FORM 10-Q


                SECURITIES AND EXCHANGE COMMISSION
                       WASHINGTON, DC 20549


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



                For Quarter Ended November 28, 1998
-------------------------------------------------------------------


                   Commission File Number 0-1500
-------------------------------------------------------------------


                            EVANS, INC.
-------------------------------------------------------------------
      (Exact name of registrant as specified in its charter)


           DELAWARE                                 36-1050870
-------------------------------------------------------------------
      (State or other jurisdiction of            (IRS Employer
       Incorporation or organization)       Identification Number)




  36 South State Street, Chicago, Illinois             60603
-------------------------------------------------------------------
   (Address of principal executive office)           (Zip Code)



Registrant's telephone number, including area code  312-855-2000


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


Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common  stock,  as of the  latest  practicable  date:  as of January  18,  1999,
1,299,961 shares of common stock, $.20 par value, were outstanding.
<PAGE>


                          EVANS, INC. AND SUBSIDIARIES

                                      INDEX

                                                                        Page No.
Part I.     Financial Information


            Condensed Consolidated Balance Sheets -
            November 28, 1998, November 29, 1997 and
            November 30, 1996                                        2

            Condensed Consolidated Statements of Operations -
            Thirteen and Thirty-nine weeks ended November 28, 1998
            and November 29, 1997                                    3

            Condensed Consolidated Statements of Cash Flows -
            Thirty-nine weeks ended November 28, 1998
            and November 29, 1997                                    4

            Notes to Condensed Consolidated Financial Statements   5 - 6

            Management's Discussion and Analysis of Financial
            Condition and Results  of Operations                   7 - 10

Part II.    Other Information                                       11


            Signatures                                              12
            Index to Exhibits                                       13
<PAGE>

                     PART I. FINANCIAL INFORMATION
                      Evans, Inc. and Subsidiaries
                 CONDENSED CONSOLIDATED BALANCE SHEETS



                               November 28,   November 29,    February 28,
                                   1998          1997            1998
                               -----------    -----------     -----------
                               (unaudited)    (unaudited)      (audited)
ASSETS
Current assets:
  Cash and cash equivalents     $ 801,000      $ 384,000       $ 650,000
  Accounts receivable (net)    13,231,000     15,125,000      12,639,000
  Merchandise inventories      37,772,000     39,640,000      25,495,000
  Prepaid expenses and other
      asset                       659,000      1,306,000         923,000
  Assets held for sale                  -      4,750,000               -
                               -----------    -----------     -----------

Total current assets           52,463,000     61,205,000      39,707,000
                               -----------    -----------     -----------

Property and equipment         11,958,000     11,566,000      11,642,000
Accumulated depreciation       
  and amortization             (8,759,000)    (7,948,000)     (8,203,000)
                               -----------    -----------     -----------

  Net property and equipment    3,199,000      3,618,000       3,439,000
                               -----------    -----------     -----------

Other assets                    5,000,000      5,344,000       5,254,000
                               -----------    -----------     -----------
                             $ 60,662,000   $ 70,167,000    $ 48,400,000
                              ============   ============     ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Notes payable              $ 20,273,000   $ 16,857,000    $ 13,021,000
  Current portion of long-term
   debt                         1,490,000      1,959,000       1,411,000
  Accounts payable             21,152,000     26,220,000      11,165,000
  Accrued liabilities           6,478,000      7,294,000       4,694,000
                               -----------    -----------     -----------

Total current liabilities      49,393,000     52,330,000      30,291,000
                               -----------    -----------     -----------

Long-term debt                    931,000      3,918,000       1,808,000
                               -----------    -----------     -----------

Other liabilities                       -         12,000                -
                               -----------    -----------     -----------

Shareholders' equity:
  Preferred stock, 3,000,000
    shares authorized, none
    issued
  Common stock, 8,000,000 
    shares authorized, 
    6,333,435 shares issued     1,267,000      1,267,000       1,267,000
  Capital in excess of par 
    value                      15,011,000     15,503,000      15,495,000
  Unearned compensation           (86,000)             -               -
  (Accumulated deficit) 
    retained earnings          (2,171,000)     1,503,000       3,890,000
                               -----------    -----------     -----------

                               14,021,000     18,273,000      20,652,000

Treasury stock (1,133,590
  shares at cost)              (3,683,000)    (4,366,000)     (4,351,000)
                               -----------    -----------     -----------

                               10,338,000     13,907,000      16,301,000
                               -----------    -----------     -----------

                             $ 60,662,000   $ 70,167,000    $ 48,400,000
                               ===========    ===========     ===========


See accompanying notes to condensed consolidated financial statements.
<PAGE>

                      Evans, Inc. and Subsidiaries
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                              (Unaudited)


                          Thirteen weeks ended       Thirty-nine weeks ended
                        -------------------------   -------------------------

                         November 28, November 29,  November 28, November 29,
                              1998        1997         1998         1997
                         ------------  ----------   ----------    ----------

Net sales               $ 20,857,000 $ 24,619,000 $ 39,763,000  $ 40,935,000
Service revenues           1,545,000    1,887,000   12,223,000    10,660,000
                          ----------   ----------   ----------    ----------
                          22,402,000   26,506,000   51,986,000    51,595,000
                          ----------   ----------   ----------    ----------
Costs and expenses:

  Cost of goods and 
   services sold, buying
   and occupancy          14,659,000   16,310,000    34,806,000    32,869,000
  Selling and general 
   expenses                8,879,000    9,454,000    21,706,000    20,230,000
  Provision for doubtful 
   accounts                  142,000      218,000       398,000       475,000
  Interest expense           445,000      446,000     1,147,000     1,246,000
  Other income, net           (3,000)      (1,000)      (10,000)       (3,000)
                          ----------   ----------    ----------    ----------

                          24,122,000   26,427,000    58,047,000    54,817,000
                          ----------   ----------    ----------    ----------

Net (loss) income         (1,720,000)      79,000    (6,061,000)   (3,222,000)
                          ----------   ----------    ----------    ----------


Net (loss) income per 
  common share and
  share equivalents

     Basic                  $ (0.33)      $ 0.02        $ (1.17)      $ (0.65)
                         ==========   ==========     ==========    ==========
     Diluted                $ (0.33)      $ 0.02        $ (1.17)      $ (0.65)
                         ==========   ==========     ==========    ==========


Weighted average number
 of common shares and
 share equivalents
 outstanding

     Basic               5,199,845    4,987,837       5,196,112     4,966,935
                        ==========   ==========      ==========    ==========
     Diluted             5,199,845    5,174,635       5,196,112     4,966,935
                        ==========   ==========      ==========    ==========

See accompanying notes to condensed consolidated financial statements.
<PAGE>

                          Evans, Inc. and Subsidiaries
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                  Thirty-nine weeks ended
                                         ---------------------------------------

                                          November 28, 1998    November 29, 1997
                                         ---------------------------------------
Cash Flows from Operating Activities:

Net loss                                       $ (6,061,000)       $ (3,222,000)

Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation and amortization                   819,000             802,000
    Provision for doubtful accounts                 398,000             438,000
    Non-cash compensation expense                    81,000              22,000

Change in assets and liabilities, net of effects of acquisition:
Accounts receivable                                (990,000)         (2,898,000)
Merchandise inventories                         (12,277,000)        (19,506,000)
Prepaid expenses and other current assets           281,000            (354,000)
Other assets                                              -            (192,000)
Accounts payable                                  9,987,000          16,902,000
Accrued liabilities                               1,784,000           2,311,000
Other liabilities                                         -             (31,000)
                                             ---------------    ----------------

Net cash used in operating activities            (5,978,000)         (5,728,000)

Cash Flows from Investing Activities:

Acquisition of business                                   -          (5,387,000)
Additions to property and equipment                (325,000)           (164,000)
                                             ---------------    ----------------

Net cash used in investing activities              (325,000)         (5,551,000)

Cash Flows from Financing Activities:

Proceeds from short-term borrowing                7,252,000           7,549,000
Notes payable related to acquisition                      -           3,815,000
Proceeds from long-term debt                              -             437,000
Payments on acquisition debt                       (617,000)                  -
Payments on long-term debt                         (181,000)           (291,000)
                                             ---------------     ---------------

Net cash provided by financing activities         6,454,000          11,510,000
                                             ---------------     ---------------

Net increase in cash and cash equivalents           151,000             231,000
Cash and cash equivalents at beginning of period    650,000             153,000
                                             ---------------     ---------------
Cash and cash equivalents at end of period        $ 801,000           $ 384,000
                                             ===============     ===============

Supplemental Disclosures of Cash Flow Information:

Cash paid during the period for:
  Interest                                      $ 1,090,000         $ 1,107,000
  Income taxes                                       45,000              13,000


See accompanying notes to condensed consolidated financial statements.



<PAGE>


                          EVANS, INC. AND SUBSIDIARIES

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)

1.    The financial  information included herein was prepared in conformity with
      generally accepted accounting  principles and such principles were applied
      on a basis  consistent  with those  reflected in the 1998 Form 10-K Annual
      Report filed with the Securities and Exchange Commission. The accompanying
      financial  data  should  be  read  in   conjunction   with  the  notes  to
      consolidated  financial  statements contained in the 1998 Form 10-K Annual
      Report.

      The information  furnished herein,  other than the Condensed  Consolidated
      Balance  Sheet as of February  28,  1998,  is  unaudited  and includes all
      adjustments and accruals  consisting only of normal recurring  adjustments
      which are, in the opinion of management, necessary for a fair statement of
      results for the interim periods. The Condensed  Consolidated Balance Sheet
      as of February 28, 1998 has been derived from,  and does not include,  all
      the disclosures  contained in the audited  financial  statements as of and
      for the year ended February 28, 1998.

2.    Because  of the  seasonal  nature  of the  Company's  business,  operating
      results  for  the  first  thirty-nine  weeks  are  not  considered  to  be
      indicative  of the  results  that  may be  expected  for  the  full  year.
      Historically,  the Company realizes a major portion of its annual revenues
      and most of its earnings in the fourth quarter of its fiscal year.

3.    Certain  reclassifications  have been made to the  consolidated  financial
      statements. The reclassifications did not effect operating results.

4.    The  following  table  sets  forth the  computation  of basic and  diluted
      earnings per share:
                                                         Weighted
                                                           Avg.        Per
                                            Net loss      Shares       Share
                                          (Numerator)  (Denominator)  Amounts
      Thirteen weeks ended
      November 28, 1998
      Basic EPS:
      Loss available to common shareholder $(1,720,000)   5,199,845   $(0.33)
      Effect of dilutive options                                  0

      Dilutive EPS:
      Loss available to common
      shareholder plus assumed conversions $(1,720,000)   5,199,845   $(0.33)

      Thirty-nine weeks ended
      November 28, 1998
      Basic EPS:
      Loss available to common shareholder $(6,061,000)   5,196,112   $(1.17)
      Effect of dilutive options                                  0
<PAGE>

      Dilutive EPS:
      Loss available to common
      shareholder plus assumed conversions $(6,061,000)   5,196,112   $(1.17)


      Thirteen weeks ended
      November 29, 1997
      Basic EPS:
      Loss available to common shareholder   $  79,000    4,987,837    $0.02
      shareholder
      Effect of dilutive options                            186,798

      Dilutive EPS:
      Loss available to common
      shareholder plus assumed conversions   $  79,000    5,174,635    $0.02

      Thirty-nine weeks ended
      November 29, 1997
      Basic EPS:
      Loss available to common shareholder $(3,222,000)   4,966,935  $(0.65)
      Effect of dilutive options                                  0

      Dilutive EPS:
      Loss available to common
      shareholder plus assumed conversions $(3,222,000)   4,966,935  $(0.65)


5.    On January 14, 1999,  the Company  amended its agreement with its lender
      to, among other items,  establish and modify certain financial covenants
      to  reflect  the  Company's  current  operating  results  and  financial
      needs.  The agreement  establishes a year to date debt service  coverage
      ratio  and  requires  the  maintenance  of a certain  level of  earnings
      before interest,  taxes,  depreciation  and amortization  (EBITDA) as of
      January 30, 1999 as well as modify all  financial  covenants  to revised
      levels for the year ended  February 27, 1999. In addition,  the interest
      rate was  increased  to 1.25%  over the base  rate  (prime)  for  direct
      borrowings under the revolving facility.

6.    With the  approval  of its  stockholders  given at a  Special  Meeting  of
      stockholders  on December 8, 1998,  the  Company  approved a  one-for-four
      reverse stock split. In addition,  Authorized  Preferred  Stock, par value
      $1.00 per share was reduced from 3,000,000  shares to 1,000,000 shares and
      authorized  Common  Stock,  par value $0.20 per share,  was  reduced  from
      8,000,000 shares to 3,000,000 shares.



<PAGE>


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

Liquidity and Capital Resources

Cash and cash  equivalents  at November  28,  1998 were  $801,000 as compared to
$650,000  at  February  28,  1998.  The  increase  was due to cash  provided  by
financing  activities of $6,454,000 offset by cash used in operating  activities
of $5,978,000 and cash used in investing activities of $325,000.

The cash used in  operating  activities  was due  primarily  to the  increase in
inventories  of  $12,277,000  due to the seasonal  increase of inventory for the
fall season.  Accounts  payable  increased  $9,987,000  related to the inventory
requirements.

The cash used in  investing  activities  was due to  additions  to property  and
equipment of $325,000.

The cash provided by financing  activities  was due to proceeds from  short-term
borrowings  of  $7,252,000.  The  additional  debt was offset by payments on the
acquisition   debt  of  $617,000  and  principal   payments  on  long-term  debt
obligations of $181,000.

Working capital at November 28, 1998 was $3,070,000 as compared to $9,416,000 at
February 28, 1998.

On January 14, 1999, the Company amended its agreement with its lender to, among
other items,  establish and modify  certain  financial  covenants to reflect the
Company's   current   operating  results  and  financial  needs.  The  agreement
establishes  a year to  date  debt  service  coverage  ratio  and  requires  the
maintenance of a certain level of earnings before interest,  taxes, depreciation
and amortization (EBITDA) as of January 30, 1999 as well as modify all financial
covenants to revised  levels for the year ended  February 27, 1999. In addition,
the interest  rate was  increased to 1.25% over the base rate (prime) for direct
borrowings under the revolving facility.

The credit  facility  which  expires  June 15,  2000 is  considered  adequate to
finance  seasonal  inventory  requirements  as well as  commitments  for capital
expenditures during fiscal 1999.



<PAGE>


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

Results of Operations

Total  revenues  for  the  third  quarter  ended  November  28,  1998  decreased
$4,104,000  (15.5%) as compared to the same  period last year.  Fur  merchandise
sales decreased $3,012,000 (16.3%) due primarily to a $2,878,000 decrease during
the months of October and November resulting from the impact of the unseasonably
warm pre-winter months.  Women's  ready-to-wear sales decreased $750,000 (12.3%)
due to a decline in the coats division, related to the weather. Service revenues
decreased  $342,000  (18.1%) as compared to the prior year due  primarily to the
impact of the  unseasonably  warm winter months as customers' needs for services
on their coats and purchases of new policies decreased.

Total revenues for the first nine months  increased  $391,000 (0.8%) as compared
to the same period last year. Fur merchandise  sales  decreased  $743,000 (3.0%)
due to a decrease of  $2,370,000  (12.4%) in sales at  comparable  locations and
sales of $855,000  associated  with store closing  events in the Macy's store in
Texas in the second  quarter of 1998.  These  decreases  were offset by sales of
$2,482,000  from locations  acquired during the last month of the second quarter
of fiscal 1998. The decrease in fur  merchandise  sales at comparable  locations
was largely due to a  significant  decrease of  $2,400,000  during the months of
October  and  November  resulting  from  the  impact  of the  unseasonably  warm
pre-winter  months.  For the first  nine  months,  women's  ready-to-wear  sales
decreased  $429,000 (2.7%).  Sales for ready-to-wear were mainly impacted by the
third quarter decline in sales related to the decrease in the coat division as a
result of the unseasonably warm weather.  Service revenues increased  $1,563,000
(14.7%) due  primarily  to an increase of  $2,348,000  from  locations  acquired
during the second  quarter of fiscal 1998 offset by a comparable  sales decrease
of  $776,000.  The  comparable  sales  decrease is a result of the impact of the
unseasonably  warm winter as  customers'  needs for  services on their fur coats
decreased due to reduced use and purchase of the garments.

Cost of goods and services sold,  buying and occupancy  costs as a percentage of
total  revenues  increased  for the third  quarter and for the first nine months
(65.4%  versus 61.5% and 67.0% versus  63.7%,  respectively).  Cost of goods and
services sold as a percentage of revenues  increased from 48.8% to 49.3% for the
third quarter and increased  from 48.3% to 49.0% for the nine month period.  The
increase in the quarter and year to date is due to  increased  costs  associated
with  running  the  service  business at  locations  acquired  during the second
quarter of fiscal 1998. Buying costs as a percentage of total revenues, for both
the quarter and for the nine months  ended,  were  comparable  with prior year's
levels.  Occupancy costs as a percentage of total revenues for the third quarter
(13.7% versus 10.8%) and the first nine months (14.9% versus 12.6%) increased in
comparison  with the prior  periods.  The increases were due primarily to higher
average  rental costs  related to the rentals on locations  acquired  during the
second quarter of 1998.
<PAGE>


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

Results of operations, (continued)

Total  selling  and general  expenses  decreased  $575,000  (6.1%) for the third
quarter and increased $1,476,000 (7.3%) for the first nine months as compared to
the prior year. Payroll and related fringe benefits decreased $447,000 (8.3%) in
the third  quarter  primarily  due to variable  costs  related to the decline in
sales volume.  For the nine months to date,  payroll and related fringe benefits
increased $1,602,000 (12.8%). The increases are due primarily to the payroll and
benefits related to the acquisition and the operation of the  Maximilian(R)  Fur
Salons at  Bloomingdale's  Stores  offset by the  savings in the third  quarter.
Advertising  expense decreased $168,000 (6.5%) and $109,000 (2.8%) for the third
quarter and first nine  months,  respectively,  due to the  Company's  concerted
efforts to manage expenditures through various types of media.

Interest expense for the third quarter remained  consistent with the prior year.
The first nine months of interest expense decreased $99,000 (7.9%) due primarily
to a  lower  weighted  average  interest  rate  and  higher  average  short-term
borrowings as compared to the same period last year.

Other

Evans recognizes the potential impact that the Year 2000 issue may have relative
to its computer  systems and has  implemented  an action plan to ensure that all
systems  will  be  fully  Year  2000  compliant.  The  action  plan  includes  a
combination of internal and external resources to be utilized for modifications.
These  modifications  will include hardware and software upgrades or replacement
of non-compliant systems. Modifications for all systems are in various stages of
completion.  Some  modifications  have been fully implemented and satisfactorily
tested,  while  others  are in  lesser  stages of  completion.  The  Company  is
confident that all systems will be appropriately  modified in a timely manner to
handle the turn of the century  computer  issues.  The  Company has  preliminary
estimated related costs of compliance ranging from $500,000 to $750,000.

The Company has completed its assessment with regard to  non-financial  software
and chip embedded technology. Modifications will include upgrades or replacement
of systems. The cost of making those adaptations are not expected to be material
and will be expensed in the period incurred.

The Company has contacted its critical suppliers, service providers and partners
to  determine  the extent to which the  Company  is  vulnerable  to those  third
parties' failure to remedy their own Year 2000 issues.  The Company has received
indications  from a majority of its  suppliers,  service  providers and partners
that they are in the  process of working on Year 2000  compliance.  In the event
that any of the Company's significant  suppliers,  service providers or partners
do not  successfully  and timely  achieve Year 2000  compliance,  the  Company's
business or operations could be adversely affected.

The costs of the project and the date on which the Company plans to complete its
Year 2000 assessment and remediation are based on management's estimates,  which
were derived utilizing
<PAGE>

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

numerous  assumptions of future events  including the continued  availability of
certain resources,  third party  modification plans and other factors.  However,
there can be no  guarantee  that these  estimates  will be  achieved  and actual
results could differ significantly from those plans.

The Company is developing  contingency  plans for the above areas addressing any
material  failure to deal with Year 2000  issues and  anticipates  that the plan
will be completed by the fall of 1999.

Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995

Certain  statements  included  in  these  financial   statements  that  are  not
historical facts may include  forward-looking  statements.  The Company cautions
readers that these forward-looking  statements are subject to a variety of risks
and  uncertainties  that could cause Evans' actual results to differ  materially
from  those   expressed   in   forward-looking   statements.   These  risks  and
uncertainties  include,  without  limitation,   general  economic  and  business
conditions  affecting  the customers in existing and new  geographical  markets,
competition  from national,  regional and local  retailers,  the availability of
sufficient capital, and the ability to obtain and identify the right product mix
and to maintain sufficient inventory to meet customer demand.




<PAGE>




                           PART II - OTHER INFORMATION


Item 6.           Exhibits and Reports on Form 8-K



            (a)   Exhibits

            Exhibit 4.61   Third   Amendment  to  Loan  and  Security Agreement

            Exhibit 27     Financial Data Schedule


            (b)   Reports on Form 8-K

            None.


            Items  other than  those  listed are  omitted  because  they are not
            required.



<PAGE>




                                   SIGNATURES



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf of the
undersigned thereunto duly authorized.





                                   EVANS, INC.






DATE:   January 18, 1999            ROBERT K. MELTZER
                                    ROBERT K. MELTZER
                                    President and
                                    Chief Executive Officer




DATE:   January 18, 1999            DEANNA L. HARNETT
                                    DEANNA L. HARNETT
                                    Vice President and
                                    Chief Financial Officer




<PAGE>




                          EVANS, INC. AND SUBSIDIARIES






            Exhibit                                             Page Nos.

               4.61           Third Amendment to Loan and 
                              Security Agreement                 14-21

                27            Financial Data Schedule             22


<PAGE>


          THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT


      THIS THIRD AMENDMENT TO LOAN AND SECURITY  AGREEMENT (the  "Amendment") is
made and entered into this 14th day of January,  1999, by and among EVANS, INC.,
a  Delaware  corporation   ("Evans"),   KOSLOW'S,   INC.,  a  Texas  corporation
("Koslow's"),   EVANS-ROSENDORF  OF  MARYLAND,   INC.,  a  Delaware  corporation
("Rosendorf,"  along  with  each of Evans and  Koslow,  are  referred  to as the
"Borrowers") and JACKSON NATIONAL LIFE INSURANCE  COMPANY,  a Michigan insurance
corporation, ("Jackson" or "Lender"). .


                      PRELIMINARY STATEMENTS


      A.  Borrowers  and Lender have entered into that certain Loan and Security
Agreement,  dated June 16, 1997,  as amended by the First  Amendment to Loan and
Security  Agreement  dated  August 7, 1997,  and the Second  Amendment  ("Second
Amendment") to Loan and Security Agreement dated May 28, 1998 (collectively, the
"Loan Agreement",  and together with this Amendment and with all other documents
evidencing and  implementing  this Amendment and the Loan  Agreement,  the "Loan
Documents").

      B. The Borrowers  have advised  Lender that  Borrowers are in violation of
certain financial covenants contained in the Loan Agreement.

      C. The Lender is willing to amend the Loan Agreement  subject to the terms
and conditions of this Amendment.

      NOW,  THEREFORE,  in  consideration  of the premises herein  contained and
other good and valuable consideration,  the receipt and sufficiency of which are
hereby  acknowledged,  the  parties,  intending  to be legally  bound,  agree as
follows:


                             AGREEMENT

                             ARTICLE I

                            Definitions

      1.01  Capitalized  terms used in this  Amendment  are  defined in the Loan
Agreement, as amended hereby, unless otherwise stated.



<PAGE>


                            ARTICLE II

                   Amendments to Loan Agreement

      2.01  Amendment to Section 2 - Loans and Terms of Payment.  The first full
sentence of Section 2.4(a) is deleted and replaced with the following:

           "(a)  The  Borrowers  will  pay  interest  to  Lender  on the  unpaid
      principal  amount of the Term Loan and all Revolving Loan Advances and all
      other  Obligations,  if any, at a fluctuating  rate per annum equal to one
      and one-quarter percent (1.25%) above the Prime Rate."

      2.02 Amendments to Section 10.3 - Financial  Covenants.  Sections  10.3(a)
and (b) are hereby amended in their entirety as follows;  and section 10.3(c) is
added:

           (a) Borrowers shall continuously maintain, on a consolidated basis:

                (i)  For the  twelve-month  period  ending  February  28,  1999,
           Consolidated  Tangible  Net  Worth  equal to or  greater  than  Eight
           Million Five Hundred  Thousand  Dollars  ($8,500,000)  and thereafter
           Consolidated  Tangible  Net  Worth  equal to or  greater  than  Eight
           Million  Five  Hundred   Thousand  Dollars   ($8,500,000)   increased
           quarterly  by 75% of the  Borrowers'  year to date  consolidated  Net
           Income.

                (ii)  For the  twelve-month  period  ended  November  30,  1998,
           Borrowers  shall  maintain  a minimum  ratio of  EBITDA  to  interest
           expense of (0.76) to 1.00; for the twelve-month period ended February
           28,  1999,  Borrowers  shall  maintain  a minimum  ratio of EBITDA to
           interest  expense of (0.35) to 1.00; and thereafter  shall maintain a
           minimum ratio of EBITDA to interest  expense of 2.00 to 1.00 for each
           Fiscal Quarter calculated on a rolling twelve month basis.

                (iii)Borrowers  will not  permit  consolidated  EBITDA to be (x)
           less than  negative  $1,100,000  for the  twelve-month  period  ended
           November  30,  1998,  or (y)  less  than  negative  $125,000  for the
           eleven-month period ended January 31, 1999, or (z) less than negative
           $500,000 for the twelve-month period ended February 28, 1999.

           (b) Borrowers shall not permit the ratio of Net Income  excluding any
      after-tax extraordinary gains or losses plus depreciation and amortization
      deducted in determining Net Income minus Capital Expenditures not financed
      ("Adjusted  Net Cash Flow") to current  principal  maturities of long term
      debt and Capital  Leases paid during such period for the periods set forth
      below to be either  greater than, or less than (as specified  below),
<PAGE>

      the ratio set  forth  opposite  each  such  period,  provided,  however,  
      that Borrowers  will be deemed to have  complied  for the rolling  twelve-
      month period ending nearest to February 28, 1999, if non-compliance would 
      result solely from Adjusted Net Cash Flow exceeding negative $2.40 
      million:

                                 PERIOD               RATIO
              Rolling twelve-month period
              ending                             Less than
              nearest to November 30, 1998       (1.96) to
                                                 1.00
              Rolling twelve-month period
              ending                             Greater than
              nearest to February 28, 1999       (2.30) to
                                                 1.001
              Thereafter, for each rolling
              twelve-month                       Less than
              Fiscal Quarter                     1.25 to 1.00

           (c) Borrowers shall not permit the ratio of Net Income  excluding any
      after-tax extraordinary gains or losses plus depreciation and amortization
      deducted  in  determining  Net  Income  minus  Capital   Expenditures  not
      financed,  multiplied by negative one, to current principal  maturities of
      long term debt and  Capital  Leases paid during such period for the period
      set forth below to be less than the ratio set forth  opposite such period,
      provided,  however, that Borrowers will be deemed to have complied for the
      eleven-month  period ending nearest to January 31, 1999, if non-compliance
      would result solely from Adjusted Net Cash Flow  exceeding  negative $2.00
      million:

                                 PERIOD               RATIO
              Eleven-month period ended
              nearest to                         1.90 to 1.00
              January 31, 1999

      2.03  Amendment to Schedule 10.2 of the Loan  Agreement.  Schedule 10.2 to
the Loan Agreement,  entitled Salary and Bonuses of Officers,  is amended in its
entirety to conform to Schedule 10.2 hereof.

--------
1   For  example,  if the  ratio is  (1.70) to 1.00,  the  Borrower  would be in
    violation.  If the  ratio  is  (2.50)  to  1.00,  the  Borrower  would be in
    compliance.
<PAGE>


                            ARTICLE III

                           Amendment Fee

      3.0 The Borrowers  hereby agree to pay to the Lender on the date hereof an
amendment  fee in the amount of  $15,000,  and to pay Lender a fee of $2,500 per
month to monitor collateral,  monitor bankers'  acceptances,  and facilitate the
forwarding of banking information.




                            ARTICLE IV

                     Waiver of Compliance With
                  and Reset of Certain Covenants

      4.01 Noncompliance with Certain Covenants. Borrowers acknowledge that, for
the period ending  November 30, 1998,  Borrowers were not in compliance with the
financial  covenants  set forth in Sections  10.3(a)(iii)(c)  and 10.3(b) of the
Loan Agreement,  as amended by the Second Amendment ("November  Noncompliance"),
and that  such  noncompliance  resulted  in  Events  of  Default  under the Loan
Agreement.  Subject to the terms and conditions of this Amendment, Lender hereby
agrees to waive the  November  Noncompliance  and the  Events of  Default  which
resulted therefrom,  provided, however, that nothing contained in this Amendment
shall be or be deemed a waiver  of any other  presently  existing  or  hereafter
arising or  occurring  breach,  default or Event of  Default,  or  preclude  the
exercise of any of the Lender's  rights or remedies  under the Loan Agreement or
the Loan Documents resulting  therefrom.  Upon the occurrence of a default or an
Event of Default under this  Amendment,  or under the Loan Agreement or the Loan
Documents,  Lender may exercise all of its rights and remedies, pursuant to this
Amendment,  the Loan  Agreement  or the Loan  Documents,  at law,  in  equity or
otherwise.

      4.02  Reset  of  Covenants.  Lender  agrees  to  reset  certain  financial
covenants  for the period ended  November 30, 1998, as set forth in Article 2.02
hereof.  If any  additional  Events of Default  under this  Amendment,  the Loan
Agreement or the Loan  Documents,  including  but not limited to  non-compliance
with the financial  covenants set or reset in Article 2.02 hereof,  occur or are
discovered  after  the  date of this  Amendment,  Lender  shall be  entitled  to
exercise all of its remedies under the Loan Agreement and the Loan Documents.

                             ARTICLE V

           Ratifications, Representations and Warranties

      5.01  Ratifications.  The terms and provisions set forth in this Amendment
shall modify and supersede all  inconsistent  terms and  provisions set forth in
the Loan Agreement and the Loan Documents, and, except as expressly modified and
superseded by this Amendment, the terms and provisions of the Loan Agreement and
the Loan  Documents are ratified and confirmed and shall  continue in full force
and effect.  Borrowers  and Lender  agree that the Loan  Agreement  and the Loan
Documents,  as amended hereby,  shall continue to be legal,  valid,  binding and
enforceable in accordance with their respective terms.
<PAGE>

      5.02  Representations  and  Warranties.  Borrowers  hereby  represent  and
warrant to Lender  that (a) the  execution,  delivery  and  performance  of this
Amendment and any and all Loan Documents executed and/or delivered in connection
herewith,  have been authorized by all requisite corporate action on the part of
Borrowers and will not violate the Articles of Incorporation or Bylaws of any of
the Borrowers;  (b) the  representations  and  warranties  contained in the Loan
Agreement, as amended hereby, and any Loan Documents are true and correct on and
as of the date  hereof and on and as of the date of  execution  hereof as though
made on and as of each such date;  (c) except as set forth  expressly in Article
4.01  hereof,  no Event of Default or event or condition  which,  with notice or
passage of time or both,  would  constitute  an Event of Default  under the Loan
Agreement, as amended hereby, has occurred and is continuing;  and (d) except as
set forth  herein,  Borrowers  are in full  compliance  with all  covenants  and
agreements  contained in the Loan Agreement and the Loan  Documents,  as amended
hereby.

                            ARTICLE VI

                     Miscellaneous Provisions

      6.01 Survival of Representations  and Warranties.  All representations and
warranties made in the Loan Agreement or any Loan Documents,  including, without
limitation,  any document  furnished in connection  with this  Amendment,  shall
survive the execution and delivery of this Amendment and the Loan Documents, and
no  investigation by Lender shall affect the  representations  and warranties or
the right of Lender to rely upon them.

      6.02 Reference to Loan Agreement.  Each of the Loan Agreement and the Loan
Documents,  and any and all other  agreements,  documents or instruments  now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to the
terms of thc Loan Agreement,  as amended hereby,  are hereby amended so that any
reference in the Loan Agreement and the Loan Documents shall mean a reference to
the Loan Agreement and the Loan Documents as amended hereby.

      6.03 Expenses of Agent. As provided in the Loan Agreement, Borrowers agree
to pay on  demand  all  reasonable  costs  and  expenses  incurred  by Lender in
connection with the preparation, negotiation and execution of this Amendment and
the  Loan  Documents  executed  pursuant  hereto,  and any  and all  amendments,
modifications,  and supplements  thereto,  including,  without  limitation,  the
reasonable costs and fees of Lender's legal counsel.

      6.04  Severability.  Any  provision of this  Amendment  held by a court of
competent  jurisdiction  to be  invalid  or  unenforceable  shall not  impair or
invalidate  the  remainder of this  Amendment  and the effect  thereof  shall be
confined to thc provision so held to be invalid or unenforceable.

      6.05  Successors  and  Assigns.  This  Amendment is binding upon and shall
insure to the benefit of Lender and  Borrowers and their  respective  successors
and  assigns,  except that  Borrowers  may not assign or  transfer  any of their
rights or obligations hereunder without the prior written consent of Lender.
<PAGE>

      6.06  Counterparts.  This  Amendment  may  be  executed  in  one  or  more
counterparts,  each of which when so executed shall be deemed to be an original,
but all of  which  when  taken  together  shall  constitute  one  and  the  same
instrument, and facsimile signatures may serve as original signatures.

      6.07 Effect of Waiver. No consent or waiver, express or implied, by Lender
to or for any breach of or deviation from any covenant or condition by Borrowers
shall be  deemed a consent  to or waiver of any other  breach of the same or any
other covenant, condition or duty.

      6.08  Headings.  The headings,  captions,  and  arrangements  used in this
Amendment are for convenience  only and shall not affect the  interpretation  of
this Amendment.

      6.09 Mutual Waiver of Jury Trial.  BECAUSE  DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL  TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY  RESOLVED
BY AN EXPERIENCED  AND EXPERT PERSON AND THE PARTIES WISH  APPLICABLE  STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION  RULES),  THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.  THEREFORE,
TO ACHIEVE THE BEST  COMBINATION  OF THE BENEFITS OF THE JUDICIAL  SYSTEM AND OF
ARBITRATION,  THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THE
LOAN AGREEMENT OR OF THE LOAN DOCUMENTS.

      6.10 Governing Law. NOTWITHSTANDING ANYTHING ELSE IN THE LOAN AGREEMENT OR
THE LOAN DOCUMENTS,  ALL MATTERS UNDER THIS AMENDMENT, THE LOAN AGREEMENT OR THE
LOAN DOCUMENTS, INCLUDING ALL MATTERS OF CONSTRUCTION,  VALIDITY AND PERFORMANCE
OF  THIS  AMENDMENT,  THE  LOAN  AGREEMENT  AND  THE  LOAN  DOCUMENTS,  AND  THE
OBLIGATIONS ARISING THEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE  WITH,  THE LAWS OF THE STATE OF ILLINOIS  APPLICABLE TO CONTRACTS
MADE AND  PERFORMED  IN SUCH STATE,  WITHOUT  REGARD TO THE  PRINCIPLES  THEREOF
REGARDING  CONFLICT OF LAWS, AND COOK COUNTY,  ILLINOIS OR NEW YORK COUNTY,  NEW
YORK,  SHALL BE THE EXCLUSIVE  VENUE FOR LITIGATION AS TO ALL SUCH MATTERS.  THE
LENDER AND BORROWERS AGREE TO SUBMIT TO PERSONAL  JURISDICTION  AND TO WAIVE ANY
OBJECTION AS TO VENUE IN COOK COUNTY, ILLINOIS OR NEW YORK COUNTY, NEW YORK.




                THIS SPACE INTENTIONALLY LEFT BLANK



<PAGE>


      Witness  the  due  execution  hereof  by the  respective  duly  authorized
officers of the undersigned as of the date first written above.


                                  EVANS, INC.,


                                 By:                               
                                    Title:  Vice President


                                 KOSLOW'S, INC.,


                                 By:                               
                                    Title:  Vice President


                                 EVANS-ROSENDORF OF MARYLAND, INC.,


                                 By:                               
                                    Title:  Vice President


                                 JACKSON NATIONAL LIFE INSURANCE
                                    COMPANY, as Lender,

                                 By:PPM America, Inc.,
                                    Attorney-in-Fact


                                 By:                               
                                     Title:


<PAGE>


          SCHEDULE 10.2 - SALARY AND BONUSES OF OFFICERS



    NAME                                          BASE        BASE
   OFFICER           TITLE             SALARY   BONUS %     BONUS $
Robert Meltzer President and CEO    $190,000     12.5%     $23,750    
John Sarama    Vice President
               Operations,           150,000     12.5%      18,750    
               Director of Stores
Deanna Harnett Vice President, CFO   110,000     12.5%      15,000    
Sam Garber     Vice President,
               Secretary,            115,000     12.5%      14,375    
               and General Counsel
Dean Obrecht   Vice President,
               Human Resources       100,000    12.5%       12,500    
David Meltzer  Chairman of the           -0-      N/A          -0-      
               Board
                                    $665,000               $84,375