   ARTICLE XI.

                                  Risk of Loss

     11.1.  Condemnation and Casualty. If, prior to the Closing Date, all or any
portion of the  Property  is taken by  eminent  domain,  or is the  subject of a
pending  taking  which has not been  consummated,  or is destroyed or damaged by
fire or other  casualty,  Seller  shall notify  Purchaser of such fact  promptly
after Seller obtains  knowledge  thereof.  If such  condemnation  or casualty is
Material (as such term is hereinafter defined), Pur chaser shall have the option
to terminate  this  Agreement upon notice to Seller given not later than fifteen
(15)  business  days after  receipt of Seller's  notice,  or the  Closing  Date,
whichever is earlier.  If this  Agreement is  terminated,  the Deposit  shall be
returned to Purchaser and thereafter neither Seller nor Purchaser shall have any
further rights or obligations to the other hereunder  except with respect to the
Surviving Termination Obligations.  If this Agreement is not terminated,  Seller
shall not be obligated to repair any damage or destruction  but (x) Seller shall
assign and turn over to  Purchaser  the  insurance  proceeds  as they  relate to
property  damage to Property that the  Purchaser  will have an interest in after
the Closing or condemnation  awards, as applicable,  net of any costs of repairs
and net of reasonable  collection costs (or, if such have not been awarded,  all
of its  right to  receive  the  same)  authorized  by  Purchaser  to be paid and
actually  paid by  Seller  with  respect  to  such  fire or  other  casualty  or
condemnation,  including any rent abatement insurance accruing after the Closing
for such  casualty or  condemnation,  provided that  Purchaser  shall retain the
exclusive right to file and prosecute the  adjustment,  compromise or settlement
of any claim for the  insurance  proceeds as they  relate to property  damage to
Property that the Purchaser will have an interest in after the Closing,  and (y)
the  parties  shall  proceed to Closing  pursuant  to the terms  hereof  without
abatement  of the  Purchase  Price  except  for a credit  in the  amount  of the
applicable insurance deductible.

     11.2.  Condemnation not Material. If the condemnation is not Material, then
the Closing  shall occur  without  abatement  of the Purchase  Price and,  after
deducting  Seller's  reasonable  costs and expenses  incurred in collecting  any
award,  Seller shall assign all remaining awards or any rights to collect awards
to Purchaser on the Closing Date.

     11.3.  Casualty not  Material.  If the Casualty is not  Material,  then the
Closing shall occur without abatement of the Purchase Price (except for a credit
against the  Purchase  Price in the amount of the  applicable  deductible  under
Seller's  insurance  policies),  Seller  shall not be  obligated  to repair such
damage or destruction and Seller shall

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assign and turn over to Purchaser all of the insurance proceeds net of any costs
of repairs  and net of  reasonable  collection  costs (or, if such have not been
awarded,  all of its right, title and interest therein)  authorized by Purchaser
to be paid  and  actually  paid by  Seller  with  respect  to such  fire or such
casualty,  including any rent abatement insurance accruing after the Closing for
such casualty.

     11.4.  Materiality.  For purposes of this  Article XI, the term  "Material"
shall mean:

     (i) with respect to a taking by eminent domain, a taking of (x) any portion
of the Broadway Parcel or the Improvement thereon, or (y) the entirety of either
the  Barclay  Parcel or the Park Place  Parcel,  or both,  and the  Improvements
located thereon,  excluding,  however, any taking solely of subsurface rights or
takings for utility easements or right of way easements,  if the surface of such
Land, after such taking,  may be used in substantially the same manner as though
such rights had not been taken; and

     (ii) with respect to a casualty, any casualty such that the cost of repair,
as reasonably  estimated by an independent  engineer  licensed to do business in
the  State of New York  acceptable  to  Seller  and  Purchaser,  is in excess of
$10,000,000.

     11.5.  General  Obligations  Law.  The  provisions  of this  Article XI are
intended to supersede those of Section 5-1311 of the General  Obligations Law of
New York.

                                  ARTICLE XII.

                                     Default

     12.1.  Default  by  Seller.  Except  as set forth  below,  in the event the
Closing and the transactions contemplated hereby do not occur as provided herein
by reason  of the  default  of  Seller,  Purchaser  may  elect,  as the sole and
exclusive  remedy of Purchaser,  to (i) terminate this Agreement and receive the
Deposit from the Escrow Agent in  accordance  with the terms and  provisions  of
Section  3.2  hereof,  and in such  event  Seller  shall not have any  liability
whatsoever  to  Purchaser  hereunder  other than with  respect to the  Surviving
Termination Obligations,  or (ii) enforce specific performance of, or seek other
equitable actions under,  this Agreement,  provided none of the same requests or
entitles  Purchaser to any monetary  damages  from  Seller.  Purchaser  shall be
deemed to have elected to terminate  this  Agreement  (as provided in subsection
(i) above) if Purchaser fails to deliver

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to Seller  written  notice of its intent to file a cause of action for  specific
performance  against  Seller  within  thirty (30) days after  written  notice of
termination  from  Seller or thirty  (30) days  after the  originally  scheduled
Closing Date,  whichever shall occur first, or having given Seller notice, fails
to file a lawsuit  asserting  such cause of action within ninety (90) days after
the originally  scheduled Closing Date.  Notwithstanding the foregoing,  nothing
contained herein shall limit Purchaser's  remedies at law or in equity as to the
Surviving Termination Obligations.

     12.2.  Default by Purchaser.  In the event the Closing and the transactions
contemplated  hereby do not occur as provided herein by reason of any default of
Pur chaser,  Purchaser  and Seller agree it would be  impractical  and extremely
difficult to fix the damages which Seller may suffer.  Therefore,  Purchaser and
Seller  hereby agree a  reasonable  estimate of the total net  detriment  Seller
would suffer in the event Purchaser  defaults and fails to complete the purchase
of the Property is and shall be, as Seller's sole and exclusive  remedy (whether
at law or in  equity),  a sum  equal  to  the  Deposit.  Upon  such  default  by
Purchaser,  Seller  shall have the right to receive the Deposit  from the Escrow
Agent, in accordance with the terms and provisions of Section 3.2 hereof, as its
sole and exclusive  remedy and thereupon this Agreement  shall be terminated and
neither  Seller nor  Purchaser  shall  have any  further  rights or  obligations
hereunder  except with respect to the  Surviving  Termination  Obligations.  The
amount of the  Deposit  shall be the full,  agreed and  liquidated  damages  for
Purchaser's  default and failure to complete the purchase of the  Property,  all
other  claims to damages or other  remedies  being  hereby  expressly  waived by
Seller.  Notwithstanding  the foregoing,  nothing  contained  herein shall limit
Seller's  remedies  at  law  or  in  equity  as  to  the  Surviving  Termination
Obligations.  Notwithstanding the foregoing,  Purchaser may cure any defaults by
paying the Balance of the Purchase Price and performing all other obligations of
Purchaser hereunder of a monetary nature on the Closing Date.


                                  ARTICLE XIII.

                                     Brokers

     13.1.   Brokerage   Indemnity.   Purchaser  shall  indemnify  Seller,   its
affiliates,  and its and  their  partners,  trustees,  advisors,  officers,  and
directors,  against all losses,  damages,  costs, expenses (including reasonable
fees and  expenses of  attorneys),  causes of action,  suits or judgments of any
nature arising out of any claim, demand or liability to or asserted

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by any broker,  agent or finder,  licensed or otherwise,  claiming to have dealt
with  Purchaser  in  connection  with this  transaction  other than J.P.  Morgan
Securities  Inc. and The Georgetown  Company  (together,  the "Broker").  Seller
shall  indemnify  Purchaser  and its  affiliates,  and its and  their  partners,
members,  trustees,  advisors,  officers  and  directors,  against  all  losses,
damages,  costs, expenses (including reasonable fees and expenses of attorneys),
causes of action,  suits or  judgments  of any nature  arising out of any claim,
demand  or  liability  to or  asserted  by the  Broker in  connection  with this
transaction or by any broker, agent or finder,  licensed or otherwise,  claiming
to have dealt with Seller in connection with this transaction.  Seller shall pay
the Broker in connection with the consummation of the transactions  contemplated
by this Agreement  pursuant to a separate  agreement  between Seller and Broker.
The provisions of this Article XIII shall survive the Closing and/or termination
of this Agreement.


                                  ARTICLE XIV.

                                 Confidentiality

     14.1. Publication. Purchaser and Seller shall consult with each other prior
to  making  any  public  statements  with  respect  to  this  Agreement  and the
transactions  contem plated  hereby and,  except as otherwise may be required by
law or in connection  with any filings  required to be made by either party with
the Securities and Exchange Commission,  Purchaser and Seller shall not make any
public  statements,  including,  without  limitation,  any press releases,  with
respect to this Agreement and the transactions  contemplated hereby, without the
prior  written  consent of the other party,  which consent shall not be unreason
ably withheld.  Notwithstanding  the foregoing,  this Article 14 shall terminate
and be of no further force and effect from and after the Closing.


                                   ARTICLE XV.

                                Employee Matters

     15.1. Employment Responsibilities.  Seller shall terminate all Employees on
the Closing  Date.  Purchaser  shall offer to rehire and employ on and after the
Closing  not less  than 33  Employees,  which  Seller  represents  is 60% of the
aggregate  number of  Employees  represented  by any and all  unions on the date
hereof  (collectively,  the "Union Employ ees") on substantially the same wages,
terms and conditions as such Union Employees were employed by Seller immediately
prior to Seller's  termination  of such  employment.  Except as set forth below,
Purchaser  shall be solely  responsible  for, and hereby assumes all liabilities
whatsoever  with respect to: (i) all  salaries  and wages  relating to any Union
Employee  hired by  Purchaser  and  attributable  to the period on and after the
Closing Date,  (ii) benefits  relating to any Union  Employee hired by Purchaser
and  attributable  to the period on and after the Closing  Date,  (iii)  benefit
continuation  and/or  severance  payments  relating  to any Union  Employee as a
result of any  termination  of employment of any Union Employee on and after the
Closing Date, (iv) notices, payments, fines or assessments pursuant to any laws,
rules or  regulations  with  respect to the  employment,  discharge or layoff of
Union  Employees on or after the Closing  Date,  including,  but not limited to,
such liability as arises under the Worker Adjustment and Retraining Notification
Act, Section 4980B of the Code (COBRA) and any rules or regulations as have been
issued in connec tion with any of the foregoing and (v) any withdrawal liability
under any  multiemployer  pension plans or similar  arrangements with respect to
the Union  Employees  (the aggregate  amount of liabilities  pursuant to clauses
(iii), (iv) and (v) being hereinafter  collectively referred to as the "Employee
Termination  Liabilities").  Subject  to the  provisions  of the next  sentence,
Seller  shall be  responsible  for one-half  (1/2) of the  Employee  Termination
Liabilities  (defined  herein)  up  to  a  maximum  of  $250,000  (the  "Maximum
Termination Responsibility").  Purchaser may elect, without notice to Seller, to
decrease  the percent age of Union  Employees  which  Purchaser  is obligated to
offer to rehire  from 33 to any  number  (but not less than 27),  provided  that
Purchaser  shall,  in addition to Purchaser's  liabilities  set forth above,  be
solely responsible for, and hereby assumes all Employee Termination Liabilities,
with  respect  to a number of Union  Employees  equal to 33 minus the  number of
Union  Employees  Purchaser  actually  offered to hire.  Solely for  purposes of
calculating   Purchaser's   liability  pursuant  to  the  immediately  preceding
sentence,   Seller  shall  select  which  Union   Employees  shall  be  used  in
apportioning  liability from the list of Union Employees which Purchaser did not
offer employment.

    48

     Subject to  Seller's  Maximum  Termination  Responsibility,  Purchaser  and
Seller each hereby agrees to indemnify the other and their respective affiliates
against,  and agrees to defend and hold them  harmless  from any and all claims,
losses,  damages  and  expenses  (including,   without  limitation,   reasonable
attorneys' fees) and other liabilities and obligations incurred or suffered as a
result  of any  claim by or on  behalf  any Union  Employee  that  arises  under
federal, state or local statute (including, without limitation, Title VII of the
Civil Rights Act of 1964, the Civil Rights Act of 1991,  the Age  Discrimination
in Employment Act of 1990,  the Equal Pay Act, the Americans  with  Disabilities
Act of 1990, the Employ ee Retirement  Income Security Act of 1974 and all other
statutes  regulating  the terms and  conditions  of  employment),  regulation or
ordinance,  under the common law or in equity (including any claims for wrongful
discharge or otherwise,  but specifically excluding any claims under any policy,
agreement,  understanding or promise, written or oral, formal or informal (other
than the CBAs),  between  Seller and the Union  Employees),  arising solely as a
result of termination of employment on the Closing Date.  Seller shall indemnify
and hold Purchaser  harmless from any of the foregoing to the extent arising out
of any acts or omissions that occurred (or, in the case of omissions,  failed to
occur) prior to the Closing Date.
 
     15.2.  Collective  Bargaining  Agreements.  Effective  as of  the  Closing,
Purchaser  shall  diligently  proceed in good  faith to enter into or  otherwise
become a party  or  subject  to and  thereafter  observe,  pay and  perform  all
obligations and liabilities under, arising from or otherwise relating to (i) the
1996 Commercial  Building  Agreement  between Local 32B-32J,  Service  Employees
International  Union,  AFL-CIO and the Realty Advisory Board on Labor Relations,
Inc. and (ii) the 1998 Engineer  Agreement  between the Realty Advisory Board of
Labor  Relations,  Incorporated  and Local  94-94A-94B,  International  Union of
Operating Engineers AFL-CIO  (hereafter,  collectively,  the "CBAs").  Purchaser
shall have sole  responsibility for all such obligations and liabilities arising
under or  relating  to the CBAs , to the extent  entered  into or  binding  upon
Purchaser (subject to Seller's Maximum Termination  Responsibility) on or at any
time  after the Clos ing Date and hereby  agrees to  indemnify  and hold  Seller
harmless  from and  against all loss,  cost and expense  incurred by Seller as a
result of Purchaser's failure to perform its obligation under this Section 15.2.

     15.3.  Survival.  The  provisions  of this  Article  XV shall  survive  the
Closing.


                                  ARTICLE XVI.

                                  Miscellaneous

     16.1.   Notices.   Any  and  all  notices,   requests,   demands  or  other
communications  hereunder  shall be deemed to have been duly given if in writing
and if transmitted by hand delivery with receipt therefor, by facsimile delivery
(with  confirmation  by hard copy),  by overnight  courier,  or by registered or
certified mail, return receipt requested,  first class postage prepaid addressed
as follows (or to such new address as the addressee of such a

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communication  may have  notified the sender  thereof)  (the date of such notice
shall be the date of actual  delivery to the recipient or recipients  refusal to
accept thereof):

To Purchaser:                       233 Broadway Owners, LLC
                                    c/o The Witkoff Group LLC
                                    220 East 42nd Street
                                    New York, New York 10017
                                    Attn:  James Stomber, Esq.
                                    Fax No.:  (212) 672-3434

With a copy to:                     Herrick, Feinstein LLP
                                    2 Park Avenue
                                    New York, New York  10016
                                    Attn:  Neil Shapiro, Esq.
                                    Fax No.:  (212) 889-7577

To Seller:                          233 Broadway, Inc.
                                    c/o Venator Group, Inc.
                                    233 Broadway
                                    New York, New York  10279
                                    Attn: General Counsel
                                    Fax No.: (212) 553-7038

With a copy to:                     Skadden, Arps, Slate, Meagher & Flom LLP
                                    919 Third Avenue
                                    New York, New York  10022
                                    Attn:  Benjamin F. Needell, Esq.
                                    Fax No.: (212) 735-2000

To Escrow Agent:                    Skadden, Arps, Slate, Meagher & Flom LLP
                                    919 Third Avenue
                                    New York, New York  10022
                                    Attn:  James F. O'Rorke, Jr., Esq.
                                    Fax No.:(212) 735-2000

With a copy to:                     Each of the other parties to this Agreement


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     Purchaser's counsel may give any notices or other communications hereunder
on behalf of  Purchaser  and  Seller's  counsel  may give any  notices  or other
communications hereunder on behalf of Seller.

     16.2. Governing Law; Venue.

     16.2.1.  This  Agreement  was  negotiated  in the State of New York and was
executed and delivered by Seller and  Purchaser in the State of New York,  which
State the parties agree has a substantial relationship to the parties and to the
underlying transactions embodied hereby, and in all respects, including, without
limiting the generality of the  foregoing,  matters of  construction,  validity,
enforcement  and  performance,   this  Agreement  and  the  obligations  arising
hereunder  shall be governed by and construed in accordance with the laws of the
State of New York applicable to contracts made and performed  wholly within such
State,  without  giving  effect to the  principles  of  conflicts of law of such
jurisdiction. To the fullest extent permitted by law, the parties hereby uncondi
tionally and  irrevocably  waive and release any claim that the law of any other
jurisdiction  governs this  Agreement and this  Agreement  shall be governed and
construed  in accor  dance  with the laws of the State of New York as  aforesaid
pursuant to Section 5-1401 of the New York General Obligations Law.

     16.3.  Headings.  The captions and headings  herein are for convenience and
reference  only and in no way  define  or limit  the  scope or  content  of this
Agreement or in any way affect its provisions.

     16.4.  Business  Days. If any date herein set forth for the  performance of
any  obligations of Seller or Purchaser or for the delivery of any instrument or
notice as herein provided should be on a Saturday,  Sunday or legal holiday, the
compliance with such  obligations or delivery shall be deemed  acceptable on the
next business day following  such  Saturday,  Sunday or legal  holiday.  As used
herein,  the term "legal  holiday" means any state or Federal  holiday for which
financial  institutions or post offices are generally closed in the state of New
York.

     16.5.  Counterpart  Copies.  This  Agreement may be executed in two or more
counterpart  copies,  all of which  counterparts  shall  have the same force and
effect as if all parties hereto had executed a single copy of this Agreement.


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     16.6.  Binding  Effect.  This  Agreement  shall  be not  become  a  binding
obligation  upon  Seller  unless and until the same has been fully  executed  by
Purchaser  and Seller and a fully  executed  counterpart  delivered by Seller to
Purchaser

     16.7.  Successors and Assigns.  This  Agreement  shall be binding upon, and
inure to the benefit of, the parties hereto and their respective  successors and
permitted assigns.

     16.8. Assignment. This Agreement may not be assigned by Purchaser except to
a directly or indirectly  wholly-owned  subsidiary or subsidiaries of Purchaser,
or to a partnership, corporation or limited liability company in which Guarantor
(or any of his family  members)  and/or  Lehman  Brothers  Holdings  Inc. (or an
affiliate  thereof) owns,  either  directly or  indirectly,  at least 75% of the
profits  thereof and controls the  management of the affairs of such entity (any
such  entity,  a "Permitted  Assignee")  and any other  assignment  or attempted
assignment by Purchaser  shall  constitute a default by Purchaser  hereunder and
shall be  deemed  null and  void  and of no  force  or  effect.  Notwithstanding
anything to the contrary contained herein, Purchaser may (i) assign the right to
purchase the Broadway  Parcel,  the Barclay Parcel and the Park Place Parcel and
the Improvements  relating to each such parcel to different entities,  provided,
however,  that  each  of  such  entities  is  a  Permitted  Assignee,  and  (ii)
collaterally  assign this Agreement to any institu tional lender.  A copy of any
assignment  permitted  hereunder,  together  with an  agreement  of the assignee
assuming all of the terms and  conditions  of this  Agreement to be performed by
Purchaser,  in form  reasonably  satisfactory  to counsel for  Seller,  shall be
delivered to the attorneys for Seller prior to the Closing,  and in any event no
such assignment shall relieve Purchaser from Purchaser's  obligations under this
Agreement nor result in a delay in the Closing.

     16.9.  Interpretation.  This Agreement shall not be construed more strictly
against one party than  against  the other  merely by virtue of the fact that it
may have been  prepared by counsel for one of the parties,  it being  recognized
that both Seller and Purchaser have contributed  substantially and materially to
the preparation of this Agree ment.

     16.10.  Entire  Agreement.  This  Agreement  and the Exhibits and Schedules
attached  hereto  contain  the final and entire  agreement  between  the parties
hereto with respect to the sale and purchase of the Property and are intended to
be an  integration  of all prior  negotiations  and  understandings.  Purchaser,
Seller and their agents shall not be

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bound by any terms, conditions, statements, warranties or representations,  oral
or written,  not contained  herein. No change or modifications to this Agreement
shall be valid  unless the same is in writing and signed by the parties  hereto.
Each party  reserves the right to waive any of the terms or  conditions  of this
Agreement  which  are  for  their  respective  benefit  and  to  consummate  the
transactions  contemplated  by this  Agreement in accordance  with the terms and
conditions of this Agreement which have not been so waived. Any such waiver must
be in  writing  signed by the party for whose  benefit  the  provision  is being
waived.

     16.11. Severability.  If any one or more of the provisions hereof shall for
any reason be held to be invalid,  illegal or unenforceable in any respect, such
invalidity,  illegality or unenforceability shall not affect any other provision
hereof,  and this  Agreement  shall be construed as if such invalid,  illegal or
unenforceable  provision  had never  been  contained  herein,  unless and to the
extent that the invalidation of any such term or provision materially alters the
intent of the parties hereto.

     16.12.  Survival.  Except as  otherwise  specifically  provided for in this
Agreement   (collectively,   the  "Surviving  Termination   Obligations"),   the
provisions  of this Agree ment and the  representations  and  warranties  herein
shall not survive  after the  conveyance  of title and  payment of the  Purchase
Price but be merged therein.

     16.13.  Exhibits.  Exhibits A through R and  Schedules 1 through 8 attached
hereto are incorporated herein by reference.

     16.14. Limitation of Liability.  Subject to Article XIX, the obligations of
Seller are intended to be binding only on Seller and Seller's assets,  and shall
not be  personally  binding  upon,  nor shall any  resort be had to,  any of the
partners,  officers,  directors,  shareholders,  advisors,  trustees, agents, or
employees of Seller, or its affiliates or any of their respective properties.

     16.15.  Prevailing Party. Should either party employ an attorney to enforce
any of the provisions hereof (whether before or after Closing, and including any
claims or actions  involving  amounts  held in escrow),  then the  nonprevailing
party  in  any  final  judgment  agrees  to pay  the  other  party's  reasonable
attorneys'  fees and  expenses in or out of  litigation  and, if in  litigation,
trial,  appellate,  bankruptcy  or other  proceedings,  expended  or incurred in
connection therewith, as determined by a court of competent jurisdiction.

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The  provisions  of  this  Section  16.15  shall  survive   Closing  and/or  any
termination  of this  Agreement and shall not be subject to any  limitations  on
liability set forth herein.
 
     16.16. Real Estate Reporting Person.  Escrow Agent is hereby designated the
"real  estate  reporting  person" for  purposes of Section  6045 of the Code and
Treasury  Regulation  1.6045-4  and any  instructions  or  settlement  statement
prepared  by  Escrow  Agent  shall  so  provide.  Upon the  consummation  of the
transaction  contemplated by this  Agreement,  Escrow Agent shall file Form 1099
information  return  and send the  statement  to  Seller as  required  under the
aforementioned  statute and  regulation.  Seller and Pur chaser  shall  promptly
furnish  their  federal  tax  identification  numbers to Escrow  Agent and shall
otherwise  reasonably  cooperate  with Escrow  Agent in  connection  with Escrow
Agent's duties as real estate reporting person.

     16.17.  No Recording.  Neither this  Agreement nor any  memorandum or short
form  hereof  shall be  recorded  or filed in any  public  land or other  public
records of any  jurisdiction,  by either  party and any  attempt to do so may be
treated by the other party as a breach of this Agreement.

     16.18.  No Other Parties.  This Agreement is not intended,  nor shall it be
con strued,  to confer upon any person or entity,  except the parties hereto and
their respective heirs, successors and permitted assigns, any rights or remedies
under or by reason of this Agreement.

     16.19.  Waiver of Trial by Jury.  The  respective  parties hereto shall and
hereby do waive trial by jury in any action,  proceeding or counterclaim brought
by either of the parties  hereto  against  the other on any  matters  whatsoever
arising  out of or in  any  way  connected  with  this  Agreement,  or  for  the
enforcement of any remedy under any statute, emergency or otherwise.

     16.20.  Rule 314.  Seller agrees to cooperate with the  appropriate  owning
party in  connection  with any audit  pursuant  to Rule 314  promulgated  by the
Securities and Exchange Commission,  and to execute a representation certificate
in compliance with applicable law,  provided that Purchaser shall be responsible
for Seller's  reasonable  costs and expenses  (including  reasonable  attorney's
fees) in connection with such cooperation and representation certificate.



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                                  ARTICLE XVII.

                               Purchaser Guaranty

     17.1.  Purchaser  Guaranty.  In order to induce  Seller to enter  into this
Agree ment, the Guarantor hereby unconditionally and irrevocably guarantees (the
"Purchaser  Guaranty")  the full and prompt  payment when due of the  Additional
Deposit.  The  Guarantor  shall be primarily  (rather  than merely  secondarily)
liable hereunder with respect to the Additional Deposit.

     17.2.  Waivers.  The Purchaser Guaranty is a continuing  guaranty and shall
remain in force until the Additional Deposit has been paid in full to the Escrow
Agent and is  independent  of every other  recourse which Seller may at any time
hold or have for the  Additional  Deposit.  The Guarantor  waives all diligence,
presentment and protest, and also notice of dishonor, protest and nonpayment. No
failure  by Seller to assert  any right or pursue  any  remedy  with  respect to
Purchaser  or the  Purchaser  Guaranty  shall  relieve  the  Guarantor  from his
obligations with respect to the Additional Deposit.  The Purchaser Guaranty is a
guaranty of payment and not merely of collection and the Guarantor hereby waives
any right to require  that any action be brought  against  Purchaser or that the
Agreement  be  enforced  by Seller  without  Seller  first  taking  any steps or
proceedings against Purchaser.

     17.3. Absolute Obligation. The Guarantor agrees that the Purchaser Guaranty
shall  not  be  diminished  or  affected,   in  any  way,  by  any   bankruptcy,
reorganization,  arrangement,  liquidation or similar proceeding with respect to
Purchaser or by dissolution of Purchaser or by any default  hereunder by Seller.
The Purchaser  Guaranty shall continue in full force and effect  notwithstanding
any merger,  consolidation,  sale of assets or any other similar  transaction by
Purchaser or the  Guarantor.  In addition,  the Purchaser  Guaranty shall not be
affected by any act,  omission,  matter or thing which,  but for this provision,
might operate to release or otherwise exonerate the Guarantor from the Purchaser
Guaranty or affect the  Guarantor's  obligations  with respect to the Additional
Deposit,  including,  without  limitation  and  whether  or  not  known  to  the
Guarantor:

     17.3.1.  any variation of this  Agreement or any other  document  delivered
pursuant hereto or any time, indulgence,  waiver or consent at any time given to
Purchaser or any other person or entity;


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     17.3.2.  any  compromise  or  release  of, or  abstention  from  obtaining,
perfecting or enforcing any security or other right or remedy whatsoever from or
against Purchaser or any other person or entity;

     17.3.3. any legal limitation, disability, incapacity or other circumstances
relating to Purchaser or any other person or entity; and

     17.3.4. any irregularity, unenforceability or invalidity of this Agreement.

     17.4. Enforcement Costs. The Guarantor further agrees to pay all reasonable
costs and expenses,  including, without limitation,  reasonable attorneys' fees,
at any time  paid or  incurred  by or on  behalf  of  Seller  in  enforcing  the
Purchaser Guaranty.

     17.5. Waiver of Subrogation. The Guarantor irrevocably waives all rights to
enforce  or  collect  upon any rights  which it now has or may  acquire  against
Purchaser either by way of subrogation, indemnity, reimbursement or contribution
for  any  amount  paid  under  the  Purchaser  Guaranty  or by way of any  other
obligations  whatsoever of Purchaser to the  Guarantor,  nor shall the Guarantor
file, assert or receive payment on any claim,  whether now existing or hereafter
arising,  against  Purchaser  in the  event of any  bankruptcy,  reorganization,
arrangement, liquidation or similar proceeding with respect to Purchaser.

     17.6. Waiver of Defenses.  The Guarantor  absolutely,  unconditionally  and
irrevocably  waives any and all right to assert or interpose any defense  (other
than the final  and  indefeasible  payment  in full to the  Escrow  Agent of the
Additional Deposit), setoff, counterclaim or crossclaim of any nature whatsoever
with respect to the Purchaser Guaranty or the Additional Deposit.


                                 ARTICLE XVIII.

                                  Venator Lease

     18.1.  Venator Lease.  Seller and Purchaser hereby agree to proceed in good
faith to  expeditiously  finalize a lease (the  "Venator  Lease")  governing the
tenancy of Venator Group, Inc. or an affiliate thereof  (acceptable to Purchaser
subject to the terms of Exhibit F at the  Improvements  upon the Broadway Parcel
and the Park Place Parcel from and after the Closing Date, such Venator Lease to
incorporate the terms and conditions set

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forth in the term sheet attached  hereto as Exhibit F and otherwise be upon such
commer cially  reasonable  terms and  conditions  as Seller and Purchaser  shall
agree upon on or before July 15, 1998. Promptly after the Venator Lease has been
finalized in  accordance  with this  Article  XVIII,  Seller  shall  execute the
Venator Lease and shall cause the tenant thereunder to execute the Venator Lease
and,  upon such  execution,  the  Venator  Lease shall be deemed a Lease for all
purposes  under this  Agreement  and Seller shall  deliver a copy of the Venator
Lease to Purchaser.

     18.2.  Disputes.  In the event  that,  on or before  July 15, 1998 (or such
additional  period of time thereafter as Seller and Purchaser may mutually agree
upon in writing),  Seller and Purchaser shall be unable to agree upon any of the
terms and conditions of the Venator Lease (other than those set forth on Exhibit
F), then either party may, upon notice to the other identifying with specificity
the matter in dispute,  submit the  resolution  of such  dispute to the first to
accept of Robert S. Nash,  Gerald R. Uram,  Lawrence D. Eisenberg and L. Stanton
Towne (the "Lease Mediator"), such individuals to be requested to serve as Lease
Mediator in the order in which their names  appear  herein.  In the event of any
such submission, each party shall, at any time during the ten (10) business days
following the  initiating  party's notice (which notice shall identify the Lease
Mediator), submit to the Lease Mediator a written proposal for the resolution of
such  dispute.  In the  event  that one (but not  both) of the  parties  to this
Agreement shall fail to so submit its proposal to the Lease Mediator within such
ten (10) day  period,  then the Lease  Mediator  shall  proceed to  resolve  the
dispute without the benefit of the other proposal. Within ten (10) business days
after the Lease Mediator's receipt of such proposals (or, in the event that only
one proposal is submitted to the Lease  Mediator,  within ten (10) business days
after  the later to occur of (i) the  expiration  of the ten (10)  business  day
period for submis  sion of written  proposals  and (ii) the  receipt of a single
proposal),  the Lease Mediator shall resolve the dispute by drafting appropriate
provisions for incorporation  into, and/or deletion of specific provisions from,
the Venator Lease.  During such ten (10) business day period, the Lease Mediator
may conduct such hearings and  investigations  as he may deem  appropriate.  The
determination of the Lease Mediator shall be final and binding upon the parties.
Each party shall pay its own counsel fees and  expenses,  if any, in  connection
with any dispute  resolution  under this Section.  The costs and expenses of the
Lease Mediator  shall be borne equally by Seller and Purchaser.  In the event of
the  death or  incapacitation  of the Lease  Mediator,  then the  parties  shall
promptly and in good faith agree upon the identity of a successor Lease Mediator
from the list of individuals identified above.


228463.07-New YorkS4A
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CONFIDENTIAL

     18.3.  Alterations.  Purchaser  hereby  consents  to  and  approves  of the
alterations to the Venator Premises  described in the memorandum  annexed hereto
as  Exhibit  Q,  provided,  that  such  alterations  (i) shall  not  affect  the
structural  integrity of the Improve ments,  (ii) shall not adversely affect the
building  systems  in the  Improvements,  and  (iii) are  completed  in a manner
consistent with corporate  headquarters in buildings similar to the Improvements
on the Broadway Parcel.


                                  ARTICLE XIX.

                                 Seller Guaranty

     19.1.  Seller  Guaranty.  In order to induce  Purchaser  to enter into this
Agree ment, Venator Group, Inc. (the "Seller Affiliate") hereby  unconditionally
and irrevoca bly guarantees (the "Seller Guaranty") the full and prompt payment,
performance  and observance of the Seller's  obligations  hereunder (the "Seller
Obligations").  The Seller  Affiliate  shall be  primarily  (rather  than merely
secondarily) liable hereunder with respect to the Seller Obligations.

     19.2.  Waivers.  The Seller  Guaranty is a  continuing  guaranty  and shall
remain in force until the Seller  Obligations has been paid or performed in full
and is independent of every other recourse which  Purchaser may at any time hold
or have for the Seller Obliga  tions,  subject to the  limitations  set forth in
this  Agreement.  The Seller  Affiliate  waives all diligence,  presentment  and
protest,  and also notice of  dishonor,  protest and  nonpayment.  No failure by
Purchaser to assert any right or pursue any remedy with respect to Seller or the
Seller  Guaranty shall relieve the Seller  Affiliate from its  obligations  with
respect to the Seller Obligations.  The Seller Guaranty is a guaranty of payment
and  performance  and not merely of collection and the Seller  Affiliate  hereby
waives any right to require  that any action be brought  against  Seller or that
the Agreement be enforced by Purchaser  against Seller without  Purchaser  first
taking any steps or proceedings against Seller.

     19.3.  Absolute  Obligation.  The Seller  Affiliate  agrees that the Seller
Guaranty  shall not be  diminished or affected,  in any way, by any  bankruptcy,
reorganization,  arrangement,  liquidation or similar proceeding with respect to
Seller or by dissolution of Seller.  The Seller  Guaranty shall continue in full
force and effect  notwithstanding any merger,  consolidation,  sale of assets or
any other similar  transaction by Seller or the Seller  Affiliate.  In addition,
the Seller Guaranty shall not be affected by any act, omission, matter

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CONFIDENTIAL

or thing which,  but for this  provision,  might operate to release or otherwise
exonerate  the Seller  Affiliate  from the Seller  Guaranty or affect the Seller
Affiliate's  obligations  with  respect  to the Seller  Obligations,  including,
without limitation and whether or not known to the Seller Affiliate:

     19.3.1.  any variation of this  Agreement or any other  document  delivered
pursuant hereto or any time, indulgence,  waiver or consent at any time given to
Seller or any other person or entity;

     19.3.2.  any  compromise  or  release  of, or  abstention  from  obtaining,
perfecting or enforcing any security or other right or remedy whatsoever from or
against Seller or any other person or entity;

     19.3.3. any legal limitation, disability, incapacity or other circumstances
relating to Seller or any other person or entity; and

     19.3.4. any irregularity, unenforceability or invalidity of this Agreement.

     19.4.  Enforcement  Costs. The Seller  Affiliate  further agrees to pay all
reason  able  costs and  expenses,  including,  without  limitation,  reasonable
attorneys'  fees,  at any time paid or incurred by or on behalf of  Purchaser in
enforcing the Seller Guaranty.

     19.5. Waiver of Subrogation.  The Seller Affiliate  irrevocably  waives all
rights to  enforce or collect  upon any rights  which it now has or may  acquire
against  Seller  either  by  way of  subrogation,  indemnity,  reimbursement  or
contribution  for any amount  paid under the  Seller  Guaranty  or by way of any
other obligations  whatsoever of Seller to the Seller  Affiliate,  nor shall the
Seller  Affiliate  file,  assert or receive  payment on any claim,  whether  now
existing or hereafter  arising,  against Seller in the event of any  bankruptcy,
reorganiza tion, arrangement,  liquidation or similar proceeding with respect to
Seller.

     19.6. Waiver of Defenses. The Seller Affiliate absolutely,  unconditionally
and  irrevocably  waives any and all right to assert or  interpose  any  defense
(other than the final and  indefeasible  payment and  performance  of the Seller
Obligations),  setoff,  counterclaim or crossclaim of any nature whatsoever with
respect to the Seller Guaranty or the Seller Obligations.


228463.07-New YorkS4A
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CONFIDENTIAL

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement on the
date first written above.


                                    SELLER:

                                    233 BROADWAY, INC.,  a New York corporation


                                    By: /s/ Gary H. Brown
                                        -------------------
                                    Name: Gary H. Brown
                                    Title: Vice President


                                    PURCHASER:

                                    233 BROADWAY OWNERS, LLC,
                                      a New York limited liability company

                                    By: 233 Broadway Next Generation LLC,
                                           its managing member


                                    By: /s/  James F. Stomber Jr.
                                        --------------------------
                                    Name: James F. Stomber Jr.
                                    Title: Authorized signatory

                                    FOR PURPOSES OF ARTICLE XVII HEREOF:


                                    /s/ Steven C. Witkoff
                                    -----------------------------------
                                    Steven C. Witkoff, individually and
                                    not in any representative capacity



228463.07-New YorkS4A
                                       50
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CONFIDENTIAL

                                    FOR PURPOSES OF ARTICLE XVIII HEREOF:

                                    VENATOR GROUP, INC.


                                    By: /s/ Gary H. Brown
                                        -----------------------
                                    Name: Gary H. Brown
                                    Title: Vice President


     The Escrow Agent hereby  executes  this  Agreement  for the sole purpose of
acknowledging receipt of the Initial Deposit and its responsibilities  hereunder
and to evidence  its  consent to serve as Escrow  Agent in  accordance  with the
terms of this Agreement.


                                    ESCROW AGENT:

                                    SKADDEN, ARPS, SLATE, MEAGHER
                                      & FLOM LLP


                                    By: /s/ Benjamin F. Needell
                                        ------------------------
                                    Name: Benjamin F. Needell
                                    Title: Partner

228463.07-New YorkS4A
                                       51




    61
                            

                               233 BROADWAY, INC.
                             c/o Venator Group, Inc.
                                  233 Broadway
                            New York, New York 10279


                                             September 11, 1998



233 Broadway Owners, LLC
c/o The Witkoff Group, LLC
220 East 42nd Street
New York, New York  10017

                  Re:  Woolworth Building

Ladies and Gentlemen:

     Reference  is hereby made to that  certain  Purchase  and Sale Agree- ment,
dated  June 20,  1998 (the  "Agreement"),  by and  between  233  Broadway,  Inc.
("Seller"), as seller, and 233 Broadway Owners, LLC ("Purchaser"), as purchaser.
All initially  capitalized  terms used herein  without  definition and which are
defined in the Agreement  shall have the meaning set forth for such terms in the
Agreement.

     This will serve to confirm and clarify that the term "CBA's",  as such term
is  defined  in Section  15.2 of the  Agreement,  shall,  for  purposes  of such
Section,  include  any rider,  amendment  or  addendum  which may be  negotiated
between the unions(s) and Purchaser as a condition of Purchaser entering into or
becoming a party or subject to the CBA's.

     In addition,  the second full paragraph of Section 15.1 shall be amended so
as to delete the words "Subject to Seller's Maximum Termination  Responsibility,
Purchaser  and  Seller  each  hereby  agrees  to  indemnify  the other and their
respective  affiliates against" from the beginning of the first sentence thereof
and to substitute  therefore the words "Subject to Seller's Maximum  Termination
Responsibility,  Purchaser  hereby agrees to indemnify Seller and its respective
affiliates against".

     Lastly, Seller and Purchaser have agreed to extend the date by which Seller
and  Purchaser  are to have agreed upon the terms and  conditions of the Venator
Lease  through  September  18, 1998.  Thus,  the  references to July 15, 1998 in
Sections 18.1 and 18.2 of the Agreement are hereby  replaced with  references to
September 18, 1998.

245948.02-New YorkS4A
                                        1
    62





233 Broadway Owners, LLC
September 11, 1998
Page 2

     In all other respects, the Agreement remains in full force and effect.


                                            Very truly yours,

                                            233 BROADWAY, INC.


                                            By: /s/ John H. Cannon
                                                ------------------  


Acknowledged and Agreed to:

233 BROADWAY OWNERS, LLC

By:      233 Broadway Next Generation LLC,
         its managing member


         By: /s/ James F. Stomber Jr.
             ------------------------




/s/ Steven C. Witkoff
- -----------------------------------
Steven C. Witkoff, individually and
not in any representative capacity



VENATOR GROUP, INC.


By: /s/ John H. Cannon
    -------------------------
Name: John H. Cannon
Title:

245948.02-New YorkS4A
                                        2



    63                                     

                               233 BROADWAY, INC.
                               VENATOR GROUP, INC.
                                  233 Broadway
                            New York, New York 10279



                                            October 13, 1998



233 Broadway Owners, LLC
and Steven C. Witkoff
c/o The Witkoff Group, LLC
220 East 42nd Street
New York, New York  10017

                  Re:  Woolworth Building

Ladies and Gentlemen:

     Reference  is hereby  made to that  certain  Purchase  and Sale Agree ment,
dated June 20, 1998 (as amended by those certain letter  agreements  dated as of
September 11, 1998 and September 18, 1998, the "Agreement"),  by and between 233
Broadway,   Inc.   ("Seller"),   as  seller,   and  233  Broadway  Owners,   LLC
("Purchaser"), as purchaser. All initially capitalized terms used herein without
definition shall have the meaning set forth for such terms in the Agreement.

     The  Agreement is hereby  amended to provide that the Closing Date shall be
October 15, 1998 (time being of the essence with  respect  thereto).  Thus,  the
Closing shall occur at the offices of Skadden,  Arps, Slate, Meagher & Flom LLP,
919 Third Avenue,  New York, New York or at the offices of Purchaser's  lender's
counsel, if requested by Purchaser's lender, at 10:00 a.m. local time on October
15, 1998 (time being of the essence with respect thereto).

     In all other respects, the Agreement remains in full force and effect.


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233 Broadway Owners, LLC
October 13, 1998
Page 2


     Please  signify your agreement with the foregoing by signing and dating the
enclosed  counterpart of this letter where indicated  below.  This letter may be
executed in one or more counterparts, all of which together shall constitute one
and the same original.

                                          Very truly yours,

         233 BROADWAY, INC.                          VENATOR GROUP, INC.


         By: /s/ John H. Cannon                      By: /s/ John H. Cannon
             ------------------                          ------------------


Acknowledged and Agreed:
- -----------------------


233 BROADWAY OWNERS, LLC

By:      233 Broadway Next Generation LLC,
         its managing member


         By: /s/ Steven C. Witkoff
             ---------------------



/s/ Steven C. Witkoff
- -----------------------------------
Steven C. Witkoff, individually and
not in any representative capacity

249660.02-New YorkS4A
                                        2


    65
                          
                               233 BROADWAY, INC.
                                  233 Broadway
                            New York, New York 10279

                                                            October 14, 1998

233 Broadway Owners, LLC  and Steven C. Witkoff
c/o The Witkoff Group, LLC
220 East 42nd Street
New York, New York  10017

                  Re:  Woolworth Building

Ladies and Gentlemen:

     Reference is hereby made to that certain Purchase and Sale Agreement, dated
June 20,  1998  (as  amended  by those  certain  letter  agreements  dated as of
September 11, 1998,  September 18, 1998 and October 13, 1998, the  "Agreement"),
by and  between 233  Broadway,  Inc.  ("Seller"),  as seller,  and 233  Broadway
Owners, LLC ("Purchaser"),  as purchaser.  All initially  capitalized terms used
herein without definition shall have the meaning set forth for such terms in the
Agreement.  Purchaser and Seller have agreed to make certain further  amendments
to the Agreement as and to the extent hereinafter set forth.

          1.   Seller and Purchaser hereby confirm that each has agreed upon the
               terms and conditions of, and have finalized, the Venator Lease in
               the  form  of  Exhibit  A  attached   hereto  and  Seller   shall
               concurrently herewith execute, and cause the tenant thereunder to
               execute,  such  agreed-upon  Venator  Lease  as  contemplated  by
               Section 18.1 of the Agree ment.

     2.   Section 4.1.1 of the  Agreement is hereby  deleted in its entirety and
          replaced with the following new Section 4.1.1:

          "4.1.1  The  closing of the  purchase  and sale of the  Property  (the
          "Closing")  shall be held at the  offices  of  Skadden,  Arps,  Slate,
          Meagher & Flom LLP,  919 Third  Avenue,  New York,  New York or at the
          offices of Purchaser's  lender's counsel, if requested by Pur chaser's
          lender,  at 10:00 a.m.  local time on  December 4, 1998 (time being of
          the essence with respect thereto).  The date of Closing is referred to
          in this Agreement as the "Closing Date". "
 
          Section 4.1.2 of the Agreement is hereby deleted in its entirety.

          3.   Notwithstanding  Section 3.1 of the  Agreement,  Escrow  Agent is
               hereby  authorized  and  instructed  to  immediately  release the
               Initial  Deposit,  together with all interest  earned  thereon to
               date,  to or at the  direction  of Seller  and upon such  release
               Escrow

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233 Broadway Owners, LLC and
Steven C. Witkoff
October 14, 1998
Page 2

               Agent shall be relieved and released from any liability under the
               Agreement.  Upon consummation of the Closing,  as contemplated by
               the  Agreement,  Purchaser  shall be entitled to receive a credit
               against the Purchase Price equal to $44,370.64, such amount being
               one-half (50%) of the amount of interest  earned through  October
               14, 1998 on the Initial Deposit.

          4.   The definition of the term "Purchase Price", as such defined term
               appears in Section 2.1 of the Agreement,  is hereby amended so as
               to  delete   therefrom  the  reference  to  $146,500,000  and  to
               substitute therefor a reference to $126,500,000.

          5.   Clause (ii) of Section 2.1 of the Agreement is hereby amended and
               restated in its entirety to read as follows:

          "(ii)  Five  Million  Dollars   ($5,000,000)  (the  "First  Additional
          Deposit")  shall be paid directly to or at the direction of the Seller
          by wire transfer of immediately  available  federal funds on or before
          5:00 p.m. on October 19, 1998 (the "First  Additional  Deposit Payment
          Date") (time being of the essence with respect  thereto).  Two Million
          Five Hundred  Thousand Dollars  ($2,500,000)  (the "Sec ond Additional
          Deposit")  shall be paid directly to or at the direction of the Seller
          by wire transfer of immediately  available  federal funds on or before
          5:00 p.m. on November 9, 1998 (the "Second  Additional Deposit Payment
          Date") (time being of the essence with respect thereto). Seven Million
          Five Hundred  Thousand  Dollars  ($7,500,000)  (the "Third  Additional
          Deposit")  shall be paid directly to or at the direction of the Seller
          by wire transfer of immediately  available  federal funds on or before
          5:00 p.m. on November 16, 1998 (the "Third Additional  Deposit Payment
          Date")  (time being of the essence with  respect  thereto).  The First
          Additional  Deposit,  the  Second  Additional  Deposit  and the  Third
          Additional  Deposit  are  collectively   referred  to  herein  as  the
          "Additional  Deposit",  and the  Initial  Deposit  and the  Additional
          Deposit are  collectively  referred to herein as the "Deposit." In the
          event  that  Purchaser  shall fail for any reason to so pay any of the
          First Additional Deposit or the Second Additional Deposit or the Third
          Addi tional Deposit on the First  Additional  Deposit Payment Date and
          the Second  Additional  Deposit Payment Date and the Third  Additional
          Deposit  Payment  Date,  respectively,  then  Purchaser  shall  be  in
          material  default  under  this  Agreement  and  this  Agreement  shall
          automatically  terminate  without  further  action by the  parties and
          neither party shall have any further rights or  obligations  hereunder
          other than Purchaser's  obligation to pay any remaining unpaid portion
          of the  Deposit to Seller,  which  shall  expressly  survive  any such
          termination.  Payment of the First Additional Deposit is guaranteed by
          Steven C. Witkoff (the  "Guarantor") in accordance with the provisions
          of Article XVII hereof."


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233 Broadway Owners, LLC and
Steven C. Witkoff
October 14, 1998
Page 3

     Payment of the  Additional  Deposit shall be made pursuant to Seller's wire
transfer  instructions attached hereto as Exhibit D, or such other wire transfer
instructions  as Seller may deliver to Purchaser in accordance with Section 16.1
of the Agreement.

     The  provisions  of  Article  III  of the  Agreement  with  respect  to the
maintenance, retention, and release of the Deposit by the Escrow Agent in escrow
are hereby  deleted and of no further force or effect,  except that  Purchaser's
and  Seller's  indemnification  obliga  tions in favor of the Escrow Agent shall
survive.

     From and after the  release of the  Initial  Deposit to Seller as  provided
hereby, references in the Agreement to payments of the Additional Deposit and/or
the Deposit to or by Escrow Agent shall be deemed to be  references  to payments
to or by Seller,  as the case may be.  Without  limiting the  foregoing,  Seller
agrees to deliver  and apply the  Deposit  as  provided  in  Section  3.2 of the
Agreement.
 
6.   (a)  Steven C.  Witkoff,  by his  signature  hereto,  hereby  ratifies  and
     confirms  his guaranty of the payment of the First  Additional  Deposit (as
     modified  pursuant  to  this  letter  agreement)  in  accordance  with  the
     provisions of Article XVII of the Agree ment.  Notwithstanding  anything to
     the  contrary  contained  herein or in the  Agreement,  all  references  in
     Article XVII to the  "Additional  Deposit" shall be deemed to be references
     to the First Additional Deposit.
 
     (b) Venator  Group,  Inc., by its  signature  hereto,  hereby  ratifies and
confirms its guaranty of the Seller  Obligations  (as modified  pursuant to this
letter  agree  ment) in  accordance  with the  provisions  of Article XIX of the
Agreement.

7.   Purchaser  hereby  acknowledges  its receipt and  approval of copies of the
     Estoppel  Certificates  received  by the  Seller  from each of the  Tenants
     identified  on  Exhibit  B hereto  and  acknowledges  and  agrees  that the
     Seller's  obligations  under Section 8.7 and Section 9.2.3 of the Agreement
     have been fully satisfied  (other than with respect to delivery of Estoppel
     Certificates from Seller and Seller's  Affiliates) and that Purchaser shall
     have no right to terminate the Agreement,  nor shall  Purchaser be entitled
     to a reduction  of the Purchase  Price or  otherwise  be relieved  from its
     obligations  under  the  Agreement  on  account  of any  statement  made or
     information  contained in any such Estoppel  Certificate.  Without limiting
     the  generality of the foregoing,  Purchaser  acknowl edges and agrees that
     (A)  Seller  shall  have  no  basis  to  object  to  any  of  the  Estoppel
     Certificates  on the basis that any of the same are dated more than  thirty
     (30) days  prior to the  Closing  Date  provided  for herein and (B) Seller
     shall not be  required to  provide,  and the  Closing  shall in no event be
     conditioned   upon  the  Purchaser's   receipt  of,  any  further  Estoppel
     Certificates from any Tenants or an Estoppel Certificate executed by Seller
     with

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233 Broadway Owners, LLC and
Steven C. Witkoff
October 14, 1998
Page 4

respect to Leases for any Tenants,  other than  Estoppel  Certificates  from all
affiliates of Seller  occupying  all or any portion of the Property  (including,
without limitation, an Estoppel Certificate from Venator Group Inc. with respect
to the Venator  Lease)  which  Seller will cause to be delivered to Purchaser on
the Closing Date, dated as of the Closing Date.

8.   Exhibit C to the  Agreement is hereby  deleted and replaced  with Exhibit C
     attached hereto and made a part hereof. Purchaser agrees to accept title to
     the Property subject to those matters set forth on, and in the manner shown
     on,  Exhibit C attached  hereto and any other  matters  caused,  created or
     consented to by Purchaser.

9.   Purchaser  acknowledges  its receipt of copies of (i) a complaint  filed in
     the Supreme Court of the State of New York, County of New York in an action
     entitled  Harry's  at  the  Woolworth  Building,  Inc.  vs.  Venator  Group
     Speciality,  Inc.  (f/k/a F.W.  Woolworth Co.) (Index No.  98/604764)  (the
     "Harry's  Action")  and (ii) a notice of appeal filed in the civil court of
     the  City of New  York,  County  of New  York in an  action  entitled  F.W.
     Woolworth  Co.  against  Harad  Realty Corp.  and Harry's at the  Woolworth
     Building, Inc. (Index No. L&T 81281/98) (the "Landlord- Tenant Action" and,
     collectively, with the Harry's Action, the "Harry's Litigation"). Schedules
     2 and 7 of the Agreement and Seller's representations  contained in Section
     6.1.4(ii) are each hereby amended to refer to the Harry's  Litigation,  and
     the allegations contained therein, as well as a certain offer of settlement
     made by  Harry's at the  Woolworth  Building,  Inc.  (the  "Plaintiff")  in
     connection therewith. Seller represents and warrants that together herewith
     it has delivered to Pur chaser copies of the material  court filings in the
     Harry's  Litigation  and shall  hereafter  deliver to Purchaser  any future
     court filings as well as such other information as Purchaser may reasonably
     request. Purchaser acknowledges and agrees that, at the Closing, Pur chaser
     shall take title to the Property  subject to the pendency of and any relief
     afforded to the  Plaintiff  in the Harry's  Litigation,  if any,  provided,
     however that Seller agrees that (a) it shall indemnify, defend and hold the
     Purchaser  harmless  from and against any claims or judgments  for monetary
     damages  awarded to the Plaintiff in the Harry's  Litigation and reasonable
     out-of-pocket  costs  and  expenses  related  thereto,  including,  without
     limitation,  any  abatement,  set-off  or  reductions  of the  rent  now or
     hereafter due and owing under the Plaintiff's lease for the period prior to
     the Closing Date and/or  damages,  or reasonable  out-  of-pocket  costs or
     expenses arising out of any  court-ordered  modification of such lease (and
     Seller shall continue to defend and prosecute the Harry's Action subsequent
     to  the  Closing  (if  it is  not  sooner  resolved)),  (b)  it  shall  use
     commercially  reasonable efforts prior to the Closing to cause the eviction
     of the Plaintiff from the Property pursuant to the Landlord-Tenant  Action,
     (c) it shall not modify or amend the Plaintiff's Lease or waive any default
     thereunder  without the approval of  Purchaser  and (d) it shall not settle
     the Harry's Action or the Landlord-Tenant  Action in any manner which would
     permit the Plaintiff to

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233 Broadway Owners, LLC and
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October 14, 1998
Page 5

     retain  occupancy  of its premises  subsequent  to the Closing Date without
     Purchaser's consent.  From and after the Closing Date, Purchaser shall take
     over and have all  rights  and  responsibilities  in,  and  shall  take the
     Property subject to, the Landlord-Tenant Action and matters relating to the
     Plaintiff's  possession of the Property and the Plaintiff's  Lease,  except
     with  respect to monetary  claims  under the Harry's  Action,  which Seller
     shall  continue to  prosecute  and defend (if not sooner  resolved)  as set
     forth above and monetary  judgments  under the  Landlord-Tenant  Action (to
     which Seller is and shall remain entitled to retain).  Purchaser and Seller
     each agree to reasonably  co-operate  with the other in connection with the
     Harry's Action and the  Landlord-Tenant  Action  subsequent to the Closing.
     The provisions of the Section 9 shall survive the Closing.

10.  Section  12.1 of the  Agreement  is hereby  amended to provide  that in the
     event the Closing and the  transactions  contemplated  by the Agreement (as
     amended by this letter agreement) do not occur as provided in the Agreement
     (as amended by this letter  agree ment) by reason of the default of Seller,
     Purchaser's sole remedy shall be to terminate the Agreement and receive the
     Deposit from Seller.  Without  limiting the  generality  of the  foregoing,
     Purchaser hereby irrevocably waives any right to (and agrees not to seek or
     prosecute  any action to) enforce  specific  performance  of, or seek other
     equitable  relief or actions under,  the Agreement in the event the Closing
     and the transactions  contemplated thereby do not occur as provided therein
     by reason of the default of Seller.

11.  Purchaser  agrees that it shall, on or before October 23, 1998,  deliver to
     CT  Corporation  for  filing  with  the New York  Secretary  of  State,  an
     amendment  to the  Articles of  Organization  of  Purchaser  providing  the
     following (the "Articles Amendment"):

     "Notwithstanding  anything to the contrary contained in these Articles, the
     sole  business and purpose of the Company shall be the  acquisition  of the
     property  located at 233 Broadway,  New York, New York (the "Property") and
     to exercise all powers enumerated in the LLC Law necessary or convenient to
     the conduct,  promotion or attainment of such purpose. From the date hereof
     through the date of the Company's acquisition of the Property,  the Company
     shall have an  independent  member (the "IM"),  who shall have no financial
     interest in the Company or  affiliation  (as employee,  owner or otherwise)
     with The Witkoff Group,  LLC. The IM shall be an employee of CT Corporation
     or  shall  otherwise  be  reasonably  acceptable  to  233  Broadway,   Inc.
     ("Seller"), and any individual IM may be replaced at any time, upon request
     of the Company,  by another  individual  IM employed by CT  Corporation  or
     otherwise  reasonably  acceptable to Seller. The Company may not commence a
     bankruptcy  proceeding  without the consent of the IM. The IM shall have no
     rights or interests in the Company or otherwise with respect to the Company
     or the  Property  and shall have no right to vote on any issue,  other than
     the right to grant or  withhold  its consent  pursuant  to the  immediately
     preceding  sentence.  Notwithstanding any provision hereof to the contrary,
     the following shall govern: When acting on matters

247306.08-New YorkS4A
                                        5
    70

233 Broadway Owners, LLC and
Steven C. Witkoff
October 14, 1998
Page 6

     subject to the vote of the members, notwithstanding that the Company is not
     then insol vent, all of the members shall take into account the interest of
     the Company's creditors, as well as those of the members. The terms of this
     paragraph  shall be null and void from and after the date of the  Company's
     acquisition  of the Property or on any earlier date with  Seller's  consent
     (which may be granted or  withheld  in Seller's  sole and  absolute  discre
     tion)."

Seller agrees to act reasonably and promptly in granting its written  consent to
an IM and to any replacement IM. At the Closing,  upon the request of Purchaser,
Seller shall execute any confirmation reasonably requested by Purchaser in order
to amend its  Articles to delete the Articles  Amendment.  In the event that (i)
Purchaser  fails to deliver  the  Articles  Amendment  as set forth  above on or
before  October 25,  1998;  or (ii)  Purchaser  amends its Articles to modify or
remove the Articles  Amendment prior to Closing  without  Seller's  consent;  or
(iii) Purchaser breaches the Articles Amendment,  then (x) Purchaser shall be in
material  default  under  the  Agreement  and the  Additional  Deposit  shall be
immediately  due and payable to or at the  direction  of Seller and,  when paid,
shall be  non-refundable  and (y) if such failure,  modification or breach shall
continue for two (2) business  days after notice from Seller,  then Seller shall
be entitled to terminate  the Agreement and neither party shall have any further
rights or obligations  thereunder,  other than Purchaser's obligation to pay any
remaining unpaid portion of the Deposit to Seller.

12.  The second and third grammatical  sentences of Section 8.1 of the Agreement
     are hereby deleted and replaced with the following:

     "Subsequent  to  the  Closing,   Purchaser  has  the  right,  but  not  the
     obligation,  to undertake certain repairs to the facade of the Improvements
     substantially  in accordance  with the  specifications  attached  hereto as
     Exhibit F (the "Facade Repairs").  Seller agrees that subsequent to Closing
     Purchaser may make any and all repairs it desires to the Improve ments and,
     if all or any portion of the Facade  Repairs are made by Purchaser,  Seller
     shall promptly after written request reimburse Purchaser for one-half (1/2)
     of the amounts  actually  expended by  Purchaser  in  connection  with such
     Facade  Repairs,  up to a  maximum  of  $450,000  ("Seller's  Share").  The
     provisions of the Section 8.1 shall survive the Closing."

        


247306.08-New YorkS4A
                                        6
    71

233 Broadway Owners, LLC and
Steven C. Witkoff
October 14, 1998
Page 7


13.  The second grammatical sentence of Section 4.2.6 of the Agreement is hereby
     amended to restate the  proviso at the end  thereof as follows:  "provided,
     however,  that  Seller  shall not apply any  Security  Deposits to cure any
     non-monetary  Tenant  defaults",  it being expressly agreed that Seller may
     apply any  Security  Deposits  in  accordance  with the terms of the Leases
     during the thirty  (30) days prior to the Closing to cure  monetary  Tenant
     defaults.

14.  Intentionally omitted.

15.  (a) Purchaser and Steven C. Witkoff hereby jointly and severally  represent
     and warrant to Seller that the execution,  delivery and  performance by the
     Purchaser of this  agreement and all actions  taken by Purchaser  hereunder
     have each been duly authorized,  executed and delivered by Purchaser,  that
     this agreement is the legal, valid and binding obligation of Purchaser, and
     that  neither  this  agreement  nor any of the actions  taken by  Purchaser
     hereunder violate any provision of any agreement or judicial order to which
     Purchaser  is a  party  or to  which  Purchaser  or any of its  constituent
     members is subject.  Without  limiting  the  generality  of the  foregoing,
     Purchaser  and Steven C. Witkoff each  jointly and  severally  specifically
     represent and warrant to Seller that no consent,  approval, waiver or other
     authorization which has not been obtained by Purchaser and is in full force
     and effect on the date hereof is required  to be obtained by  Purchaser  in
     connec tion with the execution, delivery and/or performance by Purchaser of
     its obligations hereunder and under the Agreement.

     (b) Seller hereby represents and warrants to Purchaser that the execu tion,
delivery and  performance  by the Seller of this agreement and all actions taken
by Seller  hereunder have each been duly  authorized,  executed and delivered by
Seller,  that this  agreement  is the legal,  valid and  binding  obligation  of
Seller,  and that neither this agree ment nor any of the actions taken by Seller
hereunder  violate any  provision of any  agreement  or judicial  order to which
Seller is a party or to which Seller is subject. Without limiting the generality
of the foregoing,  Seller  represents and warrants to Purchaser that no consent,
approval,  waiver or other  authorization  which has not been obtained by Seller
and is in full force and effect on the date hereof is required to be obtained by
Seller in connec tion with the execution,  delivery and/or performance by Seller
of its obligations hereunder and under the Agreement.

        
247306.08-New YorkS4A
                                        7
    72

233 Broadway Owners, LLC and
Steven C. Witkoff
October 14, 1998
Page 8




16.  (a)  Purchaser  hereby  confirms  that,  as of the date  hereof,  it has no
     knowledge of any defenses, personal or otherwise,  offsets or counterclaims
     to all or any of the  obligations  of the Purchaser  hereunder or under the
     Agreement  and,  to the  extent  that  any of the  same  are  known  to the
     Purchaser, Purchaser hereby waives and releases the same.

     (b) Seller hereby  confirms  that,  as of the date hereof,  it has no knowl
     edge of any defenses,  personal or otherwise,  offsets or  counterclaims to
     all or any  of  the  obligations  of the  Seller  hereunder  or  under  the
     Agreement  and, to the extent that any of the same are known to the Seller,
     Seller hereby waives and releases the same.

17.  In all other respects,  the Agreement  remains in full force and effect and
     is hereby ratified and affirmed by the parties as modified hereby.


     Please  signify your agreement with the foregoing by signing and dating the
enclosed  counterpart of this letter where indicated  below.  This letter may be
executed in one or more counterparts, all of which together shall constitute one
and the same original.

                                    Very truly yours,

                                    233 BROADWAY, INC.


                                    By: /s/ John E. DeWolf III
                                        ----------------------


FOR PURPOSES OF SECTION 6(b) HEREOF:

                                    VENATOR GROUP, INC.


                                    By: /s/ John E. DeWolf III
                                        ----------------------

Acknowledged and Agreed:
- -----------------------


233 BROADWAY OWNERS, LLC

By:      233 Broadway Next Generation LLC,
         its managing member


         By: /s/ James F. Stomber Jr.
             -------------------------


FOR PURPOSES OF SECTION 6(a) and SECTION 15(a)  HEREOF:


/s/ Steven C. Witkoff
- -----------------------------------
Steven C. Witkoff, individually and
not in any representative capacity

247306.08-New YorkS4A
                                        8
    73


                                    EXHIBIT A
                                    ---------
                              FORM OF VENATOR LEASE


                                  See Attached.


























247306.08-New YorkS4A
                                        9
    74


                                    EXHIBIT B
                         ACCEPTED ESTOPPEL CERTIFICATES

1.       Steve Golfarb and Arthur Greenberg
2.       The Southmont Foundation
3.       Tellerman, Paticoff & Greenberg
4.       Joseph Cella
5.       Mel Sachs
6.       The Bank of New York
7.       Friedland, Fisbein, Laifer & Robbins
8.       Friedland, Fisbein, Laifer & Robbins
9.       William M. Kimball
10.      Stuart Shestack, Hayes Young, Michael Wofson and John Carroll
11.      Jack Goldstein and Donald Wallman
12.      The Basket Shop
13.      BDB Development Enterprise Corp.
14.      Madison Newstand VIII, Inc.
15.      Russell Guba
16.      Schneider, Kleinick, Weitz, Damashek, Godosky & Gentile
17.      Schneider, Kleinick, Weitz, Damashek, Godosky & Gentile
18.      Staat Personnel, Inc.
19.      Paragon Process Service
20.      Robert T. Schumpert
21.      Dick Dunphy Advertising Specialties, Inc.
22.      Panken, Besterman, Winer, Becker & Sherman, LLP
23.      Basichas & Sherman, P.C.
24.      Franklin Gould, Norman Reimer & Robert Gottfried
25.      Thomas O'Rourke & Ronald Degen
26.      Fasulo, Freidson & Joyce
27.      Gargiulo & Co
28.      Engitech Resources, Inc.
29.      Revinson & Reis
30.      Sheila Dugan
31.      Superior Officers Council
32.      Lionard Drexler
33.      Mark E. Seitelman
34.      Mark E. Seitelman
35.      Isidore R. Tucker
36.      Irving Fein, Peter Jakab, Jay B. Ringel and John M. Paige
37.      Daniel McCarthy
38.      Marvin Salenger and Robert Sack
39.      Doar Devorkin & Rieck
40.      Doar Devorkin & Rieck
41.      Serving by Irving, Inc.

247306.08-New YorkS4A
                                       10
    75


42.      Eisenberg, Margolis, Friedman & Basichas
43.      Stanley Young
44.      William S. Hocking Realty
45.      Electronic Instrument Co.
46.      Fromme, Schwartz, Newman & Cornicello, LLP
47.      Hanley Goble & Dennis LLP
48.      Richard A. Deinst and Allan G. Serrins
49.      Melito & Adolfsen, P.C.
50.      Dudley Gaffin
51.      Jeffrey T. Schwartz
52.      Associated Commodity Corp.
53.      Bruce Clark
54.      Stuart Perry & David Schwarz
55.      Solomon Pearl Blum & Quinn LLP
56.      Melvyn Jacknowitz
57.      Marcel Weisman
58.      DeBlasio & Alton, P.C.
59.      Downing & Mehrtens, P.C.
60.      Seymour Ostrow
61.      Kramer, Dillof
62.      Theobald J. Dengler
63.      Iannuzzi and Iannuzzi, John Nicholas Iannuzzi
64.      Kaplan, Ostheimer & Kuflik (Lamb & Lerch)
65.      Ginsburg, Becker & Weaver, LLP



 

247306.08-New YorkS4A
                                       11
    76


                                    EXHIBIT C
                             PRO FORMA TITLE POLICY

                                 (See Attached)


























247306.08-New YorkS4A
                                       12
    77


                                    EXHIBIT D
                           WIRE TRANSFER INSTRUCTIONS


Bank:                      M&I Marshall & Ilsley Bank, Milwaukee, WI
                           Abbreviated Name: MARSHALL MILW

                           ABA: 075000051

Credit:                    The Chicago Trust Company
                           Account No. 01-24-2202

Further Credit to:         Trust Number: 385600010

                           Trust Name: 233 Broadway, Inc./CDEC

Telephone Confirmation:    Chicago Deferred Exchange Commission
                           1-312-223-2931 or
                           1-800-621-1919 ext. 2931
                           Attn: Mary Cunningham















247306.08-New YorkS4A
                                       13
    77


                                    EXHIBIT E

                              INTENTIONALLY OMITTED


















247306.08-New YorkS4A
                                       14
    78

                                    EXHIBIT F

                          FACADE REPAIR SPECIFICATIONS


                                 (See Attached)



















 

247306.08-New YorkS4A
                                       15




    79
                          
                               233 BROADWAY, INC.
                                  233 Broadway
                            New York, New York 10279




                                                        as of November 9, 1998




233 Broadway Owners, LLC and Steven C. Witkoff
c/o The Witkoff Group, LLC
220 East 42nd Street
New York, New York  10017

                  Re:  Woolworth Building
                       ------------------

Ladies and Gentlemen:

     Reference is hereby made to that certain Purchase and Sale Agreement, dated
June 20,  1998  (as  amended  by those  certain  letter  agreements  dated as of
September 11, 1998,  September 18, 1998,  October 13, 1998 and October 14, 1998,
the "Agreement"),  by and between 233 Broadway, Inc. ("Seller"),  as seller, and
233 Broadway Owners, LLC ("Purchaser"),  as purchaser. All initially capitalized
terms used herein without  definition  shall have the meaning set forth for such
terms in the Agreement. Purchaser and Seller have agreed to make certain further
amendments to the Agreement as and to the extent hereinafter set forth.

     1. Seller and Purchaser  hereby  confirm that clause (ii) of Section 2.1 of
the  Agreement  (as such  clause  appears in Section 5 of the  October  14, 1998
amendment to the  Agreement)  is hereby  amended so as to delete  therefrom  the
references to November 9, 1998 and November 16, 1998 and to substitute therefor,
in each case,  a reference to November 19,  1998.  Thus,  the Second  Additional
Deposit Payment Date and the Third Additional Payment Date shall be, and each of
the Second Additional  Deposit and the Third Additional Deposit shall be due on,
November 19, 1998 (time being of the essence with respect thereto).

     2. Purchaser  hereby  acknowledges  and agrees that the Venator Lease,  the
form of which is attached as Exhibit A to the October 14, 1998  amendment to the
Agreement, shall be amended in the following respects:


253036.04-New YorkS4A
                                        1
    80


233 Broadway Owners, LLC and
Steven C. Witkoff
as of November 9, 1998
Page 2

     (a) the  reference,  in the second  (2nd)  sentence of Section 28A, to 6:00
p.m. shall be deleted and a reference to 7:00 p.m.  substituted in lieu thereof;
and

     (b) the  third  (3rd)  sentence  of  Section  28A shall be  deleted  in its
entirety as the following substituted therefor:

     Tenant shall have the additional right,  without  additional charge (except
     as hereinafter  expressly  provided),  (i) to exclusively use not less than
     (1) of the freight elevators (such freight  elevator(s) to be designated by
     Tenant)  at any time  during  the Term on ten (10)  Business  Days  advance
     notice to Landlord  (which may be telephonic) in order to relocate from the
     1998 Office  Space,  the 1999 Office  Space,  the Retail  Space  and/or the
     Kinney Storage Space to the Office Space and shall pay for any such freight
     elevator  usage on or after July 1, 1999 at an hourly  rate equal to $75.00
     during  Overtime  Periods,  (ii) to exclusively use two (2) of the four (4)
     passenger  elevators  serving the "tower floors" of the Woolworth  Building
     during Overtime Periods in order to relocate from the 1998 Office Space and
     1999 Office Space located on such "tower floors" of the Woolworth  Building
     to the Office  Space and (iii) to up to  one-half  (1/2)  hour of  reserved
     freight  elevator  service each Business Day for the moving of fixtures and
     equipment using a freight elevator to be designated by Tenant.

3.   In all other respects,  the Agreement  remains in full force and effect and
     is hereby ratified and affirmed by the parties as modified hereby.


253036.04-New YorkS4A
                                        2
    81


233 Broadway Owners, LLC and
Steven C. Witkoff
as of November 9, 1998
Page 3

     Please  signify your agreement with the foregoing by signing and dating the
enclosed  counterpart of this letter where indicated  below.  This letter may be
executed in one or more counterparts, all of which together shall constitute one
and the same original.

                                    Very truly yours,

                                    233 BROADWAY, INC.


                                    By: /s/ Gary H. Brown
                                        -----------------


ACKNOWLEDGED AND AGREED:
- -----------------------

233 BROADWAY OWNERS, LLC

By:      233 Broadway Next Generation LLC,
         its managing member


         By: /s/ James F. Stomber Jr.
             -----------------------



/s/ Steven C. Witkoff
- ----------------------------------
Steven C. Witkoff, individually and
not in any representative capacity



VENATOR GROUP, INC.


By: /s/ Gary H. Brown
    ------------------
253036.04-New YorkS4A
                                        3



    82                          
                               233 BROADWAY, INC.
                                  233 Broadway
                            New York, New York 10279




                                                              November 19, 1998




233 Broadway Owners, LLC and Steven C. Witkoff
c/o The Witkoff Group, LLC
220 East 42nd Street
New York, New York  10017

                  Re:  Woolworth Building

Ladies and Gentlemen:

     Reference is hereby made to that certain Purchase and Sale Agreement, dated
June 20,  1998  (as  amended  by those  certain  letter  agreements  dated as of
September 11, 1998,  September 18, 1998,  October 13, 1998, October 14, 1998 and
November  9,  1998,  the  "Agreement"),   by  and  between  233  Broadway,  Inc.
("Seller"), as seller, and 233 Broadway Owners, LLC ("Purchaser"), as purchaser.
All initially  capitalized  terms used herein without  definition shall have the
meaning  set forth for such terms in the  Agreement.  Purchaser  and Seller have
agreed to reinstate the Old Agreement and make certain further amendments to the
Agreement as and to the extent hereinafter set forth.

1.   Seller and Purchaser hereby agree that,  notwithstanding the termination of
     the  Agreement on November 19, 1998 in accordance  with Section  2.1(ii) of
     the  Agreement,  the  Agreement  is  hereby  reinstated  on the  terms  and
     conditions set forth therein and herein.

2.   Seller and Purchaser  hereby confirm that clause (ii) of Section 2.1 of the
     Agreement  (as such  clause  appears in Section 5 of the  October  14, 1998
     amendment to the  Agreement and was amended in Section 1 of the November 9,
     1998  amendment  to the  Agreement)  is hereby  amended and restated in its
     entirety to read as follows:

     "(ii) Five Million Dollars  ($5,000,000) (the "First  Additional  Deposit")
     shall  be  paid  directly  to or at the  direction  of the  Seller  by wire
     transfer of immediately


    83
233 Broadway Owners, LLC and
Steven C. Witkoff
November 19, 1998
Page 2


     available  federal  funds on or before  5:00 p.m.  on October 19, 1998 (the
     "First  Additional  Deposit  Payment Date") (time being of the essence with
     respect thereto). Five Million Dollars ($5,000,000) (the "Second Additional
     Deposit")  shall be paid  directly to or at the  direction of the Seller by
     wire transfer of immedi ately available  federal funds on November 20, 1998
     (the "Second  Additional  Deposit Payment Date") (time being of the essence
     with  respect  thereto).  The  First  Additional  Deposit  and  the  Second
     Additional  Deposit are collectively  referred to herein as the "Additional
     Deposit",   and  the  Initial  Deposit  and  the  Additional   Deposit  are
     collectively  referred to herein as the "Deposit." Purchaser shall initiate
     the wire  transfer of the Second  Additional  Deposit and advise Seller and
     its counsel in writing as to reference  number  applicable  thereto  (which
     advice may be given by telecopy only) on or before 12:00 noon on the Second
     Additional Deposit Payment Date. In the event that Purchaser shall fail for
     any  reason to so pay any of the First  Additional  Deposit  or the  Second
     Additional  Deposit on the First  Additional  Deposit  Payment Date and the
     Second Additional  Deposit Pay ment Date,  respectively,  and to advise the
     Seller as to the  reference  number  applicable  to the  Second  Additional
     Deposit,  then Purchaser shall be in material  default under this Agreement
     and this Agreement shall automatically  terminate without further action by
     the parties and neither party shall have any further  rights or obligations
     hereunder  other than  Purchaser's  obligation to pay any remaining  unpaid
     portion of the Deposit to Seller,  which shall  expressly  survive any such
     termination.  Payment  of the First  Additional  Deposit is  guaranteed  by
     Steven C. Witkoff (the  "Guarantor")  in accordance  with the provisions of
     Article XVII hereof."

3.   Purchaser hereby confirms that, as of the date hereof,  it has no knowledge
     of any defenses, personal or otherwise,  offsets or counterclaims to all or
     any of the  obligations  of the Purchaser  hereunder or under the Agreement
     and,  to the  extent  that  any of the same  are  known  to the  Purchaser,
     Purchaser hereby waives and releases the same.

4.   Purchaser and Seller each hereby confirm that the Agreement,  as reinstated
     and  amended by this  letter  agreement,  constitutes  the entire and final
     agreement  between the parties with respect to the subject  matter  thereof
     and hereof and that there are no other  agreements,  written or oral,  with
     respect  thereto or  hereto.  This  letter  agreement  may not be  changed,
     terminated  or otherwise  varied,  except by a writing duly executed by the
     parties hereto.

5.   In all other respects,  the Agreement  remains in full force and effect and
     is hereby  reinstated,  ratified  and  affirmed  by the parties as modified
     hereby.


254271.02-New YorkS4A
                                        2
    84

233 Broadway Owners, LLC and
Steven C. Witkoff
November 19, 1998
Page 3

     Please  signify your agreement with the foregoing by signing and dating the
enclosed  counterpart of this letter where indicated  below.  This letter may be
executed in one or more counterparts, all of which together shall constitute one
and the same original.

                                    Very truly yours,

                                    233 BROADWAY, INC.


                                    By: /s/ John H. Cannon
                                        -------------------

ACKNOWLEDGED AND AGREED:
- -----------------------

233 BROADWAY OWNERS, LLC

By:      233 Broadway Next Generation LLC,
         its managing member


         By: /s/ James F. Stomber Jr.
             ----------------------------  


/s/ Steven c. Witkoff
- -----------------------------------
Steven C. Witkoff, individually and
not in any representative capacity



VENATOR GROUP, INC.


By: /s/ John H. Cannon
    -------------------


254271.02-New YorkS4A
                                        3


    1

                                                                      

                              

                                                                      EXHIBIT 15

                           Accountants' Acknowledgment
                           ---------------------------



Venator Group, Inc.
New York, New York

Board of Directors:

Re:  Registration  Statements Numbers 33-10783,  33-91888,  33-91886,  33-97832,
     333- 07215,  333-21131 and  333-62425 on Form S-8 and Numbers  33-43334 and
     33-86300 on Form S-3

With  respect  to  the  subject  registration  statements,  we  acknowledge  our
awareness  of the use therein of our report  dated  November 19, 1998 related to
our review of interim financial information.

Pursuant to Rule 436(c)  under the  Securities  Act of 1933,  such report is not
considered  a part of a  registration  statement  prepared  or  certified  by an
accountant or a report prepared or certified by an accountant within the meaning
of Sections 7 and 11 of the Act.




/s/ KPMG Peat Marwick LLP
New York, New York
December 14, 1998

 



5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED October 31, 1998 AND THE CONSOLIDATED BALANCE SHEET AS OF October 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000,000 9-MOS JAN-30-1999 FEB-1-1998 OCT-31-1998 147 0 0 0 1,112 1,615 0 0 3,145 1,260 508 0 0 0 1,002 3,145 3,223 3,223 2,324 2,324 89 0 35 (52) (26) (26) (147) 0 0 (173) (1.27) (1.27)
 


5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED October 25, 1997 AND THE CONSOLIDATED BALANCE SHEET AS OF October 25, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000,000 9-MOS JAN-31-1998 JAN-26-1997 OCT-25-1997 17 0 0 0 886 1,649 0 0 2,815 652 510 0 0 0 1,154 2,815 3,198 3,198 2,167 2,167 90 0 25 172 65 107 (232) 0 0 (125) (0.93) (0.92)


    1
                                                                           
                                                                      EXHIBIT 99



                     Independent Accountants' Review Report
                     --------------------------------------


The Board of Directors and Shareholders
Venator Group, Inc.:


We have  reviewed the  accompanying  condensed  consolidated  balance  sheets of
Venator Group,  Inc.  (formerly  Woolworth  Corporation)  and subsidiaries as of
October 31, 1998 and October 25, 1997,  and the related  condensed  consolidated
statements of operations,  comprehensive income (loss),  retained earnings,  and
cash flows for the thirteen and thirty-nine  week periods ended October 31, 1998
and October 25, 1997. These condensed  consolidated financial statements are the
responsibility of Venator Group Inc.'s management.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information consists principally of applying analytical  procedures to financial
data and making  inquiries of persons  responsible  for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with  generally  accepted  auditing  standards,  the  objective  of which is the
expression of an opinion  regarding the financial  statements  taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.

We have  previously  audited,  in accordance  with generally  accepted  auditing
standards,   the  consolidated   balance  sheet  of  Venator  Group,   Inc.  and
subsidiaries as of January 31, 1998, and the related consolidated  statements of
operations,  changes in shareholders'  equity,  and cash flows for the year then
ended  (not  presented  herein);  and in our report  dated  March 11,  1998,  we
expressed an unqualified opinion on those consolidated financial statements.  In
our  opinion,   the  information  set  forth  in  the   accompanying   condensed
consolidated  balance  sheet as of January 31, 1998,  is fairly  stated,  in all
material respects,  in relation to the consolidated  balance sheet from which it
has been derived.
 


/s/ KPMG Peat Marwick LLP
New York, New York
November 19, 1998