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

                           LOAN AND SECURITY AGREEMENT


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

                            FLEET RETAIL FINANCE INC.
                                    AGENT FOR
                          THE LENDERS REFERENCED HEREIN
                       -----------------------------------

                             HELLER FINANCIAL, INC.
                        CO-AGENT AND DOCUMENTATION AGENT


                                 PHAR-MOR, INC.
                                THE LEAD BORROWER
        ----------------------------------------------------------------
                                 PHAR-MOR, INC.
                               PHAR-MOR, INC. LLC
                           PHAR-MOR OF DELAWARE, INC.
                            PHAR-MOR OF FLORIDA, INC.
                             PHAR-MOR OF OHIO, INC.
                           PHAR-MOR OF VIRGINIA, INC.
                           PHAR-MOR OF WISCONSIN, INC.
                                PHARMHOUSE CORP.
                                 RX REALTY CORP.


                                  THE BORROWERS
        ----------------------------------------------------------------

                              Fleet Securities Inc.
                              THE SYNDICATION AGENT
        ----------------------------------------------------------------



                               September 24, 2001
================================================================================



<PAGE>


                                TABLE OF CONTENTS


Article 1:- DEFINITIONS:.......................................................1


Article 2:- THE REVOLVING CREDIT:.............................................26

        21- ESTABLISHMENT OF REVOLVING CREDIT.................................26

        22- INITIAL RESERVES. CHANGES TO RESERVES.............................27

        23- ADVANCES IN EXCESS OF BORROWING BASE (OVERLOANS)..................27

        24- RISKS OF VALUE OF COLLATERAL......................................28

        25- COMMITMENT TO MAKE REVOLVING CREDIT LOANS AND SUPPORT
                LETTERS OF CREDIT.............................................28

        26- REVOLVING CREDIT LOAN REQUESTS....................................28

        27- MAKING OF REVOLVING CREDIT LOANS..................................29

        28- SWINGLINE LOANS...................................................30

        29- THE LOAN ACCOUNT..................................................30

        210- THE REVOLVING CREDIT NOTES.......................................31

        211- PAYMENT OF THE LOAN ACCOUNT......................................32

        212- INTEREST ON REVOLVING CREDIT LOANS...............................33

        213- REVOLVING CREDIT COMMITMENT FEE..................................33

        214- AGENT'S FEE......................................................33

        215- UNUSED LINE FEE..................................................34

        216- EARLY TERMINATION FEE............................................34

        217- CONCERNING FEES..................................................34

        218- AGENT'S AND REVOLVING CREDIT LENDERS' DISCRETION.................34

        219- PROCEDURES FOR ISSUANCE OF L/C'S.................................35

        220- FEES FOR L/C'S...................................................36

        221- CONCERNING L/C'S.................................................37

        222- CHANGED CIRCUMSTANCES............................................38

        223- DESIGNATION OF LEAD BORROWER AS BORROWERS' AGENT.................39

        224- LENDERS' COMMITMENTS.............................................40

        225- REDUCTION OF REVOLVING CREDIT CEILING............................41

<PAGE>

Article 3:- CONDITIONS PRECEDENT:.............................................41

        31- CORPORATE DUE DILIGENCE...........................................41

        32- OPINION...........................................................41

        33- ADDITIONAL DOCUMENTS..............................................41

        34- BORROWING ORDER...................................................41

        35- REPRESENTATIONS AND WARRANTIES....................................42

        36- CONSENTS AND APPROVALS............................................42

        37- NO DEFAULTS UNDER APPLICABLE LAW OR MATERIAL AGREEMENTS...........42

        38- NO LITIGATION.....................................................42

        39- ALL FEES AND EXPENSES PAID........................................42

        310- NO MATERIAL ADVERSE CHANGE.......................................42

        311- MINIMUM DAY ONE EXCESS AVAILABILITY..............................42

        312- BORROWER NOT IN DEFAULT..........................................42

        313- PROJECTIONS......................................................42

        314- OTHER INFORMATION................................................43

        315- GOVERNMENT REGULATIONS...........................................43

        316- BENEFIT OF CONDITIONS PRECEDENT..................................43


Article 4:- GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:................43

        41- PAYMENT AND PERFORMANCE OF LIABILITIES............................43

        42- DUE ORGANIZATION. AUTHORIZATION. NO CONFLICTS.....................43

        43- TRADE NAMES.......................................................44

        44- INFRASTRUCTURE....................................................45

        45- LOCATIONS.........................................................45

        46- TITLE TO ASSETS...................................................46

        47- INDEBTEDNESS......................................................46

        48- INSURANCE.........................................................47

        49- LICENSES..........................................................47

        410- LEASES...........................................................48

        411- REQUIREMENTS OF LAW..............................................48

        412- LABOR RELATIONS..................................................48


<PAGE>

        413- MAINTAIN PROPERTIES..............................................49

        414- TAXES............................................................49

        415- NO MARGIN STOCK..................................................50

        416- ERISA............................................................50

        417- HAZARDOUS MATERIALS..............................................51

        418- LITIGATION.......................................................51

        419- DIVIDENDS. INVESTMENTS. CORPORATE ACTION.........................51

        420- NEW BORROWERS....................................................52

        421- LOANS............................................................53

        422- PROTECTION OF ASSETS.............................................53

        423- LINE OF BUSINESS.................................................54

        424- AFFILIATE TRANSACTIONS...........................................54

        425- FURTHER ASSURANCES...............................................54

        426- ADEQUACY OF DISCLOSURE...........................................55

        427- NO RESTRICTIONS ON LIABILITIES...................................55

        428- OTHER COVENANTS..................................................55


Article 5:- FINANCIAL REPORTING AND PERFORMANCE COVENANTS:....................55

        51- MAINTAIN RECORDS..................................................55

        52- ACCESS TO RECORDS.................................................56

        53- IMMEDIATE NOTICE TO AGENT.........................................57

        54- Borrowing Base Certificate........................................58

        55- MONTHLY REPORTS...................................................58

        56- QUARTERLY REPORTS.................................................58

        57- ANNUAL REPORTS....................................................58

        58- OFFICERS' CERTIFICATES............................................59

        59- INVENTORIES, APPRAISALS, AND AUDITS...............................60

        510- ADDITIONAL FINANCIAL INFORMATION.................................60

        511- MINIMUM EXCESS AVAILABILITY......................................61


Article 6:- USE OF COLLATERAL:................................................62

        61- USE OF INVENTORY COLLATERAL.......................................62


<PAGE>

        62- INVENTORY QUALITY.................................................62

        63- ADJUSTMENTS AND ALLOWANCES........................................62

        64- VALIDITY OF ACCOUNTS..............................................62

        65- NOTIFICATION TO ACCOUNT DEBTORS...................................63


Article 7:- CASH MANAGEMENT. PAYMENT OF LIABILITIES:..........................63

        71- DEPOSITORY ACCOUNTS...............................................63

        72- CREDIT CARD RECEIPTS..............................................63

        73- THE CONCENTRATION, BLOCKED, AND OPERATING ACCOUNTS................64

        74- PROCEEDS AND COLLECTIONS..........................................64

        75- PAYMENT OF LIABILITIES............................................65

        76- THE OPERATING ACCOUNT.............................................66


Article 8:- GRANT OF SECURITY INTEREST:.......................................66

        81- GRANT OF SECURITY INTEREST........................................66

        82- EXTENT AND DURATION OF SECURITY INTEREST..........................67


Article 9:- AGENT AS BORROWER'S ATTORNEY-IN-FACT:.............................67

        91- APPOINTMENT AS ATTORNEY-IN-FACT...................................67

        92- NO OBLIGATION TO ACT..............................................68


Article 10:- EVENTS OF DEFAULT:...............................................68

        101- FAILURE TO PAY THE REVOLVING CREDIT..............................68

        102- FAILURE TO MAKE OTHER PAYMENTS...................................68

        103- FAILURE TO PERFORM COVENANT OR LIABILITY (NO GRACE PERIOD).......68

        104- Financial Reporting Requirements.................................68

        105- FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD)..........69

        106- MISREPRESENTATION................................................69

        107- ACCELERATION OF OTHER DEBT. BREACH OF LEASE......................69

        108- DEFAULT UNDER OTHER AGREEMENTS...................................69

        109- UNINSURED CASUALTY LOSS..........................................69

        1010- ATTACHMENT. JUDGMENT. RESTRAINT OF BUSINESS.....................69


<PAGE>

        1011- MODIFICATION OF BORROWING ORDER.................................70

        1012- APPOINTMENT OF TRUSTEE OR EXAMINER..............................70

        1013- CONVERSION OF PROCEEDINGS.......................................70

        1014- RELIEF FROM STAY................................................70

        1015- DEFAULT BY GUARANTOR............................................70

        1016- INDICTMENT - FORFEITURE.........................................70

        1017- TERMINATION OF GUARANTY.........................................70

        1018- CHALLENGE TO LOAN DOCUMENTS.....................................71

        1019- CHANGE IN CONTROL...............................................71


Article 11:- RIGHTS AND REMEDIES UPON DEFAULT:................................71

        111- Acceleration.....................................................71

        112- RIGHTS OF ENFORCEMENT............................................71

        113- SALE OF COLLATERAL...............................................72

        114- OCCUPATION OF BUSINESS LOCATION..................................72

        115- GRANT OF NONEXCLUSIVE LICENSE....................................73

        116- ASSEMBLY OF COLLATERAL...........................................73

        117- RIGHTS AND REMEDIES..............................................73


Article 12:- REVOLVING CREDIT FUNDINGS AND DISTRIBUTIONS:.....................73

        121- REVOLVING CREDIT FUNDING PROCEDURES..............................73

        122- SWINGLINE LOANS..................................................74

        123- AGENT'S COVERING OF FUNDINGS:....................................74

        124- ORDINARY COURSE DISTRIBUTIONS....................................76


Article 13:- ACCELERATION AND LIQUIDATION:....................................77

        131- ACCELERATION NOTICES.............................................77

        132- ACCELERATION.....................................................77

        133- INITIATION OF LIQUIDATION........................................77

        134- ACTIONS AT AND FOLLOWING INITIATION OF LIQUIDATION...............78

        135- AGENT'S CONDUCT OF LIQUIDATION...................................78


<PAGE>

        136- DISTRIBUTION OF LIQUIDATION PROCEEDS:............................78

        137- RELATIVE PRIORITIES TO PROCEEDS OF LIQUIDATION...................79


Article 14:- THE AGENT:.......................................................79

        141- APPOINTMENT OF THE AGENT.........................................79

        142- RESPONSIBILITIES OF AGENT........................................80

        143- CONCERNING DISTRIBUTIONS BY THE AGENT............................81

        144- DISPUTE RESOLUTION:..............................................81

        145- DISTRIBUTIONS OF NOTICES AND OF DOCUMENTS........................82

        146- CONFIDENTIAL INFORMATION.........................................82

        147- RELIANCE BY AGENT................................................82

        148- NON-RELIANCE ON AGENT AND OTHER REVOLVING CREDIT LENDERS.........83

        149- INDEMNIFICATION..................................................83

        1410- RESIGNATION OF AGENT............................................84


Article 15:- ACTION BY AGENTS - CONSENTS - AMENDMENTS - WAIVERS:..............84

        151- ADMINISTRATION OF CREDIT FACILITIES..............................84

        152- ACTIONS REQUIRING OR ON DIRECTION OF MAJORITY LENDERS............85

        153- ACTIONS REQUIRING OR ON DIRECTION OF SUPERMAJORITY LENDERS.......85

        154- ACTION REQUIRING CERTAIN CONSENT.................................86

        155- ACTIONS REQUIRING OR DIRECTED BY UNANIMOUS CONSENT...............86

        156- ACTIONS REQUIRING SWINGLINE LENDER CONSENT.......................87

        157- ACTIONS REQUIRING AGENT'S CONSENT................................87

        158- MISCELLANEOUS ACTIONS............................................87

        159- ACTIONS REQUIRING BORROWER'S CONSENT.............................88

        1510- NONCONSENTING REVOLVING CREDIT LENDER...........................88


Article 16:- ASSIGNMENTS BY REVOLVING CREDIT LENDERS:.........................89

        161- ASSIGNMENTS AND ASSUMPTIONS......................................89

        162- ASSIGNMENT PROCEDURES............................................90


<PAGE>

        163- EFFECT OF ASSIGNMENT.............................................90


Article 17:- NOTICES:.........................................................91

        171- NOTICE ADDRESSES.................................................91

        172- NOTICE GIVEN.....................................................92


Article 18:- TERM:............................................................92

        181- TERMINATION OF REVOLVING CREDIT..................................92

        182- ACTIONS ON TERMINATION...........................................92


Article 19:- GENERAL:.........................................................93

        191- PROTECTION OF COLLATERAL.........................................93

        192- PUBLICITY........................................................93

        193- SUCCESSORS AND ASSIGNS...........................................93

        194- SEVERABILITY.....................................................93

        195- AMENDMENTS. COURSE OF DEALING....................................93

        196- POWER OF ATTORNEY................................................94

        197- APPLICATION OF PROCEEDS..........................................94

        198- INCREASED COSTS..................................................94

        199- COSTS AND EXPENSES OF THE AGENT..................................95

        1910- COPIES AND FACSIMILES...........................................95

        1911- MASSACHUSETTS LAW...............................................96

        1912- INDEMNIFICATION.................................................96

        1913- RULES OF CONSTRUCTION...........................................96

        1914- INTENT..........................................................98

        1915- PARTICIPATIONS:.................................................98

        1916- RIGHT OF SET-OFF................................................98

        1917- PLEDGES TO FEDERAL RESERVE BANKS:...............................98

        1918- MAXIMUM INTEREST RATE...........................................99

        1919- EXECUTION IN COUNTERPARTS.......................................99

        1920- WAIVERS.........................................................99



<PAGE>



                                    EXHIBITS

        2:2-8(c)         :       SwingLine Note
        2:2-10           :       Revolving Credit Note
        2:2-24           :       Revolving Credit Lenders' Commitments
        3:3-2            :       Form of Opinion
        3:3-14           :       Additional Documents
        4:4-2            :       Corporate Information
        4:4-3            :       Trade Names
        4:4-5            :       Locations, Leases, and Landlords
        4:4-6            :       Encumbrances
        4:4-6(c)(ii)     :       Equipment Usage Agreement
        4:4-7            :       Indebtedness
        4:4-8            :       Insurance Policies
        4:4-10           :       Capital Leases
        4:4-12           :       Labor Relations
        4:4-14           :       Taxes
        4:4-16(a)        :       ERISA
        4:4-17(a)        :       Hazardous Materials
        4:4-18           :       Litigation
        5:5-4            :       Borrowing Base Certificate
        5:5-5            :       Monthly Reports
        7:7-1(a)         :       DDA's.
        7:7-1(b)(ii)     :       Blocked Account Agreement
        7:7-2            :       Credit Card Arrangements
        16:16-2          :       Assignment and Acceptance



<PAGE>1

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

LOAN AND SECURITY AGREEMENT

================================================================================
                                                              September 24, 2001


THIS AGREEMENT is made between

          Fleet Retail  Finance Inc. (in such capacity,  herein the "Agent"),  a
     Delaware corporation with offices at 40 Broad Street, Boston, Massachusetts
     02109, as agent for the ratable benefit of the "Revolving  Credit Lenders",
     who  are,  at  present,  those  financial  institutions  identified  on the
     signature  pages of this  Agreement and who in the future are those Persons
     (if any) who become  "Revolving  Credit  Lenders"  in  accordance  with the
     provisions of Section 2:2-24, below;

          and

          The Revolving Credit Lenders;

          and

          Phar-Mor,  Inc.,  debtor-in-possession,  in such capacity, ( the "Lead
     Borrower"), a Pennsylvania corporation with its principal executive offices
     at 20  Federal  Plaza  West,  Youngstown,  Ohio  44503,  as  agent  for the
     following (individually, a "Borrower" and collectively, the "Borrowers"):

               Phar-Mor, Inc., a Pennsylvania corporation, debtor-in-possession,
          Phar-Mor   of   Florida,    Inc.,    a    Pennsylvania    corporation,
          debtor-in-possession,  Phar-Mor of Ohio,  Inc.,  an Ohio  corporation,
          debtor-in-possession,   Phar-Mor  of   Virginia,   Inc.,   a  Virginia
          corporation,  debtor-in-possession,  Phar-Mor of  Wisconsin,  Inc.,  a
          Wisconsin  corporation,  debtor-in-possession,  Phar-Mor of  Delaware,
          Inc., a Delaware  corporation,  debtor-in-possession,  Phar-Mor,  Inc.
          LLC, a Pennsylvania  limited liability company,  debtor-in-possession,
          Pharmhouse Corp., a New York corporation, debtor-in-possession, and RX
          Realty  Corp.,  a  New  York  corporation,   debtor-in-possession,

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


                                   WITNESSETH:

Article 1: - DEFINITIONS:

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


               "Acceleration":  The  making of demand  or  declaration  that any
                    indebtedness,  not  otherwise  due and  payable,  is due and
                    payable.  Derivations  of the word  "Acceleration"  (such as
                    "Accelerate") are used with like meaning in this Agreement.
<PAGE>2


               "Acceleration  Notice":  Written notice as follows:
                         (a) From the Agent to the Revolving Credit Lenders,  as
                    provided in 13:13-1(a).
                         (b) From the  SuperMajority  Lenders to the  Agent,  as
                    provided in Section 13:13-1(b).


               "Account Debtor": Has the meaning given that term in the UCC.


               "Accounts" and "Accounts Receivable" include, without limitation,
                    "accounts"  as defined in the UCC,  and also all:  accounts,
                    accounts  receivable,  receivables,  and  rights to  payment
                    (whether or not earned by  performance)  for:  property that
                    has been or is to be sold, leased,  licensed,  assigned,  or
                    otherwise  disposed of; services rendered or to be rendered;
                    a policy of  insurance  issued or to be issued;  a secondary
                    obligation  incurred or to be  incurred;  arising out of the
                    use of a credit or charge card or  information  contained on
                    or used with that card;  and also all  Inventory  which gave
                    rise thereto, and all rights associated with such Inventory,
                    including the right of stoppage in transit;  all  reclaimed,
                    returned,  rejected or  repossessed  Inventory  (if any) the
                    sale of which gave rise to any Account.


               "ACH": Automated clearing house.


               "Affiliate": The following:
                         (a) With respect to any two Persons,  a relationship in
                    which (i) one holds,  directly or indirectly,  not less than
                    twenty five percent (25%) of the capital  stock,  beneficial
                    interests,  partnership interests, or other equity interests
                    of the other; or (ii) one has,  directly or indirectly,  the
                    right,  under  ordinary  circumstances,   to  vote  for  the
                    election  of a majority of the  directors  (or other body or
                    Person who has those powers customarily vested in a board of
                    directors of a  corporation);  or (iii) not less than twenty
                    five percent (25%) of their respective ownership is directly
                    or indirectly held by the same third Person.
                         (b) Any  Person  which:  is a  parent,  brother-sister,
                    subsidiary,  of a Borrower; could have such enterprise's tax
                    returns  or  financial  statements  consolidated  with  that
                    Borrower's;  could be a member of the same controlled  group
                    of corporations  (within the meaning of Section  1563(a)(1),
                    (2) and (3) of the Internal Revenue Code of 1986, as amended
                    from time to time) of which  any  Borrower  is a member;  or
                    controls or is controlled by any Borrower.


               "Agent": Is referred to in the Preamble.


               "Agent's Cover": Defined in Section 12:12-3(c)(i).
<PAGE>3


               "Agent's Fee": Is defined in Section 2:2-14.


               "Agent's Rights and Remedies": Is defined in Section 11:11-7.


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


               "Applicable Margin": The Base Margin Loans,  Eurodollar Loans and
                    L/C Fees  determined as of the date of this Agreement  based
                    upon the following criteria:

              |----|------------|-----------|----------|-----------|-----------|
              |Tier|Availability|Base Margin|Eurodollar|Documentary|Standby L/C|
              |    |            |Applicable |Applicable|L/C Fees   |Fees       |
              |    |            |Margin     |Margin    |           |           |
              |----|------------|-----------|----------|-----------|-----------|
              |1   |In excess of|     0%    |   2.25%  |   1.75%   |   2.25%   |
              |    |$50,000,000 |           |          |           |           |
              |----|------------|-----------|----------|-----------|-----------|
              |2   |In excess of|    .25%   |   2.50%  |   2.00%   |   2.50%   |
              |    |$20,000,000 |           |          |           |           |
              |    |but less    |           |          |           |           |
              |    |than or     |           |          |           |           |
              |    |equal to    |           |          |           |           |
              |    |$50,000,000 |           |          |           |           |
              |----|------------|-----------|----------|-----------|-----------|
              |3   |Less than or|    .50%   |   2.75%  |   2.25%   |   2.75%   |
              |    |equal to    |           |          |           |           |
              |    |$20,000,000 |           |          |           |           |
              |----|------------|-----------|----------|-----------|-----------|


                  The initial Applicable Margin and L/C Fees shall be at Tier 2,
                  above. The Applicable Margin and L/C Fees shall be adjusted
                  quarterly as of the first day of each calendar quarter based
                  upon the average Availability for the immediately preceding
                  quarter, as shown on the Borrowing Base Certificates for such
                  quarter. Upon the occurrence of an Event of Default, interest
                  shall accrue at the rate set forth in Section 2:2-11(f), and
                  L/C Fees shall accrue at 200 basis points in excess of the L/C
                  Fees set forth at Level 3, above.


               "Assigning   Revolving   Credit   Lender":   Defined  in  Section
                    16:16-1(a).
<PAGE>4


               "Assignment and Acceptance": Defined in Section 16:16-2.


               "Availability": The lesser of (a) or (b), where:
                               (a)is the result of
                                        (i)       The Revolving Credit Ceiling

                                                  Minus

                                        (ii)      The aggregate unpaid balance
                                                  of the Loan Account

                                                  Minus

                                        (iii)     The aggregate undrawn Stated
                                                  Amount of all then outstanding
                                                  L/C's.

                                                  Minus

                                        (vi)      The Carve Out.

                                                  Minus

                                        (vii)     The amounts then outstanding,
                                                  if any, under the Pre-Petition
                                                  Agreement.


                               (b) is the result of

                                        (i)       The Borrowing Base

                                                  Minus

                                        (ii)      The aggregate unpaid balance
                                                  of the Loan Account

                                                  Minus

                                        (iv)      The aggregate undrawn Stated
                                                  Amount of all then outstanding
                                                  L/C's.

                                                  Minus

                                        (v)       The aggregate of the
                                                  Availability Reserves

                                                  Minus

                                        (vi)      The Carve Out.

                                                  Minus

                                        (vii)     The amounts then outstanding,
                                                  if any, under the Pre-Petition
                                                  Agreement.
<PAGE>5


               "Availability Reserves":  Such reserves as the Agent from time to
                    time   determines   in  the  Agent's   discretion  as  being
                    appropriate  to  reflect  the  impediments  to  the  Agent's
                    ability to realize upon the Collateral.


               "Bankruptcy  Code":  Title 11,  U.S.C.,  as amended  from time to
                    time.


               "Bankruptcy  Recoveries":  Any claim or recovery  realized by any
                    Borrower or which any  Borrower may be entitled to assert by
                    reason  of any  avoidance  or other  power  vested  in or on
                    behalf of any Borrower or the estate of any  Borrower  under
                    the Bankruptcy Code, including,  without limitation,  claims
                    and recoveries  based upon powers  provided for in Chapter 5
                    thereof.


               "Base": The higher of (i) the annual rate of  interest  announced
                    from time to time by Fleet  National Bank at its head office
                    in  Boston,  Massachusetts,  as its  "Prime  Rate"  or  (ii)
                    one-half  of one  percent  (.50%)  above the  Federal  Funds
                    Effective Rate.  Federal Funds Effective Rate shall mean for
                    any day, the rate per annum equal to the weighted average of
                    the  rates on  overnight  federal  funds  transactions  with
                    members of the Federal  Reserve  System  arranged by federal
                    funds brokers, as published for such day (or, if such day is
                    not a Business Day, for the next preceding  Business Day) by
                    the Federal  Reserve  Bank of New York,  or, if such rate is
                    not  published  for any  day  that is a  Business  Day,  the
                    average of the quotations for such day on such  transactions
                    received by Fleet  National Bank from three funds brokers of
                    recognized  standing  selected by Fleet  National  Bank. Any
                    change in "Base"  shall be  effective,  for  purposes of the
                    calculation of interest due  hereunder,  when such change is
                    made effective  generally by the bank on whose rate or index
                    "Base" is being set.


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


               "Base Margin Rate":  The  aggregate  of Base plus the  Applicable
                    Margin per annum.


               "Blocked  Account":  Any DDA into which the contents of any other
                    DDA is transferred.


               "Blocked Account  Agreement":  An Agreement  substantially in the
                    form of EXHIBIT 7:7-1(b)(ii).


               "Borrower" and "Borrowers": Is defined in the Preamble.
<PAGE>6


               "Borrowing Base": The aggregate of the following:

                         The  face  amount  of  Eligible   Receivables  (net  of
                    Receivables  Reserves) multiplied by the Receivables Advance
                    Rate.

                                    Plus

                         The lesser of (a) the Cost of Eligible  Inventory  (net
                    of Inventory  Reserves)  multiplied by the Inventory Advance
                    Rate  or (b)  eighty-five  percent  (85%)  of the  appraised
                    liquidation  value of  Eligible  Inventory  (expressed  as a
                    percentage  of the  Cost of  appraised  Eligible  Inventory)
                    (provided  that  the  appraised  liquidation  value  of  the
                    Borrowers'  prescription  list shall in no event exceed nine
                    percent (9%) of the appraised  liquidation value of Eligible
                    Inventory, as determined in accordance with Section 5:5-9).


               "Borrowing Base Certificate": Is defined in Section 5:5-4.


               "Borrowing Order":  An order entered by the  Bankruptcy  Court in
                    the Proceedings in substantially  the form annexed hereto as
                    EXHIBIT  1-2 (or such  other  form as is  acceptable  to the
                    Agent in its  reasonable  discretion),  which shall not have
                    been stayed, modified in an adverse manner, as determined by
                    the Agent in its reasonable discretion,  or appealed (if the
                    Agent  determines  in  its  reasonable   discretion,   after
                    designation of the issues on appeal,  that such appeal could
                    reasonably affect the value of the Collateral or the Agent's
                    or Lenders' ability to realize upon the Collateral).


               "Business Day": Any day other than (a) a Saturday or Sunday;  (b)
                    any  day on  which  banks  in  Boston,  Massachusetts  or in
                    Youngstown,  Ohio,  generally  are not  open to the  general
                    public for the  purpose  of  conducting  commercial  banking
                    business;  or (c) a day on which the principal office of the
                    Agent or  Fleet  National  Bank is not  open to the  general
                    public to conduct business.


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


               "Capital Lease": Any lease which may be capitalized in accordance
                    with GAAP.


               "Carve Out": $1,000,000.00, subject to the terms of the Borrowing
                    Order.

<PAGE>7

               "Change in Control": The occurrence of any of the following:

                         (a) The  acquisition,  by any group of persons  (within
                    the  meaning  of the  Securities  Exchange  Act of 1934,  as
                    amended) or by any Person,  of beneficial  ownership (within
                    the  meaning of Rule 13d-3 of the  Securities  and  Exchange
                    Commission)  of 20% or more of the  issued  and  outstanding
                    capital stock of the Lead Borrower  having the right,  under
                    ordinary   circumstances,   to  vote  for  the  election  of
                    directors of the Lead Borrower (excluding any acquisition of
                    stock by Avatex Corporation).
                         (b) More than half of the persons who were directors of
                    the Lead Borrower on the first day of any period  consisting
                    of twelve  (12)  consecutive  calendar  months (the first of
                    which twelve (12) month  periods  commencing  with the first
                    day of the month during which this  Agreement was executed),
                    cease,  for any reason  other  than  death,  disability,  or
                    replacement   by   other   Persons   nominated   by   Avatex
                    Corporation,  a Delaware  corporation to be directors of the
                    Lead Borrower.
                         (c)  Any   failure  of  the  Lead   Borrower   to  own,
                    beneficially and of record, 100% of the capital stock of all
                    other  Borrowers,  either  directly or through  ownership of
                    100% of the capital stock of any entity which owns the stock
                    of any other Borrower.


               "Chattel Paper": Has the meaning given that term in the UCC.


               "Collateral": Is defined in Section 8:8-1.


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


               "Concentration Account": Is defined in Section 7:7-3.


               "Consent":  Actual  consent given by the Revolving  Credit Lender
                    from whom such  consent is sought;  or the  passage of seven
                    (7)  Business  Days  from  receipt  of  written  notice to a
                    Revolving  Credit Lender from the Agent of a proposed course
                    of action to be followed by the Agent without such Revolving
                    Credit  Lender's  giving  the Agent  written  notice of that
                    Revolving  Credit  Lender's  objection  to  such  course  of
                    action,  provided that the Agent may rely on such passage of
                    time as consent by a  Revolving  Credit  Lender only if such
                    written notice states that consent will be deemed  effective
                    if no objection is received within such time period.

<PAGE>8

               "Consigned   Inventory":   Inventory   held  by  a  Borrower   on
                    consignment (including, without limitation, GE lightbulbs).


               "Cost": The lower of (a) or (b), where:

                         (a) is the calculated cost of purchases, based upon the
                    Borrowers' accounting  practices,  known to the Agent, which
                    practices are in effect on the date on which this  Agreement
                    was executed as such  calculated  cost is  determined  from:
                    invoices received by the Borrowers;  the Borrowers' purchase
                    journal; or the Borrowers' stock ledger.
                         (b) is the cost  equivalent  of the lowest  ticketed or
                    promoted price at which the subject  Inventory is offered to
                    the public,  after all mark-downs (whether or not such price
                    is then  reflected  on the  Borrowers'  accounting  system),
                    which cost  equivalent is determined in accordance  with the
                    cost method of accounting.
                         "Cost" does not include inventory  capitalization costs
                    or other  non-purchase  price charges (such as freight) used
                    in the Borrowers' calculation of cost of goods sold.


               "Costs  of  Collection":   All  reasonable  attorneys'  fees  and
                    reasonable  out-of-pocket  expenses  incurred by the Agent's
                    attorneys,  and all reasonable  out-of-pocket costs incurred
                    by the Agent in the administration of the Liabilities and/or
                    the   Loan   Documents,   including,   without   limitation,
                    reasonable  costs and  expenses  associated  with  travel on
                    behalf of the  Agent,  where  such  costs and  expenses  are
                    directly  or  indirectly  related  to or in  respect  of the
                    Agent's:  administration  and management of the Liabilities;
                    negotiation,   documentation,  and  amendment  of  any  Loan
                    Document;  or  efforts to  preserve,  protect,  collect,  or
                    enforce the Collateral, the Liabilities,  and/or the Agent's
                    Rights and Remedies and/or any of the rights and remedies of
                    the Agent  against or in respect of any  guarantor  or other
                    person liable in respect of the Liabilities  (whether or not
                    suit is instituted in connection with such efforts).  "Costs
                    of Collection"  shall also include the  reasonable  fees and
                    expenses  of  Lenders'   Special   Counsel.   The  Costs  of
                    Collection  are  Liabilities,  and at the Agent's option may
                    bear  interest,  after demand,  at the then  effective  Base
                    Margin Rate.


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


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


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

<PAGE>9

               "Delinquent   Revolving   Credit  Lender":   Defined  in  Section
                    12:12-3(c).


               "Deposit Account": Has the meaning given that term in the UCC.


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


               "Documents of Title": Has the meaning given that term in the UCC.


               "Eligible  Assignee":  A  bank,  insurance  company,  or  company
                    engaged in the business of making  commercial loans having a
                    combined  capital  and  surplus  in excess of three  hundred
                    million  dollars  ($300,000,000.00)  or any Affiliate of any
                    Revolving  Credit Lender,  or any Person to whom a Revolving
                    Credit Lender assigns its rights and obligations  under this
                    Agreement as part of a programmed assignment and transfer of
                    such Revolving  Credit  Lender's rights in and to a material
                    portion of such Revolving Credit Lender's portfolio of asset
                    based credit facilities.


               "Eligible  Inventory":  Eligible  L/C  Inventory  and such of the
                    Borrowers'  Inventory  consisting of  merchandise  inventory
                    (inclusive  of  pharmaceutical  Inventory  and  prescription
                    list),  at such  locations,  and of such  types,  character,
                    qualities  and  quantities,  as the Agent in its  discretion
                    from time to time determines to be acceptable for borrowing,
                    as to which  Inventory,  the Agent has a perfected  security
                    interest  which  is  prior  and  superior  to  all  security
                    interests,  claims,  and Encumbrances  (other than Permitted
                    Encumbrances).  Eligible  Inventory  will  exclude,  without
                    limitation,   Inventory  that  is  not  saleable,  including
                    non-merchandise categories (labels, bags, packaging,  etc.),
                    Inventory  in foreign  locations  (except for  Eligible  L/C
                    Inventory), fresh produce inventory, samples, damaged goods,
                    return to vendor merchandise, and Consigned Inventory.


               "Eligible L/C Inventory": Inventory to be acquired by a Borrower,
                    the purchase of which is supported by a documentary L/C then
                    having an  initial  expiry of forty  five (45) or less days,
                    provided that
                                    (a) Such Inventory is of such types,
                           character, qualities and quantities (net of Inventory
                           Reserves) as the Agent in its reasonable discretion
                           from time to time reasonably determines to be
                           eligible for borrowing; and
                                    (b) The documentary L/C supporting such
                           purchase names the Agent or any Issuer as consignee
                           of the subject Inventory and the Agent has control
                           over the documents which evidence ownership of the
                           subject Inventory (such as by the providing to the
                           Agent of a Customs Brokers Agreement in form
                           reasonably satisfactory to the Agent).
<PAGE>10


               "Eligible Receivables":  Such of the Borrowers' Accounts as arise
                    in the ordinary course of the Borrowers'  business for goods
                    sold  and/or  services  rendered  by  the  Borrowers,  which
                    Accounts have been determined by the Agent in its discretion
                    to be  satisfactory  and have been earned by performance and
                    are owed to the  Borrowers by such of the  Borrowers'  trade
                    customers as the Agent determines to be satisfactory, in the
                    Agent's  discretion in each instance,  as to which Accounts,
                    the Agent has a perfected  security  interest which is prior
                    and  superior  to  all  security   interests,   claims,  and
                    Encumbrances (other than Permitted Encumbrances).

               "Employee Benefit Plan": As defined in ERISA.


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


               "End Date":  The date upon  which both (a) all  Liabilities  have
                    been paid in full and (b) all  obligations  of any Revolving
                    Credit  Lender to make  loans and  advances  and to  provide
                    other financial  accommodations  to the Borrowers  hereunder
                    shall have been irrevocably terminated.


               "Environmental Laws": All of the following:
                         (a)  Applicable  Law which  regulates or relates to, or
                    imposes any  standard of conduct or  liability on account of
                    or  in  respect   to   environmental   protection   matters,
                    including,  without limitation,  Hazardous Materials, as are
                    now or hereafter in effect.
                         (b) The  common  law  relating  to damage to Persons or
                    property from Hazardous Materials.
<PAGE>11


               "Equipment": Includes, without limitation, "equipment" as defined
                    in the UCC, and also all furniture,  store  fixtures,  motor
                    vehicles, rolling stock, machinery,  office equipment, plant
                    equipment,  tools,  dies, molds, and other goods,  property,
                    and assets which are used and/or were  purchased  for use in
                    the operation or furtherance of a Borrower's  business,  and
                    any  and  all   accessions   or   additions   thereto,   and
                    substitutions therefor.


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


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


               "Eurodollar  Business  Day": Any day which is both a Business Day
                    and a day on which the principal  market in  Eurodollars  in
                    which Fleet National Bank  participates is open for dealings
                    in United States Dollar deposits.


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


               "Eurodollar Offer Rate":  That rate of interest (rounded upwards,
                    if  necessary,  to the next 1/100 of 1%)  determined  by the
                    Agent to be a prevailing rate per annum at which deposits on
                    U.S.   Dollars  are  offered  to  Fleet  National  Bank,  by
                    first-class  banks in the  Eurodollar  market in which Fleet
                    National Bank participates at or about 10:00AM (Boston Time)
                    two (2) Eurodollar Business Days before the first day of the
                    Interest  Period  for the  subject  Eurodollar  Loan,  for a
                    deposit  approximately in the amount of the subject loan for
                    a  period  of time  approximately  equal  to  such  Interest
                    Period.


               "Eurodollar Rate":  That per annum rate which is the aggregate of
                    the  Eurodollar  Offer Rate plus the  Applicable  Margin for
                    Eurodollar  Loans except  that,  in the event that the Agent
                    determines  that any Revolving  Credit Lender may be subject
                    to the Reserve Percentage, the "Eurodollar Rate" shall mean,
                    with respect to any Eurodollar Loans then outstanding  (from
                    the date on  which  that  Reserve  Percentage  first  became
                    applicable   to  such  loans),   and  with  respect  to  all
                    Eurodollar Loans thereafter made, an interest rate per annum
                    equal the sum of (a) plus (b), where:
<PAGE>12

                         (a)  is  the  decimal   equivalent   of  the  following
                    fraction:

                                        Eurodollar Offer Rate
                                      --------------------------
                                      1 minus Reserve Percentage

                         (b) is the Applicable Margin for Eurodollar Loans.


               "Events of  Default":  Is defined in  Article  10:.  An "Event of
                    Default"  shall  be  deemed  to  have  occurred  and  to  be
                    continuing  unless and until that Event of Default  has been
                    duly waived by the requisite  Revolving Credit Lenders or by
                    the Agent as applicable.


               "Exempt DDA": A depository  account  maintained  by any Borrower,
                    the  only  contents  of  which  may be  transfers  from  the
                    Operating  Account  and  actually  used solely (i) for petty
                    cash purposes; or (ii) for payroll.

               "Fee Letter":  That letter  dated  September  24, 2001 and styled
                    "Fee Letter"  between the Lead  Borrower  and the Agent,  as
                    such letter may from time to time be amended.


               "Final  Borrowing  Order":  A  Borrowing  Order  entered  in  the
                    Proceedings  after  notice and a final  hearing  pursuant to
                    Rule 4001(c) of the Federal Rules of Bankruptcy Procedure.


               "Fiscal":  When  followed by "month" or  "quarter",  the relevant
                    fiscal  period  based  on the  Borrowers'  fiscal  year  and
                    accounting  conventions.  When  followed by  reference  to a
                    specific  year, the fiscal year which ends in a month of the
                    year  to  which   reference  is  being  made  (e.g.  if  the
                    Borrowers'  fiscal year ends in January  2001  reference  to
                    that year would be to the Borrowers' "Fiscal 2001").


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


               "FRFI": Fleet Retail Finance Inc.


               "GAAP": Generally accepted accounting  principles  promulgated or
                    adopted by the Financial  Accounting Standards Board and its
                    predecessors  (or  successors)  in effect and  applicable to
                    that accounting period in respect of which reference to GAAP
                    is being made, provided, however, in the event of a Material
                    Accounting Change, then unless otherwise specifically agreed
                    to by the  Agent,  (a) the  Borrowers'  compliance  with the
                    financial  performance covenants imposed pursuant to Section
                    5:5-11 shall be determined  as if such  Material  Accounting
                    Change had not taken place and (b) the Lead  Borrower  shall
                    include, with its monthly,  quarterly,  and annual financial
                    statements  a  schedule,  certified  by the Lead  Borrower's

<PAGE>13

                    chief  financial  officer,  on  which  the  effect  of  such
                    Material  Accounting  Change  on  that  statement  shall  be
                    described.


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


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



<PAGE>14

               "Hazardous  Materials":  Any (a)  substance  which is  defined or
                    regulated   as  a   hazardous   material  in  or  under  any
                    Environmental Law and (b) oil in any physical state.


               "Indebtedness": All indebtedness and obligations of or assumed by
                    any  Person  on  account  of or in  respect  to  any  of the
                    following:
                         (a)  In  respect  of  money  borrowed   (including  any
                    indebtedness  which is  non-recourse  to the  credit of such
                    Person but which is secured by an  Encumbrance  on any asset
                    of such  Person)  whether or not  evidenced  by a promissory
                    note,  bond,  debenture or other  written  obligation to pay
                    money.
                         (b)  In  connection   with  any  letter  of  credit  or
                    acceptance transaction (including,  without limitation,  the
                    face amount of all letters of credit and acceptances  issued
                    for the account of such Person or  reimbursement  on account
                    of which such Person would be obligated).
                         (c) In connection with the sale or discount of accounts
                    receivable or chattel paper of such Person.
                         (d) As lessee under Capital Leases.
                         (e) In connection with any sale and leaseback
                    transaction.
                    "Indebtedness" also includes
                                            (x) Any guaranty, endorsement,
                                    suretyship or other undertaking pursuant to
                                    which that Person may be liable on account
                                    of any obligation of any third party.
                                            (y) The Indebtedness of a
                                    partnership or joint venture for which such
                                    Person is liable as a general partner or
                                    joint venturer.


               "Indemnified Person": Is defined in Section 19:19-12.


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


               "Interest Payment Date": With reference to:
                           Each Eurodollar Loan: The last day of the Interest
                  Period relating thereto (and on the last day of month three
                  for any such loan which has a six month Interest Period); the
                  Termination Date; and the End Date.
                           Each Base Margin Loan: The first day of each month;
                  the Termination Date; and the End Date.


               "Interest Period": The following:
                           (a) With respect to each Eurodollar Loan: Subject to
                  Subsection (c), below, the period commencing on the date of
                  the making or continuation of, or conversion to, the subject
                  Eurodollar Loan and ending one, two, three, or six months
                  thereafter, as the Lead Borrower may elect by notice (pursuant
                  to Section 2:2-6) to the Agent.

<PAGE>15

                           (b) With respect to each Base Margin Loan: Subject to
                  Subsection (c), below, the period commencing on the date of
                  the making or continuation of or conversion to such Base
                  Margin Loan and ending on that date (i) as of which the
                  subject Base Margin Loan is converted to a Eurodollar Loan, as
                  the Lead Borrower may elect by notice (pursuant to Section
                  2:2-6) to the Agent, or (ii) on which the subject Base Margin
                  Loan is paid by the Borrowers.
                           (c) The setting of Interest Periods is in all
                  instances subject to the following:
                                    (i) Any  Interest  Period for a Base Margin
                           Loan which would otherwise  end on a day  which  is
                           not a Business  Day  shall be extended to the next
                           succeeding Business Day.
                                    (ii) Any Interest Period for a Eurodollar
                           Loan which would otherwise end on a day that is not a
                           Business Day shall be extended to the next succeeding
                           Business Day, unless that succeeding Business Day is
                           in the next calendar month, in which event such
                           Interest Period shall end on the last Business Day of
                           the month during which the Interest Period ends.
                                    (iii) Subject to Subsection (iv), below, any
                           Interest Period applicable to a Eurodollar Loan,
                           which Interest Period begins on a day for which there
                           is no numerically corresponding day in the calendar
                           month during which such Interest Period ends, shall
                           end on the last Business Day of the month during
                           which that Interest Period ends.
                                    (iv) Any Interest Period which would
                           otherwise end after the Termination Date shall end on
                           the Termination Date.
                                    (v)  The number of Interest Periods in
                           effect at any one time is subject to Section
                           2:2-12(d)hereof.

               "Interim  Borrowing  Order":  A  Borrowing  Order  entered in the
                    Proceedings  prior to notice and a final hearing pursuant to
                    Rule 4001(c) of the Federal Rules of Bankruptcy Procedure.


               "Inventory": Includes, without limitation, "inventory" as defined
                    in the UCC and also  all:  (a) Goods  which are  leased by a
                    Person as lessor;  are held by a Person for sale or lease or
                    to be furnished  under a contract of service;  are furnished
                    by a Person  under a contract of service;  or consist of raw
                    materials, work in process, or materials used or consumed in
                    a business;  (b) Goods of said  description in transit;  (c)
                    Goods of said  description  which are returned,  repossessed
                    and  rejected;  (d)  packaging,  advertising,  and  shipping
                    materials  related to any of the  foregoing;  (e) all names,
                    marks, and General  Intangibles  affixed or to be affixed or
                    associated thereto; and (f) Documents and Documents of Title
                    which  represent any of the  foregoing,  provided,  however,
                    that Inventory shall not include Consigned Inventory.

               "Inventory Advance Rate": Sixty-four percent (64%).
<PAGE>16


               "Inventory  Reserves":  Such  Reserves as may be  established
                    from  time to time by the  Agent in the  Agent's  discretion
                    with respect to the  determination  of the  saleability,  at
                    retail,  of the  Eligible  Inventory  or which  reflect such
                    other  factors as affect the  market  value of the  Eligible
                    Inventory. Without limiting the generality of the foregoing,
                    Inventory  Reserves  may  include  (but are not  limited to)
                    reserves based on the following:
                           (i)      Obsolescence (based upon Inventory on hand
                                    beyond a given number of days).
                           (ii)     Seasonality.
                           (iii)    Shrinkage.
                           (iv)     Imbalance.
                           (v)      Change in Inventory character.
                           (vi)     Change in Inventory composition
                           (vii)    Change in Inventory mix.
                           (viii)   Markdowns (both permanent and point of sale)
                           (ix)     Retail markons and markups inconsistent with
                                    prior period practice and performance;
                                    industry standards; current business plans;
                                    or advertising calendar and planned
                                    advertising events.


               "Investment  Property":  Has the  meaning  given that term in the
                    UCC.


               "Issuer": The issuer of any L/C.


               "L/C": Any letter of credit, the issuance of which is procured by
                    the Agent for the account of any Borrower and any acceptance
                    made on account of such letter of credit. After entry of the
                    Interim   Borrowing   Order,   all  L/Cs  issued  under  the
                    Pre-Petition  Agreement  shall be deemed to have been issued
                    hereunder and shall constitute L/Cs for all purposes of this
                    Agreement and the other Loan Documents.


               "L/C Landing  Costs":  To the extent not  included  in the Stated
                    Amount  of  an  L/C,  customs,   duty,  freight,  and  other
                    out-of-pocket  costs and expenses  which will be expended to
                    "land" the Inventory,  the purchase of which is supported by
                    such L/C.


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


               "Leasehold Interest":  Any interest of a Borrower as lessee under
                    any Lease.



<PAGE>17

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


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


               "Liabilities": Includes, without limitation, the following:
                    (a) All and each of the  following,  whether now existing or
               hereafter  arising under this Agreement or under any of the other
               Loan Documents:
                           (i) Any and all direct and indirect liabilities,
                  debts, and obligations of each Borrower to the Agent or any
                  Revolving Credit Lender, each of every kind, nature, and
                  description.
                           (ii) Each obligation to repay any loan, advance,
                  indebtedness, note, obligation, overdraft, or amount now or
                  hereafter owing by any Borrower to the Agent or any Revolving
                  Credit Lender (including all future advances whether or not
                  made pursuant to a commitment by the Agent or any Revolving
                  Credit Lender), whether or not any of such are liquidated,
                  unliquidated, primary, secondary, secured, unsecured, direct,
                  indirect, absolute, contingent, or of any other type, nature,
                  or description, or by reason of any cause of action which the
                  Agent or any Revolving Credit Lender may hold against any
                  Borrower.
                           (iii) All notes and other obligations of each
                  Borrower now or hereafter assigned to or held by the Agent or
                  any Revolving Credit Lender, each of every kind, nature, and
                  description.
                           (iv)  All interest, fees, and charges and other
                  amounts which may be charged by the Agent or any Revolving
                  Credit Lender to any Borrower and/or which may be due from any
                  Borrower to the Agent or any Revolving Credit Lender from time
                  to time.
                           (v)   All Costs of Collection.
                           (vi)  Any and all covenants of each Borrower to or
                  with the Agent or any Revolving Credit Lender and any and all
                  obligations of each Borrower to act or to refrain from acting
                  in accordance with any agreement between that Borrower and the
                  Agent or any Revolving Credit Lender or instrument furnished
                  by that Borrower to the Agent or any Revolving Credit Lender.
                           (vii) Each of the foregoing as if each reference to
                  the " the Agent or any Revolving Credit Lender" were to each
                  Affiliate of the Agent.
                    (b) Any and all direct or indirect  liabilities,  debts, and
               obligations of each Borrower to the Agent or any Affiliate of the

<PAGE>18

               Agent,  each of every  kind,  nature,  and  description  owing on
               account of any service or  accommodation  provided to, or for the
               account  of any  Borrower  pursuant  to  this or any  other  Loan
               Document, including cash management services and the issuances of
               L/C's.


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


               "Loan Account": Is defined in Section 2:2-9.


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


               "Loan Documents": This  Agreement,  each  instrument and document
                    executed  and/or  delivered as  contemplated  by Article 3:,
                    below,  and each other  instrument  or document from time to
                    time  executed  and/or  delivered  in  connection  with  the
                    arrangements  contemplated  hereby or in connection with any
                    transaction  with the Agent or any  Affiliate  of the Agent,
                    including,  without limitation, any transaction which arises
                    out of any cash management,  depository,  investment, letter
                    of credit,  interest rate protection,  or equipment  leasing
                    services  provided  by the  Agent  or any  Affiliate  of the
                    Agent, as each may be amended from time to time.


               "Majority   Lenders":   Revolving   Credit  Lenders  (other  than
                    Delinquent  Revolving Credit Lenders) holding 51% or more of
                    the Loan  Commitments  (other than any Loan Commitments held
                    by  Delinquent  Revolving  Credit  Lenders),  or if the Loan
                    Commitments have been  terminated,  Revolving Credit Lenders
                    whose  percentage of the outstanding  Revolving Credit Loans
                    and face amount of all  outstanding  L/Cs (after  settlement
                    and repayment of all SwingLine Loans by the Revolving Credit
                    Lenders)   aggregate   not   less   than  51%  of  all  such
                    Liabilities.


               "Material  Accounting  Change":  Any change in GAAP applicable to
                    accounting  periods subsequent to the Borrowers' fiscal year
                    most  recently  completed  prior  to the  execution  of this
                    Agreement,  which  change  has  a  material  effect  on  the
                    Borrowers'  Consolidated  financial  condition  or operating
                    results,  as reflected on financial  statements  and reports
                    prepared by or for the  Borrowers,  when  compared with such
                    condition  or results as if such  change had not taken place
                    or  where  preparation  of  the  Borrowers'  statements  and
                    reports in compliance with such change results in the breach

<PAGE>19

                    of a  financial  performance  covenant  imposed  pursuant to
                    Section  5:5-11 where such a breach would not have  occurred
                    if such change had not taken place or visa versa.


               "Material  Adverse   Change":   Other  than  the  filing  of  the
                    Proceedings,  any event, fact,  circumstance,  change in, or
                    effect on, the business of, any Borrower which, individually
                    or in the aggregate or on a cumulative  basis with any other
                    circumstances,  changes in, or effects on, the  Borrowers or
                    the Collateral, taken as a whole which:
                         (a)  Is,  or  would   reasonably  be  expected  to  be,
                    materially  adverse to the business,  operations,  assets or
                    liabilities  (including,   without  limitation,   contingent
                    liabilities),   results  of   operations  or  the  financial
                    condition of that Borrower.
                         (b)  Would   reasonably   be  expected  to   materially
                    adversely  affect the ability of that Borrower to operate or
                    conduct its business in all material  respects in the manner
                    necessary  to  perform  its   obligations   under  the  Loan
                    Documents .
                         (c) Would  reasonably  be  expected  to have a material
                    adverse effect or result in a material adverse change in the
                    value,  enforceability,  collectability or the nature of the
                    Collateral.

               "Material Adverse Effect": A result, consequence, or outcome with
                    respect  to  the  Borrowers  which  constitutes  a  Material
                    Adverse Change.

               "Maturity Date":  October 23,  2001,  unless the Final  Borrowing
                    Order is entered by that  date,  and if the Final  Borrowing
                    Order is so entered,  "Maturity  Date" shall mean  September
                    24, 2003.

               "New Borrower": Is defined in Section 4:4-20.

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

               "Operating Account": Is defined in Section 7:7-3.

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

               "Participant": Is defined in Section 19:19-15, hereof.

               "Payment Intangible":  Has the meaning given that term in the UCC
                    and also  refers to any general  intangible  under which the
                    Account   Debtor's   primary   obligation   is  a   monetary
                    obligation.

               "Permissible   OverLoans":   Revolving  Credit  Loans  which  are
                    OverLoans,  but as to which each of the following conditions
                    is  satisfied:  (a)  the  Revolving  Credit  Ceiling  is not
                    exceeded; and (b) when aggregated with all other Permissible


<PAGE>20

                    OverLoans, such Revolving Credit Loans do not aggregate more
                    than ten percent  (10%) of the  aggregate  of the  Borrowing
                    Base;  and (c)  such  Revolving  Credit  Loans  are  made or
                    undertaken in the Agent's discretion to protect and preserve
                    the interests of the Revolving Credit Lenders.

               "Permitted Encumbrances": The following:
                         (a) Encumbrances in favor of the Agent.
                         (b)  Encumbrances  listed  on  EXHIBIT  4:4-6,  annexed
                    hereto.
                         (c) Encumbrances on Equipment or real property, subject
                    to compliance with the terms of Section 4:4-6(c), below.
                         (d)  Non-consensual  statutory  liens (other than liens
                    securing  the  payment  of taxes)  arising  in the  ordinary
                    course of a  Borrowers'  business to the extent:  such liens
                    secure  obligations  which  are not  overdue  or such  liens
                    secure  obligations  relating to claims or liabilities which
                    are  fully  insured  (subject  to  commercially   reasonable
                    deductibles) and being defended at the sole cost and expense
                    and at the sole risk of the  insurer or are being  contested
                    in good faith by appropriate  proceedings diligently pursued
                    and available to a Borrower,  in each instance  prior to the
                    commencement of foreclosure or other similar proceedings and
                    with respect to which adequate  reserves have been set aside
                    on the Borrowers' books.
                         (e) Carriers',  warehousemen's,  mechanics, repairmen's
                    or  similar  liens  incurred  in  the  ordinary   course  of
                    business.
                         (f) Zoning restrictions, easements, licenses, covenants
                    and other restrictions affecting the use of real property.
                         (g) Deposits under workmen's compensation, unemployment
                    insurance  and  social  security  laws,  or  to  secure  the
                    performance of bids, tenders,  contracts (other than for the
                    repayment  of  borrowed  money)  or  leases,  or  to  secure
                    statutory  obligations  or  surety or  appeal  bonds,  or to
                    secure indemnity, performance or other similar bonds arising
                    in the ordinary course of business.
                         (h) Landlord's liens by operation of law.
                         (i) Interests of lessors under Capital Leases.
                         (j) Liens  consisting  of security  deposits  made by a
                    Borrower.  The  inclusion  of  any  of  the  foregoing  as a
                    "Permitted   Encumbrance"   does  not  affect  its  relative
                    priority  vis a vis any  Collateral  Interest  created  by a
                    Borrower in favor of the Agent.
                         (k)  Encumbrances  subordinated to the  Encumbrances of
                    the  Agent,  so  long  as  the  amount  and  terms  of  such
                    subordination are reasonably satisfactory to the Agent.



<PAGE>21

               "Permitted Store Closing Sales": The scheduled  permanent closing
                    of those 65 of the Borrowers' Stores  previously  identified
                    to the Agent and the proposed sale of all Collateral located
                    thereon  through the  retention  by the  Borrowers of one or
                    more professional retail liquidators,  reasonably acceptable
                    to the Agent,  as approved by the Bankruptcy  Court pursuant
                    to Section 363 of the Bankruptcy Code.

               "Petition Date": September 24, 2001.

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

               "Post Foreclosure Asset":  All or  any  part  of the  Collateral,
                    ownership  of which is acquired by the Agent or a Nominee on
                    account of the  "bidding in" at a  disposition  as part of a
                    Liquidation  or by  reason  of a  "deed  in  lieu"  type  of
                    transaction.

               "Plan": A plan or plans  pursuant to Chapter 11 of the Bankruptcy
                    Code.

               "Pre-Petition  Agreement":  The Loan and Security Agreement dated
                    November 16, 2000 by and among FRFI,  as Agent,  the Lenders
                    party  thereto  and  the  Borrowers  and  all   instruments,
                    documents and agreements  executed in connection  therewith,
                    each as amended and in effect.

               "Proceedings":   The  cases,   pursuant  to  Chapter  11  of  the
                    Bankruptcy  Code,  initiated by the  Borrowers in the United
                    States Bankruptcy Court for the Northern District of Ohio.

               "Proceeds": Includes,  without limitation,  "Proceeds" as defined
                    in the UCC and each type of  property  described  in Section
                    8:8-1 hereof.

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

               "Receivables Advance Rate": Eighty five percent (85%).

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

               "Receivables Reserves":  Such Reserves as may be established from
                    time to time by the  Agent in the  Agent's  discretion  with
                    respect to the  determination of the  collectability  in the
                    ordinary course and of the  creditworthiness of the relevant
                    Account  Debtor.  Without  limiting  the  generality  of the
                    foregoing,  Receivables  Reserves  may include  (but are not
                    limited to) reserves based on the following:

<PAGE>22

                         (a) The aggregate of all accounts receivables which are
                    more than sixty (60) days past original invoice date.
                         (b) The  aggregate of all accounts  receivable  owed by
                    any  Account  Debtor  twenty five  percent  (25%) or more of
                    whose accounts are described in Subsection (a), above.
                         (c) That  portion of Eligible  Receivables  owed by any
                    Account  Debtor which  exceed  thirty  percent  (30%) of all
                    Eligible Receivables.
                         (d) The  aggregate  of all  accounts  receivable  which
                    arise out of the sale by any Borrower of goods  consigned or
                    delivered to that Borrower or to the Account  Debtor on sale
                    or return  terms  (whether or not  compliance  has been made
                    with the  applicable  provisions of Article 2 of the Uniform
                    Commercial Code).
                         (e) The  aggregate  of all  accounts  receivable  which
                    arise out of any sale made on a basis  other than upon terms
                    usual to the business of any Borrower.
                         (f) The  aggregate  of all  accounts  receivable  which
                    arise out of any sale made on a "bill and hold," dating,  or
                    delayed shipping basis.
                         (g) The aggregate of all accounts  receivable which are
                    owed by any Account Debtor whose principal place of business
                    is not within the continental  United States or the District
                    of Columbia.
                         (h) The aggregate of all accounts  receivable which are
                    owed by any Affiliate.
                         (i) So much of any  account  as to  which  the  subject
                    Account   Debtor   holds  or  is   entitled  to  any  claim,
                    counterclaim,  set off, or  chargeback  as determined by the
                    Agent in its discretion.
                         (j) The aggregate of all accounts  receivable which are
                    evidenced  by  a  promissory  note  or  other  documentation
                    evidencing modified payment terms.
                         (k) The  aggregate  of all  accounts  receivable  which
                    arise out of any agreement  with, or purchase order from (a)
                    the United States, or any  instrumentality  thereof,  or (b)
                    with any  other  state or local  governmental  entity  as to
                    whose  contracts,  the assignment  thereof is subject to any
                    limitation or prohibition,  including,  without  limitation,
                    all so-called Medicare and Medicaid receivables.
                         (l) The aggregate of all accounts  receivable which are
                    owed by any person  employed  by, or a  salesperson  of, any
                    Borrower.

               "Register": Is defined in Section 16:16-2(c).
<PAGE>23

               "Requirements of Law": As to any Person:
                         (a) Applicable Law.
                         (b) That Person's organizational documents.
                         (c) That  Person's  by-laws  and/or  other  instruments
                    which  deal  with  corporate  or  similar   governance,   as
                    applicable.
                         (d) Without  limiting the  generality of the foregoing,
                    "Requirement  of  Law"  includes  all  requirements  of  the
                    Bankruptcy   Code;   all  rules  adopted   pursuant  to  the
                    Bankruptcy Code or otherwise and applicable to the Borrowers
                    and/or the  Proceedings;  the Borrowing Order; and all other
                    orders or  rulings  formally  or  informally  entered in the
                    Proceedings  or in any action or  proceeding  which  relates
                    thereto.

               "Reserve  Percentage":   The  decimal  equivalent  of  that  rate
                    applicable to a Revolving  Credit  Lender under  regulations
                    issued  from time to time by the Board of  Governors  of the
                    Federal  Reserve System for  determining the maximum reserve
                    requirement of that Revolving  Credit Lender with respect to
                    "Eurocurrency  liabilities" as defined in such  regulations.
                    The Reserve Percentage applicable to a particular Eurodollar
                    Loan shall be based upon that in effect  during the  subject
                    Interest  Period,  with  changes in the  Reserve  Percentage
                    which take effect during such Interest Period to take effect
                    (and to  consequently  change any interest  rate  determined
                    with  reference to the Reserve  Percentage) if and when such
                    change is applicable to such loans.

               "Reserves":  The following:  Receivables  Reserves;  Availability
                    Reserves; and Inventory Reserves.

               "Revolving Credit": Is defined in Section 2:2-1.

               "Revolving Credit Ceiling":  After entry of the Interim Borrowing
                    Order through  December 23, 2001,  subject to the provisions
                    of Section  2-25  hereof,  the sum of  $135,000,000.00,  and
                    thereafter, the sum of $100,000,000.00.

               "Revolving Credit Commitment Fee": Is defined in Section 2:2-13.

               "Revolving  Credit  Dollar  Commitment":  As set forth on EXHIBIT
                    2:2-24,  annexed  hereto  (as such  amounts  may  change  in
                    accordance with the provisions of this Agreement).

               "Revolving Credit Early  Termination  Fee": Is defined in Section
                    2:2-16.

               "Revolving Credit Lenders": Each Revolving Credit Lender party to
                    this  Agreement  as of the date hereof and any other  Person
                    who becomes a "Revolving  Credit Lender" in accordance  with
                    the provisions of to this Agreement.
<PAGE>24

               "Revolving Credit Loans":  Loans made under the Revolving Credit,
                    except that where the term  "Revolving  Credit Loan" is used
                    with reference to available interest rates applicable to the
                    loans under the  Revolving  Credit,  it refers to so much of
                    the unpaid  principal  balance of the Loan  Account as bears
                    the same rate of interest for the same Interest Period. (See
                    Section 2:2-11(c)).

               "Revolving Credit Note": Is defined in Section 2:2-10.

               "Revolving Credit  Obligations":  The aggregate of the Borrowers'
                    liabilities,  obligations, and indebtedness of any character
                    on account of or in respect to the Revolving Credit.

               "Revolving Credit Commitment Percentage": As set forth on EXHIBIT
                    2:2-24,  annexed  hereto  (as such  amounts  may  change  in
                    accordance with the provisions of this Agreement).

               "SEC": The Securities and Exchange Commission.

               "Stated  Amount":  The  maximum  amount  for  which an L/C may be
                    honored.

               "Store": A place  at  which a  Borrower  customarily  offers  its
                    Inventory for retail sale to the public.

               "Subsidiary": Any corporation,  association, joint stock company,
                    business trust or other similar organization of which 50% or
                    more of the  ordinary  voting  power for the  election  of a
                    majority of the members of the board of  directors  or other
                    governing  body of such  entity is held or  controlled  by a
                    Borrower or a  Subsidiary  of a Borrower;  or any other such
                    organization   the   management  of  which  is  directly  or
                    indirectly  controlled  by a Borrower or a  Subsidiary  of a
                    Borrower  through the exercise of voting power or otherwise;
                    or any joint venture,  whether incorporated or not, in which
                    a Borrower or any of its  Subsidiaries  has a 50%  ownership
                    interest.

               "SuperMajority  Lenders":  Revolving  Credit  Lenders (other than
                    Delinquent Revolving Credit Lenders) holding 66-2/3% or more
                    the Loan Commitments  (other than Loan Commitments held by a
                    Delinquent   Revolving  Credit  Lender),   or  if  the  Loan
                    Commitments have been  terminated,  Revolving Credit Lenders
                    whose  percentage of the outstanding  Revolving Credit Loans
                    and face amount of all  outstanding  L/Cs (after  settlement
                    and repayment of all SwingLine Loans by the Revolving Credit
                    Lenders)  aggregate  not  less  than  66-2/3%  of  all  such
                    Liabilities.


<PAGE>25

               "Supporting  Obligation":  Has the meaning given that term in the
                    UCC and also refers to a Letter-of-Credit Right or secondary
                    obligation  which  supports the payment or performance of an
                    Account, Chattel Paper, a Document, a General Intangible, an
                    Instrument, or Investment Property.

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

               "SwingLine Lender": FRFI.

               "SwingLine Loan Ceiling":  $13,500,000.00 (subject to increase as
                    provided in Section 15:15-4).

               "SwingLine Loans": Defined in Section 2:2-8.

               "SwingLine Note": Defined in Section 3-7(c).

               "Syndication Agent": Fleet Securities Inc.

               "Termination Date": The earliest of (a) the Maturity Date; or (b)
                    the effective date of a confirmed  Plan in the  Proceedings;
                    or (c) the Agent's  notice to the Lead Borrower  setting the
                    Termination  Date on account of the  occurrence of any Event
                    of Default;  or (d) that date,  thirty (30) days irrevocable
                    written  notice of which is provided by the Lead Borrower to
                    the Agent.

               "Transfer":  Wire transfer  pursuant to the wire transfer  system
                    maintained by the Board of Governors of the Federal  Reserve
                    Board, or as otherwise may be agreed to from time to time by
                    the Agent  making such  Transfer  and the subject  Revolving
                    Credit Lender.  Wire instructions may be changed in the same
                    manner  that  Notice   Addresses  may  be  changed  (Section
                    17:17-1), except that no change of the wire instructions for
                    Transfers to any Revolving  Credit Lender shall be effective
                    without the consent of the Agent.
<PAGE>26

               "UCC": The Uniform Commercial Code as in effect from time to time
                    in Massachusetts.

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

               "Unused Line Fee": Is defined in Section 2:2-15.


Article 2:- THE REVOLVING CREDIT:


     21- ESTABLISHMENT OF REVOLVING CREDIT
     (a) The  Revolving  Credit  Lenders  hereby  establish a revolving  line of
credit (the "Revolving  Credit") in the Borrowers'  favor pursuant to which each
Revolving  Credit Lender,  subject to, and in accordance  with,  this Agreement,
acting  through the Agent,  shall make loans and advances and otherwise  provide
financial  accommodations  to and for the account of the  Borrowers  as provided
herein.
     (b) Loans,  advances,  and  financial  accommodations  under the  Revolving
Credit shall be made with  reference to the Borrowing  Base and shall be subject
to Availability.  The Borrowing Base and Availability shall be determined by the
Agent by  reference  to  Borrowing  Base  Certificates  furnished as provided in
Section  5:5-4,  below.  The Cost of Eligible  Inventory will be determined in a
manner consistent with practices in effect as of the Petition Date, based on the
Borrowers' general ledger inventory.
     (c) The commitment of each  Revolving  Credit Lender to provide such loans,
advances, and financial accommodations is subject to Section 2:2-24.
     (d) The proceeds of  borrowings  under the  Revolving  Credit shall be used
solely for the  Borrowers'  working  capital  (including,  repayment of existing
Indebtedness to institutional lenders), and Capital Expenditures,  to the extent
permitted  by this  Agreement.  No proceeds of a borrowing  under the  Revolving
Credit  may be  used,  nor  shall  any be  requested,  with a view  towards  the
accumulation  of any general fund or funded reserve of the Borrowers  other than
in the  ordinary  course of the  Borrowers'  business  and  consistent  with the
provisions of this Agreement.

<PAGE>27

     22- INITIAL RESERVES. CHANGES TO RESERVES.
     (a) At the execution of this Agreement,  the only Reserves are as reflected
on the initial Borrowing Base Certificate.
     (b)  Reserves  that  may be  revised,  by the  Agent  in good  faith in its
reasonable business judgment:
          (ii) To reflect events,  conditions,  contingencies  or risks that, as
     determined by the Agent in good faith in its reasonable  business judgment,
     do or may affect any of:
               (B) The  Collateral  or any  other  property  which  secures  the
          Liabilities.
               (C) The assets, business or prospects of any Borrower.
               (D) The Collateral Interests and other rights of the Agent in, or
          to  realize  upon,  the  Collateral   (including  the  enforceability,
          perfection and priority thereof).
          (i) To  reflect  the  Agent's  good  faith  belief  in its  reasonable
     business  judgment  that any  collateral  report or  financial  information
     furnished  by or on behalf of a  Borrower  to the Agent is or may have been
     incomplete, inaccurate or misleading in any material respect.
          (ii) To  reflect  any  state of facts  which  constitutes  an Event of
     Default.
     (a) A change to a then existing Reserve may be made only with not less than
seven (7) Business Days prior notice to the Lead  Borrower,  during which period
the Agent shall  afford the Borrower an  opportunity  to  demonstrate  that such
Reserve is not necessary  (unless the Agent determines that the Collateral would
be  materially  and  adversely  affected  by such  delay or an Event of  Default
exists,  in which case such Reserve may be immediately  imposed),  except that a
change to a then existing Reserve,  which change reflects changed  circumstances
of which the Lead Borrower has  knowledge  (such as a change in the aggregate of
taxes then outstanding), may be made without such notice.


     23- ADVANCES IN EXCESS OF BORROWING BASE (OVERLOANS).
     (a) No  Revolving  Credit  Lender  has any  obligation  to make any loan or
advance,  or  otherwise  to  provide  any  credit to or for the  benefit  of the
Borrowers where the result of such loan, advance, or credit is an OverLoan.
     (b) The  Revolving  Credit  Lenders'  obligations,  among  themselves,  are
subject to Section  12:12-3(a)  (which relates to each Revolving Credit Lender's
making amounts available to the Agent) and to Section  15:15-3(a) (which relates
to Permissible OverLoans).
     (c) The  Revolving  Credit  Lenders'  providing  of an  OverLoan on any one
occasion does not affect the obligations of each Borrower  hereunder  (including
each  Borrower's  obligation  to  immediately  repay any amount which  otherwise
constitutes  an OverLoan) nor obligate the Revolving  Credit Lenders to do so on
any other occasion.



<PAGE>28

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


     25- COMMITMENT  TO MAKE  REVOLVING  CREDIT  LOANS AND  SUPPORT  LETTERS OF
CREDIT.  Subject to the  provisions  of this  Agreement,  the  Revolving  Credit
Lenders shall make Revolving  Credit Loans and the Agent shall cause L/C's to be
issued for the account of the Lead Borrower, in each instance if duly and timely
requested by the Lead Borrower as provided herein provided that:
          (a) The  amount of the loan or advance  or L/C so  requested  does not
     exceed Availability.
          (b) No Borrower is in Default.


     26- REVOLVING CREDIT LOAN REQUESTS.
          (a) Requests for  Revolving  Credit  Loans or for the  continuance  or
     conversion of an interest rate applicable to a Revolving Credit Loan may be
     requested  by the Lead  Borrower in such manner as may from time to time be
     acceptable to the Agent.
          (b) Subject to the provisions of this Agreement, the Lead Borrower may
     request a Revolving  Credit Loan and elect an  interest  rate and  Interest
     Period to be applicable to that  Revolving  Credit Loan by giving notice to
     the Agent by no later than the following:
                    (ii)  If  such  Revolving  Credit  Loan is to be or is to be
               converted to a Base Margin Loan:  By 12:00 PM on the Business Day
               on which the subject Revolving Credit Loan is to be made or is to
               be  so  converted.  Base  Margin  Loans  requested  by  the  Lead
               Borrower,  other than those  resulting  from the  conversion of a
               Eurodollar Loan, shall not be less than $10,000.00.
                    (iii) If such  Revolving  Credit  Loan is to be, or is to be
               continued as, or converted to, a Eurodollar Loan: By 1:00PM three
               (3) Eurodollar  Business Days before the  commencement of any new
               Interest  Period  or  the  end of the  then  applicable  Interest
               Period.  Eurodollar  Loans and  conversions  to Eurodollar  Loans
               shall  each be not less than  $500,000.00  and in  increments  of
               $100,000.00 in excess of such minimum.
                    (iv) Any Eurodollar Loan which matures while any Borrower is
               in Default shall be converted,  at the option of the Agent,  to a
               Base  Margin  Loan  notwithstanding  any  notice  from  the  Lead
               Borrower that such Loan is to be continued as a Eurodollar Loan.

          (a) Any request for a Revolving  Credit Loan or for the continuance or
     conversion of an interest rate applicable to a Revolving  Credit Loan which
     is made after the applicable  deadline therefor,  as set forth above, shall
     be deemed to have been made at the  opening  of  business  on the then next
     Business Day or Eurodollar Business Day, as applicable.
          (b) The Lead Borrower may request that the Agent cause the issuance by
     the Issuer of L/C's for the account of the Borrowers as provided in Section
     2:2-19.

<PAGE>29

          (c) The Agent may rely on any request for a loan or advance,  or other
     financial accommodation under the Revolving Credit which the Agent, in good
     faith,  believes  to have been made by a Person duly  authorized  to act on
     behalf of the Lead Borrower and may decline to make any such requested loan
     or advance,  or issuance,  or to provide any such  financial  accommodation
     pending the Agent's being furnished with such documentation concerning that
     Person's authority to act as may be reasonably satisfactory to the Agent.
          (d) A  request  by the Lead  Borrower  for loan or  advance,  or other
     financial accommodation under the Revolving Credit shall be irrevocable and
     shall constitute certification by each Borrower that as of the date of such
     request, each of the following is true and correct:
               (v) Except for the  commencement  of the  Proceedings,  there has
          been no material adverse change in the Borrowers'  financial condition
          from the most  recent  financial  information  furnished  Agent or any
          Revolving Credit Lender pursuant to this Agreement.
               (vi) If on any day that an advance is made  hereunder,  any sales
          tax owed by the Borrowers is due and payable and remains unpaid,  then
          some or all of such advance  shall be applied to cover the  Borrowers'
          payment of such sales tax.
               (vii) Each  representation  which is made herein or in any of the
          Loan  Documents is then true and complete in all material  respects as
          of and as if made on the date of such request.
               (viii) No Borrower is in Default.

     (a) If, at any time or from time to time, any Borrower is in Default:
               (ix) The Agent may suspend the Revolving Credit immediately.
               (x) Neither the Agent nor any  Revolving  Credit  Lender shall be
          obligated, during such suspension, to make any loans or advance, or to
          provide any financial  accommodation hereunder or to seek the issuance
          of any L/C.
               (xi) The Agent may  suspend  the  right of the Lead  Borrower  to
          request  any  Eurodollar  Loan or to convert any Base Margin Loan to a
          Eurodollar Loan.


     27- MAKING OF REVOLVING CREDIT LOANS.
          (a) A loan or advance under the Revolving  Credit shall be made by the
     transfer of the proceeds of such loan or advance to the  Operating  Account
     or as otherwise instructed by the Lead Borrower.
          (b) A loan or  advance  shall be deemed  to have  been made  under the
     Revolving  Credit (and the Borrowers shall be indebted to the Agent and the
     Revolving  Credit  Lenders  for  the  amount  thereof  immediately)  at the
     following:
               (ii) The Agent's  initiation  of the  transfer of the proceeds of
          such  loan  or  advance  in  accordance   with  the  Lead   Borrower's
          instructions  (if such loan or  advance is of funds  requested  by the
          Lead Borrower).
               (iii) The charging of the amount of such loan to the Loan Account
          (in all other circumstances).

          (a) There shall not be any  recourse to or  liability  of the Agent or
     any Revolving Credit Lender, on account of:
               (iv) Any delay beyond the reasonable  control of the Agent in the
          making of any loan or advance requested under the Revolving Credit.
               (v) Any  delay  by any bank or other  depository  institution  in
          treating the proceeds of any such loan or advance as collected funds.
               (vi) Any delay in the  receipt,  and/or any loss,  of funds which
          constitute  a loan or advance  under the  Revolving  Credit,  the wire
          transfer of which was properly  initiated  by the Agent in  accordance
          with wire instructions provided to the Agent by the Lead Borrower.



<PAGE>30

     28- SWINGLINE LOANS.
          (a) For ease of  administration,  Base Margin Loans may be made by the
     SwingLine  Lender (in the aggregate,  the "SwingLine  Loans") in accordance
     with the procedures set forth in this Agreement for the making of loans and
     advances under the Revolving  Credit.  The unpaid principal  balance of the
     SwingLine  Loans  shall not at any one time be in  excess of the  SwingLine
     Loan Ceiling.
          (b) The aggregate  unpaid  principal  balance of SwingLine Loans shall
     bear  interest at the rate  applicable  to Base  Margin  Loans and shall be
     repayable as a loan under the Revolving Credit.
          (c) The  Borrowers'  obligation  to  repay  SwingLine  Loans  shall be
     evidenced  by a Note  in the  form of  EXHIBIT  2:2-8(c),  annexed  hereto,
     executed by the Borrowers, and payable to the SwingLine Lender. Neither the
     original nor a copy of that Note shall be required,  however,  to establish
     or prove any  Liability.  The Borrowers  shall execute a replacement of any
     SwingLine  Note which has been lost,  mutilated,  or destroyed  thereof and
     deliver such replacement to the SwingLine Lender.
          (d) For all purposes of this Loan  Agreement,  the SwingLine Loans and
     the Borrowers'  obligations to the SwingLine  Lender  constitute  Revolving
     Credit Loans and are secured as "Liabilities".
          (e) SwingLine  Loans shall be subject to periodic  settlement with the
     Revolving Credit Lenders as provided in this Agreement.


     29- THE LOAN ACCOUNT.
          (a) An account  ("Loan  Account")  shall be opened on the books of the
     Agent in which a record shall be kept of all loans and advances  made under
     the Revolving Credit.
          (b) The Agent shall also keep a record  (either in the Loan Account or
     elsewhere, as the Agent may from time to time elect) of all interest, fees,
     service charges,  costs,  expenses,  and other debits owed to the Agent and
     each  Revolving  Credit  Lender on  account of the  Liabilities  and of all
     credits against such amounts so owed.
          (c) All credits  against the  Liabilities  shall be  conditional  upon
     final payment to the Agent for the account of each Revolving  Credit Lender
     of the items giving rise to such  credits.  The amount of any item credited
     against  the  Liabilities  which is charged  back  against the Agent or any
     Revolving  Credit  Lender  for  any  reason  or is not so paid  shall  be a
     Liability and shall be added to the Loan  Account,  whether or not the item
     so charged back or not so paid is returned.
          (d) Except as otherwise  provided herein,  all fees,  service charges,
     costs,  and  expenses for which any  Borrower is  obligated  hereunder  are
     payable on demand. In the determination of Availability, the Agent may deem
     fees, service charges,  accrued interest,  and other payments which will be
     due and payable between the date of such determination and the first day of
     the then next succeeding  month as having been advanced under the Revolving
     Credit whether or not such amounts are then due and payable.
          (e) The Agent,  without the request of the Lead Borrower,  may advance
     under the Revolving  Credit any interest,  fee,  service  charge,  or other
     payment to which the Agent or any Revolving  Credit Lender is entitled from
     any  Borrower  pursuant  hereto and may charge the same to the Loan Account
     notwithstanding that such amount so advanced may result in Borrowing Base's
     being exceeded. Such action on the part of the Agent shall not constitute a
     waiver of the Agent's rights and each Borrower's  obligations under Section
     2:2-11(b).  Any amount which is added to the principal  balance of the Loan
     Account as provided in this  Section  2:2-9(e)  shall bear  interest at the
     interest rate then and thereafter applicable to Base Margin Loans.

<PAGE>31

          (f) Any  written  statement  rendered  by the  Agent or any  Revolving
     Credit  Lender to the Lead Borrower  concerning  the  Liabilities  shall be
     reviewed  promptly  by the  Lead  Borrower.  To the  extent  that  the Lead
     Borrower  believes  that there is any  mistake in such  statement  the Lead
     Borrower shall promptly provide the Agent with written  objection  thereto,
     which written objection shall indicate, with particularity,  the reason for
     such  objection.  The  Loan  Account  and the  Agent's  books  and  records
     concerning the loan  arrangement  contemplated  herein and the  Liabilities
     shall be prima facie evidence of the items described therein.


     210- THE REVOLVING CREDIT NOTES.  The Borrowers'  obligation to repay loans
and advances under the Revolving Credit, with interest as provided herein, shall
be evidenced by Notes (each,  a "Revolving  Credit Note") in the form of EXHIBIT
2:2-10, annexed hereto, executed by each Borrower, one payable to each Revolving
Credit  Lender.  Neither the  original nor a copy of any  Revolving  Credit Note
shall be required,  however,  to establish or prove any Liability.  In the event
that any  Revolving  Credit Note is ever lost,  mutilated,  or  destroyed,  each
Borrower,  at the request of the Agent, shall execute a replacement  thereof and
deliver such replacement to the Agent.



<PAGE>32

     211- PAYMENT OF THE LOAN ACCOUNT.
     (a) The Borrowers may repay all or any portion of the principal  balance of
the Loan Account from time to time until the Termination Date.
     (b) The Borrowers, without notice or demand from the Agent or any Revolving
Credit  Lender,  shall pay the Agent that  amount,  from time to time,  which is
necessary so that there is no OverLoan outstanding.
     (c) The Borrowers shall repay the Revolving Credit:
          (ii) in an  amount  equal to the  proceeds  realized  from  the  sale,
     refinancing,  or other disposition of, or realization upon, any Collateral;
     and
          (iii) in  accordance  with the  provisions  of  Article 7 hereof.  All
     amounts  prepaid under this Section  2:2-11(c) may be reborrowed  under the
     Revolving  Credit,  subject to and in  accordance  with,  the terms of this
     Agreement.

     (a) The Borrowers  shall repay the then entire  unpaid  balance of the Loan
Account and all other Liabilities on the Termination Date.
     (b) The Agent shall follow the Lead  Borrower's  timely  instructions  with
respect to the application of payments against  Eurodollar Loans. In the absence
of timely instructions from the Lead Borrower, the Agent shall endeavor to cause
the application of payments (if any), pursuant to Sections 2:2-11(a) and
2:2-11(b) against Eurodollar Loans then outstanding in such manner as results in
the least cost to the Borrowers, but shall not have any affirmative obligation
to do so nor liability on account of the Agent's failure to have done so. In no
event shall action or inaction taken by the Agent excuse any Borrower from any
indemnification obligation under Section 2:2-11(f).
     (c) The  Borrowers  shall  indemnify  the Agent and each  Revolving  Credit
Lender and hold the Agent and each  Revolving  Credit  Lender  harmless from and
against any loss,  cost or expense  (including  amounts  payable by the Agent or
such Revolving  Credit Lender on account of "breakage fees"  (so-called))  which
the Agent or such  Revolving  Credit  Lender may  sustain  or incur  (including,
without limitation,  by virtue of acceleration after the occurrence of any Event
of Default) as a consequence of the following:
          (iv) Default by any Borrower in payment of the principal  amount of or
     any interest on any Eurodollar Loan as and when due and payable,  including
     any such loss or expense  arising  from  interest  or fees  payable by such
     Revolving Credit Lender in order to maintain its Eurodollar Loans.
          (v) Default by any Borrower in making a borrowing or conversion  after
     the  Borrower  has  given (or is  deemed  to have  given) a  request  for a
     Revolving  Credit Loan or a request to convert a Revolving Credit Loan from
     one applicable interest rate to another.
          (vi) The making of any payment on a  Eurodollar  Loan or the making of
     any conversion of any such  Eurodollar  Loan to a Base Margin Loan on a day
     that is not the last day of the  applicable  Interest  Period with  respect
     thereto.



<PAGE>33

     212- INTEREST ON REVOLVING CREDIT LOANS.
     (a) Each Revolving  Credit Loan shall bear interest at the Base Margin Rate
unless  timely  notice is given (as provided in Section  2:2-6) that the subject
Revolving  Credit Loan (or a portion  thereof) is, or is to be  converted  to, a
Eurodollar Loan.
     (b) Each Revolving  Credit Loan which  consists of a Eurodollar  Loan shall
bear interest at the applicable Eurodollar Rate.
     (c) Subject to, and in accordance  with, the provisions of this  Agreement,
the Lead Borrower may cause all or a part of the unpaid principal balance of the
Loan Account to bear interest at the Base Margin Rate or the Eurodollar  Rate as
specified from time to time by the Lead Borrower.
     (d) The Lead Borrower shall not select, renew, or convert any interest rate
for a  Revolving  Credit  Loan such that,  in  addition  to interest at the Base
Margin Rate,  there are more than five (5)  Eurodollar  Rates  applicable to the
Revolving Credit Loans at any one time.
     (e) The Borrowers  shall pay accrued and unpaid  interest on each Revolving
Credit Loan in arrears as follows:
          (ii) On the applicable Interest Payment Date for that Revolving Credit
     Loan.
          (iii) On the Termination Date and on the End Date.
          (iv)  Following  the  occurrence  of any Event of  Default,  with such
     frequency as may be determined by the Agent.

     (a)  Following  the  occurrence of any Event of Default (and whether or not
the Agent exercises the Agent's rights on account thereof), all Revolving Credit
Loans shall bear interest,  at the option of the Agent or at the  instruction of
the SuperMajority  Lenders at rate which is the aggregate of the rate applicable
to Base Margin Loans plus two Percent (2%) per annum.


     213- REVOLVING CREDIT COMMITMENT FEE. In consideration of the commitment to
make loans and advances to the  Borrowers  under the  Revolving  Credit,  and to
maintain sufficient funds available for such purpose,  there has been earned and
the Borrowers  shall pay the "Revolving  Credit  Commitment Fee" (so referred to
herein) in the amount and payable as provided in the Fee Letter.


     214- AGENT'S FEE. In addition to any other fee or expense to be paid by the
Borrowers on account of the Revolving Credit,  the Borrowers shall pay the Agent
the " Agent's Fee" at the times and in the amounts as set forth the Fee Letter.



<PAGE>34

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


     216- EARLY  TERMINATION FEE. In the event that the Termination Date occurs,
for any  reason,  prior  to the  Maturity  Date  (other  than by  virtue  of the
Borrower's  refinancing of the  Liabilities  with FRFI or Fleet National Bank or
any of their respective  Affiliates),  the Borrowers shall pay to the Agent, for
the  benefit of the  Revolving  Credit  Lenders,  the  "Revolving  Credit  Early
Termination  Fee" (so  referred  to herein)  in an amount  equal to 1.00% of the
Revolving Credit Ceiling in effect on the Termination Date.


     217- CONCERNING FEES.
     (a) In addition  to any other right to which the Agent is then  entitled on
account thereof, the Agent may assess an additional fee payable by the Borrowers
on account  of the  accommodation,  from time to time,  by the Agent of the Lead
Borrower's  request  that the Agent  depart or dispense  with one or more of the
administrative  provisions of this Agreement  and/or any  Borrower's  failure to
comply with any of such provisions.
     (b) By way of non-exclusive  example, the Agent may assess a fee on account
of any of the following:
               (ii) The Borrowers' failure to pay that amount which is necessary
          so  that  no  OverLoan  is  outstanding  (as  required  under  Section
          2:2-11(b) hereof).
               (iii) The  providing  of a loan or  advance  under the  Revolving
          Credit or charging of the Loan Account such that an OverLoan is made.
               (iv) The foreshortening of any of the time frames with respect to
          the making of Revolving Credit Loans as set forth in Section 2:2-6.
               (v) The Lead Borrower's failure to provide a financial  statement
          or report within the  applicable  time frame  provided for such report
          under Article 5: hereof.

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


     218- AGENT'S AND REVOLVING CREDIT LENDERS' DISCRETION.
     (a) Each  reference in the Loan  Documents to the exercise of discretion or
the like by the Agent or any  Revolving  Credit Lender shall be to such Person's
reasonable  exercise of its  judgment,  in good faith (which shall be presumed),
based upon such  Person's  reasonable  consideration  of any such factors as the
Agent or that Revolving Credit Lender,  taking into account information of which
that Person then has actual knowledge, believes:
               (ii) Will or reasonably  could be expected to affect the value of
          the Collateral, the enforceability of the Agent's Collateral Interests
          therein,  or the amount which the Agent would likely realize therefrom
          (taking into account  delays which may possibly be  encountered in the
          Agent's realizing upon the Collateral and likely Costs of Collection).

<PAGE>35

               (iii)   Indicates  that  any  report  or  financial   information
          delivered to the Agent or any Revolving  Credit Lender by or on behalf
          of any  Borrower  is  incomplete,  inaccurate,  or  misleading  in any
          material   manner  or  was  not  prepared  in   accordance   with  the
          requirements of this Agreement.
               (iv) Suggests that any Borrower is in Default.

     (a) In the exercise of such judgment,  the Agent and each Revolving  Credit
Lender also may take into account any of the following factors:
               (v) Those included in, or tested by, the definitions of "Eligible
          Accounts," "Eligible Inventory",  "Eligible L/C Inventory",  "Eligible
          Receivables" and "Cost".
               (vi) The current  financial and business  climate of the industry
          in which each Borrower  competes  (having  regard for that  Borrower's
          position in that industry).
               (vii)  General  macroeconomic  conditions  which  have a material
          effect on the Borrowers' cost structure.
               (viii)  Material  changes  in or to the  mix  of  the  Borrowers'
          Inventory.
               (ix)  Seasonality  with respect to the  Borrowers'  Inventory and
          patterns of retail sales.
               (x) Such  other  factors as the Agent and each  Revolving  Credit
          Lender  determines  as  having a  material  bearing  on  credit  risks
          associated with the providing of loans and financial accommodations to
          the Borrowers.

     (a) The burden of  establishing  the failure of the Agent or any  Revolving
Credit Lender to have acted in a reasonable  manner in such Person's exercise of
such  discretion  shall be the  Borrowers'  and may be made  only by  clear  and
convincing evidence.


     219- PROCEDURES FOR ISSUANCE OF L/C'S.
     (a) The Lead  Borrower may request that the Agent cause the issuance by the
Issuer of L/C's for the account of any  Borrower.  Each such request shall be in
such manner as may from time to time be acceptable to the Agent.
     (b) The Agent will cause the  issuance of any L/C so  requested by the Lead
Borrower,  provided  that , at the time that the request is made,  the Revolving
Credit has not been suspended as provided in Section 2:2-6(g) and if so issued:
          (ii) The aggregate  Stated Amount of all L/C's (together with any L/Cs
     issued under the  Pre-Petition  Agreement,  to the extent such are not then
     deemed L/Cs  hereunder)  then  outstanding,  does not exceed Twenty Million
     Dollars ($20,000,000.00).
          (iii) The  expiry of the L/C is not later  than the  earlier of thirty
     (30) days prior to the Maturity Date or the following:
               (B) Standby's: One (1) year from initial issuance.
               (C) Documentary's: Sixty (60) days from issuance.

          (i) An OverLoan will not result from the issuance of the subject L/C.

     (a) Each Borrower shall execute such  documentation  to apply for an L/C as
may be required by the Issuer.

<PAGE>36

     (b) There shall not be any recourse to, nor  liability of, the Agent or any
Revolving Credit Lender on account of any of the following beyond the reasonable
control of the Agent:
          (ii) Any delay or refusal by an Issuer to issue an L/C:
          (iii) Any action or  inaction of an Issuer on account of or in respect
     to, any L/C.

     (a) The Borrowers shall reimburse the Issuer for the amount of any honoring
of a drawing  under an L/C on the same day on which such  honoring  takes place.
The Agent, without the request of any Borrower,  may advance under the Revolving
Credit (and charge to the Loan  Account)  the amount of any  honoring of any L/C
and other amount for which any Borrower,  the Issuer,  or the  Revolving  Credit
Lenders become  obligated on account of, or in respect to, any L/C. Such advance
shall be made whether or not any  Borrower is in Default or such  advance  would
result in an OverLoan.  Such action shall not constitute a waiver of the Agent's
rights under Section 2:2-11(b) hereof.


     220- FEES FOR L/C'S.
     (a) The Borrowers shall pay to the Agent,  for the benefit of the Revolving
Credit  Lenders,  a fee,  on account of L/C's,  the  issuance  of which had been
procured by the Agent,  monthly in arrears,  and on the Termination  Date and on
the End Date,  equal to the applicable  L/C Fees of the weighted  average Stated
Amount of all standby and documentary  L/C's, as applicable,  outstanding during
the period in respect of which such fee is being paid except that, following the
occurrence  of any Event of Default,  such fee shall be increased by two percent
(2%) per annum.
     (b) In addition to the fee to be paid as provided in Subsection  2:2-20(a),
above,  the Borrowers shall pay to the Agent (or to the Issuer,  if so requested
by Agent), on demand,  all issuance,  processing,  negotiation,  amendment,  and
administrative fees and other amounts charged by the Issuer on account of, or in
respect to, any L/C.
     (c) If any change in Applicable Law shall either:
               (ii)  impose,  modify or deem  applicable  any  reserve,  special
          deposit or similar  requirements  against letters of credit heretofore
          or  hereafter  issued  by any  Issuer  or with  respect  to which  any
          Revolving  Credit  Lender or any Issuer has an  obligation  to lend to
          fund drawings under any L/C; or
               (iii) impose on any Issuer any other  condition  or  requirements
          relating to any such letters of credit;
and  the  result  of  any  event   referred  to  in  Section   2:2-20(c)(i)   or
2:2-20(c)(ii),  above,  shall be to increase  the cost to any  Revolving  Credit
Lender or to any Issuer of issuing or  maintaining  any L/C (which  increase  in
cost  shall be the  result of such  Issuer's  reasonable  allocation  among that
Revolving  Credit  Lender's  or  Issuer's  letter  of  credit  customers  of the
aggregate of such cost increases resulting from such events),  then, upon demand
by the Agent and delivery by the Agent to the Lead Borrower of a certificate  of
an  officer  of the  subject  Revolving  Credit  Lender  or the  subject  Issuer
describing  such  change in law,  executive  order,  regulation,  directive,  or
interpretation  thereof,  its  effect on such  Revolving  Credit  Lender or such
Issuer, and the basis for determining such increased costs and their allocation,
the Borrowers shall immediately pay to the Agent, from time to time as specified
by the Agent,  such amounts as shall be  sufficient  to  compensate  the subject
Revolving  Credit  Lender or the subject  Issuer for such  increased  cost.  Any
Revolving Credit Lender's or any Issuer's  determination of costs incurred under
Section  2:2-20(c)(i) or  2:2-20(c)(ii),  above, and the allocation,  if any, of
such costs among the  Borrowers  and other  letter of credit  customers  of such
Revolving  Credit  Lender or such  Issuer,  if done in good faith and made on an
equitable  basis and in accordance  with such  officer's  certificate,  shall be
conclusive and binding on the Borrowers.
<PAGE>37


     221- CONCERNING L/C'S.
     (a) None of the Issuer, the Issuer's  correspondents,  any Revolving Credit
Lender, the Agent, or any advising,  negotiating, or paying bank with respect to
any L/C shall be responsible in any way for:
               (ii) The  performance  by any  beneficiary  under any L/C of that
          beneficiary's obligations to any Borrower.
               (iii) The form, sufficiency,  correctness, genuineness, authority
          of any  person  signing;  falsification;  or the legal  effect of; any
          documents  called for under any L/C if (with respect to the foregoing)
          such documents on their face appear to be in order.

     (a) The Issuer may honor, as complying with the terms of any L/C and of any
drawing thereunder, any drafts or other documents otherwise in order, but signed
or issued by an  administrator,  executor,  conservator,  trustee in bankruptcy,
debtor  in  possession,  assignee  for the  benefit  of  creditors,  liquidator,
receiver,  or other legal  representative of the party authorized under such L/C
to draw or issue such drafts or other documents.
     (b) Unless otherwise agreed to, in the particular  instance,  each Borrower
hereby authorizes any Issuer to:
               (iv) Select an advising bank, if any.
               (v) Select a paying bank, if any.
               (vi) Select a negotiating bank.

     (a) All directions, correspondence, and funds transfers relating to any L/C
are at the risk of the Borrowers.  The Issuer shall have discharged the Issuer's
obligations  under any L/C which, or the drawing under which,  includes  payment
instructions,  by the  initiation of the method of payment called for in, and in
accordance with, such instructions (or by any other commercially  reasonable and
comparable  method).  None of the Agent,  any Revolving  Credit  Lender,  or the
Issuer shall have any responsibility for any inaccuracy, interruption, error, or
delay in  transmission  or  delivery  by post,  telegraph  or cable,  or for any
inaccuracy of translation.
     (b) The Agent's,  each Revolving Credit Lender's,  and the Issuer's rights,
powers,  privileges and immunities  specified in or arising under this Agreement
are in addition to any heretofore or at any time hereafter  otherwise created or
arising, whether by statute or rule of law or contract.
     Except to the extent otherwise expressly provided hereunder or agreed to in
writing by the Issuer and the Lead Borrower,  documentary L/C's will be governed
by the Uniform  Customs and  Practice  for  Documentary  Credits,  International
Chamber of Commerce,  Publication No. 500, and standby L/C's will be governed by
International  Standby Practices ISP98 (adopted by the International  Chamber of
Commerce on April 6, 1998) and any respective  subsequent revisions thereof. The
obligations  of the  Borrowers  under this  Agreement  with respect to L/C's are
absolute,  unconditional,  and  irrevocable  and shall be performed  strictly in
accordance with the terms hereof under all circumstances,  whatsoever including,
without limitation, the following:
     (a)  Any lack of validity or enforceability or restriction,  restraint,  or
          stay in the  enforcement  of this  Agreement,  any L/C,  or any  other
          agreement or instrument relating thereto.
               (i) Any  Borrower's  consent  to any  amendment  or waiver of, or
          consent to the departure from, any L/C.
               (ii) The existence of any claim, set-off, defense, or other right
          which any Borrower may have at any time against the beneficiary of any
          L/C.



<PAGE>38

     222- CHANGED CIRCUMSTANCES.
     (a) The Agent may advise the Lead Borrower that the Agent has made the good
faith determination  (which  determination shall be final and conclusive) of any
of the following:
          (ii)  Adequate and fair means do not exist for  ascertaining  the rate
     for Eurodollar Loans.
          (iii) The  continuation of or conversion of any Revolving  Credit Loan
     to a  Eurodollar  Loan has  been  made  impracticable  or  unlawful  by the
     occurrence  of a contingency  that  materially  and  adversely  affects the
     applicable  market or the  compliance by the Agent or any Revolving  Credit
     Lender in good faith with any Applicable Law.
          (iv) The indices on which the interest rates for Eurodollar  Loans are
     based  shall no longer  represent  the  effective  cost to the Agent or any
     Revolving  Credit Lender for U.S. dollar  deposits in the interbank  market
     for deposits in which it regularly participates.

     (a) In the event that the Agent  advises the Lead Borrower of an occurrence
described in Section 2:2-22(a), then, until the Agent notifies the Lead Borrower
that the circumstances giving rise to such notice no longer apply:
          (v) The  obligation  of the Agent or each  Revolving  Credit Lender to
     make loans of the type affected by such changed  circumstances or to permit
     the Lead  Borrower  to  select  the  affected  interest  rate as  otherwise
     applicable to any Revolving Credit Loans shall be suspended.
          (vi) Any  notice  which the Lead  Borrower  had  given the Agent  with
     respect to any  Eurodollar  Loan, the time for action with respect to which
     has not  occurred  prior to the Agent's  having  given  notice  pursuant to
     Section 2:2-22(a), shall be deemed at the option of the Agent to not having
     been given.



<PAGE>39

     223- DESIGNATION OF LEAD BORROWER AS BORROWERS' AGENT.
     (a) Each  Borrower  hereby  irrevocably  designates  and  appoints the Lead
Borrower  as that  Borrower's  agent to  obtain  loans  and  advances  under the
Revolving Credit,  the proceeds of which shall be available to each Borrower for
those uses as those set forth in Section  2:2-1(d).  As the disclosed  principal
for its agent,  each Borrower shall be obligated to the Agent and each Revolving
Credit  Lender on account  of loans and  advances  so made  under the  Revolving
Credit as if made directly by the  Revolving  Credit  Lenders to that  Borrower,
notwithstanding  the manner by which such loans and advances are recorded on the
books and records of the Lead Borrower and of any Borrower.
     (b)  Each  Borrower  recognizes  that  credit  available  to it  under  the
Revolving  Credit is in excess of and on better  terms than it  otherwise  could
obtain on and for its own account  and that one of the  reasons  therefor is its
joining in the credit  facility  contemplated  herein with all other  Borrowers.
Consequently,   each  Borrower  hereby  assumes  and  agrees  to  discharge  all
Liabilities  of all other  Borrowers  as if the  Borrower so assuming  were each
other Borrower.
     (c) The Lead Borrower  shall act as a conduit for each Borrower  (including
itself,  as a  "Borrower")  on whose behalf the Lead  Borrower  has  requested a
Revolving Credit Loan.
     (d) The  proceeds of each loan and  advance  provided  under the  Revolving
Credit  which is  requested by the Lead  Borrower  shall be  deposited  into the
Operating  Account or as  otherwise  indicated  by the Lead  Borrower.  The Lead
Borrower  shall  cause the  transfer  of the  proceeds  thereof  to the  (those)
Borrower(s)  on whose  behalf such loan and advance  was  obtained.  Neither the
Agent nor any Revolving  Credit  Lender shall have any  obligation to see to the
application of such proceeds.



<PAGE>40

     224- LENDERS' COMMITMENTS
     (a)  Subject  to  Section  16:16-1  (which  provides  for  assignments  and
assumptions of commitments),  each Revolving Credit Lender's  "Revolving  Credit
Commitment Percentage",  and "Revolving Credit Dollar Commitment"  (respectively
so referred to herein) is set forth on EXHIBIT 2:2-24, annexed hereto.
     (b) The  obligations  of each  Revolving  Credit Lender are several and not
joint. No Revolving  Credit Lender shall have any obligation to make any loan or
advance under the Revolving Credit in excess of the lesser of the following:
          (ii)  That  Revolving  Credit  Lender's  Revolving  Credit  Commitment
     Percentage of the subject loan or advance or of Availability.
          (iii)  that  Revolving   Credit  Lender's   Revolving   Credit  Dollar
     Commitment.

     (a) No Revolving Credit Lender shall have any liability to the Borrowers on
account of the failure of any other Revolving  Credit Lender to provide any loan
or  advance  under  the  Revolving  Credit  nor  any  obligation  to make up any
shortfall which may be created by such failure.
     (b) The Revolving Credit Dollar  Commitments,  Revolving Credit  Commitment
Percentages, and identities of the Revolving Credit Lenders may be changed, from
time to time by the  reallocation  or  assignment  of  Revolving  Credit  Dollar
Commitments and Revolving Credit  Commitment  Percentages  amongst the Revolving
Credit Lenders or with other Persons who determine to become  "Revolving  Credit
Lenders", as described in Section 16:16-1,  below,  provided,  however unless an
Event of Default has  occurred  (in which  event,  no consent of any Borrower is
required)  subsequent  to the  completion  of  the  initial  syndication  by the
Syndication Agent, any assignment to a Person not then a Revolving Credit Lender
shall  be  subject  to  the  prior  consent  of the  Lead  Borrower  (not  to be
unreasonably  withheld),  which  consent  will be deemed  given  unless the Lead
Borrower  provides  the Agent  with  written  objection,  not more than five (5)
Business Days after the Agent shall have given the Lead Borrower  written notice
of a proposed assignment).
     (c) . Upon written  notice given the Lead Borrower from time to time by the
Agent, of any assignment or allocation referenced in Section 2:2-24(d):
          (iv) Each  Borrower  shall execute one or more  replacement  Revolving
     Credit Notes to reflect such changed  Revolving Credit Dollar  Commitments,
     Revolving Credit Commitment  Percentages,  and identities and shall deliver
     such  replacement  Revolving  Credit  Notes to the  Agent  (which  promptly
     thereafter shall deliver to the Lead Borrower the Revolving Credit Notes so
     replaced).
          (v) Such change shall be effective  from the effective  date specified
     in such written  notice and any Person added as a Revolving  Credit  Lender
     shall have all rights,  privileges,  and obligations of a Revolving  Credit
     Lender hereunder  thereafter as if such Person had been a signatory to this
     Agreement and any other Loan Document to which a Revolving Credit Lender is
     a signatory  and any Person  removed as a Revolving  Credit Lender shall be
     relieved of any  obligations  or  responsibilities  of a  Revolving  Credit
     Lender hereunder thereafter arising.



<PAGE>41

     225- REDUCTION  OF REVOLVING  CREDIT  CEILING.  Upon at least two Business
Days' prior written  notice to the Agent at any time  commencing  after entry of
the Final Order,  the Borrowers  may  permanently  reduce the  Revolving  Credit
Ceiling,  prior  to the  permanent  reduction  set  forth in the  definition  of
Revolving  Credit  Ceiling,  provided  that no such  reduction  shall  cause the
Revolving  Credit Ceiling to be less than  $100,000,000.00.  Each such reduction
shall be in the  principal  amount  of  $5,000,000.00  or an  integral  multiple
thereof. Each such reduction shall be applied ratably to the Commitments of each
Lender under the Revolving  Credit and shall be irrevocable  when given.  At the
time of each such  reduction,  the  Borrowers  shall pay to the Agent all Unused
Line Fees accrued on the amount so reduced and any amount by which the principal
balance of the  Revolving  Credit  Loans and Stated  Amount of L/Cs  exceeds the
Revolving Credit Ceiling as so reduced.


Article 3:- CONDITIONS PRECEDENT:

     As a condition to the effectiveness of this Agreement, the establishment of
the  Revolving  Credit,  and the making of the first  loan  under the  Revolving
Credit, each of the documents and conditions respectively described below, shall
have been delivered to the Agent, or satisfied (in form and substance reasonably
satisfactory to the Agent):


     31- CORPORATE DUE DILIGENCE.
     (a)   Certificates   of  corporate   good   standing  for  each   Borrower,
respectively,  issued by the  Secretary  of State  for the  state in which  that
Borrower is incorporated.
     (b)  Certificates  of due  qualification,  in good standing,  issued by the
Secretary(ies) of State of each State in which the nature a Borrower's  business
conducted or assets owned could require such qualification.
     (c)  Certificates  of  each  Borrower's  secretary  of  the  due  adoption,
continued  effectiveness,  and  setting  forth  the  texts  of,  each  corporate
resolution  adopted in connection with the establishment of the loan arrangement
contemplated  by the Loan Documents and attesting to the true signatures of each
Person authorized as a signatory to any of the Loan Documents.


     32- OPINION.  An opinion of counsel to the Borrowers in the form of EXHIBIT
3:3-2, annexed hereto..


     33- ADDITIONAL DOCUMENTS.  Such additional instruments and documents as the
Agent or its counsel reasonably may require or request.


     34- BORROWING  ORDER.  There shall have been entered in the  Proceedings an
Interim Borrowing Order.



<PAGE>42

     35- REPRESENTATIONS AND WARRANTIES.  Each of the representations made by or
on  behalf  of each  Borrower  in this  Agreement  or in any of the  other  Loan
Documents or in any other report,  statement,  document, or paper provided by or
on behalf of each Borrower  shall be true and complete in all material  respects
as of the date as of which such representation or warranty was made.


     36- CONSENTS AND  APPROVALS.  All  necessary  consents and approvals to the
transactions   contemplated  hereby  shall  have  been  obtained  and  shall  be
reasonably satisfactory to the Agent.

     37- NO  DEFAULTS  UNDER  APPLICABLE  LAW  OR  MATERIAL   AGREEMENTS.   The
consummation of the transactions  contemplated  hereby shall not (a) violate any
Requirement  of Law or (b)  conflict  with,  or result in a default  or event of
default under, any material agreement of the Borrowers.


     38- NO  LITIGATION.   There  shall  not  exist  any  litigation  or  other
proceedings,  the  result of which has or is likely to have a  Material  Adverse
Effect on any Borrower.


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


     310- NO  MATERIAL  ADVERSE  CHANGE.  Except  for the  commencement  of the
Proceedings,  no event shall have occurred or failed to occur,  which occurrence
or failure has or is reasonably likely to have a materially  adverse effect upon
the Borrower's  financial  condition when compared with such financial condition
at August 4, 2001.


     311- MINIMUM  DAY  ONE  EXCESS   AVAILABILITY.   On  the  Petition   Date,
Availability,  after  giving  effect to the first  funding  under the  Revolving
Credit;  post-petition  accounts  payable  which are  beyond  credit  terms then
accorded  the  Borrower;  overdrafts;  any charges to the Loan  Account  made in
connection with the  establishment of the credit facility  contemplated  hereby;
and L/C's to be issued at, or immediately subsequent to, such establishment,  is
not less than $30,000,000.00.


     312- BORROWER NOT IN DEFAULT. No Borrower is in Default.


     313- PROJECTIONS.  The Agent shall have  received  and be  satisfied  with
detailed  one-year  financial  projections  and  business  assumptions  for  the
Borrower.



<PAGE>43

     314- OTHER  INFORMATION.  Any other  documents set forth on EXHIBIT 3:3-14,
annexed  hereto  shall have been  received by the Agent and shall be in form and
substance reasonably satisfactory to the Agent.


     315- GOVERNMENT  REGULATIONS.  The  proposed  financing  is subject to the
condition  that no  material  changes in  governmental  regulations  or policies
affecting the Borrower,  the Agent or Lenders involved in this transaction occur
prior to Closing.


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


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


Article 4:- GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:

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


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


     42- DUE ORGANIZATION. AUTHORIZATION. NO CONFLICTS.
     (a) Each Borrower  presently is and hereafter shall remain in good standing
as a corporation  under the laws of the State in which it is  organized,  as set
forth in the Preamble to this Agreement and is and shall  hereafter  remain duly
qualified and in good  standing in every other State in which,  by reason of the
nature or location of each  Borrower's  assets or operation  of each  Borrower's
business,  such  qualification may be necessary,  except where the failure to so
qualify would not have a Material Adverse Effect.
     (b)  Each  Borrower's  respective   organizational   identification  number
assigned  to it by the State of its  incorporation  and its  respective  federal
employer identification number is stated on EXHIBIT 4:4-2, annexed hereto.

<PAGE>44

     (c) No Borrower shall change its State of organization;  any organizational
identification  number  assigned  to  that  Borrower  by  that  State;  or  that
Borrower's federal taxpayer identification number.
     (d) Each  Affiliate is listed on EXHIBIT  4:4-2.  The Lead  Borrower  shall
provide the Agent with prior written notice of any entity's  becoming or ceasing
to be an Affiliate.
     (e) Upon entry of the Interim Order,  each Borrower will have all requisite
power and  authority  to execute and deliver  all Loan  Documents  to which that
Borrower is a party and has and will  hereafter  retain all  requisite  power to
perform all Liabilities.
     (f) Upon entry of the Interim  Order,  the  execution  and delivery by each
Borrower  of  each  Loan  Document  to  which  it is a  party;  each  Borrower's
consummation of the transactions contemplated by such Loan Documents (including,
without  limitation,  the creation of  Collateral  Interests by that Borrower to
secure the  Liabilities);  each Borrower's  performance  under those of the Loan
Documents to which it is a party; the borrowings  hereunder;  and the use of the
proceeds thereof:
          (ii) Will be duly authorized by all necessary action.
          (iii) Will not,  contravene  in any material  respect any provision of
     any Requirement of Law or obligation of that Borrower.
          (iv)  Will  not  result  in the  creation  or  imposition  of,  or the
     obligation  to create or impose,  any  Encumbrance  upon any assets of that
     Borrower pursuant to any Requirement of Law or obligation,  except pursuant
     to the Loan Documents.

     (a) Based upon entry of the Interim  Order,  the Loan  Documents  have been
duly  executed  and  delivered  by each  Borrower  and are the legal,  valid and
binding  obligations  of each  Borrower,  enforceable  against each  Borrower in
accordance with their respective terms.


     43- TRADE NAMES.
     (a) EXHIBIT 4:4-3, annexed hereto, is a listing of:
               (ii) All  names  under  which any  Borrower  ever  conducted  its
          business after September 11, 1995.
               (iii) All Persons with whom any  Borrower  ever  consolidated  or
          merged,   or  from  whom  any  Borrower  ever  acquired  in  a  single
          transaction or in a series of related  transactions  substantially all
          of such Person's assets.

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



<PAGE>45

     44- INFRASTRUCTURE.
     (a) Each  Borrower  has and will  maintain a sufficient  infrastructure  to
conduct its business as presently  conducted and as contemplated to be conducted
following its execution of this Agreement.
     (b) Each  Borrower  owns and  possesses,  or has the right to use (and will
hereafter  own,  possess,  or have such  right to use) all  patents,  industrial
designs,  trademarks,  trade names,  trade styles,  brand names,  service marks,
logos, copyrights, trade secrets, know-how,  confidential information, and other
intellectual  or  proprietary  property of any third Person  necessary  for that
Borrower's conduct of that Borrower's business.
     (c) The  conduct by each  Borrower  of that  Borrower's  business  does not
presently  infringe (nor will any Borrower conduct its business in the future so
as to infringe) the patents, industrial designs,  trademarks, trade names, trade
styles, brand names, service marks, logos, copyrights,  trade secrets, know-how,
confidential  information,  or other intellectual or proprietary property of any
third Person, to the extent that any infringement  would have a Material Adverse
Effect.


     45- LOCATIONS.
     (a) The  Collateral,  and the  books,  records,  and  papers of  Borrowers'
pertaining thereto, are kept and maintained solely at the following locations:
          (ii) The Lead  Borrower's  chief  executive  offices  which  are at 20
     Federal Plaza West, Youngstown, Ohio 44503.
          (iii)  Those  locations  which are  listed on EXHIBIT  4:4-5,  annexed
     hereto,  which EXHIBIT  includes,  with respect to each such location,  the
     name and address of the  landlord on the Lease which  covers such  location
     (or an  indication  that a Borrower  owns the subject  location) and of all
     service  bureaus with which any such records are  maintained  and the names
     and addresses of each of then Borrowers' landlords.

     (a)  Notwithstanding  anything  herein to the  contrary,  the Borrowers may
remove  and  destroy  records  and  papers of the  Borrowers  pertaining  to the
Collateral to the extent that it is consistent  with  practices of the Borrowers
in effect as of the Petition Date.
     (b) No  Borrower  shall  remove  any  of the  Collateral  from  said  chief
executive  office or those  locations  listed on  EXHIBIT  4:4-5  except for the
following purposes:
          (iv) To  accomplish  sales of  Inventory  in the  ordinary  course  of
     business.
          (v) In  connection  with the conduct of any  Permitted  Store  Closing
     Sales.
          (vi) To move Inventory from one such location to another such location
     of the same Borrower.
          (vii) To  utilize  such of the  Collateral  as is  removed  from  such
     locations in the ordinary course of business (such as motor vehicles).

     (a) No  Borrower  will  execute  any Lease  other  than  where  each of the
following conditions is satisfied:
          (viii) Such execution is in the ordinary course of business.
          (ix) Neither such execution nor any Borrower's acting under such Lease
     results in any Borrower's becoming in Default.
          (x) Not less  than  fifteen  (15)  days  prior  written  notice  (with
     reasonable  particularity)  is given to the Agent of the  execution  of the
     subject Lease.

<PAGE>46

          (xi) Such execution  will not result in the Borrowers'  opening of one
     or more  Stores,  if the  opening  of such  Store or  Stores  is  otherwise
     prohibited by this Agreement.

     (a) Each  Borrower  may alter,  modify,  or amend any Lease in the ordinary
course  of its  business  ;  provided  that  such  alteration,  modification  or
amendment does not cause any Borrower to become in Default.
     (b) During any fiscal year  during  which this  Agreement  is in effect the
Borrowers  may open and/or  relocate  those  number of Stores  reflected  in the
forecast  furnished to the Agent,  provided that such opening and/or  relocation
otherwise complies with this Agreement.
     (c) On or  before  October  12,  2001,  or as  extended  in the  reasonable
discretion of the Agent, the Borrowers shall obtain an order from the Bankruptcy
Court,  acceptable to the Agent,  approving and  authorizing the Permitted Store
Closing Sales.  Other than the Permitted Store Closing Sales the Borrowers shall
not close any additional Stores without the prior written consent of the Agent.
     (d) Except as  otherwise  disclosed  pursuant  to, or  permitted  by,  this
Section 4:4-5, no tangible  personal  property of any Borrower is in the care or
custody of any third party or stored or  entrusted  with a bailee or other third
party and none shall hereafter be placed under such care,  custody,  storage, or
entrustment.


     46- TITLE TO ASSETS.
     (a) The  Borrowers  are,  and shall  hereafter  remain,  the  owners of the
Collateral free and clear of all  Encumbrances  with the exceptions of Permitted
Encumbrances.
     (b) No Borrower  has, and none shall,  have,  possession of any property on
consignment to that Borrower other than such property disclosed in the Borrowing
Base Certificate.
     (c) No Borrower  shall  acquire or obtain the right to use any Equipment in
which Equipment any third party has an interest, except for:
          (ii) Equipment which is used to conduct that Borrower's business.
          (iii)  Equipment  with  respect  to which the Agent  has  received  an
     agreement  (substantially  in the  form of  EXHIBIT  4:4-6(c)(ii),  annexed
     hereto) with the third party which has an interest in such Equipment.


     47- INDEBTEDNESS.  The Borrowers do not and shall not  hereafter  have any
Indebtedness with the exceptions of:
     (a) Any Indebtedness on account of the Revolving Credit.
     (b) The Indebtedness (if any) listed on EXHIBIT 4:4-7, annexed hereto.
     (c)  Indebtedness  incurred in connection with the financing or refinancing
of any Equipment and real estate.
     (d) Indebtedness incurred in connection with loans made among Borrowers.
     (e) Indebtedness  subordinated to the  Liabilities,  in such amounts and on
such terms and  conditions as are acceptable to the Agent incurred in connection
with Permitted Encumbrances.



<PAGE>47

     48- INSURANCE.
     (a) EXHIBIT 4:4-8,  annexed hereto, is a schedule of all insurance policies
owned by the Borrowers or under which any Borrower is the named insured. Each of
such policies is in full force and effect. Neither the issuer of any such policy
nor any  Borrower  is in  material  default or  material  violation  of any such
policy.
     (b) The Borrowers shall have and maintain at all times  insurance  covering
such risks,  in such  amounts,  containing  such terms,  in such form,  for such
periods, and written by such companies as may be satisfactory to the Agent.
     (c) All insurance  carried by the Borrowers  shall provide for a minimum of
thirty  (30)  days'  written  notice of  cancellation  to the Agent and all such
insurance  which covers the Collateral  shall include an endorsement in favor of
the Agent, which endorsement shall provide that the insurance,  to the extent of
the Agent's interest therein, shall not be impaired or invalidated,  in whole or
in part,  by reason of any act or neglect of any  Borrower  or by the failure of
any Borrower to comply with any warranty or condition of the policy.
     (d) The  coverage  reflected  on  EXHIBIT  4:4-8  presently  satisfies  the
foregoing requirements, it being recognized by each Borrower, however, that such
requirements may change hereafter to reflect changing circumstances.
     (e) The Lead  Borrower  shall  furnish  the  Agent  from  time to time with
certificates or other evidence satisfactory to the Agent regarding compliance by
the Borrowers with the foregoing requirements.
     (f) In the event of the failure by the  Borrowers to maintain  insurance as
required herein, the Agent, at its option, may obtain such insurance,  provided,
however,  the Agent's obtaining of such insurance shall not constitute a cure or
waiver of any Event of  Default  occasioned  by the  Borrowers'  failure to have
maintained such insurance.


     49-  LICENSES.  Each  license,  distributorship,   franchise,  and  similar
agreement  issued to, or to which any  Borrower  is a party is in full force and
effect in all material respects. No party to any such license or agreement is in
default or violation  thereof  which would have a Material  Adverse  Effect.  No
Borrower has received any notice or threat of  cancellation  of any such license
or agreement where such cancellation could have a Material Adverse Effect.



<PAGE>48

     410- LEASES. EXHIBIT 4:4-10, annexed hereto, is a schedule of all presently
effective Capital Leases.  (Exhibit 4:4-5 includes a list of all other presently
effective  Leases).  Each of such Leases and Capital Leases is in full force and
effect in all material respects.  No party to any such Lease or Capital Lease is
in default or violation of any such Lease or Capital Lease (other than a default
resulting  from the  filing of the  Proceedings)  which  would  have a  Material
Adverse Effect. No Borrower has received any notice or threat of cancellation of
any such Lease or Capital  Lease where such  cancellation  could have a Material
Adverse Effect.  Each Borrower hereby  authorizes the Agent at any time and from
time to time to contact any of the Borrowers' respective landlords in accordance
with  commercially   reasonable  lending  practices  in  order  to  confirm  the
Borrowers'  continued  compliance  with the terms and conditions of the Lease(s)
between the subject  Borrower  and that  landlord  and to discuss  such  issues,
concerning the subject  Borrower's  occupancy under such Lease(s),  as the Agent
may determine.


     411-  REQUIREMENTS  OF LAW.  Each Borrower is in compliance in all material
respects with, and shall hereafter  comply with and use its assets in compliance
in all material  respects with, all Requirements of Law if the failure to comply
with any Requirements of Law would have a Material  Adverse Effect.  No Borrower
has received any notice of any  violation  of any  Requirement  of Law where the
effect of such violation could have a Material Adverse Effect.


     412- LABOR RELATIONS. Except as described in EXHIBIT 4:4-12:

     (a) No Borrower has been,  and none is presently a party to any  collective
bargaining or other labor contract.
     (b) There is not presently pending and, to any Borrower's knowledge,  there
is not threatened any of the following:
          (ii) Any  strike,  slowdown,  picketing,  work  stoppage,  or employee
     grievance process.
          (iii) Any proceeding against or affecting any Borrower relating to the
     alleged  violation of any Applicable  Law pertaining to labor  relations or
     before National Labor Relations  Board,  the Equal  Employment  Opportunity
     Commission,  or any comparable governmental body,  organizational activity,
     or other labor or  employment  dispute  against or affecting  any Borrower,
     which,  if  determined  adversely  to that  Borrower  could have a Material
     Adverse Effect on that Borrower
          (iv) Any lockout of any  employees by any Borrower (and no such action
     is contemplated by any Borrower).
          (v) Any application for the  certification of a collective  bargaining
     agent.

     (a) No event has occurred or  circumstance  exists which could  provide the
basis for any work stoppage or other labor dispute.
     (b) Each Borrower:
          (vi) Has complied in all material  respects  with all  Applicable  Law
     relating to employment,  equal employment  opportunity,  nondiscrimination,
     immigration,  wages, hours, benefits, collective bargaining, the payment of
     social  security and similar  taxes,  occupational  safety and health,  and
     plant closing, if the failure to comply with any such Applicable Laws would
     have a Material Adverse Effect.
          (vii) Is not liable for the payment of more than a de minimius  amount
     of  compensation,  damages,  taxes,  fines,  penalties,  or other  amounts,
     however  designated,  for  that  Borrower's  failure  to  comply  with  any
     Applicable Law referenced in Section 4:4-12(d)(i), the failure of which had
     or has a Material Adverse Effect.



<PAGE>49

     413- MAINTAIN PROPERTIES. The Borrowers shall:
     (a) Keep the Collateral in good order and repair (ordinary  reasonable wear
and tear and insured casualty excepted).
     (b) Not suffer or cause the waste or  destruction  of any material  part of
the Collateral.
     (c) Not use any  material  portion of the  Collateral  in  violation of any
policy of insurance thereon.
     (d) Not sell, lease, or otherwise  dispose of any of the Collateral,  other
than the following:
          (ii) The sale of Inventory in compliance with this Agreement.
          (iii) The disposal of Equipment which is obsolete,  worn out,  damaged
     beyond  repair,  or no longer  useful in the business of a Borrower,  which
     Equipment  is replaced to the extent  necessary  to preserve or improve the
     operating efficiency of any Borrower.
          (iv) The turning over to the Agent of all Receipts as provided herein.


     414- TAXES.
     (a) With respect to the Borrowers' federal,  state, and local tax liability
and obligations:
          (ii) The Lead Borrower,  in compliance  with all  Applicable  Law, has
     properly  filed  all  returns  due to be  filed  up to  the  date  of  this
     Agreement.
          (iii) Except as described on EXHIBIT 4:4-14:
               (B) At no time  during the past three (3) years has any  Borrower
          received  from  any  taxing  authority  any  request  to  perform  any
          examination  of or with respect to any Borrower nor any other  written
          notice in any way  relating to any claimed  failure by any Borrower to
          materially  comply with all Applicable  Law concerning  payment of any
          taxes or other  amounts in the nature of taxes,  the  failure of which
          would have a Material Adverse Effect.
               (C) No agreement is extant which waives or extends any statute of
          limitations  applicable to the right of any taxing authority to assert
          a  deficiency  or make any other  claim for or in  respect  to federal
          income taxes.
               (D) No  issue  has  been  raised  in any tax  examination  of any
          Borrower which, by application of similar principles, reasonably could
          be expected to result in the assertion of a deficiency  for any fiscal
          year  open  for  examination,  assessment,  or  claim  by  any  taxing
          authority.

     (a) The Borrowers shall:  pay as they become due and payable,  and incurred
subsequent  to the  filing  of  the  Proceedings,  all  taxes  and  unemployment
contributions  and other  charges  of any kind or  nature  levied,  assessed  or
claimed  against any  Borrower or the  Collateral  by any person or entity whose
claim could  result in an  Encumbrance  upon any asset of any Borrower or by any
governmental  authority;  properly exercise any trust  responsibilities  imposed
upon any Borrower by reason of withholding  from  employees' pay or by reason of
any Borrower's  receipt of sales tax or other funds for the account of any third
party;  timely  make all  contributions  and other  payments  as may be required
pursuant  to any  Employee  Benefit  Plan now or  hereafter  established  by any
Borrower;  and timely file all tax and other returns and other reports with each
governmental authority to whom any Borrower is obligated to so file.



<PAGE>50

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


     416- ERISA.
     (a) Except as described in EXHIBIT 4:4-16(a),  neither any Borrower nor any
ERISA Affiliate, since September 11, 1995:
          (ii) Violated or failed to be in full  compliance  with any Borrower's
     Employee   Benefit  Plan  it  maintains,   except  where  such  failure  or
     noncompliance  could not reasonably be expected to have a Material  Adverse
     Effect.
          (iii) Failed timely to file all reports and filings  required by ERISA
     to be filed by any  Borrower,  except where such  failure or  noncompliance
     could not reasonably be expected to have a Material Adverse Effect.
          (iv) Engaged in any nonexempt "prohibited transactions" or "reportable
     events" (respectively as described in ERISA).
          (v)  Engaged  in, or  committed,  any act such  that a tax or  penalty
     reasonably  could be imposed upon any Borrower on account thereof  pursuant
     to ERISA.
          (vi) Accumulated any material cumulative funding deficiency within the
     meaning of ERISA.
          (vii)  Terminated any Employee  Benefit Plan such that a lien could be
     asserted  against any assets of any Borrower on account thereof pursuant to
     ERISA.
          (viii) Been a member of,  contributed to, or have any obligation under
     any Employee Benefit Plan which is a multiemployer  plan within the meaning
     of Section 4001(a) of ERISA.

     (a) Neither any Borrower nor any ERISA  Affiliate  shall ever engage in any
action of the type described in Section 4:4-16(a).



<PAGE>51

     417- HAZARDOUS MATERIALS.
     (a)  Except as  described  in  EXHIBIT  4:4-17(a),  no  Borrower  has since
September 11, 1995: (i) been held legally  responsible for any release or threat
of release of any Hazardous Material in violation of any Environmental  Laws, or
(ii) received  notification  of the incurrence of any expense in connection with
the assessment, containment, or removal of any Hazardous Material for which that
Borrower would be responsible.
     (b) Each  Borrower  shall:  (i) dispose of any  Hazardous  Material only in
compliance with all Environmental Laws and (ii) have possession of any Hazardous
Material  only  in the  ordinary  course  of  that  Borrower's  business  and in
compliance with all Environmental Laws.


     418- LITIGATION. Except as described in EXHIBIT 4:4-18, annexed hereto, and
the Proceedings,  there is not presently pending or threatened by or against any
Borrower any suit,  action,  proceeding,  or investigation  which, if determined
adversely to any Borrower, could have a Material Adverse Effect on a Borrower.


     419- DIVIDENDS. INVESTMENTS. CORPORATE ACTION. No Borrower shall:
     (a) Pay any cash dividend or make any other  distribution in respect of any
class of that Borrower's capital stock.
     (b) Own, redeem, retire, purchase, or acquire any of any Borrower's capital
stock other than in connection with the creation of a New Borrower (as to which,
see Section 4:4-20).
     (c) Invest in or purchase any stock or securities or rights to purchase any
such stock or securities, of any Person, including,  without limitation,  Avatex
Corporation, other than in connection with the creation of a New Borrower (as to
which, see Section 4:4-20).
     (d) Merge or  consolidate  or be merged  or  consolidated  with or into any
other corporation or other entity.
     (e) Consolidate  any of that Borrower's  operations with those of any other
Person other than of another Borrower.
     (f)  Organize or create any  Affiliate  other than in  connection  with the
creation of a New Borrower (as to which, see Section 4:4-20).
     (g) Subordinate any debts or obligations owed to that Borrower by any third
party to any other  debts  owed by such  third  party to any other  Person.
     (h) Acquire  any assets  other than in the  ordinary  course and conduct of
that Borrower's business as conducted at the execution of this Agreement, except
for assets  acquired in connection  with the opening of new stores (as permitted
hereunder),  and otherwise with the consent of the Agent, such consent not to be
unreasonably withheld.



<PAGE>52

     420- NEW BORROWERS.
     (a) Subject to and  conditioned  on the  satisfaction  of the  requirements
included and referred to in this  Section  4:4-20,  any Borrower may organize or
create a wholly owned subsidiary (a "New Borrower").
     (b) A Borrower may organize or create a New Borrower  provided that each of
the following is satisfied:
          (ii) The  Borrowers  are not then and will not  thereby be rendered in
     Default.
          (iii) The Lead  Borrower has furnished the Agent with the following by
     no less than fifteen (15) days prior to any New  Borrower's  acquiring  any
     assets:
               (B) A certificate of incorporation  for the New Borrower,  issued
          no more than seven (7) days previous to the date when so furnished, by
          the Secretary of State in which that New Borrower is organized.
               (C)  Certificates of  qualification  to do business issued by any
          State  in  which  such  qualification  of  the  New  Borrower  may  be
          necessary.
               (D) A  Certificate  of the  Secretary of the New  Borrower  which
          includes  copies of the  resolutions  of the New  Borrower to become a
          party to this Agreement as a "Borrower".
               (E)  The  written   assumption   agreement  (in  form  reasonably
          satisfactory  to the Agent) by the New Borrower  pursuant to which the
          New Borrower  assumes all  Liabilities  as if the New Borrower  were a
          Borrower immediately prior to such assumption and agreement.
               (F) Financing  statements to satisfy the  requirements of Section
          4:4-25 (which relates to additional assurances).
               (G)   Notifications  to  the  New  Borrower's   depositories  (if
          different  from that to which  notices have  previously  been provided
          pursuant to Section  7:7-1(b)(i)) in form  reasonably  satisfactory to
          the Agent.
               (H)  Notices to the New  Borrower's  credit  card  processor  (if
          different  from that to which  notices have  previously  been provided
          pursuant to Section  7:7-2(b)) in form reasonably  satisfactory to the
          Agent.
               (I) All stock  certificates (each with a separate transfer power,
          executed in blank by the holder thereof) for the New Borrower.
               (J)  Such  other   instruments  and  documents  which  the  Agent
          reasonably may request in connection with the subject New Borrower.

     (a) Any New  Borrower  shall be a  "Borrower"  within  the  meaning of this
Agreement  from the  earliest  moment  that such  Person is  required  to be the
subject of the notice required by Section 4:4-20(b)(ii).



<PAGE>53

     421- LOANS.  No Borrower  shall make any loans or advances  to, nor acquire
the  Indebtedness  of, any Person,  provided,  however,  the foregoing  does not
prohibit any of the following:
     (a) Advance  payments  made to that  Borrower's  suppliers  in the ordinary
course.
     (b) Advances to that Borrower's officers,  employees, and salespersons with
respect to reasonable expenses to be incurred by such officers,  employees,  and
salespersons  for the benefit of that  Borrower,  which  expenses  are  properly
substantiated  by the person seeking such advance and properly  reimbursable  by
that Borrower.
     (c)  Advances  made to  incentivize  employees  and  prospective  employees
employed or to be employed as pharmacists,  not to exceed  $20,000.00 per person
and $200,000.00 in any twelve (12) month period.
     (d) Advances  made to  employees  in the nature of bridge loans  associated
with relocation expenses, not to exceed $200,000.00 per person and $1,000,000.00
in any twelve (12) month period.
     (e) Loans made between two (2) or more Borrowers.
     (f) Existing Loans which have been made to Cabot Noble, Inc.
     (g) Existing Loans which have been made to Strouss Building Associates.


     422-  PROTECTION  OF ASSETS.  The Agent,  in the  Agent's  discretion,  and
following  written  notice  to the Lead  Borrower,  and from  time to time,  may
discharge any tax or  Encumbrance  on any of the  Collateral,  or take any other
action  which the Agent may deem  necessary  or  desirable  to  repair,  insure,
maintain,  preserve,  collect, or realize upon any of the Collateral.  The Agent
shall not have any  obligation  to undertake any of the foregoing and shall have
no  liability  on account of any action so  undertaken  except  where there is a
specific  finding  in a  judicial  proceeding  (in  which  the  Agent has had an
opportunity  to be heard),  from which  finding no further  appeal is available,
that the Agent had acted in actual bad faith or in a grossly  negligent  manner.
The  Borrowers  shall  pay  to the  Agent,  on  demand,  or  the  Agent,  in its
discretion,  may add to the Loan  Account,  all amounts  paid or incurred by the
Agent pursuant to this section 4:4-22.



<PAGE>54

     423- LINE OF BUSINESS.  No Borrower shall engage in any business other than
the business in which it is currently engaged or a business  reasonably  related
thereto.


     424- AFFILIATE  TRANSACTIONS.  No Borrower shall make any payment, nor give
any value to any Affiliate  (other than another  Borrower)  except for goods and
services actually  purchased by that Borrower from, or sold by that Borrower to,
such Affiliate for a price and on terms which shall:
     (a) be  competitive  and fully  deductible  as an "ordinary  and  necessary
business  expense" and/or fully  depreciable  under the Internal Revenue Code of
1986 and the Treasury Regulations, each as amended; and
     (b) be no less  favorable to that Borrower than those which would have been
charged and imposed in an arms length transaction.


     425- FURTHER ASSURANCES.
     (a) Except for Permitted Encumbrances, no Borrower is the owner of, nor has
it any interest in, any Collateral  which,  immediately upon the satisfaction of
the  conditions   precedent  to  the   effectiveness   of  the  credit  facility
contemplated  hereby (Article 3:) will not be subject to a perfected  Collateral
Interest  in favor of the Agent  (subject  only to  Permitted  Encumbrances)  to
secure the Liabilities.
     (b) Except for Permitted  Encumbrances,  no Borrower will hereafter acquire
any  asset or any  interest  in  property  which is not,  immediately  upon such
acquisition,  subject to such a  perfected  Collateral  Interest in favor of the
Agent to secure the Liabilities (subject only to Permitted Encumbrances).
     (c) Each Borrower shall execute and deliver to the Agent such  instruments,
documents,  and papers, and shall do all such things from time to time hereafter
as the Agent  reasonably  may  request to carry into effect the  provisions  and
intent  of this  Agreement;  to  protect  and  perfect  the  Agent's  Collateral
Interests  in the  Collateral;  and to comply with all  applicable  statutes and
laws, and facilitate the collection of the Receivables Collateral. Each Borrower
shall execute all such  instruments as may be required by the Agent with respect
to the  recordation  and/or  perfection of the Collateral  Interests  created or
contemplated herein.
     (d) Each Borrower  hereby  designates the Agent as and for that  Borrower's
true and lawful attorney, with full power of substitution,  to sign and file any
financing  statements  in order to  perfect or protect  the  Agent's  Collateral
Interests in the Collateral.
     (e) Each  Borrower  hereby  authorizes  the  Agent to file  such  financing
statements  as the Agent  determines  as  appropriate  to perfect or protect the
Agent's Collateral Interests in the Collateral.
     (f) A carbon,  photographic,  or other reproduction of this Agreement or of
any financing  statement or other instrument  executed  pursuant to this Section
4:4-25 shall be sufficient for filing to perfect the security  interests granted
herein.



<PAGE>55

     426- ADEQUACY OF DISCLOSURE.
     (a) All financial  statements  furnished to the Agent and to each Revolving
Credit  Lender by each  Borrower  have been  prepared  in  accordance  with GAAP
consistently  applied and present  fairly the  condition of the Borrowers at the
date(s)  thereof and the results of operations  and cash flows for the period(s)
covered (provided however,  that unaudited  financial  statements are subject to
normal  year  end  adjustments  and to the  absence  of  footnotes).  Except  as
otherwise  disclosed  in  writing  by the Lead  Borrower  to the Agent or in its
filings  with the  SEC,  there  has been no  material  change  in the  financial
condition,  results  of  operations,  or cash flows of the  Borrowers  since the
date(s) of such financial statements,  other than changes in the ordinary course
of business,  which changes have not been materially adverse,  either singularly
or in the aggregate.
     (b) No Borrower has any  contingent  obligations  or  obligation  under any
Lease or Capital Lease which is not noted in the Borrowers' financial statements
furnished  to the  Agent  and to  each  Revolving  Credit  Lender  prior  to the
execution of this Agreement (except to the extent not required by GAAP).
     (c) No document, instrument, agreement, or paper now or hereafter given the
Agent and to each  Revolving  Credit  Lender by or on behalf of each Borrower or
any  guarantor  of the  Liabilities  in  connection  with the  execution of this
Agreement  by the Agent and to each  Revolving  Credit  Lender  contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements  therein not misleading.
There is no fact known to any Borrower which has, or which, is reasonably likely
to have, a material  adverse  effect on the financial  condition of any Borrower
which has not been  disclosed  in  writing  to the  Agent and to each  Revolving
Credit Lender.


     427- NO  RESTRICTIONS  ON  LIABILITIES.  No  Borrower  shall  enter into or
directly or  indirectly  become  subject to any  agreement  which  prohibits  or
restricts, in any manner, any Borrower's:
     (a)  Creation  of, and  granting of  Collateral  Interests  in favor of the
Agent.
     (b) Incurrence of Liabilities.


     428- OTHER  COVENANTS.  No Borrower shall indirectly do or cause to be done
any act which,  if done  directly by that  Borrower,  would  breach any covenant
contained in this Agreement.


Article 5:- FINANCIAL REPORTING AND PERFORMANCE COVENANTS:


     51- MAINTAIN RECORDS. The Borrowers shall:
     (a) At all times,  keep proper books of account,  in which full,  true, and
accurate entries shall be made of all of the Borrowers' financial  transactions,
all in accordance  with GAAP applied  consistently  with prior periods to fairly
reflect  the  financial  condition  of the  Borrowers  at the close of,  and its
results of operations for, the periods in question.
     (b) Timely provide the Agent with those financial reports,  statements, and
schedules  required  by this  Article 5: or  otherwise,  each of which  reports,
statements  and  schedules  shall be  prepared,  to the  extent  applicable,  in
accordance with GAAP applied  consistently  with prior periods to fairly reflect
the  financial  condition  of the  Borrowers at the close of, and the results of
operations for, the period(s) covered therein.

<PAGE>56

     (c)  At  all  times,  keep  accurate  current  records  of  the  Collateral
including,  without limitation,  accurate current stock, cost, and sales records
of its  Inventory,  accurately  and  sufficiently  itemizing and  describing the
kinds,  types,  and  quantities  of  Inventory  and the cost and selling  prices
thereof.
     (d) At all times,  retain independent  certified public accountants who are
reasonably  satisfactory  to the Agent and instruct  such  accountants  to fully
cooperate  with,  and be  available  to,  the Agent to  discuss  the  Borrowers'
financial  performance,  financial condition,  operating results,  controls, and
such other matters,  within the scope of the retention of such  accountants,  as
may be raised by the Agent.
     (e) Not change any Borrower's fiscal year.


     52- ACCESS TO RECORDS.
     (a) Each Borrower shall accord the Agent with access,  at reasonable times,
on  reasonable  notice,  from  time to  time as the  Agent  may  require  to all
properties owned by or over which any Borrower has control. The Agent shall have
the right,  and each  Borrower  will permit the Agent from time to time as Agent
may request,  to examine,  inspect,  copy, and make extracts from any and all of
the Borrowers' books,  records,  electronically  stored data, papers, and files.
Each Borrower shall make all of that Borrower's copying facilities  available to
the Agent.
     (b) Each Borrower hereby authorizes the Agent to:
          (ii) Inspect,  copy,  duplicate,  review,  cause to be reduced to hard
     copy,  run  off,  draw  off,  and  otherwise  use any and all  computer  or
     electronically stored information or data which relates to any Borrower, or
     any service bureau,  contractor,  accountant,  or other person, and directs
     any such service bureau,  contractor,  accountant, or other person fully to
     cooperate with the Agent with respect thereto.
          (iii)  Verify  at any  time the  Collateral  or any  portion  thereof,
     including  verification  with Account Debtors,  and/or with each Borrower's
     computer billing  companies,  collection  agencies,  and accountants  (such
     verification  to be  undertaken  in keeping  with  commercially  reasonable
     commercial  lending practices) and to sign the name of each Borrower on any
     notice  to  each   Borrower's   Account  Debtors  or  verification  of  the
     Collateral.

     (a)  Notwithstanding  anything to the contrary herein, no Borrower shall be
required  to deliver or disclose  any  customer  pharmacy  records to the extent
prohibited by Applicable Law.
     (b) The Agent from time to time may designate  one or more  representatives
to exercise the Agent's rights under this Section 5:5-2 as fully as if the Agent
were doing so.



<PAGE>57

     53- IMMEDIATE NOTICE TO AGENT.
     (a) The Lead Borrower shall provide the Agent with written notice  promptly
upon the occurrence of any of the following  events,  which written notice shall
be with reasonable particularity as to the facts and circumstances in respect of
which such notice is being given:
          (ii) Any change in any Borrower's President,  chief executive officer,
     chief operating officer, and chief financial officer (without regard to the
     title(s) actually given to the Persons  discharging the duties  customarily
     discharged by officers with those titles).
          (iii) Any ceasing of any Borrower's making of payment, in the ordinary
     course,  to any of its creditors  (other than its ceasing of making of such
     payments on account of a dispute in the  ordinary  course),  other than any
     payment due on account of indebtedness  incurred prior to the filing of the
     Proceedings.
          (iv) Any failure by any Borrower to pay rent  incurred  subsequent  to
     the filing of the  Proceedings at any of that Borrower's  locations,  which
     failure  continues  for more than Three (3) days  following the last day on
     which such rent was payable  without more than a de minimis  adverse effect
     to that Borrower.
          (v) Any Material Adverse Change.
          (vi) Any Borrower's becoming in Default.
          (vii) Any  intention  on the part of any  Borrower to  discharge  that
     Borrower's present independent accountants or any withdrawal or resignation
     by such  independent  accountants from their acting in such capacity (as to
     which, see Subsection 5:5-1(d)).
          (viii) Any litigation which, if determined  adversely to any Borrower,
     might have a material  adverse  effect on the  financial  condition of that
     Borrower.

     (a) The Lead Borrower shall:
          (ix)  Provide  the  Agent,  when so  distributed,  with  copies of any
     materials  distributed to the  shareholders  of the Lead Borrower (qua such
     shareholders).
          (x) Provide the Agent:
               (B) When filed, copies of all filings with the SEC.
               (C) When  received,  copies of all  correspondence  from the SEC,
          other than routine  non-substantive  general  communications  from the
          SEC.

          (i) Add the Agent as an addressee on all mailing  lists  maintained by
     or for each Borrower.
          (ii) At the request of the Agent, from time to time, provide the Agent
     with copies of all advertising  (including  copies of all print advertising
     and duplicate tapes of all video and radio advertising).
          (iii) Provide the Agent, when received by any Borrower, with a copy of
     any management letter or similar  communications from any accountant of any
     Borrower.
          (iv) Provide the Agent and the Agent's  counsel  with copies,  when so
     filed or submitted, or as soon as practicable thereafter,  of any pleadings
     filed in the  Proceedings by or on behalf of any Borrower or the submission
     by any Borrower of any financial  statement to any of the Bankruptcy  Court
     in which the  Proceedings  are  pending,  the office of the  United  States
     Trustee, or any committee appointed in the Proceedings.



<PAGE>58

     54- Borrowing Base  Certificate.  The Lead Borrower shall provide the Agent
with a  collateral  report  and a  Borrowing  Base  Certificate  (in the form of
EXHIBIT 5:5-4 annexed  hereto,  as such form may be revised from time to time by
the Agent) by 2:00PM, weekly, on Friday of each week (as of the then immediately
preceding  Saturday).  Such  Certificate  may be sent to the Agent by  facsimile
transmission,  provided that the original  thereof is mailed to the Agent on the
date of such transmission.


     55- MONTHLY REPORTS.
     Monthly,   the  Lead  Borrower   shall  provide  the  Agent  with  original
counterparts  of the following (each in such form as the Agent from time to time
may specify):
          (i) Those reports  described in EXHIBIT 5:5-5 hereto, at the times set
     forth in such EXHIBIT; and
          (ii) The officer's compliance certificate described in Section 5:5-8.


     56- QUARTERLY REPORTS. Quarterly, within forty five (45) days following the
end of each of the Borrowers'  fiscal quarters,  the Lead Borrower shall provide
the Agent with the following:
     (a) An original counterpart of a management prepared financial statement of
the Borrowers for the period from the beginning of the  Borrowers'  then current
fiscal year through the end of the subject quarter, with comparative information
for the same period of the previous fiscal year,  which statement shall include,
at a minimum,  a balance sheet,  income  statement (on a store specific and on a
"consolidated"  basis),  statement of changes in shareholders'  equity, and cash
flows and  comparisons  for the  corresponding  quarter of the then  immediately
previous year.
     (b) The officer's compliance certificate described in Section 5:5-8.


     57- ANNUAL REPORTS.
     (a) Annually,  within one hundred and five (105) days  following the end of
the  Borrowers'  fiscal year, the Lead Borrower shall furnish the Agent with the
following:
          (ii) The Borrowers' annual financial statement,  which statement shall
     bear the opinion, without material qualification other than a going concern
     reservation,   of  the  Lead  Borrower's   independent   certified   public
     accountants  (i.e. said statement shall be "certified" by such accountants)
     and shall include, at a minimum (with comparative  information for the then
     prior fiscal year) a balance sheet, income statement,  statement of changes
     in shareholders' equity, and cash flows.
          (iii) The officer's compliance certificate described in Section 5:5-8.

     (a) No later than the earlier of Fifteen (15) days prior to the end of each
of the Borrowers'  fiscal years or the date on which such  accountants  commence
their work on the preparation of the Borrowers' annual financial statement,  the
Lead Borrower shall give written notice to such accountants (with a copy of such
notice, when sent, to the Agent) that:

<PAGE>59

          (iv) Such annual  financial  statement  will be  delivered by the Lead
     Borrower to the Agent (for subsequent distribution to each Revolving Credit
     Lender).
          (v) It is the primary intention of the Borrowers, in its engagement of
     such accountants, to satisfy the financial reporting requirements set forth
     in this Article 5:.
          (vi) The  Lead  Borrower  has been  advised  that the  Agent  and each
     Revolving   Credit   Lender  will  rely   thereon   with   respect  to  the
     administration of, and transactions under, the credit facility contemplated
     by this Agreement.

     (a)  Each  annual  statement  shall  be  accompanied  by such  accountant's
Certificate  indicating that, in conducting the audit for such annual statement,
nothing came to the attention of such  accountants to believe that the Borrowers
are in  Default  (or  that,  if the  Borrowers  are in  Default,  the  facts and
circumstances thereof).


     58- OFFICERS'  CERTIFICATES.  The Lead Borrower shall cause either the Lead
Borrower's  President,  Chief  Financial  Officer,  or its  Controller,  in each
instance,  to provide such Person's  Certificate  with those monthly  statements
required pursuant to Section 5:5-5(a)(ii),  quarterly,  and annual statements to
be furnished pursuant to this Agreement, which Certificate shall:

     (a) Indicate that, to the best of such Person's  knowledge,  after inquiry,
the subject statement was prepared in accordance with GAAP consistently  applied
and presents  fairly the  financial  condition of the Borrowers at the close of,
and the results of the  Borrowers'  operations and cash flows for, the period(s)
covered, subject, however to the following:
          (ii) Usual year end adjustments  (this exception shall not be included
     in the Certificate which accompanies such annual statement).
          (iii) Material  Accounting  Changes (in which event,  such Certificate
     shall include a schedule (in reasonable  detail) of the effect of each such
     Material Accounting Change) not previously  specifically taken into account
     in the determination of the financial performance covenant imposed pursuant
     to Section 5:5-11.

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



<PAGE>60

     59- INVENTORIES, APPRAISALS, AND AUDITS.
     (a) The Agent,  at the expense of the Borrowers,  may participate in and/or
observe each  physical  count and/or  inventory of so much of the  Collateral as
consists of Inventory which is undertaken on behalf of any Borrower.
     (b) The Borrowers,  at their own expense, shall cause not less than one (1)
physical  inventory  to be  undertaken  in each Fiscal  year  during  which this
Agreement is in effect,  conducted by such  inventory  takers as are  reasonably
satisfactory  to the Agent  and  following  such  methodology  as is  reasonably
satisfactory to the Agent.
          (ii) Each such  inventory  shall be  reconciled  and  recorded  in the
     Borrowers'  financial  statements  within  thirty  (30)  days  of the  date
     following the completion of such inventory.
          (iii) The Lead Borrower,  within thirty (30) days following the end of
     each month, shall provide the Agent with the results of each such inventory
     that was recorded in that month.
          (iv) The Agent, in its discretion,  if any Borrower is in Default, may
     cause  such  additional  inventories  to be taken as the  Agent  determines
     (each, at the expense of the Borrowers).

     (a) The Agent may obtain  appraisals of the  Collateral,  from time to time
(in all events, at the Borrowers' expense),  conducted by such appraisers as are
reasonably satisfactory to the Agent.
     (b) The Agent  contemplates  conducting three (3) commercial  finance field
examinations (in each event, at the Borrowers'  expense) of the Borrowers' books
and records  during any twelve (12) month period during which this  Agreement is
in effect,  but in its discretion,  may undertake  additional such audits during
such period.


     510- ADDITIONAL FINANCIAL INFORMATION.
     (a) In addition to all other  information  required to be provided pursuant
to this Article 5:, the Lead Borrower  promptly shall provide the Agent (and any
guarantor  of the  Liabilities),  with  such  other and  additional  information
concerning  the  Borrowers,  the  Collateral,  the  operation of the  Borrowers'
business, and the Borrowers' financial condition,  as the Agent may from time to
time reasonably request from the Lead Borrower.
     (b) The Lead Borrower may provide the Agent,  from time to time  hereafter,
with updated forecasts of the Borrowers'  anticipated  performance and operating
results.
     (c) In all events, the Lead Borrower, no sooner than Ninety (90) days prior
to the end of each of the Borrowers' fiscal years,  shall provide the Agent with
an updated and extended  forecast which shall go out at least through the end of
the then next fiscal year and shall include an income statement,  balance sheet,
and statement of cash flow, by month,  each prepared in conformity with GAAP and
consistent with the Borrowers' then current practices.

<PAGE>61

     (d) The Agent and each of the Revolving Credit Lenders agrees that,  except
with  the  prior  consent  of the  Lead  Borrower,  it  will  not  disclose  any
confidential  information  with respect to the Borrowers  which is now or in the
future  furnished  pursuant  to this  Agreement  or any other  Loan  Document  ,
provided,  however, that the Agent and each Revolving Credit Lender may disclose
any such information as follows:
          (ii) To the following  (but only if the Person to whom so disclosed is
     instructed to treat such information as confidential):
               (B) To its employees, Affiliates, advisors or counsel.
               (C) To any  prospective  or actual  transferee or  participant in
          connection with any  contemplated  transfer or  participation  of this
          Agreement,  the  Liabilities,  or any interest therein by the Agent or
          any  Revolving  Credit  Lender,  which  transfer or  participation  is
          permitted by the terms of this Agreement.
               (D) To the Agent and other Revolving Credit Lenders.

          (i) As has become generally available to the public.
          (ii) As may be required or  appropriate  in any report,  statement  or
     testimony  submitted to any municipal,  state,  or federal  regulatory body
     having or claiming  to have  jurisdiction  over the Agent or any  Revolving
     Credit Lender.
          (iii) As may be required or  appropriate  in respect to any summons or
     subpoena or in connection with any litigation
          (iv) In order to  comply  with any law,  order,  regulation  or ruling
     applicable to the Agent or any Revolving Credit Lender.


     511- MINIMUM  EXCESS  AVAILABILITY.  The Borrowers  shall not permit Excess
Availability  at any time to be less than the greater of (x)  $8,000,000.00,  or
(y) seven percent (7%) of the Borrowing Base at the time of calculation. For the
purposes of the  calculation  of  Availability  under this  Section  5-11,  cash
deposited  in the  Concentration  Account no later than 1:00 p.m. on the date of
calculation  shall  be added to the  amount  of  Availability.  The  Lender  may
determine the Borrowers'  compliance  with such  covenants  based upon financial
reports and statements  provided by the Lead Borrower to the Lender  (whether or
not such financial reports and statements are required to be furnished  pursuant
to this  Agreement)  as well as by  reference to interim  financial  information
provided to, or developed by, the Lender.



<PAGE>62

Article 6:- USE OF COLLATERAL:


     61- USE OF INVENTORY COLLATERAL.
     (a) Except for Permitted Store Closing Sales, no Borrower shall engage
          (ii)  In  any  sale  of  the   Inventory   other  than  for  (a)  fair
     consideration  in the conduct of the  Borrowers'  business in the  ordinary
     course, or (b) dispositions of damaged or unsaleable  Inventory  consistent
     with the Borrowers' historical practices.
          (iii) Sales or other dispositions to creditors.
          (iv) Sales or other dispositions in bulk.
          (v)  Sales  of any  Collateral  in  breach  of any  provision  of this
     Agreement.

     (a) No sale of Inventory  shall be on consignment,  approval,  or under any
other  circumstances  such that, with the exception of the Borrowers'  customary
return policy applicable to the return of inventory  purchased by the Borrowers'
retail  customers in the ordinary  course,  such  Inventory may be returned to a
Borrower without the consent of the Agent.
     (b) The Borrowers shall not consent to the return of any item of Collateral
pursuant to Section 546(g)* of the Bankruptcy Code.


     62- INVENTORY  QUALITY.  All  Inventory now owned or hereafter  acquired by
each  Borrower  is and will be of good and  merchantable  quality  and free from
material defects (other than defects within customary trade tolerances).


     63- ADJUSTMENTS AND ALLOWANCES.  Each Borrower may grant such allowances or
other adjustments to that Borrower's Account Debtors (exclusive of extending the
time for payment of any Account or Account  Receivable,  which shall not be done
without first  obtaining the Agent's prior written  consent in each instance) as
that  Borrower  may  reasonably  deem to accord  with sound  business  practice,
provided,  however, the authority granted the Borrowers pursuant to this Section
6:6-3 may be  limited  or  terminated  by the  Agent at any time in the  Agent's
discretion.


     64- VALIDITY OF ACCOUNTS.
     (a) The amount of each Account shown on the books, records, and invoices of
the  Borrowers  represented  as owing by each Account  Debtor is and will be the
correct  amount  actually owing by such Account Debtor and shall have been fully
earned by performance by the Borrowers.
     (b) The  Agent  from time to time may  verify  the  Receivables  Collateral
directly with the Borrowers' Account Debtors, such verification to be undertaken
in keeping with commercially reasonable commercial lending standards.
     (c) No Borrower  has any  knowledge  of any  impairment  of the validity or
collectibility of any of the Accounts.  The Lead Borrower shall notify the Agent
of any such impairment  immediately after any Borrower becomes aware of any such
impairment.



<PAGE>63

     65- NOTIFICATION TO ACCOUNT DEBTORS.  The Agent shall have the right (after
an Event of  Default  has  occurred),  to notify any of the  Borrowers'  Account
Debtors to make payment  directly to the Agent and to collect all amounts due on
account of the Collateral.


Article 7:- CASH MANAGEMENT. PAYMENT OF LIABILITIES:


     71- DEPOSITORY ACCOUNTS.
     (a) Annexed hereto as EXHIBIT  7:7-1(a) is a Schedule of all present DDA's,
which  Schedule  includes,  with  respect  to each  depository  (i) the name and
address  of that  depository;  (ii)  the  account  number(s)  of the  account(s)
maintained with such depository; and (iii) a contact person at such depository.
     (b) The Lead  Borrower  shall  deliver  the  following  to the Agent,  as a
condition to the effectiveness of this Agreement:
          (ii)  Notification,  executed  on  behalf  of each  Borrower,  to each
     depository  institution  with which any DDA is  maintained  (other than any
     Exempt DDA and the Blocked Account), in form reasonably satisfactory to the
     Agent of the Agent's interest in such DDA.
          (iii) A Blocked Account Agreement substantially in the form of EXHIBIT
     7:7-1(b)(ii),  annexed  hereto,  with any  depository  institution at which
     either of the following conditions applies:
               (B)  Both any DDA  (other  than the  Operating  Account)  and the
          Operating Account is maintained.
               (C) A Blocked Account is maintained.

     (a) No Borrower will establish any DDA hereafter (other than an Exempt DDA)
unless, contemporaneous with such establishment,  the Lead Borrower delivers the
following to the Agent:
          (ii)  Notification  to the depository at which such DDA is established
     if the same would have been required pursuant to Section 7:7-1(b)(ii)(A) if
     the subject DDA were open at the execution of this Agreement.
          (iii) A Blocked Account Agreement executed on behalf of the depository
     at which  such DDA is  established  if the same  would  have been  required
     pursuant  to Section  7:7-1(b)(ii)(B)  if the  subject DDA were open at the
     execution of this Agreement.


     72- CREDIT CARD RECEIPTS.
     (a) Annexed  hereto as EXHIBIT  7:7-2,  is a Schedule  which  describes all
arrangements  to which any  Borrower  is a party with  respect to the payment to
that Borrower of the proceeds of credit card charges for sales by that Borrower.
     (b) The Lead  Borrower  shall  deliver to the Agent,  as a condition to the
effectiveness  of this  Agreement,  notification,  executed  on  behalf  of each
Borrower,  to each of each Borrower's credit card  clearinghouses and processors
of notice (in form reasonably  satisfactory to the Agent), which notice provides
that  upon  notification  by the  Agent,  payment  of all  credit  card  charges
submitted by that  Borrower to that  clearinghouse  or other  processor  and any
other amount payable to that Borrower by such  clearinghouse  or other processor
shall be directed to the Blocked Account or as otherwise designated from time to
time by the Agent. No Borrower shall change such direction or designation except
upon and with the prior written consent of the Agent.



<PAGE>64

     73- THE CONCENTRATION, BLOCKED, AND OPERATING ACCOUNTS .
     (a) The following  checking  accounts have been or will be established (and
are so referred to herein):
          (ii) The "Concentration Account" (so referred to herein):  Established
     by the Agent with Fleet National Bank.
          (iii) The "Blocked  Account" (so referred to herein):  Established  by
     the Lead Borrower with PNC Bank and Bank One.
          (iv) The "Operating  Account" (so referred to herein):  Established by
     the Borrowers with PNC Bank.

     (a) The contents of each DDA (other than the Operating  Account) and of the
Blocked Account constitutes Collateral and Proceeds of Collateral.  The contents
of the Concentration Account constitutes proceeds of the Collateral.
     (b) The  Borrowers  shall pay all fees and  charges of, and  maintain  such
impressed  balances as may be required by the depository in which any account is
opened  as  required  hereby  (even if such  account  is opened by and/or is the
property of the Agent).


     74- PROCEEDS AND COLLECTIONS .
     (a) All Receipts constitute Collateral and proceeds of Collateral.
     (b) All Receipts:
          (ii) Shall be held in trust by the Borrowers for the Agent.
          (iii) Shall not be commingled with any of any Borrower's other funds.
          (iv) Shall be deposited and/or transferred only to the Blocked Account
     or the Concentration Account.

     (a) The Lead  Borrower  shall cause the ACH or wire transfer to the Blocked
Account or the  Concentration  Account  (except in those instances in which such
transfer is not within the control of the Lead Borrower or any other  Borrower),
no less  frequently  than daily (and whether or not there is then an outstanding
balance in the Loan Account) of the following:
          (v) The then  contents of each DDA (other than any Exempt  DDA),  each
     such transfer to be net of any minimum balance, not to exceed $2,000.00, as
     may be  required to be  maintained  in the subject DDA by the bank at which
     such DDA is maintained.
          (vi) The  proceeds of all credit card charges not  otherwise  provided
     for pursuant hereto.

     (a) In the event  that,  notwithstanding  the  provisions  of this  Section
7:7-4(b),  7:7-4(c) any Borrower  receives or otherwise has dominion and control
of any  Receipts,  or any  proceeds  or  collections  of  any  Collateral,  such
Receipts,  proceeds, and collections shall be held in trust by that Borrower for
the Agent and shall not be commingled with any of that Borrower's other funds or
deposited in any account of any Borrower other than as instructed by the Agent.



<PAGE>65

     75- PAYMENT OF LIABILITIES.
     (a) On each Business Day, the Agent shall apply the then collected  balance
of the  Concentration  Account  (net of  fees  charged,  and of  such  impressed
balances as may be required  by the bank at which the  Concentration  Account is
maintained)  First,  towards the SwingLine Loans and Second,  towards the unpaid
balance of the Loan Account and all other Liabilities.
     (b) The  following  rules shall apply to deposits  and  payments  under and
pursuant to this Agreement:
          (ii) Funds shall be deemed to have been deposited to the Concentration
     Account on the Business Day on which deposited.
          (iii)  Funds  paid  to  the  Agent,  other  than  by  deposit  to  the
     Concentration  Account,  shall  be  deemed  to have  been  received  on the
     Business Day when they are good and collected  funds,  provided that notice
     of such payment is available to the Agent by 2:00PM on that Business Day.
          (iv) If notice  of a deposit  to the  Concentration  Account  (Section
     7:7-5(b)(i))  or payment  (Section  7:7-5(b)(ii))  is not  available to the
     Agent until after 2:00PM on a Business  Day,  such deposit or payment shall
     be deemed to have been made at 9:00AM on the then next Business Day.
          (v) All deposits to the  Concentration  Account and other  payments to
     the Agent are subject to clearance and collection.

     (a) The Agent shall  transfer to the  Operating  Account any surplus in the
Concentration  Account  remaining after the application  towards the Liabilities
referred to in Section 7:7-5(a), above (less those amount which are to be netted
out, as provided therein) provided, however, in the event that
          (vi) any Borrower is in Default; and
          (vii)  one or more  L/C's  are then  outstanding,  then the  Agent may
     establish a funded reserve of up to 110% of the aggregate Stated Amounts of
     such L/C's.  Such funded  reserve  shall either be (i) returned to the Lead
     Borrower  provided  that no Borrower is in Default or (ii) applied  towards
     the  Liabilities  following  acceleration  following the  occurrence of any
     other Event of Default.



<PAGE>66

     76- THE OPERATING ACCOUNT. Except as otherwise specifically provided in, or
permitted by, this Agreement,  all check clearings and other disbursements shall
be funded by the Lead Borrower solely from, the Operating Account.


Article 8:- GRANT OF SECURITY INTEREST:


     81- GRANT OF SECURITY INTEREST. To secure the Borrowers' prompt,  punctual,
and  faithful  performance  of all and each of the  Liabilities,  each  Borrower
hereby  grants to the Agent,  for the ratable  benefit of the  Revolving  Credit
Lenders, a continuing security interest in and to, and assigns to the Agent, for
the ratable  benefit of the Revolving  Credit Lenders,  the following,  and each
item  thereof,  whether now owned or now due, or in which that  Borrower  has an
interest,  or hereafter  acquired,  arising,  or to become due, or in which that
Borrower obtains an interest,  and all products,  Proceeds,  substitutions,  and
accessions of or to any of the following (all of which,  together with any other
property in which the Agent may in the future be granted a security interest, is
referred to herein as the "Collateral"):
     (a) All Accounts and accounts receivable.
     (b) All Inventory.
     (c) All General Intangibles.
     (d) All Equipment.
     (e) All Chattel Paper.
     (f) All Letter-of-Credit Rights.
     (g) All Payment Intangibles.
     (h) All Supporting Obligations.
     (i) All books,  records,  and information relating to the Collateral and/or
to the operation of each Borrower's  business,  and all rights of access to such
books, records, and information,  and all property in which such books, records,
and information are stored, recorded, and maintained.
     (j) All Investment  Property,  Instruments,  Documents,  Deposit  Accounts,
money,  policies and certificates of insurance,  deposits,  impressed  accounts,
compensating balances, and cash.
     (k) All Leasehold Interests.
     (l) All  insurance  proceeds,  refunds,  and  premium  rebates,  including,
without limitation,  proceeds of fire and credit insurance,  whether any of such
proceeds,  refunds,  and  premium  rebates  arise  out of any of the  foregoing.
(8:8-1(a) through 8:8-1(j)).
     (m) All liens,  guaranties,  rights, remedies, and privileges pertaining to
any of the  foregoing  (8:8-1(a)  through  8:8-1(l)),  including  the  right  of
stoppage in transit.



<PAGE>67

     82- EXTENT AND DURATION OF SECURITY INTEREST.
     (a) The security interest created and granted herein is in addition to, and
supplemental of, any security interest previously granted by any Borrower to the
Agent and shall continue in full force and effect  applicable to all Liabilities
until both (a) all Liabilities  have been paid and/or  satisfied in full and (b)
the security interest created herein is specifically  terminated in writing by a
duly authorized officer of the Agent.
     (b) It is intended that the Collateral  Interests  created herein extend to
and cover all assets of each Borrower other than Bankruptcy Recoveries.


Article 9:-  AGENT AS BORROWER'S ATTORNEY-IN-FACT:


     91-  APPOINTMENT  AS  ATTORNEY-IN-FACT.  Each Borrower  hereby  irrevocably
constitutes  and appoints the Agent as that (acting through any of its officers)
Borrower's true and lawful attorney, with full power of substitution,  following
the occurrence of an Event of Default,  to convert the  Collateral  into cash at
the sole risk, cost, and expense of that Borrower. The rights and powers granted
the Agent by this appointment include but are not limited to the right and power
to:
     (a) Prosecute,  defend,  compromise,  or release any action relating to the
Collateral.
     (b) Sign  change of  address  forms to change  the  address  to which  each
Borrower's  mail is to be sent to such  address  as the Agent  shall  designate;
receive and open each Borrower's  mail;  remove any  Receivables  Collateral and
Proceeds of  Collateral  therefrom and turn over the balance of such mail either
to the Lease  Borrower or to any trustee in  bankruptcy  or receiver of the Lead
Borrower,  or other legal representative of a Borrower whom the Agent determines
to be the appropriate person to whom to so turn over such mail.
     (c)  Endorse the name of the  relevant  Borrower in favor of the Agent upon
any and all checks, drafts, notes,  acceptances,  or other items or instruments;
sign and endorse the name of the  relevant  Borrower  on, and receive as secured
party, any of the Collateral, any invoices, schedules of Collateral,  freight or
express receipts, or bills of lading,  storage receipts,  warehouse receipts, or
other documents of title respectively relating to the Collateral.
     (d) Sign the name of any Borrower on any notice to the  Borrower's  Account
Debtors or verification of the Receivables Collateral;  sign any Borrower's name
on any Proof of Claim in Bankruptcy  against Account Debtors,  and on notices of
lien, claims of mechanic's liens, or assignments or releases of mechanic's liens
securing the Accounts.
     (e) Take all such action as may be  necessary  to obtain the payment of any
letter  of  credit  and/or  banker's  acceptance  of  which  any  Borrower  is a
beneficiary.
     (f) Repair,  manufacture,  assemble,  complete,  package, deliver, alter or
supply  goods,  if any,  necessary  to fulfill in whole or in part the  purchase
order of any customer of each Borrower.
     (g)  Use,  license  or  transfer  any or all  General  Intangibles  of each
Borrower.



<PAGE>68

     92- NO OBLIGATION TO ACT. The Agent shall not be obligated to do any of the
acts or to exercise any of the powers authorized by Section 9:9-1 herein, but if
the Agent elects to do any such act or to exercise any of such powers,  it shall
not be  accountable  for more  than it  actually  receives  as a result  of such
exercise of power,  and shall not be  responsible to any Borrower for any act or
omission  to act except for any act or  omission  to act as to which  there is a
final determination made in a judicial proceeding (in which proceeding the Agent
has had an  opportunity  to be heard)  which  determination  includes a specific
finding that the subject act or omission to act had been grossly negligent or in
actual bad faith.


Article 10:-  EVENTS OF DEFAULT:

     The  occurrence  of any event  described in this  Article 10:  respectively
shall constitute an "Event of Default" herein.  Upon the occurrence of any Event
of Default the Agent may, and on the instruction of the SuperMajority Lenders as
provided in Section  13:13-1(b)  shall,  declare any and all  Liabilities  shall
become immediately due and payable. The occurrence of any Event of Default shall
also constitute,  without notice or demand, a default under all other agreements
between  the  Agent  or  any  Revolving  Credit  Lender  and  any  Borrower  and
instruments  and papers  heretofore,  now, or  hereafter  given the Agent or any
Revolving Credit Lender by any Borrower.


     101- FAILURE TO PAY THE  REVOLVING  CREDIT.  The failure by any Borrower to
pay when due any principal of, interest on, or fees in respect of, the Revolving
Credit.


     102- FAILURE TO MAKE OTHER  PAYMENTS.  The failure by any  Borrower to pay
within  five (5) days of when due any payment  Liability  other than any payment
liability on account of the principal of, or interest on, or fees in respect of,
the Revolving Credit.


     103-  FAILURE TO PERFORM  COVENANT  OR  LIABILITY  (NO GRACE  PERIOD) . The
failure by any Borrower to promptly, punctually,  faithfully and timely perform,
discharge,  or comply  with any  covenant  or  Liability  included in any of the
following provisions hereof:


         Section______Relates to______:
         ------------------------------
         4:4-7                  Indebtedness
         4:4-19                 Dividends. Investments. Other  Corporate Actions
         4:4-24                 Affiliate Transactions
         5:5-11                 Minimum Excess Availability
         Article 7:             Cash Management


     104- Financial Reporting Requirements.  The failure by the Lead Borrower to
promptly,  punctually,  faithfully and timely perform, discharge, or comply with
the financial reporting requirements included in Article 5, subject, however, to
the following  limited  number of grace  periods  applicable to certain of those
requirements:

<PAGE>69
<TABLE>
<S>                        <C>           <C>                   <C>
-------------------------  ------------  --------------------  ---------------------
REPORT / STATEMENT         REQUIRED BY   GRACE PERIOD          NUMBER OF GRACE
                           SECTION                             PERIODS
-------------------------  ------------  --------------------  ---------------------
Borrowing Base             5:5:5-4       One Business Day      3 per fiscal Quarter
Certificates
-------------------------  ------------  --------------------  ---------------------

Monthly Report (15 Days)   5:5-5         Three Business Day    4 in any 12 months
-------------------------  ------------  --------------------  ---------------------

</TABLE>

     105- FAILURE TO PERFORM COVENANT OR LIABILITY  (GRACE PERIOD).  The failure
by any Borrower  within twenty (20) days following the earlier of any Borrower's
actual  knowledge of a breach of any covenant or Liability  not described in any
of Sections 10:10-1,  10:10-2,  10:10-3, or 10:10-4 or of its receipt of written
notice  from  the  Agent  of the  breach  of any of  any of  such  covenants  or
Liabilities.


     106- MISREPRESENTATION.   The   determination   by  the  Agent  that  any
representation  or warranty at any time made by any Borrower to the Agent or any
Revolving  Credit Lender was not true or complete in all material  respects when
given.


     107- ACCELERATION  OF OTHER DEBT.  BREACH OF LEASE.  The occurrence of any
event such that any  Indebtedness of any Borrower in excess of  $1,000,000.00 to
any creditor other than the Agent or any Revolving Credit Lender,  arising after
the Petition Date, could be accelerated or, without the consent of any Borrower,
any Lease could be terminated (except for any termination in connection with any
Permitted  Store Closing Sales)  (whether or not the subject  creditor or lessor
takes any action on account of such occurrence).


     108- DEFAULT UNDER OTHER  AGREEMENTS.  Except for a default  resulting from
the filing of the  Proceedings,  the occurrence of any breach of any covenant or
Liability imposed by, or of any default under, any agreement (including any Loan
Document)  between the Agent or any Revolving  Credit Lender and any Borrower or
instrument given by any Borrower to the Agent or any Revolving Credit Lender and
the expiry,  without cure, of any applicable grace period  (notwithstanding that
the subject Agent or Revolving  Credit Lender may not have  exercised all or any
of its rights on account of such breach or default).


     109- UNINSURED  CASUALTY LOSS. The occurrence of any uninsured loss, theft,
damage, or destruction of or to any material portion of the Collateral.


     1010- ATTACHMENT. JUDGMENT. RESTRAINT OF BUSINESS.
     (a)  The  entry  of  any  judgment   against  any  Borrower  in  excess  of
$1,000,000.00, which judgment is not satisfied (if a money judgment) or appealed
from (with execution or similar process stayed,  whether pursuant to Section 362
of the Bankruptcy Code or otherwise) within fifteen (15) days of its entry.

<PAGE>70

     (b) The entry of any order or the  imposition of any other  process  having
the force of law,  the effect of which is to  restrain in any  material  way the
conduct by any Borrower of its business in the ordinary  course,  unless  stayed
pursuant to Section 362 of the Bankruptcy Code or otherwise.


     1011-  MODIFICATION  OF  BORROWING  ORDER.  The  entry  of an  order in the
Proceedings,  which  order  constitutes  the stay,  modification  in an  adverse
manner, as determined by the Agent in its reasonable discretion, or appealed (if
the Agent  determines in its  reasonable  discretion,  after  designation of the
issues on appeal,  that such  appeal  could  reasonably  affect the value of the
Collateral or the Agent's or Lenders'  ability to realize upon the  Collateral),
or reversal  of any  Borrowing  Order or which  otherwise  materially  adversely
affects,  as  determined  by  the  Agent  in  its  reasonable  discretion,   the
effectiveness of any Borrowing Order.


     1012-   APPOINTMENT  OF  TRUSTEE  OR  EXAMINER.   The  appointment  in  the
Proceedings of a trustee or of any examiner  having  expanded  powers to operate
all or any part of any Borrower's business.


     1013-  CONVERSION OF  PROCEEDINGS.  The conversion of the  Proceedings to a
case under Chapter 7 of the Bankruptcy Code.


     1014- RELIEF FROM STAY. The entry of any order which  provides  relief from
the automatic stay otherwise  imposed  pursuant to Section 362 of the Bankruptcy
Code,  which order permits any creditor,  other than the Agent, to realize upon,
or to exercise any right or remedy with  respect to, any  material  asset of any
Borrower or to terminate any license, franchise, or similar agreement, where the
exercise of such right or remedy or such realization or termination could have a
material  adverse  effect on any  Borrower's  financial  condition or ability to
conduct its business in the ordinary course.


     1015- DEFAULT BY GUARANTOR.  The occurrence of any of the foregoing  Events
of Default with respect to any  guarantor or endorser of the  Liabilities  as if
such guarantor were a "Borrower" described therein.


     1016- INDICTMENT - FORFEITURE.  The  indictment  of, or institution of any
legal process or proceeding  against,  any Borrower,  under any  Applicable  Law
where the  relief,  penalties,  or  remedies  sought or  available  include  the
forfeiture  of any property of any  Borrower  aggregating  for all  Borrowers an
amount in excess of  $1,000,000.00,and/or  the  imposition  of any stay or other
order, the effect of which would have a Material Adverse Effect.


     1017- TERMINATION OF GUARANTY.  The termination or attempted termination of
any guaranty by any guarantor of the Liabilities.



<PAGE>71

     1018- CHALLENGE TO LOAN DOCUMENTS.
     (a) Any  challenge by or on behalf of any Borrower or any  guarantor of the
Liabilities  to the  validity  of any  Loan  Document  or the  applicability  or
enforceability  of any Loan  Document  which  seeks to void,  avoid,  limit,  or
otherwise  adversely  affect  any  security  interest  created by or in any Loan
Document or any payment made pursuant thereto.
     (b) Any  determination  by any court or any other  judicial  or  government
authority  that any Loan  Document is not  enforceable  or which voids,  avoids,
limits, or otherwise adversely affects any security interest created by any Loan
Document or any payment made pursuant thereto.


     1019- CHANGE IN CONTROL. Any Change in Control.


Article 11:-  RIGHTS AND REMEDIES UPON DEFAULT:


     111- Acceleration.  Upon the occurrence of any Event of Default, subject to
the  terms  of the  Borrowing  Order,  the  Agent  may (and on the  issuance  of
Acceleration  Notice(s)  requisite  to the  causing of  Acceleration,  the Agent
shall) declare all Indebtedness of the Borrowers to the Revolving Credit Lenders
to be immediately due and payable and may exercise all of the Agent's Rights and
Remedies as the Agent from time to time thereafter determines as appropriate.


     112-  RIGHTS  OF  ENFORCEMENT.  Following  the  occurrence  of any Event of
Default,  the Agent shall have all of the rights and remedies of a secured party
upon  default  under the UCC,  in addition to which the Agent shall have all and
each of the following rights and remedies:
     (a) To give  notice  to any bank at which  any DDA or  Blocked  Account  is
maintained and in which Proceeds of Collateral are deposited,  to turn over such
Proceeds directly to the Agent.
     (b) To give notice to any customs  broker of any of the Borrowers to follow
the  instructions  of  the  Agent  as  provided  in  any  written  agreement  or
undertaking of such broker in favor of the Agent.
     (c) To collect  the  Receivables  Collateral  with or without the taking of
possession of any of the Collateral.
     (d) To take possession of all or any portion of the Collateral.
     (e) To sell,  lease, or otherwise  dispose of any or all of the Collateral,
in its then condition or following  such  preparation or processing as the Agent
deems  advisable  and with or  without  the taking of  possession  of any of the
Collateral.
     (f) To conduct  one or more going out of business  sales which  include the
sale or other disposition of the Collateral.
     (g) To apply the  Receivables  Collateral or the Proceeds of the Collateral
towards (but not necessarily in complete satisfaction of) the Liabilities.
     (h) To exercise all or any of the rights, remedies, powers, privileges, and
discretions under all or any of the Loan Documents.



<PAGE>72

     113- SALE OF COLLATERAL.
     (a) Any sale or other  disposition  of the  Collateral  may be at public or
private  sale upon such terms and in such manner as the Agent  deems  advisable,
having due regard to  compliance  with any  statute or  regulation  which  might
affect, limit, or apply to the Agent's disposition of the Collateral.
     (b) The Agent,  in the  exercise of the Agent's  rights and  remedies  upon
default, may conduct one or more going out of business sales, in the Agent's own
right or by one or more agents and  contractors.  Such  sale(s) may be conducted
upon any premises owned, leased, or occupied by any Borrower.  The Agent and any
such agent or  contractor,  in  conjunction  with any such sale, may augment the
Inventory  with other  goods (all of which  other  goods  shall  remain the sole
property of the Agent or such agent or  contractor).  Any amounts  realized from
the sale of such goods which  constitute  augmentations to the Inventory (net of
an  allocable  share of the costs and  expenses  incurred in their  disposition)
shall be the sole property of the Agent or such agent or contractor  and neither
any Borrower  nor any Person  claiming  under or in right of any Borrower  shall
have any interest therein.
     (c) Unless the Collateral is perishable or threatens to decline speedily in
value, or is of a type customarily  sold on a recognized  market (in which event
the Agent shall  provide  the Lead  Borrower  such notice as may be  practicable
under the  circumstances),  the Agent shall give the Lead  Borrower at least ten
(10) days prior  written  notice of the date,  time,  and place of any  proposed
public sale,  and of the date after which any private sale or other  disposition
of the  Collateral  may be made.  Each Borrower  agrees that such written notice
shall satisfy all  requirements  for notice to that  Borrower  which are imposed
under  the UCC or other  applicable  law with  respect  to the  exercise  of the
Agent's rights and remedies upon default.
     (d) The Agent and any Revolving  Credit Lender may purchase the Collateral,
or any portion of it at any sale held under this Article.
     (e) If any of the Collateral is sold,  leased, or otherwise  disposed of by
the Agent on credit, the Liabilities shall not be deemed to have been reduced as
a result  thereof  unless and until payment is finally  received  thereon by the
Agent.
     (f) The Agent  shall  apply the  proceeds  of the  Agent's  exercise of its
rights and remedies upon default pursuant to this Article 11: in accordance with
Sections 13:13-6 and 13:13-7.


     114-  OCCUPATION  OF  BUSINESS  LOCATION.  In  connection  with the Agent's
exercise of the Agent's rights under this Article 11:, the Agent may enter upon,
occupy, and use any premises owned or occupied by each Borrower, and may exclude
each Borrower from such premises or portion  thereof as may have been so entered
upon, occupied,  or used by the Agent. The Agent shall not be required to remove
any of the Collateral from any such premises upon the Agent's taking  possession
thereof,  and may render any Collateral  unusable to the Borrowers.  In no event
shall the Agent be liable to any  Borrower  for use or occupancy by the Agent of
any premises pursuant to this Article 11:, nor for any charge (such as wages for
any Borrower's  employees and utilities) incurred in connection with the Agent's
exercise of the Agent's Rights and Remedies.



<PAGE>73

     115- GRANT OF  NONEXCLUSIVE  LICENSE.  Each  Borrower  hereby grants to the
Agent a royalty free nonexclusive  irrevocable  license to use, apply, and affix
any  trademark,  trade  name,  logo,  or the like in which any  Borrower  now or
hereafter has rights, such license being with respect to the Agent's exercise of
the rights  hereunder  including,  without  limitation,  in connection  with any
completion  of the  manufacture  of  Inventory or sale or other  disposition  of
Inventory.


     116 -ASSEMBLY OF COLLATERAL. The Agent may require any Borrower to assemble
the Collateral  and make it available to the Agent at the  Borrowers'  sole risk
and expense at a place or places  which are  reasonably  convenient  to both the
Agent and the Lead Borrower.

     117 -RIGHTS AND REMEDIES. The rights,  remedies,  powers,  privileges,  and
discretions of the Agent  hereunder  (herein,  the Agent's Rights and Remedies")
shall be cumulative  and not exclusive of any rights or remedies  which it would
otherwise have. No delay or omission by the Agent in exercising or enforcing any
of the Agent's  Rights and Remedies  shall operate as, or  constitute,  a waiver
thereof.  No waiver by the Agent of any Event of Default or of any default under
any other agreement shall operate as a waiver of any other default  hereunder or
under any other  agreement.  No single or partial exercise of any of the Agent's
Rights or  Remedies,  and no express  or implied  agreement  or  transaction  of
whatever  nature  entered  into  between the Agent and any person,  at any time,
shall preclude the other or further exercise of the Agent's Rights and Remedies.
No waiver by the Agent of any of the  Agent's  Rights  and  Remedies  on any one
occasion  shall be deemed a waiver on any subsequent  occasion,  nor shall it be
deemed a continuing  waiver. The Agent's Rights and Remedies may be exercised at
such time or times and in such order of preference  as the Agent may  determine.
The Agent's Rights and Remedies may be exercised without resort or regard to any
other source of satisfaction of the Liabilities.


Article 12:-  REVOLVING CREDIT FUNDINGS AND DISTRIBUTIONS:


     121- REVOLVING CREDIT FUNDING PROCEDURES. Subject to Section 12:12-2:
     (a) The Agent shall  advise each  Revolving  Credit  Lender,  no later than
2:00PM on a date on which any  Revolving  Credit  Loan  (other  than a SwingLine
Loan) is to be made on that  date.  Such  advice,  in each  instance,  may be by
telephone  or  facsimile  transmission,  provided  that  if  such  advice  is by
telephone,  it shall be confirmed in writing.  Advice of a Revolving Credit Loan
shall  include  the  amount  of and  interest  rate  applicable  to the  subject
Revolving Credit Loan.
     (b) Subject to that  Revolving  Credit  Lender's  Revolving  Credit  Dollar
Commitment,  each Revolving Credit Lender,  by no later than the end of business
on the day on which  the  subject  Revolving  Credit  Loan is to be made,  shall
Transfer that Revolving Credit Lender's  Revolving Credit Commitment  Percentage
of the subject Revolving Credit Loan to the Agent.



<PAGE>74

     122- SWINGLINE LOANS.
     (a) In the event that,  when a  Revolving  Credit  Loan is  requested,  the
aggregate  unpaid  balance of the SwingLine Loan is less than the SwingLine Loan
Ceiling,  then the  SwingLine  Lender may  advise  the Agent that the  SwingLine
Lender has  determined  to include up to the amount of the  requested  Revolving
Credit Loan as part of the SwingLine Loan. In such event,  the SwingLine  Lender
shall Transfer the amount of the requested Revolving Credit Loan to the Agent.
     (b) The  SwingLine  Loan shall be converted  to a Revolving  Credit Loan in
which all Revolving Credit Lenders participate as follows:
          (ii) At any time  and from  time to time,  the  SwingLine  Lender  may
     advise  the Agent  that  all,  or any part of the  SwingLine  Loan is to be
     converted to a Revolving  Credit Loan in which all Revolving Credit Lenders
     participate,  provided that if the Agent is not so advised by the SwingLine
     Lender,  then all  SwingLine  Loans shall be converted to Revolving  Credit
     Loans in which all Revolving Credit Lenders  participate no less frequently
     than weekly.
          (iii) At the  initiation  of a  Liquidation,  the then  entire  unpaid
     principal  balance of the SwingLine  Loan shall be converted to a Revolving
     Credit Loan in which all Revolving Credit Lenders participate.

In either such event,  the Agent shall advise each  Revolving  Credit  Lender of
such  conversion as if, and with the same effect as if such  conversion were the
making of a Revolving Credit Loan as provided in Section 12:12-1.
     (a) The SwingLine Lender, in separate capacities, may also be the Agent and
a Revolving Credit Lender.
     (b) The SwingLine  Lender,  in its capacity as SwingLine  Lender,  is not a
"Revolving Credit Lender" for any of the following purposes:
          (iv)  Except  as  otherwise  specifically  provided  in  the  relevant
     Section, any distribution pursuant to Section 13:13-6.
          (v)  Determination  of whether the  requisite  Loan  Commitments  have
     Consented to action requiring such Consent.


     123- AGENT'S COVERING OF FUNDINGS:
     (a) Each  Revolving  Credit  Lender shall make  available to the Agent,  as
provided  herein,  that Revolving Credit Lender's  Revolving  Credit  Commitment
Percentage of the following:
          (ii) Each  Revolving  Credit  Loan,  up to the maximum  amount of that
     Revolving  Credit  Lender's  Revolving  Credit  Dollar  Commitment  of  the
     Revolving Credit Loans.
          (iii) Up to the  maximum  amount  of that  Revolving  Credit  Lender's
     Revolving Credit Dollar  Commitment of each L/C Drawing (to the extent that
     such L/C Drawing is not  "covered"  by a Revolving  Credit Loan as provided
     herein).

     (a) In all circumstances, the Agent may:
          (iv)  Assume that each  Revolving  Credit  Lender,  subject to Section
     12:12-3(a),  timely shall make available to the Agent that Revolving Credit
     Lender's  Revolving Credit  Commitment  Percentage of each Revolving Credit
     Loan, notice of which is provided pursuant to Section 12:12-1.
          (v) In reliance upon such assumption, make available the corresponding
     amount to the Borrowers.
          (vi) Assume that each  Revolving  Credit  Lender timely shall pay, and
     shall make  available,  to the Agent all other amounts which that Revolving
     Credit  Lender is  obligated to so pay and/or make  available  hereunder or
     under any of the Loan Documents.


<PAGE>75

     (a) In the event that, in reliance upon any of such assumptions,  the Agent
makes  available,  a  Revolving  Credit  Lender's  Revolving  Credit  Commitment
Percentage of one or more Revolving Credit Loans, or any other amount to be made
available hereunder or under any of the Loan Documents, which amount a Revolving
Credit Lender (a "Delinquent  Revolving  Credit Lender") fails to provide to the
Agent within One (1) Business Day of written notice of such failure, then:
          (vii) The amount  which had been made  available  by the Agent is an "
     Agent's Cover" (and is so referred to herein).
          (viii) All interest  paid by the Borrowers on account of the Revolving
     Credit Loan or coverage  of the  subject L/C Drawing  which  consist of the
     Agent's Cover shall be retained by the Agent until the Agent's Cover,  with
     interest, has been paid.
          (ix) The Delinquent Revolving Credit Lender shall pay to the Agent, on
     demand,  interest at a rate equal to the  prevailing  federal funds rate on
     any Agent's Cover in respect of that Delinquent Revolving Credit Lender.
          (x) The Agent shall have  succeeded  to all rights to payment to which
     the Delinquent  Revolving  Credit Lender otherwise would have been entitled
     hereunder  in  respect  of  those  amounts  paid  by or in  respect  of the
     Borrowers on account of the Agent's Cover  together with interest  until it
     is repaid.  Such payments shall be deemed made first towards the amounts in
     respect  of which the  Agent's  Cover was  provided  and only then  towards
     amounts  in  which  the   Delinquent   Revolving   Credit  Lender  is  then
     participating. For purposes of distributions to be made pursuant to Section
     12:12-4(a)  (which  relates to ordinary  course  distributions)  or Section
     13:13-6  (which  relates to  distributions  of proceeds  of a  Liquidation)
     below,  amounts  shall be deemed  distributable  to a Delinquent  Revolving
     Credit  Lender (and  consequently,  to the Agent to the extent to which the
     Agent  is  then  entitled)  at  the  highest  level  of  distribution   (if
     applicable) at which the Delinquent Revolving Credit Lender would otherwise
     have been entitled to a distribution.
          (xi) Subject to Subsection  12:12-3(c)(iv),  the Delinquent  Revolving
     Credit  Lender shall be entitled to receive any payments from the Borrowers
     to which the Delinquent Revolving Credit Lender is then entitled,  provided
     however  there shall be deducted from such amount and retained by the Agent
     any  interest  to which the Agent is then  entitled  on  account of Section
     12:12-3(c)(ii), above.

     (a) A  Delinquent  Revolving  Credit  Lender  shall not be  relieved of any
obligation of such Delinquent Revolving Credit Lender hereunder (all and each of
which shall  constitute  continuing  obligations  on the part of any  Delinquent
Revolving Credit Lender).
     (b)  A  Delinquent  Revolving  Credit  Lender  may  cure  its  status  as a
Delinquent  Revolving  Credit  Lender by paying the Agent the  aggregate  of the
following:
          (xii) The Agent's  Cover (to the extent not  previously  repaid by the
     Borrowers  and  retained  by  the  Agent  in  accordance   with  Subsection
     12:12-3(c)(iv),  above) with respect to that  Delinquent  Revolving  Credit
     Lender.

               Plus

          (xiii)  The  aggregate  of  the  amount   payable   under   Subsection
     12:12-3(c)(iii),  above  (which  relates  to  interest  to be  paid by that
     Delinquent Revolving Credit Lender).

               Plus

          (xiv) All such costs and  expenses  as may be incurred by the Agent in
     the  enforcement of the Agent's rights  against such  Delinquent  Revolving
     Credit Lender.



<PAGE>76

     124- ORDINARY  COURSE  DISTRIBUTIONS.  (This Section 12:12-4 applies unless
the provisions of Section 13:13-6 (which relates to  distributions  in the event
of a Liquidation) becomes operative).
     (a)  Weekly,  on such day as may be set from  time to time by the Agent (or
more  frequently  at the  Agent's  option) the Agent and each  Revolving  Credit
Lender  shall  settle up on  amounts  advanced  under the  Revolving  Credit and
collected funds received in the Concentration Account.
     (b)  The  Agent  shall  distribute  to the  SwingLine  Lender  and to  each
Revolving  Credit Lender,  such Person's  respective  Pro-Rata share of interest
payments on the Revolving  Credit Loans when actually  received and collected by
the Agent.  For  purposes of  calculating  interest  due to a  Revolving  Credit
Lender,  that Revolving  Credit Lender shall be entitled to receive  interest on
the actual  amount  contributed  by that  Revolving  Credit  Lender  towards the
principal  balance  of  the  Revolving  Credit  Loans  outstanding   during  the
applicable period covered by the interest payment made by the Borrowers. Any net
principal  reductions  to the  Revolving  Credit Loans  received by the Agent in
accordance  with the Loan  Documents  during such  period  shall not reduce such
actual amount so  contributed,  for purposes of  calculation  of interest due to
that Revolving Credit Lender,  until the Agent has distributed to that Revolving
Credit Lender its pro-rata share thereof.
     (c) The Agent  shall  distribute  fees  paid on  account  of the  Revolving
Credit, as follows:
          (i) The Agent shall pay each Revolving  Credit Lender a portion of the
     Revolving Credit  Commitment Fee in accordance with the terms of the letter
     agreement between the Agent and such Revolving Credit Lender within two (2)
     Business  days  after  such  Person  becomes  a  Revolving   Credit  Lender
     hereunder.
          (ii) The Agent shall  distribute the Unused Fee, the L/C Fees, and the
     Early  Termination Fees to the Revolving Credit Lenders pro rata based upon
     their respective  Revolving Credit Commitment  Percentages,  within two (2)
     Business Days after the Agent's receipt thereof.

     (d) No  Revolving  Credit  Lender  shall have any  interest in, or right to
receive any part of, the Agent's  Fee to be paid by the  Borrowers  to the Agent
pursuant to this Agreement.
     (e) Any  amount  received  by the  Agent as  reimbursement  for any cost or
expense  (including  without  limitation,  reasonable  attorneys' fees) shall be
distributed by the Agent to that Person which is entitled to such  reimbursement
as provided in this  Agreement  (and if such  Person(s)  is (are) the  Revolving
Credit Lenders, pro-rata based upon their respective Revolving Credit Commitment
Percentages  at the  date on  which  the  expense,  in  respect  of  which  such
reimbursement is being made, was incurred).
     (f) Each  distribution  pursuant  to this  Section  12:12-4  is  subject to
Section 12:12-3(c), above.



<PAGE>77

Article 13:-  ACCELERATION AND LIQUIDATION:


     131- ACCELERATION NOTICES
     (a) The Agent may give the Revolving Credit Lenders an Acceleration  Notice
at any time following the occurrence of an Event of Default.
     (b) The SuperMajority  Lenders may give the Agent an Acceleration Notice at
any time following the occurrence of an Event of Default.  Such notice may be by
multiple  counterparts,  provided  that  counterparts  executed by the requisite
Revolving  Credit  Lenders are received by the Agent within a period of five (5)
consecutive Business Days.


     132- ACCELERATION Unless stayed by judicial or statutory process, the Agent
shall  Accelerate  the  Revolving  Credit   Obligations  within  a  commercially
reasonable time following:
     (a) The Agent's giving of an  Acceleration  Notice to the Revolving  Credit
Lenders as provided in Section 13:13-1(a).
     (b) The Agent's  receipt of an Acceleration  Notice from the  SuperMajority
Lenders, in compliance with Section 13:13-1(b) .


     133-  INITIATION  OF  LIQUIDATION  Unless  stayed by judicial or  statutory
process,  a  Liquidation  shall be initiated by the Agent within a  commercially
reasonable time following Acceleration of the Revolving Credit Obligations.



<PAGE>78

     134- ACTIONS AT AND FOLLOWING INITIATION OF LIQUIDATION
     (a) At the initiation of a Liquidation:
          (ii) The unpaid principal balance of the SwingLine Loan (if any) shall
     be converted,  pursuant to Section  12:12-2(b)(ii),  to a Revolving  Credit
     Loan in which all Revolving Credit Lenders participate.
          (iii) The Agent and the Revolving  Credit Lenders shall "net out" each
     Revolving Credit Lender's  respective  contributions  towards the Revolving
     Credit Loans,  so that each  Revolving  Credit Lender holds that  Revolving
     Credit Lender's  Revolving  Credit  Commitment  Percentage of the Revolving
     Credit Loans and advances.

     (a) Following the initiation of a Liquidation, each Revolving Credit Lender
shall  contribute,  towards  any L/C  thereafter  honored  and  not  immediately
reimbursed by the Borrowers,  that Revolving  Credit Lender's  Revolving  Credit
Commitment Percentage of such honoring.


     135- AGENT'S CONDUCT OF LIQUIDATION
     (a) Any  Liquidation  shall be conducted by the Agent,  with the advice and
assistance of the Revolving Credit Lenders.
     (b) The Agent may  establish  one or more Nominees to "bid in" or otherwise
acquire ownership to any Post Foreclosure Asset.
     (c) The Agent  shall  manage the Nominee and manage and dispose of any Post
Foreclosure  Assets with a view towards the realization of the economic benefits
of the ownership of the Post  Foreclosure  Assets and in such regard,  the Agent
and/or the Nominee may operate, repair, manage,  maintain,  develop, and dispose
of any  Post  Foreclosure  Asset  in such  manner  as the  Agent  determines  as
appropriate under the circumstances.
     (d) The Agent may decline to  undertake  or to continue  taking a course of
action  or to  execute  an action  plan  (whether  proposed  by the Agent or any
Revolving Credit Lender) unless  indemnified to the Agent's  satisfaction by the
Revolving  Credit Lenders against any and all liability and expense which may be
incurred by the Agent by reason of taking or  continuing  to take that course of
action or action plan.
     (e) Each  Revolving  Credit Lender shall execute all such  instruments  and
documents not  inconsistent  with the  provisions of this Agreement as the Agent
and/or the Nominee  reasonably  may request  with  respect to the  creation  and
governance of any Nominee,  the conduct of the  Liquidation,  and the management
and disposition of any Post Foreclosure Asset.


     136- DISTRIBUTION OF LIQUIDATION PROCEEDS:
     (a) The Agent may establish one or more reasonably  funded reserve accounts
into which  proceeds  of the  conduct of any  Liquidation  may be  deposited  in
anticipation  of  future  expenses  which  may be  incurred  by the Agent in the
exercise of rights as a secured creditor of the Borrowers and prior claims which
the Agent anticipates may need to be paid.
     (b)  The  Agent  shall  distribute  the  net  proceeds  of  Liquidation  in
accordance with the relative priorities set forth in Section 13:13-7.
     (c) Each  Revolving  Credit  Lender,  on the  written  request of the Agent
and/or any Nominee,  not more frequently  than once each month,  shall reimburse
the Agent  and/or any  Nominee,  pro-rata,  for any cost or  expense  reasonably
incurred by the Agent and/or the Nominee in the conduct of a Liquidation,  which
amount  is not  covered  out of  current  proceeds  of  the  Liquidation,  which
reimbursement shall be paid over to and distributed by the Agent.



<PAGE>79

     137- RELATIVE PRIORITIES TO PROCEEDS OF LIQUIDATION The relative priorities
to the proceeds of a Liquidation are as follows:
     (a) To the Agent as reimbursement  for all reasonable third party costs and
expenses incurred by the Agent and to Lenders' Special Counsel and to any funded
reserve established pursuant to Section 13:13-6(a); and then
     (b) To  the  SwingLine  Lender,  on  account  of any  SwingLine  loans  not
converted to Revolving Credit Loans pursuant to Section 13:13-4(a)(i); and then
     (c) To the Revolving  Credit Lenders  (other than any Delinquent  Revolving
Credit  Lender),  pro-rata,  to the unpaid  principal  balance of the  Revolving
Credit; and then
     (d) To the Revolving  Credit Lenders  (other than any Delinquent  Revolving
Credit Lender), pro-rata, to accrued interest on the Revolving Credit; and then
     (e) To the Revolving  Credit Lenders  (other than any Delinquent  Revolving
Credit Lender), pro-rata, to those fees distributable hereunder to the Revolving
Credit Lenders; and then
     (f) To any  Delinquent  Revolving  Credit  Lenders,  pro-rata to amounts to
which such Revolving Credit Lenders  otherwise would have been entitled pursuant
to Sections 13:13-7(c), 13:13-7(d), 13:13-7(e) ; and then
     (g) To the  Revolving  Credit  Lenders,  pro-rata,  to  the  extent  of the
Revolving Credit Early Termination Fee; and then
     (h) To any other Liabilities.


Article 14:-  THE AGENT:


     141 -APPOINTMENT OF THE AGENT
     (a) Each Lender  appoints and  designates  Fleet Retail Finance Inc. as the
"Agent" hereunder and under the Loan Documents.
     (b) Each Revolving Credit Lender authorizes the Agent:
          (ii) To execute those of the Loan Documents and all other  instruments
     relating thereto to which the Agent is a party.
          (iii) To take such action on behalf of the  Revolving  Credit  Lenders
     and to exercise  all such powers as are  expressly  delegated  to the Agent
     hereunder  and in the Loan  Documents and all related  documents,  together
     with such other powers as are reasonably incident thereto.

     (a) Heller  Financial,  Inc.  has been  granted the title of " Co-Agent and
Documentation  Agent",  in which capacity,  it shall not have any rights nor any
responsibilities. It may resign such position, at any time, on written notice to
the  Agent;   and  shall  cease  to  be   Co-Agent   and   Documentation   Agent
contemporaneous with its ceasing to be a Revolving Credit Lender.



<PAGE>80

     142- RESPONSIBILITIES OF AGENT
     (a) The Agent  shall not have any  duties  or  responsibilities  to, or any
fiduciary  relationship  with,  any  Revolving  Credit  Lender  except for those
expressly set forth in this Agreement.
     (b) Neither the Agent nor any of its Affiliates shall be responsible to any
Revolving Credit Lender for any of the following:
          (ii) Any recitals,  statements,  representations or warranties made by
     any Borrower or any other Person.
          (iii)  Any  appraisals  or  other  assessments  of the  assets  of any
     Borrower  or of any  other  Person  responsible  for or on  account  of the
     Liabilities.
          (iv) The value, validity, effectiveness,  genuineness, enforceability,
     or  sufficiency  of the Loan  Agreement,  the Loan  Documents  or any other
     document referred to or provided for therein.
          (v) Any failure by any  Borrower or any other  Person  (other than the
     Agent) to perform its obligations under the Loan Documents.

     (a) The Agent may employ attorneys,  accountants,  and other  professionals
and agents and attorneys-in-fact and shall not be responsible for the negligence
or misconduct of any such attorneys,  accountants,  and other  professionals  or
agents or attorneys-in-fact  selected by the Agent with reasonable care. No such
attorney,  accountant,  other professional,  agent, or attorney-in-fact shall be
responsible  for any  action  taken or  omitted  to be taken by any  other  such
Person.
     (b) Neither the Agent,  nor any of its  directors,  officers,  or employees
shall be  responsible  to any  Revolving  Credit  Lender for any action taken or
omitted to be taken or  omitted  to be taken by any other of them in  connection
herewith in reliance  upon advice of its counsel  nor, in any other event except
for any  action  taken or  omitted  to be  taken  as to  which a final  judicial
determination  has been or is made (in a proceeding in which such Person has had
an  opportunity  to be heard) that such Person had acted in a grossly  negligent
manner, in actual bad faith, or in willful misconduct.
     (c) The Agent shall not have any responsibility in any event for more funds
than the Agent actually receives and collects.
     (d) The Agent,  in its separate  capacity as a Lender,  shall have the same
rights and powers hereunder as any other Lender.
     (e) The Syndication  Agent (except as provided in the commitment letter for
this transaction) shall have no powers,  rights, duties or responsibilities with
respect to this Agreement and the other Loan Documents.



<PAGE>81

     143- CONCERNING DISTRIBUTIONS BY THE AGENT
     (a) The Agent in the Agent's  reasonable  discretion based upon the Agent's
determination  of the  likelihood  that  additional  payments  will be received,
expenses  incurred,  and/or  claims made by third parties to all or a portion of
such proceeds,  may delay the distribution of any payment received on account of
the Liabilities.
     (b) The Agent may disburse funds prior to  determining  that the sums which
the Agent expects to receive have been finally and  unconditionally  paid to the
Agent.  If and to the  extent  that the Agent does  disburse  funds and it later
becomes  apparent  that the  Agent did not then  receive a payment  in an amount
equal to the sum paid out,  then any  Revolving  Credit Lender to whom the Agent
made the funds  available,  on demand from the Agent,  shall refund to the Agent
the sum paid to that person.
     (c) If,  in the  opinion  of the  Agent,  the  distribution  of any  amount
received  by the  Agent  might  involve  the  Agent  in  liability,  or might be
prohibited  hereby,  or might be  questioned  by any Person,  then the Agent may
refrain from making  distribution  until the Agent's right to make  distribution
has been adjudicated by a court of competent jurisdiction.
     (d) The proceeds of any Revolving Credit Lender's exercise of any right of,
or in the  nature  of,  set-off  shall be deemed,  First,  to the extent  that a
Revolving Credit Lender is entitled to any distribution hereunder, to constitute
such  distribution  and Second,  shall be shared with the other Revolving Credit
Lenders as if  distributed  pursuant  to (and  shall be deemed as  distributions
under) Section 13:13-7.
     (e) Each  Revolving  Credit  Lender  recognizes  that the  crediting of the
Borrowers  with the "proceeds" of any  transaction  in which a Post  Foreclosure
Asset is  acquired  is a  non-cash  transaction  and that,  in  consequence,  no
distribution of such "proceeds" will be made by the Agent to any Lender.
     (f) In the event that (x) a court of competent  jurisdiction  shall adjudge
that any  amount  received  and  distributed  by the  Agent is to be  repaid  or
disgorged or (y) the SuperMajority Lenders determine to effect such repayment or
disgorgement,  then each Revolving Credit Lender to which any such  distribution
shall have been made shall repay, to the Agent which had made such distribution,
that  Revolving  Credit  Lender's  Pro-Rata  share of the amount so  adjudged or
determined to be repaid or disgorged.


     144- DISPUTE  RESOLUTION:  Any dispute among the Revolving  Credit  Lenders
and/or the Agent concerning the interpretation,  administration,  or enforcement
of the financing arrangements contemplated by this or any other Loan Document or
the  interpretation  or  administration of this or any other Loan Document which
cannot be resolved  amicably  shall be resolved  in the United  States  District
Court for the  District of  Massachusetts,  sitting in Boston or in the Superior
Court of Suffolk County, Massachusetts, to the jurisdiction of which courts each
Revolving Credit Lender hereto hereby submits.



<PAGE>82

     145-  DISTRIBUTIONS  OF NOTICES AND OF DOCUMENTS  The Agent will forward to
each Revolving Credit Lender, promptly after the Agent's receipt thereof, a copy
of each  notice  or other  document  furnished  to the  Agent  pursuant  to this
Agreement,   including  monthly,  quarterly,  and  annual  financial  statements
received from the Lead Borrower pursuant to Article 5: of this Agreement,  other
than any of the following:
     (a) Routine  communications  associated with requests for Revolving  Credit
Loans and/or the issuance of L/C's.
     (b) Routine or nonmaterial communications.
     (c) Any notice or  document  required  by any of the Loan  Documents  to be
furnished to the Revolving Credit Lenders by the Lead Borrower.
     (d) Any  notice or  document  of which the  Agent has  knowledge  that such
notice or document had been forwarded to the Revolving Credit Lenders other than
by the Agent.


     146- CONFIDENTIAL INFORMATION
     (a) Each Revolving Credit Lender will maintain, as confidential, all of the
following:
          (ii) Proprietary approaches, techniques, and methods of analysis which
     are  applied  by the Agent in the  administration  of the  credit  facility
     contemplated by this Agreement.
          (iii) Proprietary forms and formats utilized by the Agent in providing
     reports to the Revolving  Credit Lenders  pursuant  hereto,  which forms or
     formats are not of general currency.

     (a) Nothing  included  herein  shall  prohibit the  disclosure  of any such
information  as may  be  required  to be  provided  by  judicial  process  or by
regulatory authorities having jurisdiction over any party to this Agreement.


     147-  RELIANCE  BY AGENT  The  Agent  shall be  entitled  to rely  upon any
certificate,  notice or other document (including any cable, telegram, telex, or
facsimile)  reasonably  believed  by the Agent to be genuine  and correct and to
have been signed or sent by or on behalf of the proper  person or  persons,  and
upon advice and statements of attorneys,  accountants and other experts selected
by the Agent.  As to any matters not expressly  provided for in this  Agreement,
any Loan Document, or in any other document referred to therein, the Agent shall
in all events be fully  protected in acting,  or in refraining  from acting,  in
accordance with the applicable Consent required by this Agreement.  Instructions
given  with the  requisite  Consent  shall be binding  on all  Revolving  Credit
Lenders.



<PAGE>83

     148- NON-RELIANCE ON AGENT AND OTHER REVOLVING CREDIT LENDERS
     (a) Each Revolving  Credit Lender  represents to all other Revolving Credit
Lenders and to the Agent that such Revolving Credit Lender:
          (ii)  Independently and without reliance on any  representation or act
     by  Agent  or by any  other  Revolving  Credit  Lender,  and  based on such
     documents  and  information  as that  Revolving  Credit  Lender  has deemed
     appropriate,  has made such Revolving  Credit Lender's own appraisal of the
     financial condition and affairs of the Borrowers and decision to enter into
     this Agreement.
          (iii) Has relied upon that  Revolving  Credit  Lender's  review of the
     Loan  Documents  by that  Revolving  Credit  Lender  and by counsel to that
     Revolving Credit Lender as that Revolving Credit Lender deemed  appropriate
     under the circumstances.

     (a) Each Revolving  Credit Lender agrees that such Revolving Credit Lender,
independently  and without  reliance  upon Agent or any other  Revolving  Credit
Lender,  and based upon such documents and information as such Revolving  Credit
Lender shall deem  appropriate at the time, will continue to make such Revolving
Credit  Lender's own  appraisals of the  financial  condition and affairs of the
Borrowers  when  determining  whether  to take or not to take any  discretionary
action under this Agreement.
     (b) The Agent, in the discharge of that Agent's duties hereunder, shall not
be required to make  inquiry of, or to inspect the  properties  or books of, any
Person.
     (c)  Except for  notices,  reports,  and other  documents  and  information
expressly  required to be furnished to the Revolving Credit Lenders by the Agent
hereunder  (as to which,  see  Section  14:14-5),  the Agent  shall not have any
affirmative  duty or  responsibility  to provide  any Lender  with any credit or
other  information  concerning any Person,  which  information may come into the
possession of Agent or any Affiliate of the Agent.
     (d)  Each  Revolving  Credit  Lender,  at such  Revolving  Credit  Lender's
request,  shall have  reasonable  access to all  nonprivileged  documents in the
possession of the Agent,  which documents  relate to the Agent's  performance of
its duties hereunder.


     149-  INDEMNIFICATION  Without  limiting the  liabilities  of the Borrowers
under any this or any of the other Loan Documents,  each Revolving Credit Lender
shall indemnify the Agent, Pro-Rata,  for any and all liabilities,  obligations,
losses,  damages,  penalties,  actions,  judgments,  suits,  costs,  expenses or
disbursements of any kind or nature whatsoever  (including reasonable attorneys'
fees and expenses and other out-of-pocket expenditures) which may at any time be
imposed on,  incurred by, or asserted  against the Agent and in any way relating
to or arising out of this  Agreement or any other Loan Document or any documents
contemplated by or referred to therein or the transactions  contemplated thereby
or the  enforcement  of any of terms  hereof  or  thereof  or of any such  other
documents, provided, however, no Revolving Credit Lender shall be liable for any
of the foregoing to the extent that any of the foregoing  arises from any action
taken  or  omitted  to be  taken  by the  Agent  as to  which a  final  judicial
determination has been or is made (in a proceeding in which the Agent has had an
opportunity to be heard) that the Agent had acted in a grossly negligent manner,
in actual bad faith, or in willful misconduct.



<PAGE>84

     1410- RESIGNATION OF AGENT
     (a) The Agent may resign at any time by giving 60 days prior written notice
thereof to the  Revolving  Credit  Lenders.  Upon  receipt of any such notice of
resignation,  the  SuperMajority  Lenders  shall  have the  right to  appoint  a
successor  to such  Agent  (and if no Event of Default  has  occurred,  with the
consent of the Lead Borrower, not to be unreasonably withheld and, in any event,
deemed  given by the Lead  Borrower if no written  objection  is provided by the
Lead Borrower to the (resigning)  Agent within seven (7) Business Days notice of
such  proposed  appointment).  If a  successor  Agent  shall  not  have  been so
appointed  and  accepted  such  appointment  within 30 days  after the giving of
notice by the resigning Agent,  then the resigning Agent may appoint a successor
Agent,  which shall be a  financial  institution  having a combined  capital and
surplus  in  excess  of  $1,000,000,000.00.  The  consent  of the Lead  Borrower
otherwise required by this Section 14:14-10(a) shall not be required if an Event
of Default has occurred.
     (b)  Upon  the  acceptance  of any  appointment  as  Agent  hereunder  by a
successor  Agent,  such successor shall thereupon  succeed to, and become vested
with, all the rights, powers, privileges, and duties of the (resigning) Agent so
replaced,  and the  (resigning)  Agent shall be discharged  from the (resigning)
Agent's  duties  and  obligations  hereunder,  other  than  on  account  of  any
responsibility  for any action  taken or omitted to be taken by the  (resigning)
Agent  as to  which a final  judicial  determination  has  been or is made (in a
proceeding in which the  (resigning)  Person has had an opportunity to be heard)
that such Person had acted in a grossly negligent manner or in bad faith.
     (c)  After  any  retiring  Agent's  resignation,  the  provisions  of  this
Agreement  and of all other  Loan  Documents  shall  continue  in effect for the
retiring Person's benefit in respect of any actions taken or omitted to be taken
by it while it was acting as Agent.


Article 15:-  ACTION BY AGENTS - CONSENTS - AMENDMENTS - WAIVERS:


     151- ADMINISTRATION OF CREDIT FACILITIES
     (a) Except as otherwise specifically provided in this Agreement,  the Agent
may take any action with respect to the credit facility contemplated by the Loan
Documents as the Agent  determines to be  appropriate , provided,  however,  the
Agent is not under any affirmative obligation to take any action which it is not
required by this Agreement or the Loan Documents specifically to so take.
     (b) Except as  specifically  provided  in the  following  Sections  of this
Agreement,  whenever a Loan Document or this Agreement  provides that action may
be taken or omitted to be taken in an Agent's  discretion,  the Agent shall have
the sole  right to take,  or refrain  from  taking,  such  action  without,  and
notwithstanding, any vote of the Revolving Credit Lender:


         Actions Described in Section____Type of Consent Required____
         ------------------------------------------------------------
                   15:15-2               Majority Lenders
                   15:15-3               SuperMajority Lenders
                   15:15-4               Certain Consent
                   15:15-5               Unanimous Consent
                   15:15-6               Consent of SwingLine Lender
                   15:15-7               Consent of the Agent

     (c) The rights  granted to the Revolving  Credit  Lenders in those sections
referenced in Section 15:15-1(b) shall not otherwise limit or impair the Agent's
exercise of its discretion under the Loan Documents.



<PAGE>85

     152-  ACTIONS  REQUIRING  OR ON  DIRECTION  OF MAJORITY  LENDERS  Except as
otherwise  provided in this Agreement,  the Consent or direction of the Majority
Lenders is required  for any  amendment,  waiver,  or  modification  of any Loan
Document.


     153- ACTIONS REQUIRING OR ON DIRECTION OF SUPERMAJORITY LENDERS The Consent
or direction of the SuperMajority Lenders is required as follows:
     (a) The Revolving  Credit  Lenders agree that any loan or advance under the
Revolving  Credit  which  results in a  Permissible  OverLoan may be made by the
Agent in its discretion  without the Consent of the Revolving Credit Lenders and
that each Revolving Credit Lender shall be bound thereby, provided, however, the
Consent  or  direction  of the  SuperMajority  Lenders is  required  to permit a
Permissible  OverLoan to be outstanding  for more than 45  consecutive  Business
Days or more than twice in any twelve month period.
     (b) If any  Borrower  is then in  Default,  the  SuperMajority  Lenders may
direct the Agent to suspend the Revolving  Credit  (including  the making of any
Permissible OverLoans), whereupon, as long as a Borrower is in Default, the only
Revolving Credit Loans which may be made are either
          (ii)  Revolving  Credit  Loans  made  or  undertaken  in  the  Agent's
     discretion to protect and preserve the  interests of the  Revolving  Credit
     Lenders; or
          (iii)  Revolving  Credit Loans made with Consent of the  SuperMajority
     Lenders.

     (a) If an Event of  Default  has  occurred  and not been duly  waived,  the
SuperMajority Lenders may:
          (iv) Give the Agent an Acceleration  Notice in accordance with Section
     13:13-1(b).
          (v) Direct the Agent to  increase  the rate of interest to the default
     rate of  interest  as  provided  in, and to the extent  permitted  by, this
     Agreement.



<PAGE>86

     154-  ACTION REQUIRING  CERTAIN CONSENT The consent of the SwingLine Lender
and Revolving  Credit Lenders (other than Delinquent  Revolving  Credit Lenders)
holding 66 2/3 % or more of the Loan Commitments of the Revolving Credit Lenders
(other than any Loan  Commitments  held by Delinquent  Revolving Credit Lenders)
shall be required to increase the SwingLine Loan Ceiling.


     155-  ACTIONS  REQUIRING  OR  DIRECTED  BY  UNANIMOUS  CONSENT  None of the
following may take place except with the Consent of each Revolving Credit Lender
adversely affected thereby or with Unanimous Consent:
     (a) Any increase in any Revolving  Credit Lender's  Revolving Credit Dollar
Commitment or Revolving Credit  Commitment  Percentage  (other than by reason of
the application of Section  15:15-10 (which deals with  NonConsenting  Revolving
Credit   Lenders)  or  Section   16:16-1  (which  deals  with   assignments  and
participations)).
     (b) Any  decrease  in any  interest  rate or fee  payable to the  Revolving
Credit Lenders on account of the Revolving Credit Loans.
     (c) Any extension of the Maturity Date.
     (d) Any forgiveness of all or any portion of any payment Liability.
     (e) Any decrease in any interest  rate or fee payable under any of the Loan
Documents  (other than any Agent's Fee (for which the consent of the Agent shall
also be  required))  and of any fee provided for by the Fee Letter (which may be
amended by written  agreement between the Lead Borrower on the one hand, and the
Agent on the other).
     (f) Any  release of a  material  portion of the  Collateral  not  otherwise
required or provided for in the Loan Documents or to facilitate a Liquidation.
     (g) Any  amendment  of the  definition  of the  terms  "Borrowing  Base" or
"Availability"  or of any  Definition of any component  thereof,  such that more
credit would be available to the Borrowers,  based on the same assets,  as would
have been  available to the Borrowers  immediately  prior to such amendment , it
being understood, however, that:
          (ii) The foregoing  shall not limit the adjustment by the Agent of any
     Reserve in the Agent's  administration of the Revolving Credit as otherwise
     permitted by this Agreement.
          (iii) The foregoing shall not prevent the Agent, in its administration
     of the Revolving  Credit,  from  restoring any component of Borrowing  Base
     which had been lowered by the Agent back to the value of such component, as
     stated in this Agreement or to an intermediate value.

     (a) Any release of any Person obligated on account of the Liabilities.
     (b) The making of any  Revolving  Credit  Loan  which,  when made,  exceeds
Availability and is not either a Permissible OverLoan, provided, however,
          (iv) no Consent shall be required in connection with the making of any
     Revolving  Credit Loan to "cover" any honoring of a drawing  under any L/C;
     and
          (v)  each  Lender  recognizes  that  subsequent  to  the  making  of a
     Revolving Credit Loan which does not constitute a Permissible OverLoan, the
     unpaid  principal  balance of the Loan Account may exceed Borrowing Base on
     account of changed circumstances beyond the control of the Agent (such as a
     drop in collateral value).


<PAGE>87

     (a) The  waiver of the  obligation  of the  Borrowers  to reduce the unpaid
principal  balance of loans under the  Revolving  Credit to an amount which does
not exceed a  Permissible  OverLoan or,  subject to the time limits  included in
Section  15:15-3(a)  (which  places  time and  frequency  limits on  Permissible
OverLoans), to eliminate an OverLoan.
     (b) Any amendment of this Article 15:.
     (c) Amendment of any of the following Definitions:
          "Majority Lender"
          "Permissible OverLoan"
          "SuperMajority Lenders
          "Unanimous Consent"


     156- ACTIONS REQUIRING  SWINGLINE LENDER CONSENT No action,  amendment,  or
waiver of  compliance  with,  any  provision  of the Loan  Documents  or of this
Agreement  which  affects the  SwingLine  Lender may be  undertaken  without the
Consent of the SwingLine Lender.


     157- ACTIONS REQUIRING AGENT'S CONSENT
     (a) No action,  amendment,  or waiver of compliance  with, any provision of
the Loan Documents or of this Agreement  which affects the Agent in its capacity
as Agent may be undertaken without the written consent of the Agent.
     (b)  No  action  referenced  herein  which  affects  the  rights,   duties,
obligations,  or liabilities of the Agent shall be effective without the written
consent of the Agent.


     158- MISCELLANEOUS ACTIONS
     (a)  Notwithstanding  any  other  provision  of this  Agreement,  no single
Revolving  Credit  Lender  independently  may  exercise  any  right of action or
enforcement against or with respect to any Borrower.
     (b) The Agent  shall be fully  justified  in  failing or  refusing  to take
action  under this  Agreement  or any Loan  Document on behalf of any  Revolving
Credit Lender unless the Agent shall first
          (ii)  receive such clear,  unambiguous,  written  instructions  as the
     Agent deems appropriate;

     and

          (iii) be  indemnified  to the Agent's  satisfaction  by the  Revolving
     Credit  Lenders  against any and all  liability  and  expense  which may be
     incurred  by the Agent by reason of taking or  continuing  to take any such
     action,  unless  such  action  had  been  grossly  negligent,   in  willful
     misconduct, or in bad faith.

     (a) The Agent may  establish  reasonable  procedures  for the  providing of
direction  and  instructions  from the  Revolving  Credit  Lenders to the Agent,
including its reliance on multiple counterparts,  facsimile  transmissions,  and
time limits  within which such  direction and  instructions  must be received in
order  to  be  included  in  a  determination  of  whether  the  requisite  Loan
Commitments has provided its direction, Consent, or instructions.



<PAGE>88

     159- ACTIONS  REQUIRING  BORROWER'S  CONSENT The Lead Borrower's consent is
required for any amendment of this Agreement,  except that each of the following
Articles  of this  Agreement  may be  amended  without  the  consent of the Lead
Borrower:

         Article_____Title of Article
         ----------------------------
         12:         Revolving Credit Fundings and Distributions
         13:         Acceleration and Liquidation
         14:         The Agent


     1510- NONCONSENTING REVOLVING CREDIT LENDER
     (a) In the event that a Revolving Credit Lender (in this Section  15:15-10,
a  "NonConsenting  Revolving  Credit  Lender") does not provide its Consent to a
proposal by the Agent to take action which  requires  consent under this Article
15:,  then one or more  Revolving  Credit  Lenders who provided  Consent to such
action may require the assignment,  without  recourse and in accordance with the
procedures  outlined in Section 16:16-1,  below, of the NonConsenting  Revolving
Credit Lender's commitment  hereunder on fifteen (15) days written notice to the
Agent and to the NonConsenting Revolving Credit Lender.
     (b)  At  the  end  of  such  fifteen  (15)  days,  and  provided  that  the
NonConsenting Revolving Credit Lender delivers the Revolving Credit Note held by
the  NonConsenting  Revolving  Credit Lender to the Agent,  the Revolving Credit
Lenders who have given such written  notice shall  Transfer the following to the
NonConsenting Revolving Credit Lender:
          (ii) Such  NonConsenting  Revolving Credit Lender's  Pro-Rata share of
     the  principal  and interest of the  Revolving  Credit Loans to the date of
     such assignment.
          (iii) All fees distributable  hereunder to the NonConsenting Revolving
     Credit Lender to the date of such assignment.
          (iv) Any out-of-pocket  costs and expenses for which the NonConsenting
     Revolving Credit Lender is entitled to reimbursement from the Borrowers.

     (a) In the event that the  NonConsenting  Revolving  Credit Lender fails to
deliver  to the  Agent  the  Revolving  Credit  Note  held by the  NonConsenting
Revolving Credit Lender as provided in Section 15:15-10(b), then:
          (v)  The  amount  otherwise  to be  Transferred  to the  NonConsenting
     Revolving  Credit Lender shall be  Transferred to the Agent and held by the
     Agent, without interest,  to be turned over to the NonConsenting  Revolving
     Credit  Lender  upon  delivery  of the  Revolving  Credit Note held by that
     NonConsenting Revolving Credit Lender.
          (vi) The  Revolving  Credit Note held by the  NonConsenting  Revolving
     Credit Lender shall have no force or effect whatsoever.
          (vii) The  NonConsenting  Revolving  Credit Lender shall cease to be a
     "Revolving Credit Lender".
          (viii) The  Revolving  Credit  Lender(s)  which have  Transferred  the
     amount to the Agent as described  above shall have  succeeded to all rights
     and become subject to all of the obligations of the NonConsenting Revolving
     Credit Lender as "Revolving Credit Lender".


<PAGE>89

     (a) In the event that more than One (1)  Revolving  Credit Lender wishes to
require such assignment,  the NonConsenting Revolving Credit Lender's commitment
hereunder shall be divided among such Revolving  Credit Lenders,  pro-rata based
upon their respective  Revolving Credit Commitment  Percentages,  with the Agent
coordinating such transaction.
     (b) The Agent shall  coordinate the retirement of the Revolving Credit Note
held by the NonConsenting  Revolving Credit Lender and the issuance of Revolving
Credit  Notes  to  those   Revolving   Credit  Lenders  which   "take-out"  such
NonConsenting  Revolving  Credit Lender,  provided,  however,  no processing fee
otherwise to be paid as provided in Section  16:16-2(b)  shall be due under such
circumstances.


Article 16:-  ASSIGNMENTS BY REVOLVING CREDIT LENDERS:


     161- ASSIGNMENTS AND ASSUMPTIONS:
     (a)  Except as  provided  herein,  each  Revolving  Credit  Lender (in this
Section 16:16-1(a), an "Assigning Revolving Credit Lender") may assign to one or
more Eligible Assignees (in this Section 16:16-1(a), each an "Assignee Revolving
Credit Lender") all or a portion of that Revolving  Credit  Lender's  interests,
rights and  obligations  under this Agreement and the Loan Documents  (including
all or a portion of its Commitment) and the same portion of the Revolving Credit
Loans at the time  owing to it,  and of the  Revolving  Credit  Note held by the
Assigning Revolving Credit Lender, provided that:
          (ii) The Agent  shall  have  given its prior  written  consent to such
     assignment,  which consent shall not be unreasonably withheld, but need not
     be given if the proposed assignment would result in any resulting Revolving
     Credit Lender's having a Dollar  Commitment of less than the "minimum hold"
     amount specified in Section 16:16-1(a)(iii).
          (iii) Each such assignment shall be of a constant,  and not a varying,
     percentage  of all the  Assigning  Revolving  Credit  Lender's  rights  and
     obligations under this Agreement.
          (iv) Following the  effectiveness  of such  assignment,  the Assigning
     Revolving Credit Lender's Dollar Commitment (if not an assignment of all of
     the Assigning Revolving Credit Lender's  Commitment) shall not be less than
     $10,000,000.00.



<PAGE>90

     162- ASSIGNMENT PROCEDURES.  (This Section 16:16-2 describes the procedures
to be  followed  in  connection  with an  assignment  effected  pursuant to this
Article 16: and permitted by Section 16:16-1).
     (a) The  parties to such an  assignment  shall  execute  and deliver to the
Agent, for recording in the Register, an Assignment and Acceptance substantially
in the form of EXHIBIT 16:16-2, annexed hereto.
     (b) The Assigning  Revolving Credit Lender shall deliver to the Agent, with
such  Assignment and Acceptance,  the Revolving  Credit Note held by the subject
Assigning  Revolving Credit Lender and the Agent's  processing fee of $3,500.00,
provided,  however,  no such  processing  fee shall be due  where the  Assigning
Revolving  Credit Lender is one of the Revolving  Credit  Lenders at the initial
execution of this Agreement.
     (c) The Agent  shall  maintain  a copy of each  Assignment  and  Acceptance
delivered  to it and a  register  or  similar  list  (the  "Register")  for  the
recordation  of the names and addresses of the Revolving  Credit  Lenders and of
the Revolving  Credit  Commitment  Percentage  and Revolving  Credit  Commitment
Percentage of each Revolving Credit Lender.  The Register shall be available for
inspection by the Revolving  Credit Lenders at any reasonable time and from time
to time upon  reasonable  prior notice.  In the absence of manifest  error,  the
entries in the Register shall be conclusive and binding on all Revolving  Credit
Lenders.  The Agent and the Revolving Credit Lenders may treat each Person whose
name is recorded in the Register as a "Revolving  Credit  Lender"  hereunder for
all purposes of this Agreement.
     (d) The Assigning  Revolving  Credit Lender and Assignee  Revolving  Credit
Lender,  directly between themselves,  shall make all appropriate adjustments in
payments  for  periods  prior  to  the  effective  date  of  an  Assignment  and
Acceptance.


     163- EFFECT OF ASSIGNMENT.
     (a) From and  after the  effective  date  specified  in an  Assignment  and
Acceptance  which has been executed,  delivered,  and recorded (which  effective
date the Agent may delay by up to five (5)  Business  Days after the delivery of
such Assignment and Acceptance):
          (ii) The Assignee Revolving Credit Lender:
               (B)  Shall be a party to this  Agreement  and the Loan  Documents
          (and to any amendments  thereof) as fully as if the Assignee Revolving
          Credit Lender had executed each.
               (C) Shall have the rights of a Revolving  Credit Lender hereunder
          to the  extent  of the  Revolving  Credit  Commitment  Percentage  and
          Revolving Credit Commitment Percentage assigned by such Assignment and
          Acceptance.

          (i) The Assigning  Revolving  Credit Lender shall be released from the
     Assigning  Revolving Credit Lender's  obligations  arising thereafter under
     this  Agreement  and the Loan  Documents  to the  extent of the  Commitment
     assigned by such Assignment and Acceptance.
          (ii) The Agent shall  undertake to obtain and  distribute  replacement
     Revolving Credit Notes to the subject Assigning Revolving Credit Lender and
     Assignee Revolving Credit Lender.

     (a) By executing and delivering an Assignment and  Acceptance,  the parties
thereto  confirm  to and agree  with each  other  and with all  parties  to this
Agreement as to those matters which are set forth in the subject  Assignment and
Acceptance.



<PAGE>91

Article 17:-  NOTICES:


     171- NOTICE ADDRESSES. All notices,  demands, and other communications made
in respect of any Loan  Document  (other than a request for a loan or advance or
other financial  accommodation  under the Revolving Credit) shall be made to the
following  addresses,  each of which may be changed  upon seven (7) days written
notice to all others given by certified mail, return receipt requested:

If to the Agent:
                                Fleet Retail Finance Inc.
                                40 Broad Street, 10th Floor
                                Boston, Massachusetts 02109
                                Attention        : Mr. Michael D. Murray
                                Fax              : 617 434-4312


With a copy to:
                                Riemer & Braunstein LLP
                                Three Center Plaza
                                Boston, Massachusetts  02108
                                Attention        :  Robert E. Paul, Esquire
                                Fax              :  617 880-3456


If to the Borrower:
                                Phar-Mor, Inc.
                                20 Federal Plaza West
                                Youngstown, Ohio 44503
                                Attention        : Mr. Martin Seekely
                                Fax              :


With a copy to:
                                Morrison & Foerster LLP
                                1290 Avenue of the Americas
                                New York, New York 10104-0050
                                Attention        : Mark B. Joachim, Esquire
                                Fax:             : 212 468-7900



<PAGE>92

     172- NOTICE GIVEN.
     (a) Except as otherwise  specifically  provided  herein,  notices  shall be
deemed made and  correspondence  received,  as follows (all times being local to
the place of delivery or receipt):
          (ii) By mail:  the sooner of when actually  received or Three (3) days
     following deposit in the United States mail, postage prepaid.
          (iii) By  recognized  overnight  express  delivery:  the  Business Day
     following the day when sent.
          (iv) By Hand:  If  delivered  on a  Business  Day after 9:00 AM and no
     later than Three (3) hours prior to the close of customary  business  hours
     of the recipient,  when  delivered.  Otherwise,  at the opening of the then
     next Business Day.
          (v) By  Facsimile  transmission  (which must include a header on which
     the party sending such  transmission  is indicated):  If sent on a Business
     Day after 9:00 AM and no later  than Three (3) hours  prior to the close of
     customary  business hours of the recipient,  one (1) hour after being sent.
     Otherwise, at the opening of the then next Business Day.

     (a)  Rejection  or  refusal to accept  delivery  and  inability  to deliver
because  of a changed  address or  Facsimile  Number for which no due notice was
given shall each be deemed receipt of the notice sent.


Article 18:-  TERM:


     181- TERMINATION OF REVOLVING CREDIT.  The Revolving Credit shall remain in
effect (subject to suspension as provided in Section  2:2-6(g) hereof) until the
Termination Date.


     182- ACTIONS ON TERMINATION.
     (a) On the Termination  Date, the Borrowers shall pay the Agent (whether or
not then due), in immediately  available funds, all then Liabilities  including,
without limitation: the following:
          (ii) The entire  balance  of the Loan  Account  (including  the unpaid
     principal balance of the Revolving Credit Loans, and the SwingLine Loan ).
          (iii)  Any  then  remaining   installments  of  the  Revolving  Credit
     Commitment Fee.
          (iv) Any then remaining installments of the Agent's Fee.
          (v) Any  payments  due on account of the  indemnification  obligations
     included in Section 2:2-11(f).
          (vi) Any accrued and unpaid Unused Line Fee.
          (vii) All unreimbursed costs and expenses of the Agent and of Lenders'
     Special Counsel for which any Borrower is responsible.

     (a) On the  Termination  Date,  the  Borrowers  shall  also shall make such
arrangements   concerning   any  L/C's  then   outstanding   as  are  reasonably
satisfactory to the Agent.
     (b) Until such payment  (Section  18:18-2(a)) and  arrangements  concerning
L/C's (Section 18:18-2(b)),  all provisions of this Agreement,  other than those
included in Article 2: which place any  obligation on the Agent or any Revolving
Credit  Lender  to make any  loans  or  advances  or to  provide  any  financial
accommodations  to any Borrower  shall remain in full force and effect until all
Liabilities shall have been paid in full.
     (c) The release by the Agent of the Collateral  Interests granted the Agent
by the Borrowers  hereunder may be upon such conditions and  indemnifications as
the Agent reasonably may require.



<PAGE>93

Article 19:-  GENERAL:


     191-  PROTECTION OF COLLATERAL.  The Agent has no duty as to the collection
or  protection  of the  Collateral  beyond  the  safe  custody  of  such  of the
Collateral as may come into the possession of the Agent.


     192-  PUBLICITY.   The  Agent  may  issue  a  "tombstone"   notice  of  the
establishment of the credit facility contemplated by this Agreement and may make
reference to each Borrower (and may utilize any logo or other distinctive symbol
associated with each Borrower) in connection with any advertising, promotion, or
marketing undertaken by the Agent.


     193-  SUCCESSORS  AND  ASSIGNS.  This  Agreement  shall be binding upon the
Borrowers  and their  respective  representatives,  successors,  and assigns and
shall enure to the  benefit of the Agent and each  Revolving  Credit  Lender and
their respective successors and assigns, provided,  however, no trustee or other
fiduciary  appointed  with  respect  to  any  Borrower  shall  have  any  rights
hereunder. In the event that the Agent or any Revolving Credit Lender assigns or
transfers its rights under this Agreement,  the assignee shall thereupon succeed
to and become  vested with all rights,  powers,  privileges,  and duties of such
assignor  hereunder and such assignor shall thereupon be discharged and relieved
from its duties and obligations hereunder.


     194-  SEVERABILITY.  Any determination that any provision of this Agreement
or any application thereof is invalid,  illegal, or unenforceable in any respect
in any instance shall not affect the validity,  legality,  or  enforceability of
such  provision  in  any  other  instance,   or  the  validity,   legality,   or
enforceability of any other provision of this Agreement.


     195- AMENDMENTS. COURSE OF DEALING.
     (a) This Agreement and the other Loan Documents incorporate all discussions
and  negotiations  between each Borrower and the Agent and each Revolving Credit
Lender, either express or implied, concerning the matters included herein and in
such other instruments, any custom, usage, or course of dealings to the contrary
notwithstanding. No such discussions,  negotiations, custom, usage, or course of
dealings shall limit,  modify,  or otherwise affect the provisions  thereof.  No
failure by the Agent or any  Revolving  Credit Lender to give notice to the Lead
Borrower of any Borrower's having failed to observe and comply with any warranty
or covenant  included in any Loan  Document  shall  constitute  a waiver of such
warranty or covenant or the  amendment of the subject Loan  Document.  No change
made by the Agent to the  manner by which  Borrowing  Base is  determined  shall
obligate  the Agent to  continue  to  determine  Borrowing  Base in that  manner
(subject to the specific terms hereof).
     (b) Each Borrower may undertake any action otherwise prohibited hereby, and
may omit to take any action otherwise required hereby, upon and with the express
prior  written  consent  of the  Agent.  Subject to  Article  15:,  no  consent,
modification,  amendment,  or waiver of any provision of any Loan Document shall
be  effective  unless  executed  in  writing  by or on behalf of the party to be
charged with such modification,  amendment,  or waiver (and if such party is the
Agent then by a duly authorized officer thereof).  Any modification,  amendment,
or waiver  provided by the Agent shall be in reliance  upon all  representations
and  warranties  theretofore  made to the Agent by or on behalf of the Borrowers
(and any guarantor, endorser, or surety of the Liabilities) and consequently may
be rescinded in the event that any of such representations or warranties was not
true and complete in all material respects when given.



<PAGE>94

     196- POWER OF ATTORNEY.  In connection with all powers of attorney included
in this  Agreement,  each Borrower  hereby grants unto the Agent (acting through
any  of its  officers)  full  power  to do  any  and  all  things  necessary  or
appropriate  in  connection  with the  exercise  of such  powers  as  fully  and
effectually as that Borrower  might or could do, hereby  ratifying all that said
attorney shall do or cause to be done by virtue of this  Agreement.  No power of
attorney  set forth in this  Agreement  shall be affected by any  disability  or
incapacity  suffered by any Borrower and each shall survive the same. All powers
conferred  upon the Agent by this  Agreement,  being  coupled  with an interest,
shall be irrevocable until this Agreement is terminated by a written  instrument
executed by a duly authorized officer of the Agent.


     197-  APPLICATION  OF PROCEEDS.  The proceeds of any  collection,  sale, or
disposition  of the  Collateral,  or of any other payments  received  hereunder,
shall be applied  towards the  Liabilities in such order and manner as the Agent
determines in its sole discretion,  consistent,  however,  with Sections 13:13-6
and 13:13-7 and any other applicable provisions of this Agreement. The Borrowers
shall remain liable for any deficiency remaining following such application.


     198-  INCREASED  COSTS.  If, after the date hereof,  the adoption of or any
change  in any  Requirement  of Law,  or of the  interpretation  or  application
thereof by any court or by any governmental or other authority or entity charged
with the administration thereof, whether or not having the force of law, which:
     (a) subjects any Revolving  Credit Lender to any taxes or changes the basis
of taxation, or increases any existing taxes, on payments of principal, interest
or other amounts  payable by any Borrower to the Agent or any  Revolving  Credit
Lender  under this  Agreement  (except  for taxes on the Agent or any  Revolving
Credit  Lender based on net income or capital  imposed by the  jurisdictions  in
which the  principal or lending  offices of the Agent or that  Revolving  Credit
Lender are located);
     (b) imposes, modifies or deems applicable any reserve, cash margin, special
deposit or similar  requirements  against  assets held by, or deposits in or for
the  account of or loans by or any other  acquisition  of funds by the  relevant
lending office of any Revolving Credit Lender;
     (c) . imposes on any  Revolving  Credit  Lender  any other  condition  with
respect to any Loan Document; or
     (d) imposes on any Revolving  Credit  Lender a  requirement  to maintain or
allocate  capital in relation to the  Liabilities;  and the result of any of the
foregoing,  in such Revolving Credit Lender's reasonable opinion, is to increase
the cost to that  Revolving  Credit  Lender of making or  maintaining  any loan,
advance or financial  accommodation  or to reduce the income  receivable by that
Revolving   Credit  Lender  in  respect  of  any  loan,   advance  or  financial
accommodation  by an amount  which  that  Revolving  Credit  Lender  deems to be
material,  then upon written  notice from the Agent,  from time to time,  to the
Lead Borrower (such notice to set out in reasonable detail the facts giving rise
to and a summary  calculation  of such increased  cost or reduced  income),  the
Borrowers  shall  forthwith  pay to the Agent,  for the  benefit of the  subject
Revolving  Credit Lender,  upon receipt of such notice,  that amount which shall
compensate  the subject  Revolving  Credit  Lender for such  additional  cost or
reduction in income.



<PAGE>95

     199- COSTS AND EXPENSES OF THE AGENT .
     (a) The  Borrowers  shall pay from time to time on  demand  all  reasonable
costs,  expenses,  and disbursements  (including  reasonable attorneys' fees and
expenses)  which are incurred by the Agent in connection  with the  preparation,
negotiation,  execution,  and delivery of this  Agreement  and of any other Loan
Documents.
     (b)  The  Borrowers  shall  pay  from  time to time  on  demand  all  other
reasonable costs, expenses,  and disbursements  (including reasonable attorneys'
fees and expenses) which may be incurred, after the execution of this Agreement,
in connection with or in respect to the credit facility  contemplated  hereby or
which otherwise are incurred with respect to the Liabilities.
     (c) The  Borrowers  shall pay from time to time on  demand  all  reasonable
costs and expenses (including reasonable attorneys' fees and expenses) incurred,
following  the  occurrence  of any Event of  Default,  by the  Revolving  Credit
Lenders to Lenders' Special Counsel.
     (d) Each  Borrower  authorizes  the Agent to pay all such fees and expenses
and in the  Agent's  discretion,  to add  such  fees  and  expenses  to the Loan
Account.
     (e) The  undertaking  on the part of each Borrower in this Section  19:19-9
shall survive payment of the Liabilities  and/or any  termination,  release,  or
discharge  executed  by the  Agent  in  favor  of  any  Borrower,  other  than a
termination,  release,  or  discharge  which makes  specific  reference  to this
Section 19:19-9.


     1910-  COPIES AND  FACSIMILES.  Each Loan  Document and all  documents  and
papers which relates thereto which have been or may be hereinafter furnished the
Agent or any Revolving  Credit Lender may be reproduced by that Revolving Credit
Lender  or by the Agent by any  photographic,  microfilm,  xerographic,  digital
imaging, or other process,  and such Person making such reproduction may destroy
any  document  so  reproduced.  Any such  reproduction  shall be  admissible  in
evidence as the  original  itself in any judicial or  administrative  proceeding
(whether  or  not  the  original  is  in  existence  and  whether  or  not  such
reproduction  was made in the regular course of business).  Any facsimile  which
bears  proof of  transmission  shall be binding  on the party  which or on whose
behalf such  transmission  was initiated and likewise  shall be so admissible in
evidence as if the original of such  facsimile  had been  delivered to the party
which or on whose behalf such transmission was received.



<PAGE>96

     1911-  MASSACHUSETTS  LAW. This  Agreement  and all rights and  obligations
hereunder,  including matters of construction,  validity, and performance, shall
be governed by the law of The Commonwealth of Massachusetts unless superceded by
the provisions of the Bankruptcy Code.


     1912- INDEMNIFICATION.  Each Borrower shall indemnify, defend, and hold the
Agent and each Revolving  Credit Lender and any of their  respective  employees,
officers,  or agents (each,  an "Indemnified  Person")  harmless of and from any
claim brought or threatened against any Indemnified Person by any Borrower,  any
guarantor or endorser of the  Liabilities,  or any other Person (as well as from
reasonable attorneys' fees, expenses, and disbursements in connection therewith)
on account of the  relationship  of the  Borrowers or of any other  guarantor or
endorser of the Liabilities,  including all costs,  expenses,  liabilities,  and
damages as may be suffered by any Indemnified  Person in connection with (x) the
Collateral;  (y) the occurrence of any Event of Default;  or (z) the exercise of
any rights or remedies under any of the Loan Documents (each of claims which may
be defended,  compromised,  settled,  or pursued by the Indemnified  Person with
counsel of the Lender's  selection,  but at the expense of the Borrowers)  other
than  any  claim  as to  which a  final  determination  is  made  in a  judicial
proceeding  (in which the Agent  and any  other  Indemnified  Person  has had an
opportunity to be heard),  which determination  includes a specific finding that
the Indemnified Person seeking  indemnification had acted in a grossly negligent
manner or in actual bad faith or in  violation  of this  Agreement  or any other
Loan Document.  This  indemnification  shall survive  payment of the Liabilities
and/or any termination,  release, or discharge executed by the Agent in favor of
the Borrowers, other than a termination,  release, or discharge duly executed on
behalf of the Agent which makes specific reference to this Section 19:19-12.


     1913- RULES OF CONSTRUCTION.  The following rules of construction  shall be
applied in the interpretation,  construction,  and enforcement of this Agreement
and of the other Loan Documents:
     (a) Unless otherwise specifically provided for herein, interest and any fee
or charge which is stated as a per annum percentage shall be calculated based on
a 360 day year and actual days elapsed.
     (b) Words in the  singular  include  the  plural  and  words in the  plural
include the singular.
     (c) Cross  references to Sections in this Agreement  begin with the Article
in which that  Section  appears,  followed  by a colon,  and then the Section to
which  reference is made.  (For  example,  a reference to "Section  5:5-6" is to
Section 5-6, which appears in Article 5 of this Agreement).

<PAGE>97

     (d)  Titles,  headings  (indicated  by being  underlined  or shown in SMALL
CAPITALS) and any Table of Contents are solely for convenience of reference;  do
not  constitute a part of the  instrument in which  included;  and do not affect
such instrument's meaning, construction, or effect.
     (e) The words "includes" and "including" are not limiting.
     (f) Text  which  follows  the words  "including,  without  limitation"  (or
similar words) is illustrative and not limitational.
     (g) Text which is shown in italics  (except  for  parenthesized  italicized
text), shown in bold, shown IN ALL CAPITAL LETTERS, or in any combination of the
foregoing, shall be deemed to be conspicuous.
     (h) The words "may not" are prohibitive and not permissive.
     (i) Any reference to a Person's  "knowledge"  (or words of similar  import)
are to  such  Person's  knowledge  assuming  that  such  Person  has  undertaken
reasonable  and  diligent  investigation  with  respect  to the  subject of such
"knowledge" (whether or not such investigation has actually been undertaken).
     (j) Terms which are defined in one  section of any Loan  Document  are used
with such definition throughout the instrument in which so defined.
     (k) The symbol "$" refers to United States  Dollars.
     (l) Unless limited by reference to a particular  Section or provision,  any
reference to "herein",  "hereof",  or "within" is to the entire Loan Document in
which such reference is made.
     (m) References to "this  Agreement" or to any other Loan Document is to the
subject instrument as amended to the date on which application of such reference
is being made.
     (n) Except as otherwise  specifically  provided, all references to time are
to Boston time.
     (o) In the  determination  of any notice,  grace,  or other  period of time
prescribed or allowed hereunder:
          (ii)  Unless  otherwise  provided  (I) the day of the act,  event,  or
     default from which the designated period of time begins to run shall not be
     included  and the last day of the  period  so  computed  shall be  included
     unless such last day is not a Business  Day, in which event the last day of
     the relevant period shall be the then next Business Day and (II) the period
     so computed shall end at 5:00 PM on the relevant Business Day.
          (iii) The word "from" means "from and including".
          (iv) The words "to" and "until" each mean "to, but excluding".
          (v) The word "through" means "to and including".

     (a) The Loan Documents  shall be construed and  interpreted in a harmonious
manner and in keeping with the intentions set forth in Section  19:19-14 hereof,
provided,  however, in the event of any inconsistency  between the provisions of
this  Agreement and any other Loan  Document,  the  provisions of this Agreement
shall govern and control.



<PAGE>98

     1914- INTENT. It is intended that:
     (a) This Agreement take effect as a sealed instrument.
     (b) The scope of all  Collateral  Interests  created  by the  Borrowers  to
secure the Liabilities be broadly  construed in favor of the Agent and that they
cover all assets of the Borrower.
     (c) All Collateral  Interests created in favor of the Agent at any time and
from time to time by any the secure all  Liabilities,  whether  now  existing or
contemplated or hereafter arising.
     (d) Unless otherwise explicitly provided herein, the Agent's consent to any
action of any Borrower  which is prohibited  unless such consent is given may be
given or  refused by the Agent in its sole  discretion,  subject to the terms of
Section 2:2-18 hereof.


     1915- PARTICIPATIONS:  Each Revolving Credit Lender may sell participations
to one or more financial  institutions (each, a "Participant") in that Revolving
Credit  Lender's  interests  herein  provided that no such  participation  shall
include any provision which accords that Participant with any rights,  vis a vis
the Agent,  with respect to any  requirement  herein for approval by a requisite
number  or  proportion  of the  Revolving  Credit  Lenders.  No  such  sale of a
participation shall relieve a Revolving Credit Lender from that Revolving Credit
Lender's obligations hereunder nor obligate the Agent to any Person other than a
Revolving Credit Lender.


     1916-  RIGHT OF  SET-OFF.  Any and all  deposits  or other sums at any time
credited by or due to any Borrower from the Agent or any Revolving Credit Lender
or any Participant or from any Affiliate of any of the foregoing,  and any cash,
securities,  instruments  or other property of any Borrower in the possession of
any of the foregoing,  whether for  safekeeping or otherwise  (regardless of the
reason  such Person had  received  the same)  shall at all times  following  the
occurrence of an Event of Default  constitute  security for all  Liabilities and
for any and all  obligations  of the  Borrowers to the Agent and such  Revolving
Credit Lender or any Participant or such Affiliate and may be applied or set off
against  the  Liabilities  and  against  such  obligations  whether or not other
collateral is then available to the Agent or that Revolving Credit Lender.


     1917- PLEDGES TO FEDERAL RESERVE BANKS:  Nothing included in this Agreement
shall  prevent or limit any  Revolving  Credit  Lender,  to the extent that such
Revolving  Credit Lender is subject to any of the twelve  Federal  Reserve Banks
organized under ss.4 of the Federal Reserve Act (12 U.S.C. ss.341) from pledging
all or any portion of that  Lender's  interest and rights under this  Agreement,
provided, however, neither such pledge nor the enforcement thereof shall release
the pledging  Revolving  Credit Lender from any of its obligations  hereunder or
under any of the Loan Documents.



<PAGE>99

     1918-  MAXIMUM  INTEREST  RATE.  Regardless  of any  provision  of any Loan
Document, neither the Agent nor any Revolving Credit Lender shall be entitled to
contract for, charge,  receive,  collect, or apply as interest on any Liability,
any amount in excess of the maximum rate imposed by Applicable  Law. Any payment
which is made which,  if treated as interest on a Liability would result in such
interest's  exceeding  such  maximum  rate shall be held,  to the extent of such
excess,  as additional  collateral  for the  Liabilities  as if such excess were
"Collateral."


     1919-  EXECUTION IN  COUNTERPARTS.  This Agreement and other Loan Documents
may be  executed in any number of  counterparts,  each of which when so executed
and delivered  shall be deemed to be an original and all of which  counterparts,
taken together, shall constitute but one and the same instrument.


     1920- WAIVERS.
     (a) The  Borrowers  (and all  guarantors,  endorsers,  and  sureties of the
Liabilities)  make each of the waivers included in Section  19:19-20(b),  below,
knowingly,  voluntarily, and intentionally,  and understands that Agent and each
Revolving Credit Lender, in establishing the facilities  contemplated hereby and
in providing loans and other financial  accommodations  to or for the account of
the Borrowers as provided  herein,  whether not or in the future,  is relying on
such waivers.
     (b)  THE  BORROWERS,   AND  EACH  SUCH  GUARANTOR,   ENDORSER,  AND  SURETY
RESPECTIVELY WAIVE THE FOLLOWING:
          (ii) Except as otherwise  specifically required hereby or by any other
     Loan Document, notice of non-payment,  demand, presentment, protest and all
     forms of demand and notice,  both with respect to the  Liabilities  and the
     Collateral.
          (iii) Except as otherwise  specifically  required hereby, the right to
     notice and/or hearing prior to the Agent's exercising of the Agent's rights
     upon default.
          (iv) THE  RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR  CONTROVERSY  IN
     WHICH  THE  AGENT OR ANY  REVOLVING  CREDIT  LENDER  IS OR  BECOMES A PARTY
     (WHETHER SUCH CASE OR  CONTROVERSY  IS INITIATED BY OR AGAINST THE AGENT OR
     ANY REVOLVING  CREDIT LENDER OR IN WHICH THE AGENT OR ANY REVOLVING  CREDIT
     LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT
     OF OR IS IN RESPECT OF, ANY  RELATIONSHIP  AMONGST OR BETWEEN THE BORROWERS
     OR ANY OTHER PERSON AND THE AGENT AND EACH REVOLVING CREDIT LENDER LIKEWISE
     WAIVES THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY).
          (v) The benefits or availability of any stay,  limitation,  hindrance,
     delay, or restriction  (including,  without limitation,  any automatic stay
     which otherwise might be imposed  pursuant to Section 362 of the Bankruptcy
     Code) with respect to any action which the Agent may or may become entitled
     to take hereunder.

                   REMAINDER OF PAGE LEFT INTENTIONALLY BLANK

<PAGE>



          (vi) Any claim to consequential, special, or punitive damages.


                                                                  PHAR-MOR, INC.
                                                               ("LEAD BORROWER")

                                             By_________________________________

                                                   Print Name: Martin S. Seekely

                                   Title: Vice President Chief Financial Officer

                                                                   ("BORROWERS")

                                                                  PHAR-MOR, INC.


                                             By_________________________________

                                                   Print Name: Martin S. Seekely

                                   Title: Vice President Chief Financial Officer


                                                                 RX REALTY CORP.


                                            By__________________________________

                                                   Print Name: Martin S. Seekely

                                   Title: Vice President Chief Financial Officer


                                                       PHAR-MOR OF FLORIDA, INC.


                                             By_________________________________

                                                   Print Name: Martin S. Seekely

                                   Title: Vice President Chief Financial Officer


                                                          PHAR-MOR OF OHIO, INC.


                                             By_________________________________

                                                   Print Name: Martin S. Seekely

                                   Title: Vice President Chief Financial Officer


                                                      PHAR-MOR OF VIRGINIA, INC.


                                             By_________________________________

                                                   Print Name: Martin S. Seekely

                                   Title: Vice President Chief Financial Officer


                                                     PHAR-MOR OF WISCONSIN, INC.


                                             By_________________________________

                                                   Print Name: Martin S. Seekely

                                   Title: Vice President Chief Financial Officer


                                                      PHAR-MOR OF DELAWARE, INC.


                                             By_________________________________

                                                   Print Name: Martin S. Seekely

                                   Title: Vice President Chief Financial Officer
<PAGE>


                                                              PHAR-MOR, INC. LLC


                                             By_________________________________

                                                   Print Name: Martin S. Seekely

                                   Title: Vice President Chief Financial Officer


                                                                PHARMHOUSE CORP.


                                             By_________________________________

                                                   Print Name: Martin S. Seekely

                                   Title: Vice President Chief Financial Officer


                                                       FLEET RETAIL FINANCE INC.
                                                                       ("AGENT")

                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________




 <PAGE>


                    The "Revolving Credit Lenders"


                                                       FLEET RETAIL FINANCE INC.


                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


                                                          HELLER FINANCIAL, INC.


                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


                                                    FOOTHILL CAPITAL CORPORATION


                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


                                                      GMAC COMMERCIAL CREDIT LLC


                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


                                                   LASALLE BUSINESS CREDIT, INC.


                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


                                                   IBJ WHITEHALL RETAIL FINANCE.


                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


                                                       GMAC BUSINESS CREDIT, LLC


                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


667811.4