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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    Form 10-K
       [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                   For the fiscal year ended January 31, 1997

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

                         Commission file number 0-028176

                           Marks Bros. Jewelers, Inc.
             (Exact Name of Registrant as Specified in Its Charter)

           Delaware                                            36-1433610
  (State or Other Jurisdiction                              (I.R.S. Employer
of Incorporation or Organization)                         Identification Number)

                 155 N. Wacker Dr., Ste. 500, Chicago, IL 60606
          (Address of principal executive offices, including zip code)

                                 (312) 782-6800
              (Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:

               Common Stock, par value $.001 per share, including
                   associated Preferred Stock Purchase Rights
                                (Title of Class)

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 by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of April 15, 1997 was  $94,767,768.50,  based on the closing price
of $11.75 of the  registrant's  common  stock on the Nasdaq Stock  Market.  This
calculation does not reflect a determination that persons are affiliates for any
other purposes.

Number of shares of Common Stock outstanding as of April 15, 1997:  10,064,443

Number of shares of Class B Common Stock outstanding as of 
April 15, 1997:  101.298

                      Documents Incorporated by Reference:

Part II - Portions of the registrant's 1996 Annual Report, as indicated herein.
Part  III -  Portions  of the  registrant's  definitive  proxy  statement  to be
distributed in conjunction with registrant's annual stockholders'  meeting to be
held in 1997 (the "Proxy Statement"), as indicated herein.

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                                     PART I

     All  statements,  trend  analysis and other  information  contained in this
report  relative  to  markets  for the  Company's  products  and  trends  in the
Company's operations or financial results, as well as other statements including
words such as "anticipate,"  "believe," "plan,"  "estimate,"  "expect," "intend"
and other similar expressions,  constitute  forward-looking statements under the
Private  Securities   Litigation  Reform  Act  of  1995.  These  forward-looking
statements  are  subject to known and  unknown  risks,  uncertainties  and other
factors  which may cause actual  results to be materially  different  from those
contemplated by the  forward-looking  statements.  Such factors  include,  among
other  things:  (1) the extent  and  results of the  Company's  store  expansion
strategy;  (2) the  seasonality  of the  Company's  business;  (3) the Company's
leverage;  (4)  economic  conditions,  the  retail  sales  environment  and  the
Company's  ability to execute its business  strategy and the related  effects on
comparable store sales and other results; (5) the extent to which the Company is
able to retain and attract key personnel; (6) competition;  (7) the availability
and cost of consumer credit; (8) relationships with suppliers;  (9) fluctuations
in gem and gold prices;  (10) regulation;  and (11) the risk factors listed from
time  to  time  in the  Company's  filings  with  the  Securities  and  Exchange
Commission.

Item 1.  Business

The Company

     General. Marks Bros. Jewelers, Inc. (the "Company") is a leading,  national
specialty  retailer of fine jewelry  (based on number of stores),  operating 176
stores in 24 states as of April 24, 1997.  Founded in 1895, the Company operates
stores in regional and  super-regional  shopping malls under the names Whitehall
Co. Jewellers(R) (129 stores), Lundstrom Jewelers(R) (42 stores) and Marks Bros.
Jewelers(TM)  (5 stores).  The Company offers at competitive  prices an in-depth
selection  of fine  jewelry in the  following  key  categories:  diamond,  gold,
precious and semi-precious jewelry. The Company's target customers are middle to
upper middle income women over 25 years old.  Central to the Company's growth in
operating  profits and its high store  productivity  are its small but  flexible
store format,  the absence of recourse credit risk, its strong sales culture and
its operating efficiencies at both the store and corporate levels.

     The Company  operates  on a fiscal  year ending  January 31. The year ended
January  31,  1997 is  referred  to herein as fiscal  1996.  From fiscal 1991 to
fiscal 1996,  the  Company's  net sales grew at a compound  annual rate of 15.2%
from $76.7 million to $155.5  million,  while income from  operations  grew at a
compound annual rate of 28.6%, from $5.4 million to $19.0 million. The Company's
growth  during  this period is  attributable  to (i) new store  openings,  which
resulted in an  increase  in the number of stores  from 111 to 164 stores,  (ii)
higher store  productivity,  as average  annual sales per store  increased  from
$699,000 to $990,000,  and (iii) improved operating efficiencies resulting in an
increase in the Company's operating margin from 7.0% to 12.2%.

     The Company believes it has significant opportunities to increase sales and
profitability  through  an  increased  number of  planned  store  openings,  the
implementation  of several  new sales and  merchandising  programs  designed  to
continue  comparable store sales growth,  and continued  adherence to its strict
operating   standards   regarding   performance   of  sales   personnel,   store
profitability and cost control.

     Retailing Concepts.  The Company's stores currently operate under the names
Whitehall Co. Jewellers(R) (129 stores),  Lundstrom  Jewelers(R) (42 stores) and
Marks Bros.  Jewelers(TM)  (5 stores).  Each store concept is designed around an
open,  brightly-lit  and  inviting  layout  which  encourages  browsing  by mall
shoppers.  The  Company's  multiple  name  format  allows  the  Company  to open
additional stores in malls where it already has profitable locations.  Whitehall
Co.  Jewellers  is the  Company's  primary  trademark  and is  positioned  to be
somewhat more upscale than the average  mall-based  jewelry  store.  The Company
operates  two stores in 34 malls and three  stores in one mall.  In most cases a
Lundstrom  store is added to a mall  only  after  the  Company  has  operated  a
successful  Whitehall  store  in  the  same  center.  Generally,   Lundstrom  is
positioned  slightly more upscale than Whitehall,  with greater emphasis on more
expensive  diamond  and gold  merchandise.  The Company is testing a new concept
that will be closer to a "guild" jewelry retailer. This test store opened in May
1996 in a mall in


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which the Company  already  operates a  Whitehall  and a  Lundstrom  store.  The
Company is continuing the evaluate the results of this test.

Industry

     Total  retail  sales by jewelry  stores in the  United  States in 1996 were
approximately  $21.07  billion,  and such sales grew between 1990 and 1996 at an
annual rate of approximately 5.6%, according to the U.S. Department of Commerce.

     The jewelry market is generally divided into three segments:  fine jewelry,
costume  jewelry,  and guild  jewelry.  The broad "fine"  jewelry market segment
represents a majority of the jewelry market in terms of revenue, and it includes
jewelry made from precious metals and gemstones,  as well as finer watches. Fine
jewelry is sold at a range of price  points from  middle to upper end,  with the
upper end  consisting  of luxury items such as unique  design  jewelry items and
expensive time pieces.  Except for a few designer label offerings,  fine jewelry
is generally not marketed under brand names. Costume jewelry consists of jewelry
made of non-precious stones and rhinestones, as well as inexpensive watches. The
"guild" market represents a small percentage of the total market.

     Jewelry is mainly  distributed  through  jewelry  stores (both  independent
stores and chains), general merchandise and discount stores,  department stores,
mail order and catalogs,  apparel and  accessories  stores,  and televised  home
shopping  networks.  General  merchandisers,  discount  stores,  and apparel and
accessories  stores  generally  sell  costume  jewelry and  lower-priced  "fine"
jewelry.  Mail order and home  shopping  distributors  generally  offer  costume
jewelry  and fine  jewelry  at low to middle  price  points.  Department  stores
generally  offer a wider  assortment  of  merchandise  including a selection  of
costume, fine and some "guild" jewelry.

     Jewelry stores,  including independent stores and jewelry chains, represent
the largest  distribution  channel based on industry sales.  Most jewelry stores
cater to the broad fine jewelry market offering a variety of items at a range of
price points.  As of December 31, 1995,  there were over 28,000  retail  jewelry
stores  nationwide  accounting  for almost  one-half of all jewelry  sales.  The
retail jewelry industry is highly fragmented with no single chain accounting for
a significant percentage of the fine jewelry market.

     The Company believes that the retail jewelry industry is consolidating  due
to a variety of factors,  including  (i) bad debt  exposure,  which has impacted
jewelry stores that extend recourse credit to customers,  (ii)  overexpansion of
stores and the failure to close unprofitable stores, and (iii) financial risk of
high leverage. The Company believes that industry consolidation will continue as
independent  jewelers  find it  increasingly  difficult to achieve  economies of
scale in merchandise purchasing and real estate site selection.

Operating Strategies

     The Company  believes that its success is  attributable in large measure to
its  business  strategy  which  emphasizes  adherence  to the  Company's  strict
operating   standards   regarding  real  estate   selection,   credit  policies,
performance  of sales  personnel,  store  profitability  and cost  control.  The
principal elements of the Company's operating strategies are as follows:

          Small,  Flexible Store Format in Regional Malls.  The Company believes
     it has a competitive  advantage in obtaining  high traffic,  "center court"
     locations in desirable regional and super-regional malls due principally to
     (i) its small average store size of approximately  800 square feet,  which,
     while  considerably  smaller  than the  average  store  size of most of the
     Company's competitors, generates comparable sales volumes, (ii) its ability
     to adapt its store design to various  sizes and  configurations,  and (iii)
     its high  average  sales per square  foot  (approximately  $1,247 in fiscal
     1996). Over two-thirds of the Company's stores are located in high traffic,
     "center court"  locations.  The stores' small flexible format (which lowers
     the Company's fixed occupancy costs) and high productivity are desirable to
     mall owners.  The stores'  open,  attractive  design  appeals to customers,
     while  facilitating foot traffic and enhancing sales  opportunities for the
     Company.


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          Absence of Recourse Credit Risk. The Company operates based upon a "no
     credit risk" policy.  When  purchasing on credit,  customers must use their
     personal  credit cards,  the Company's  private label credit card (which is
     available  through a third party and is  non-recourse  to the Company),  or
     other  non-recourse third party credit  arrangements.  The Company's strict
     policy eliminates its credit risk associated with the customer's failure to
     pay.  This  policy  also   distinguishes  the  Company  from  most  of  its
     competitors, which not only bear such credit risk, but also rely on finance
     income in addition to merchandise sales.

          Motivated,  Sales-Oriented Store Personnel. The primary responsibility
     of store sales  personnel is selling to customers.  To assist them in their
     selling  efforts,  store personnel are authorized to discount prices within
     certain limits and to choose from a variety of  return/exchange  options to
     offer the customer.  Most non-sale activities are largely  centralized.  In
     addition,  the absence of internal credit  operations  reduces the need for
     sales personnel to focus on many in-store credit  activities.  Compensation
     and bonus programs reinforce sales and margin goals on a daily,  weekly and
     monthly basis. The Company  continually seeks to enhance the selling skills
     of its sales associates through  recruitment of experienced sales personnel
     and extensive, ongoing training programs.

          Differentiated Merchandising. The Company offers an in-depth selection
     of merchandise in several key  categories of fine jewelry:  diamond,  gold,
     precious and semi-precious  jewelry.  This "key category" focus is oriented
     to the Company's target customer,  the middle to upper middle income woman.
     Unlike  many  of its  competitors,  the  Company  carries  only  a  limited
     selection of watches and virtually no costume jewelry or gift  merchandise.
     During the past four fiscal  years the Company  has  increased  its average
     store  inventory at an annual rate of  approximately  14.4% in an effort to
     expand the upper price points and add more depth to the merchandise mix.

          Strict  Operating  Controls.  The Company  emphasizes high performance
     standards,  backed  by  strong  incentive  programs.   Adherence  to  these
     standards  in the  areas of store  site  selection,  sales  targets,  store
     profitability and cost control is fundamental to the Company's success. For
     example,  the Company reduced central overhead as a percentage of net sales
     from 9.8% ($7.5  million) in fiscal  1991 to 5.1% ($8.0  million) in fiscal
     1996.  During this same period,  the Company's net sales  increased by over
     103% and the number of its stores increased by 48%.

Growth Strategies

     The Company  believes  that it has  significant  opportunities  to increase
sales and profits through  continued  execution of its store expansion  strategy
and continued  comparable  store sales gains.  The key elements of the Company's
growth strategies are as follows:

     Accelerated  New Store  Openings.  The Company opened 35 stores in the last
two fiscal  years,  and plans to open 30 stores in  calendar  1997.  The Company
anticipates  opening a similar  number of stores in 1998.  The  following  table
shows the Company's store expansion during the periods presented reflecting both
store openings and closings for the respective periods:



                                           Year Ended January 31,
                                           ----------------------
Number of Stores:           1993        1994        1995        1996       1997
-----------------           ----        ----        ----        ----       ----

Open at beginning
  of period                  111         113         122         131        146
Opened during period           4          11          11          15         20
Closed during period          (2)         (2)         (2)         --         (2)
                             ---         ---         ---         ---        ---
Open at end of period        113         122         131         146        164
                             ===         ===         ===         ===        ===
  Net increase                 2           9           9          15         18


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     To reduce the  Company's  risk  associated  with  entering  new malls,  the
Company prefers to expand in established  malls. In addition,  the Company seeks
to open additional  stores in its existing markets where the Company believes it
can obtain  greater market  penetration.  The Company also seeks to identify new
geographic  markets  where it can  cluster  stores for ease of  supervision  and
increased  name  recognition.  The  Company  entered  the St.  Louis and Phoenix
markets  in  fiscal  1994 and now has four  stores in the  Phoenix  area and six
stores in the St. Louis area. The Company entered the San Diego market in fiscal
1997 with two  stores  and plans to open two  additional  stores in this  market
later in fiscal 1997. The Company also plans to add Orange County, California as
a market in fiscal 1997 by opening two stores.

     The  Company  seeks to open new stores in key  locations  in  regional  and
super-regional  malls. The Company's  national  presence permits it to focus its
new store openings on desirable malls throughout the country and often to obtain
high traffic,  "center court"  locations in those malls to maximize  exposure to
mall  shoppers.  The Company  uses its multiple  name format to open  additional
stores in malls where it already has  profitable  locations.  For  example,  the
Company operates two stores in 34 malls and three stores in one mall.

     The Company continuously evaluates the performance of its stores and closes
certain  stores  from time to time that do not  continue  to meet its  strategic
location profile or its performance requirements.

Merchandising

     The Company believes that an important  element of its success is a focused
merchandising  strategy that reflects its upscale customer orientation and small
store format.  The Company seeks to provide a deep  assortment of items across a
broad range of price  points in its key product  categories:  diamonds  (such as
diamond  jewelry,  diamond  solitaires  and  bridal),  gold,  and  precious  and
semi-precious jewelry. Unlike many of its competitors,  the Company carries only
a limited  selection  of  watches  and  virtually  no  costume  jewelry  or gift
merchandise.

     Each  store  offers   approximately   2,500  individual  items,   including
approximately  500 core jewelry items,  which accounted for approximately 40% of
net sales in fiscal 1996. In addition,  the Company has expanded its merchandise
assortment in higher price points.  The Company's  average price per merchandise
sale has  increased  from $229 in fiscal 1994 to $245 in fiscal 1995 and $255 in
fiscal 1996.

     In recent  years,  the Company has  increased  the average  number of items
available in its stores to broaden the appeal of its merchandise  assortment and
expand its product breadth in selected product  categories,  particularly bridal
and other diamond jewelry.  For example,  store merchandise per store (including
consigned items) has grown at a compound annual rate of approximately 14.4% over
the past four fiscal years (as measured by the inventory and consigned  items on
hand at fiscal year end). During fiscal 1996, the Company placed a significantly
expanded selection of higher priced merchandise,  our Signature  Collection,  in
approximately  35 stores on a test basis.  Based on the initial  success of this
program,  the  Company  plans to expand this  program to a number of  additional
stores during fiscal 1997.

     The  following   table  sets  forth  the  Company's   percentage  of  total
merchandise sales by category for the following periods:


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                                           Year Ended January 31,
                                           ----------------------
                            1993        1994        1995        1996       1997
                            ----        ----        ----        ----       ----

Diamonds                    51.4%       54.0%       56.8%       57.6%      57.5%
Gold                        25.5        26.6        25.0        25.2       25.4
Precious/Semi-Precious      16.8        15.0        15.1        14.6       14.8
Watches                      3.0         2.7         2.4         2.1        2.1
Other                        3.3         1.7         0.7         0.5        0.2
                           -----       -----       -----       -----      -----
         Total             100.0%      100.0%      100.0%      100.0%     100.0%
                           =====       =====       =====       =====      =====

     All stores carry the Company's core items.  The Company also customizes the
merchandising  of its stores based upon each store's  sales  volume,  individual
market  preferences and historical  selling  patterns.  The Company  continually
tests new items in its stores and monitors  their sales  performance to identify
additional sales opportunities.

     Along with its broad product assortment,  the Company also provides jewelry
repair  services to its customers  (sales from which  represented  approximately
four  percent of fiscal 1996 net sales).  Actual  repair  work is  performed  by
jewelers under  independent  contract.  Approximately 90 of the Company's stores
have  independent  jewelers  located  in the  store to  provide  on-site  repair
services to the customer.

     Pricing  Strategy.  For  purposes of pricing,  the Company  classifies  its
merchandise  into several broad  categories.  Consistent  with many fine jewelry
retailers,  a  substantial  portion  of the  Company's  sales are made at prices
discounted from listed  reference  prices.  Company  personnel are authorized to
discount most merchandise prices within certain limits.

Credit

     The Company operates based upon a "no credit risk" policy.  When purchasing
on  credit,  customers  must  use  their  personal  credit  cards  (e.g.,  Visa,
MasterCard,  American  Express and others),  the Company's  private label credit
cards,  which are available  through a third party and are  non-recourse  to the
Company,  or other  non-recourse  third party credit  arrangements.  Because the
Company's  credit programs are  non-recourse to the Company,  the Company has no
customer credit risk for  non-payment by the customer  associated with the sale.
At the same time, the Company  believes that its ability to offer credit through
its  "private  label"  credit  cards  and  other  non-recourse  arrangements  is
attractive  to many  customers,  including  those who  prefer  not to have their
jewelry  purchases  count towards their credit  limits on their  personal  third
party credit cards. The Company  encourages sales on the Company's private label
credit  card or  other  non-recourse  third-party  credit  arrangements  because
customer purchases on this type of credit tend to generate higher average sales.
In fiscal 1996, the Company's average credit sale was approximately $600, versus
approximately  $100 for a purchase  paid for with cash or by check.  The Company
believes that its success in building its  non-recourse  credit sales has been a
significant factor in its improvement in comparable store sales.

     The Company's credit strategy and its focus on a more upscale clientele are
interrelated. A substantial portion of the users of private label credit offered
by most jewelers tend to be customers with more limited financial resources or a
weaker credit  history.  In contrast,  the  Company's  adherence to a "no credit
risk" policy limits the Company's sales to such  individuals.  Thus, the Company
has  historically  oriented  its  merchandising  programs  to  appeal  to a more
affluent, less credit-reliant consumer.

     The Company has established its private label program through Bank One (and
other non-recourse  credit  purveyors),  whereby customers may apply for instant
credit on  merchandise  purchases.  Under  these  credit  programs,  the  credit
purveyors have no recourse  against the Company based on the customer's  failure
to pay;  recourse against the Company is restricted to those limited cases where
the receivable itself is defective (such as incorrectly completed  documentation
or certain  situations  involving customer fraud). The Company's expense related
to these limited cases was  approximately  0.5% of sales during fiscal 1996. The
Company's  credit  card  discount  expense  for  fiscal  1996  and  fiscal  1995
represented  3.0% and 2.6%,  respectively,  of credit sales for those years.  In
general,  the Company's  credit card discount  expense is higher for its private
label


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programs than for personal credit cards,  such as Visa and MasterCard.  Pursuant
to the Company's  relationship  with Bank One, the bank  provides  credit to the
Company's customers using its own credit criteria and policies. The Company pays
a fee to Bank One based  primarily  upon the volume of credit so  extended.  The
Company has similar non-recourse arrangements with other credit purveyors, which
it uses in  addition to the Bank One program to assist  customers  in  financing
their purchases. In addition, the Company utilizes a check authorization company
which guarantees payments on transactions involving certain personal checks.

     In late fiscal 1995 and during fiscal 1996 the Company  experimented with a
"First Time Buyers"  program through a non-recourse  arrangement  with Bank One.
Under this program, Bank One granted credit to young customers with little or no
credit history,  for which the Company paid Bank One a significantly  higher fee
than it pays under its  standard  program.  Due to the costs and  results of the
program,  the Company  and Bank One have  discontinued  the "First Time  Buyers"
program as of December, 1996.

     During  recent  periods  there  has been an  increase  in  consumer  credit
delinquencies   generally,   which  has  resulted  in   financial   institutions
reexamining   their  pending   practices  and  procedures.   Consequently,   the
availability  or cost of third  party  credit  offered by the  Company  could be
adversely affected.

Store Operations

     Store Layout.  Over two-thirds of the Company's  stores are located in high
traffic,  "center  court"  locations.  Nearly  all of the  stores  have  an open
entrance rather than the more traditional  single-doorway  entrance.  Stores are
brightly-lit and generally are designed to have display cases situated along the
lease line.  By  formatting  the stores in this  "customer-friendly"  manner and
without a formal  entryway,  a casual mall shopper  comes in very close  contact
with the store's merchandise and personnel without the natural apprehension many
have upon "entering" a fine jewelry store.

     Store  Management.  Each of the  Company's  stores  is  operated  under the
direction  of  a  store  manager  who  is  responsible  for  management  of  all
store-level  operations,  including sales and personnel matters.  Most non-sales
related administrative functions are performed at the Company's corporate office
in Chicago. A significant portion of the compensation of store managers is based
on incentives which focus on sales productivity. The store managers are assisted
by a staff that usually  includes an  assistant  manager and four to eight sales
associates,  depending upon store operating hours and anticipated  sales volume.
The Company has  approximately  25 supervisors who concentrate  their efforts on
store-focused  sales  strategies.  Each  supervisor  is based in one store,  but
spends most of his or her time  visiting  other  stores.  The  Company's  senior
officers  spend a  substantial  percentage  of their  time  visiting  stores  to
reinforce the close communication between senior executives and store personnel.

     Operating Cost  Controls.  The Company's  store  operations are designed to
maintain low operating  costs at the store level.  The  Company's  small average
store size reduces fixed costs,  and the lack of recourse credit  eliminates the
need for most overhead expenses normally associated with credit operations.  The
Company also seeks to reduce store-level operating costs through efficient sales
staff utilization.  To assist store personnel in their selling efforts,  many of
the administrative functions normally performed at the store level are performed
at the corporate level. Due to computerization, more efficient use of personnel,
and the  elimination of certain  non-essential  functions,  the Company  reduced
central  overhead  as a  percentage  of net sales from 9.8% in fiscal 1991 ($7.5
million)  to 5.1% in  fiscal  1996  ($8.0  million).  During  that  period,  the
Company's  sales  increased  by over 103% and the number of stores  increased by
48%.

     Store Employee  Compensation.  The Company seeks to hire experienced  sales
personnel and motivate its store  employees by linking a substantial  percentage
of employee  compensation to individual and store sales performance,  as well as
by offering opportunities for promotion within the Company.

     Employee  Training.  The Company believes that providing  knowledgeable and
responsive   customer  service  is  critical  to  the  Company's   success  and,
accordingly, has developed and implemented extensive


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employee  training  programs.  In addition to training during the first weeks of
employment  and  continuous  on-the-job  training  provided by  management,  the
Company has several training videos to supplement its written training materials
for sales associates. Store managers complete a manager training and development
program.

Advertising and Promotions

     The Company uses in-store and point-of-sale  promotional  activities as the
main elements of its advertising strategy. The bulk of the Company's advertising
and  promotional  budget is  dedicated  to  in-store  signage,  flyers,  special
merchandise displays and targeted mailings.  Frequent special promotions such as
diamond  remount events,  clearance  sales,  "Vice  President's Day Events," and
similar promotions are designed to increase traffic through the Company's stores
and generate an urgency for customers to make purchases.  These events vary from
year to year and among stores.  Publicized  events are an important  part of the
Company's marketing efforts,  and the Company generates a significant portion of
its revenues  during such events.  The Company plans to test certain direct mail
and media advertising programs in fiscal 1997.

     The Company  permits store  personnel to choose from a variety of return or
exchange  options to offer the  customer,  including a 90-day return policy or a
90-day exchange policy.  The vast majority of the Company's sales in fiscal 1996
have been made on a 90-day exchange or similar basis, which the Company believes
has favorably affected net sales.

Purchasing

     The Company does not manufacture  its  merchandise.  The Company  purchases
substantially  all of its inventory,  including loose gems,  directly from prime
suppliers  located  in the  United  States  and  abroad.  The  Company  utilizes
approximately 130 vendors, primarily in the United States, Israel, Italy and the
Far East, who supply  various  jewelry  products  under U.S.  dollar-denominated
agreements. During fiscal 1996, the Company's largest and five largest suppliers
accounted  for  approximately  17% and  36%,  respectively,  of the  merchandise
purchased  by  the  Company.   The  Company  also  has  certain   subcontracting
arrangements  with jewelry  finishers to set loose  diamonds and gemstones  into
rings and other jewelry,  using styles  established  by the Company.  Management
believes that the  relationships  the Company has established with its suppliers
and  subcontractors  are good. The Company has not experienced any difficulty in
obtaining  satisfactory sources of supply and believes that adequate alternative
sources of supply exist for  substantially  all types of merchandise sold in its
stores. However, the loss of one or more of its major suppliers, particularly at
certain  critical times during the year could have a material  adverse effect on
the Company.

     The Company maintains a strict quality assurance  program,  with almost all
shipments  from suppliers  being counted or weighed and visually  inspected upon
receipt at the Company's headquarters in Chicago, Illinois.

     During  fiscal  1996,  the  Company's  average  net monthly  investment  in
inventory  (i.e., the total cost of inventory owned and paid for) was 65% of the
total cost of the  Company's  on-hand  merchandise.  The  amount of  consignment
merchandise  has increased in recent years.  For example,  the average amount of
consignment merchandise per store has increased from $93,000 on January 31, 1994
to $106,000 on January 31, 1997. The Company is also generally granted favorable
exchange  privileges  which  permit  it to  return or  exchange  certain  unsold
merchandise for new products at any time. Those arrangements  permit the Company
to structure its relationships with vendors to encourage their participation in,
and  responsibility   for,   merchandise   turnover  and  profitability.   These
arrangements  permit the Company to have more merchandise  available for sale in
stores and reduce  somewhat the Company's  exposure to changes in fashion trends
and inventory obsolescence.

     The  Company  and  the  jewelry   industry  in  general  are   affected  by
fluctuations  in the prices of diamonds and gold and, to a lesser extent,  other
precious and semi-precious metals and stones. During fiscal 1996,


                                      - 8 -


<PAGE>



diamonds,  gold, precious and semi-precious  jewelry accounted for approximately
98% of the Company's net merchandise  sales. The supply and price of diamonds in
the principal world markets are significantly influenced by a single entity, the
Central Selling  Organization  ("CSO"), a marketing arm of DeBeers  Consolidated
Mines Ltd. of South Africa.  The CSO has traditionally  controlled the marketing
of a  substantial  majority  of the world's  supply of diamonds  and sells rough
diamonds to worldwide  diamond  cutters from its London office in quantities and
at prices  determined in its sole discretion.  In fiscal 1996, the CSO announced
price  increases for a number of the sizes and quality  grades of diamonds.  The
availability  of  diamonds  to the CSO and the  Company's  suppliers  is to some
extent dependent on the political situation in diamond producing countries, such
as South  Africa,  Botswana,  Zaire,  republics  of the former  Soviet Union and
Australia,   and  on  continuation  of  the  prevailing   supply  and  marketing
arrangements for raw diamonds.  Until alternate sources could be developed,  any
sustained  interruption  in the supply of  diamonds or any  oversupply  from the
producing  countries could  adversely  affect the Company and the retail jewelry
industry as a whole.  The Company has been  increasing  the amount of  inventory
(especially  higher pried items)  carried in its stores.  Higher priced  jewelry
items tend to have a slower rate of turnover,  thereby  increasing  the risks to
the Company associated with price fluctuations and changes in fashion trends.

Management Information Systems

     The Company utilizes customized  management  information systems throughout
its business to facilitate the design and  implementation of selling  strategies
and as an integral  part of its financial and other  operational  controls.  The
Company's  management  information  system  utilizes  an IBM  AS400.  The system
incorporates point-of-sale computers in its stores with a merchandise management
and purchase order management system and utilizes software specifically designed
for the jewelry industry,  which the Company has customized  extensively to meet
its needs.  The  information  system has been  upgraded to support the Company's
needs and  further  upgrading  is  necessary  to support the  Company's  growth,
including upgrading required to make the information system year 2000 compliant.

     The Company uses the management information system to track each individual
item of merchandise from receipt to ultimate sale or return to the vendor.  As a
result,  management  can closely  monitor  inventory by location,  sales,  gross
margin,  inventory levels and turnover statistics,  reallocating inventory among
stores  when  beneficial.  This system also  enables  management  to review each
store's and each employee's  productivity  and  performance.  Based on the sales
data,  the Company  tailors each  store's  inventory  composition  and plans the
Company's purchasing requirements accordingly. The system enables the Company to
manage its inventory at the store level,  including the automatic  replenishment
of merchandise no less frequently than twice a week.

     The  system  also  automatically  provides a daily  reconciliation  of each
store's   transactions   for  prompt   investigation   of   discrepancies.   The
point-of-sale  computers  are  polled  nightly  by the  headquarters  system and
updated  data is  available at the  beginning  of the  following  day for use by
central  office  and store  supervisory  personnel,  and for  transfer  into the
Company's accounting, merchandising, and other management information systems.

     The Company has implemented,  through its point-of-sale system, the ability
to capture and retain  selected  customer  data from each sale  (name,  address,
phone, birthday, anniversaries, historical purchases, etc.). The data is used by
Company  store  managers  and  sales  associates  in their  efforts  to  contact
customers  and  anticipate  and  facilitate   future  add-on  purchases  by  its
customers.  For  example,  a husband who buys a diamond  necklace for his wife's
birthday may receive a mailing  approximately a year later suggesting a matching
set of diamond  earrings.  The Company believes that additional sales volume can
be achieved by utilizing such programming initiatives. The point of sale systems
also track  required  inspection  dates for customers  with diamond  warranties.
Sales associates are prompted by the system to contact these customers to remind
them of the required in-store inspection.


                                      - 9 -


<PAGE>



     The  Company's  supervisors  use  laptop  computers  in the field to obtain
up-to-date  financial  information  on  their  stores  and  down-load  it  on an
as-needed  basis from the Company's  central  computer  system.  The information
available via laptop  includes,  among other items,  store sales,  gross profit,
personnel costs, and sales associates' productivity information.

     Inventory Loss Prevention and Insurance. The Company undertakes substantial
efforts to safeguard its jewelry  inventory  from loss and theft,  including the
use of  security  alarm  systems and safes at each store and the taking of daily
inventory of higher value items. In addition, the Company's inventory management
and control system, which tracks each item in the Company's inventory,  provides
a further check against loss or theft.  During fiscal 1996,  in-store  inventory
shrinkage  amounted  to less than 1.0% of sales.  The  Company  has a  full-time
manager who directs the Company's loss prevention efforts. The Company maintains
insurance  (subject  to  certain  deductibles)  covering  the  risk  of  loss of
merchandise in transit and at store premises  (whether owned or on  consignment)
in amounts that the Company  believes are  reasonable and adequate for the types
and amounts of merchandise carried by the Company.

Competition

     The jewelry  business is  fragmented  and highly  competitive.  The Company
competes with national and regional jewelry chains and local independently owned
jewelry  stores,  especially  those  that  operate  in  malls,  as  well as with
department  stores,  catalog showrooms,  discounters,  direct mail suppliers and
televised  home  shopping  networks.  Certain of the Company's  competitors  are
substantially  larger and have greater financial  resources than the Company and
can take advantage of national advertising  programs.  The Company also believes
that it competes for consumers'  discretionary  spending  dollars with retailers
that offer merchandise other than jewelry.

     Management  believes  that the primary  competitive  factors  affecting its
operations are store  location and  atmosphere,  quality of sales  personnel and
service,  breadth  and  depth  of  merchandise  offered,   pricing,  credit  and
reputation.  The Company emphasizes its merchandise selection,  sales personnel,
store location and design and pricing in competing in its target  market,  which
is relatively less credit sensitive.

Trademarks

     Whitehall  Co.  Jewellers(R)  and  Lundstrom   Jewelers(R)  are  registered
trademarks  in the  United  States.  The  Company  has filed an  application  to
register Marks Bros. Jewelers(TM) as a trademark in the United States.

Employees

     As of January 31,  1997,  the Company had  approximately  1,100  employees,
including approximately 1,000 store level employees. The Company usually hires a
limited number of temporary employees during each Christmas selling season. None
of the Company's employees are represented by a union. The Company believes that
its relations with its employees are good.

Regulation

     The Company's  operations  are affected by numerous  federal and state laws
that impose disclosure and other  requirements  upon the origination,  servicing
and  enforcement of credit  accounts,  and  limitations on the maximum amount of
finance charges that may be charged by a credit provider. Although credit to the
Company's customers is provided by third parties without recourse to the Company
based upon a customer's failure to pay, any restrictive change in the regulation
of credit,  including the imposition of, or changes in,  interest rate ceilings,
could  adversely  affect  the cost or  availability  of credit to the  Company's
customers and,  consequently,  the Company's  results of operations or financial
condition.


                                     - 10 -


<PAGE>



     The  Company's  operations  are also  affected  by  federal  and state laws
relating to marketing practices in the retail jewelry industry.  In marketing to
its customers,  the Company  compares many of its prices to "reference  prices."
The Company's  literature indicates to customers that its reference price for an
item is  either  the  manufacturer's  suggested  retail  price or the  Company's
determination of the  non-discounted  price at which  comparable  merchandise of
like grade or quality is advertised or offered for sale by competitive retailers
and is not the Company's current selling price or the price at which it formerly
sold such item.  Although  the Company  believes  that pricing  comparisons  are
common in the jewelry business and that the Company's  practice is in compliance
with applicable laws relating to trade practices, there can be no assurance that
this position would be upheld.

Item 2.  Properties

Properties

     The  Company  operates  176  stores in 24 states.  All of these  stores are
leased and are  located in  regional  or  super-regional  malls.  The  Company's
typical  new store  lease has a term of 10 years  plus the first  partial  lease
year.  Terms  generally  include a minimum base rent, a percentage rent based on
store sales and certain  other  occupancy  charges.  At January  31,  1997,  the
average  remaining life of the leases for the Company's  stores is approximately
six years. While there can be no assurance,  the Company expects to be generally
able to renew these leases as they expire.

     The Company  also  leases  approximately  16,700  square feet of office and
administrative  space in  Chicago,  Illinois in an office  building  housing its
corporate headquarters, distribution functions and quality assurance operations.
This lease expires on May 13, 2002.

Item 3.  Legal Proceedings

Legal Proceedings

     The Company is involved in certain  legal actions from time to time arising
in the ordinary course of business,  but management  believes that none of these
actions,  either individually or in the aggregate,  will have a material adverse
effect on the Company's results of operations or financial condition.

Item 4.  Submission of Matters to a Vote of Security Holders

None.


                                     - 11 -


<PAGE>



                                     PART II


Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

     Incorporated  herein by reference to section entitled "Related  Stockholder
Matters and Market for the Company's  Common Stock" in the Company's 1996 Annual
Report, which is included as Exhibit 13 to this Annual Report on Form 10-K.

Item 6.  Selected Financial Data

     Incorporated  herein by reference to section entitled "Selected  Historical
Financial and  Operating  Data" in the Company's  1996 Annual  Report,  which is
included as Exhibit 13 to this Annual Report on Form 10-K.

Item 7.  Managements's Discussion and Analysis of Financial Condition and 
         Results of Operations

     Incorporated   herein  by  reference  to  section  entitled   "Management's
Discussion and Analysis of Financial  Condition and Results of Opertions" in
the Company's 1996 Annual Report, which is included as Exhibit 13 to this Annual
Report on Form 10-K.

Item 8.  Financial Statements and Supplementary Data

     Incorporated  herein by  reference  to  sections  entitled  "Statements  of
Operations,"  "Balance Sheets,"  "Statements of Stockholders' Equity (Deficit),"
"Statements of Cash Flows" and "Notes to Financial  Statements" in the Company's
1996 Annual  Report,  which is  included as Exhibit 13 to this Annual  Report on
Form 10-K.

Item 9.  Changes in and Disagreements with Accountants on Accounting and 
         Financial Disclosure

     None.


                                     - 12 -


<PAGE>



                                    PART III


Item 10. Directors and Executive Officers of the Registrant

     The information  contained  under the headings  "Election of Directors" and
"Executive Officers" in the Proxy Statement (which Proxy Statement will be filed
with the  Securities  and  Exchange  Commission  on or before  May 10,  1997) is
incorporated herein by reference.

Item 11. Executive Compensation

     Except for information referred to in Item 402(a)(8) of Regulation S-K, the
information  contained under the headings "Election of Directors" and "Executive
Compensation  and  Other  Information"  in  the  Proxy  Statement  (which  Proxy
Statement will be filed with the Securities and Exchange Commission on or before
May 10, 1997) is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

     The information  contained under the heading "Security Ownership of Certain
Beneficial  Owners and Management" in the Proxy Statement (which Proxy Statement
will be filed with the Securities  and Exchange  Commission on or before May 10,
1997) is incorporated herein by reference.


Item 13. Certain Relationships and Related Transactions

     The information  contained  under the heading  "Certain  Relationships  and
Related  Transactions"  in the Proxy  Statement  (which Proxy  Statement will be
filed with the Securities and Exchange  Commission on or before May 10, 1997) is
incorporated herein by reference.


                                     - 13 -


<PAGE>



                                     PART IV


Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

     (a)(1) Financial Statements

     The following financial statements are filed as part of this report:

          Report of Independent Public Accountants.*

          Balance Sheets of the Company as of January 31, 1997 and 1996.*

          Statements  of  Operations  of the Company for the years ended January
          31, 1997, 1996 and 1995.*

          Statements of  Stockholders'  Equity  (Deficit) of the Company for the
          years ended January 31, 1997, 1996 and 1995.*

          Statements  of Cash Flows of the Company  for the years ended  January
          31, 1997, 1996 and 1995.*

          Notes to Financial Statements.*


----------
*    Incorporated herein by reference from the Company's 1996 Annual Report.


     (a)(2) Financial Statement Schedules

          Report of Independent Public Accountants on Financial 
          Statement Schedule                                             Page 17
          Schedule II - Valuation and Qualifying Accounts                Page 18

     All  other  schedules  for  which  provision  is  made  in  the  applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related  instructions  or are  inapplicable,  and therefore  have been
omitted.

     (a)(3) Exhibits

     The following Exhibits are filed herewith or incorporated herein:

  Exhibit No.  Description
  -----------  -----------
     3.1       Restated Certificate of Incorporation of the Company (1)
     3.2       Restated By-Laws of the Company (1)
     4.1       Stockholders Rights Plan (2)
     4.2       Certificate  of  Designations  of  series A Junior  Participating
               Preferred Stock (1)


                                     - 14 -


<PAGE>



     4.3       Indenture  governing the Notes dated as of April 15, 1996 between
               the Company and Norwest Bank Minnesota,  National Association, as
               Trustee (2)

     4.4       Form of  Series C Notes  (included  in  Exhibit  4.3 to this Form
               10-K) (2)

     4.5       Form of  Series D Notes  (included  in  Exhibit  4.3 to this Form
               10-K) (2)

     4.6       First  Supplemental  Indenture  to  Indenture   (incorporated  by
               reference  to Exhibit 4.4 of the  Registration  Statement on Form
               S-1 (Commission File No. 333-0403))

     10.1      Second Amended and Restated Registration Agreement (2)

     10.2      Letter  Agreements re: Incentive Stock Option dated September 28,
               1995  between the Company and each of Hugh M.  Patinkin,  John R.
               Desjardins and Matthew M. Patinkin, respectively (1) (3)

     10.3      Letter Agreements re: Restricted Stock Awards dated September 28,
               1995  between the Company and each of Hugh M.  Patinkin,  John R.
               Desjardins and Matthew M. Patinkin (1) (3)

     10.4      Letter Agreements re: Incentive  Compensation dated September 28,
               1995  between the Company and each of Hugh M.  Patinkin,  John R.
               Desjardins and Matthew M. Patinkin (1) (3)

     10.5      Company's 1995 Executive Incentive Stock Option Plan (1) (3)

     10.6      Letter  Agreement re:  Incentive Stock Option between the Company
               and Lynn D. Eisenheim (1) (3)

     10.7      1996 Long-Term Incentive Plan (2) (3)

     10.8      Amended  and  Restated   Private  Label  Revolving   Credit  Plan
               Agreement,  dated May 31, 1996, between the Company and Bank One,
               N.A. (2)

     10.9      Lease  dated May 14,  1992  between the Company and New York Life
               Insurance   Company   relating   to   the   Company's   corporate
               headquarters (1)

     10.10     Revolving Credit, Term Loan and Gold Consignment Agreement, dated
               as of May 3,  1996,  among the  Company,  the  Banks (as  defined
               therein),  The First  National  Bank of Boston  and Rhode  Island
               Hospital Trust  National Bank, as Agent for the Banks,  governing
               the Bank Facility and the Gold Consignment  Facility,  as amended
               by the First Amendment thereto,  the Second Amendment thereto and
               the Third Amendment thereto (4)

     10.11     Executive  Severance  Agreements each dated May 7, 1996,  between
               the Company  and each of Hugh M.  Patinkin,  John R.  Desjardins,
               Matthew M. Patinkin and Lynn D. Eisenheim (2) (3)

     10.12     ESOP Restructuring Agreement, dated as of March 29, 1996, between
               the Company and the Marks Bros.  Jewelers,  Inc.  Employee  Stock
               Ownership Trust (2)

     10.13     1997 Long-Term Incentive Plan (3)


                                     - 15 -


<PAGE>



     10.14     Fourth  Amendment  to  Revolving  Credit,   Term  Loan  and  Gold
               Consignment  Agreement,  dated as of March  14,  1997,  among the
               Company, the Banks (as defined therein),  The First National Bank
               of Boston and Rhode Island Hospital Trust National Bank, as Agent
               for  the  Banks,   governing  the  Bank  Facility  and  the  Gold
               Consignment Facility

     10.15     Amended and Restated Employee Stock Ownership Plan

     11        Statement re: computation of per share earnings

     13        1996 Annual Report

     23        Consent of Coopers & Lybrand L.L.P.

     24        Powers of Attorney (included on signature page)

     27        Financial Data Schedule

----------
(1)  Incorporated  herein by  reference  to an exhibit  with the same  number as
     filed with the  Company's  Registration  Statement  on Form S-1, as amended
     (Registration No. 333-1794).

(2)  Incorporated  herein by  reference  to an exhibit  with the same  number as
     filed with the  Company's  Registration  Statement  on Form S-1, as amended
     (Registration No. 333-0403).

(3)  Represents management contract or compensatory plan or arrangement.

(4)  Incorporated  herein by  reference  to an exhibit  with the same  number as
     filed with the  Company's  Registration  Statement  on Form S-1, as amended
     (Registration No. 333-13903).

     (b)  Reports on Form 8-K

          None.


                                     - 16 -


<PAGE>



                        REPORT OF INDEPENDENT ACCOUNTANTS





To the Stockholders and Board of Directors of
Marks Bros. Jewelers, Inc.

Our report on the financial  statements of Marks Bros.  Jewelers,  Inc. has been
incorporated  by  reference  in this Form  10-K from page 28 of the 1996  Annual
Report of Marks  Bros.  Jewelers,  Inc.  In  connection  with our audits of such
financial  statements,  we have also  audited  the related  financial  statement
schedule which is included on page 18 of this Form 10-K.

In our  opinion,  the  financial  statement  schedule  referred  to above,  when
considered  in  relation  to the basic  financial  statements  taken as a whole,
present  fairly,  in all  material  respects,  the  information  required  to be
included therein.



COOPERS & LYBRAND L.L.P.

Chicago, Illinois,
March 17, 1997


                                     - 17 -


<PAGE>



<TABLE>
<CAPTION>
                                            MARKS BROS. JEWELERS, INC.

                                  SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                                Twelve months ended January 31, 1995, 1996 and 1997
                                              (Dollars in thousands)


                   Column A                    Column B                   Column C               Column D         Column E
------------------------------------------     --------        ---------------------------       --------         --------

                                               Balance at      Charged to        Charged                          Balance at
                                               Beginning        Costs and        to Other                            End
                Description                    of Period        Expenses         Accounts       Deduction         of Period
                -----------                    ---------        --------         --------       ---------         ---------
<S>                                             <C>              <C>                             <C>                <C>   
Twelve months ended 1/31/95:
  allowance for doubtful accounts.........      $  519           $  615             --           $  629(1)          $  505
                                                ======           ======                          ======             ======
  Inventory allowance.....................       1,226            1,932             --            1,594              1,564
                                                ======           ======                          ======             ======
Twelve months ended 1/ 31/96:
  Allowance for doubtful accounts.........      $  505           $  918             --           $  858(1)          $  565
                                                ======           ======                          ======             ======
  Inventory allowance.....................       1,564            2,045             --            2,346              1,263
                                                ======           ======                          ======             ======
Twelve months ended 1/31/97
  Allowance for doubtful accounts.........      $  565           $1,037             --           $  894(1)          $  708
                                                ======           ======                          ======             ======
  Inventory allowance.....................       1,263            2,662             --            2,214              1,711
                                                ======           ======                          ======             ======
</TABLE>

     Note:

     (1)  Uncollectible  items written off, less recoveries of items  previously
     written off.


                                     - 18 -


<PAGE>



                                   SIGNATURES

     Pursuant  to  the  requirements  of  Section  13 or  Section  15(d)  of the
Securities  Exchange Act of 1934, this Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

Date: April 15, 1997                         MARKS BROS. JEWELERS, INC.

                                        By:  /s/ John R. Desjardins
                                             -----------------------------------
                                             John R. Desjardins
                                             Executive Vice President, Finance &
                                             Administration,
                                             Treasurer and Secretary


                        POWER OF ATTORNEY AND SIGNATURES

     Each of the undersigned officers and directors of Marks Bros Jewelers, Inc.
hereby  severally  constitutes  and  appoints  Hugh  M.  Patinkin  and  John  R.
Desjardins,  and each of them singly,  our true and lawful attorneys,  with full
power  to them  and  each of them  singly,  to sign  for us in our  names in the
capacities  indicated  below, all amendments to this Annual Report on Form 10-K,
and generally to do all things in our names and on our behalf in such capacities
to enable  Marks  Bros.  Jewelers,  Inc. to comply  with the  provisions  of the
Securities  Exchange  Act of  1934,  as  amended,  and all  requirements  of the
Securities and Exchange Commission.

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Registration Statement has been signed by the following persons on behalf of the
registrant and in the capacities indicated on this 15th day of April, 1997.


<TABLE>
<CAPTION>
        Name                                           Capacity
        ----                                           --------
<S>                                  <C>
/s/ Hugh M. Patinkin                 Chairman, President and Chief Executive Officer
---------------------------          (principal executive officer) and Director
Hugh M. Patinkin                     


/s/ John R. Desjardins               Executive Vice President, Finance & Administration,
---------------------------          Treasurer and Secretary (principal financial officer) and
John R. Desjardins                   Director                                                 
                                     


/s/ Matthew M. Patinkin              Director
---------------------------
Matthew M. Patinkin


/s/ Rodney L. Goldstein              Director
---------------------------
Rodney L. Goldstein


/s/ Norman J. Patinkin               Director
---------------------------
Norman J. Patinkin
</TABLE>


                                     - 19 -


<PAGE>



/s/ Jack A. Smith                    Director
---------------------------
Jack A. Smith


/s/ Daniel H. Levy                   Director
---------------------------
Daniel H. Levy



                                     - 20 -


<PAGE>



                                  EXHIBIT INDEX





Exhibit                         
  No.                           Description
-------                         -----------
 10.13 -- 1997 Long-Term Incentive Plan 

 10.14 -- Fourth Amendment to Revolving Credit, Term Loan and
          Gold Consignment Agreement, dated as of March 14, 1997,
          among the Company, the Banks (as defined therein), The
          First National Bank of Boston and Rhode Island Hospital
          Trust National Bank, as Agent for the Banks, governing
          the Bank Facility and the Gold Consignment Facility

 10.15 -- Amended and Restated Employee Stock Ownership Plan 

    11 -- Statement re: computation of per share earnings 

    13 -- 1996 Annual Report

    23 -- Consent of Coopers & Lybrand L.L.P.

    24 -- Powers of Attorney (included on signature page) 

    27 -- Financial Data Schedule



                              - 21 -


<PAGE>



                                                                   EXHIBIT 10.13


                           MARKS BROS. JEWELERS, INC.

                          1997 LONG-TERM INCENTIVE PLAN



                                 I. INTRODUCTION

1.1 Purposes.  The purposes of the 1997 Long-Term Incentive Plan (the "Plan") of
Marks Bros.  Jewelers,  Inc. (the "Company"),  and its subsidiaries from time to
time (individually a "Subsidiary" and collectively the "Subsidiaries"),  are (a)
to align the  interests of the  Company's  stockholders  and the  recipients  of
awards under this Plan by increasing the proprietary interest of such recipients
in the Company's growth and success, (b) to advance the interests of the Company
by attracting and retaining officers and other key employees, and well-qualified
persons  who  are  not  officers  or  employees  of the  Company  ("non-employee
directors")  for service as  directors  of the Company and (c) to motivate  such
employees and  non-employee  directors to act in the long-term best interests of
the Company's stockholders.  For purposes of this Plan, references to employment
by the Company shall also mean employment by a Subsidiary.

1.2      Certain Definitions.

     "Affiliate" and "Associate" shall have the respective  meanings ascribed to
such terms in Rule 12b-2, as in effect on the effective date of this Plan, under
the Exchange Act; provided,  however, that no director or officer of the Company
shall be deemed an Affiliate  or  Associate of any other  director or officer of
the Company  solely as a result of his or her being a director or officer of the
Company.

     "Agreement" shall mean the written agreement  evidencing an award hereunder
between the Company and the recipient of such award.

     "Beneficial Owner" (including the terms  "Beneficially Own" and "Beneficial
Ownership"),  when used with  respect to any Person,  shall be deemed to include
any securities which:

     (a)  such  Person  or  any  of  such  Person's   Affiliates  or  Associates
beneficially owns, directly or indirectly (determined as provided in Rule 13d-3,
as in effect on the effective date of this Plan, under the Exchange Act);

     (b) such Person or any of such Person's Affiliates or Associates,  directly
or indirectly, has:

          (i)  the  right  to  acquire   (whether  such  right  is   exercisable
     immediately or only after the passage of time or upon the  satisfaction  of
     any  conditions,  or  both)  pursuant  to any  written  or oral  agreement,
     arrangement  or  understanding  (other than customary  agreements  with and
     among  underwriters  and selling  group members with respect to a bona fide
     public offering of securities), upon the exercise of any options, warrants,
     rights  or  conversion  or  exchange  privileges  or  otherwise;  provided,
     however,  that a Person shall not be deemed the Beneficial  Owner of, or to
     Beneficially Own securities tendered pursuant to a tender or exchange offer
     made by or on behalf of such Person or any of such  Person's  Affiliates or
     Associates  until such  tendered  securities  are  accepted for purchase or
     exchange; or

          (ii) the right to vote  pursuant  to any  written  or oral  agreement,
     arrangement or understanding; provided, however, that a Person shall not be
     deemed  the  Beneficial  Owner of, or to  Beneficially  Own,  any  security
     otherwise  subject  to this item  (ii) if such  agreement,  arrangement  or
     understanding  to vote (1) arises solely from a revocable  proxy or consent
     given to such Person or any of such  Person's  Affiliates  or Associates in
     response to a public proxy or consent solicitation made


<PAGE>



     pursuant to, and in accordance  with, the applicable  rules and regulations
     under the Exchange Act and (2) is not also then  reportable  by such Person
     on Schedule  13D (or any  comparable  or  successor  report then in effect)
     under the Exchange Act; or

          (iii)  the  right  to  dispose  of  pursuant  to any  written  or oral
     agreement,  arrangement or understanding  (other than customary  agreements
     with and among  underwriters  and selling  group  members with respect to a
     bona fide public offering of securities); or

     (c) are  beneficially  owned,  directly or indirectly,  by any other Person
with which such Person or any of such Person's  Affiliates or Associates has any
written or oral agreement,  arrangement or  understanding  (other than customary
agreements with and among underwriters and selling group members with respect to
a bona fide  public  offering  of  securities)  for the  purpose  of  acquiring,
holding,  voting (except to the extent  contemplated by the proviso to item (ii)
of subparagraph  (b) of the first paragraph of this  definition) or disposing of
any securities of the Company.

     Notwithstanding  the first  paragraph  of this  definition,  no director or
officer of the Company  shall be deemed to be the  "Beneficial  Owner" of, or to
"Beneficially  Own," shares of Common Stock or other  securities  of the Company
beneficially  owned by any other  director or officer of the Company solely as a
result of his or her being a director or officer of the Company.

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

     "Bonus  Stock" shall mean shares of Common Stock which are not subject to a
Restriction Period or Performance Measures.

     "Bonus Stock Award" shall mean an award of Bonus Stock under this Plan.

     "Cause" shall mean commission of a felony  involving moral turpitude or any
material  breach  of any  statutory  or  common  law  duty to the  Company  or a
Subsidiary involving wilful malfeasance.

     "Change in Control" shall have the meaning set forth in Section 6.8(b).

     "Code" shall mean the Internal Revenue Code of 1986, as amended.

     "Committee" shall mean the Committee designated by the Board, consisting of
two or more  members  of the Board,  each of whom  shall be (a) a  "Non-Employee
Director"  within the  meaning of Rule 16b-3 under the  Exchange  Act and (b) an
"outside  director" within the meaning of Section 162(m) of the Code, subject to
any transition rules applicable to the definition of outside director.

     "Common  Stock"  shall  mean the  common  stock,  $.001 par  value,  of the
Company.

     "Company" has the meaning specified in Section 1.1.

     "Directors Options" shall have the meaning set forth in Section 5.1.

     "Disability"  shall mean the inability for a continuous  period of at least
six  months of the  holder of an award to perform  substantially  such  holder's
duties and responsibilities, as determined solely by the Committee.

     "ERISA" shall mean the Employee  Retirement Income Security Act of 1974, as
amended.

     "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

     "Exempt  Person" shall mean each of Hugh M. Patinkin,  John R.  Desjardins,
Matthew M. Patinkin and each Affiliate thereof.


<PAGE>



     "Fair Market Value" shall mean the average of the high and low  transaction
prices of a share of Common  Stock as reported in the  National  Association  of
Securities Dealers Automated  Quotation National Market System on the date as of
which such  value is being  determined,  or, if the Common  Stock is listed on a
national securities exchange, the average of the high and low transaction prices
of a share of Common Stock on the principal national stock exchange on which the
Common  Stock is traded on the date as of which such value is being  determined,
or,  if there  shall be no  reported  transactions  for such  date,  on the next
preceding date for which transactions were reported;  provided, however, that if
Fair Market Value for any date cannot be so determined,  Fair Market Value shall
be determined by the Committee by whatever means or method as the Committee,  in
the good faith exercise of its discretion, shall at such time deem appropriate.

     "Free-Standing  SAR" shall mean an SAR which is not issued in tandem  with,
or by reference  to, an option,  which  entitles the holder  thereof to receive,
upon exercise, shares of Common Stock (which may be Restricted Stock), cash or a
combination  thereof  with an  aggregate  value  equal to the excess of the Fair
Market Value of one share of Common Stock on the date of exercise  over the base
price of such SAR, multiplied by the number of such SARs which are exercised.

     "Incentive  Stock Option" shall mean an option to purchase shares of Common
Stock that meets the  requirements  of Section 422 of the Code, or any successor
provision,  which is intended by the Committee to constitute an Incentive  Stock
Option.

     "Incumbent  Board"  shall have the meaning set forth in Section  6.8(b)(ii)
hereof.

     "Mature  Shares"  shall  mean  shares of Common  Stock for which the holder
thereof has good title,  free and clear of all liens and  encumbrances and which
such holder  either (a) has held for at least six months or (b) has purchased on
the open market.

     "Non-Employee  Director"  shall mean any director of the Company who is not
an  officer  or  employee  of the  Company  or  any  Subsidiary  (except  in the
definition of Committee,  in which case  "Non-Employee  Director" shall have the
meaning set forth in Rule 16b-3 under the Exchange Act).

     "Non-Statutory  Stock  Option"  shall mean a stock  option  which is not an
Incentive Stock Option.

     "Performance Measures" shall mean the criteria and objectives,  established
by the  Committee,  which shall be  satisfied  or met (a) as a condition  to the
exercisability  of all or a  portion  of an  option  or  SAR or (b)  during  the
applicable  Restriction  Period  or  Performance  Period as a  condition  to the
holder's  receipt,  in the case of a Restricted  Stock  Award,  of the shares of
Common  Stock  subject to such  award,  or, in the case of a  Performance  Share
Award,  of payment with respect to such award.  Such criteria and objectives may
include one or more of the following:  the attainment by a share of Common Stock
of a specified  Fair Market Value for a specified  period of time,  earnings per
share, return to stockholders (including dividends),  return on equity, earnings
of the Company,  revenues,  market share, cash flows or cost reduction goals, or
any  combination of the foregoing.  If the Committee  desires that  compensation
payable  pursuant to any award  subject to  Performance  Measures be  "qualified
performance-based  compensation"  within the  meaning  of section  162(m) of the
Code,  the  Performance  Measures shall be established by the Committee no later
than the end of the first  quarter  of the  Performance  Period  or  Restriction
Period,  as applicable  (or such other time  designated by the Internal  Revenue
Service).

     "Performance  Period"  shall mean any period  designated  by the  Committee
during which the Performance  Measures  applicable to a Performance  Share Award
shall be measured.

     "Performance  Share" shall mean a right,  contingent upon the attainment of
specified Performance Measures within a specified Performance Period, to receive
one share of Common Stock,  which may be Restricted  Stock,  or in lieu thereof,
the Fair Market Value of such Performance Share in cash.

     "Performance  Share Award" shall mean an award of Performance  Shares under
this Plan.


<PAGE>



     "Permanent  and  Total  Disability"  shall  have the  meaning  set forth in
Section 22(e)(3) of the Code or any successor thereto.

     "Person" shall mean any individual, firm, corporation, partnership or other
entity,  and shall  include any successor (by merger or otherwise) of any of the
forgoing.

     "Restricted Stock" shall mean shares of Common Stock which are subject to a
Restriction Period.

     "Restricted Stock Award" shall mean an award of Restricted Stock under this
Plan.

     "Restriction  Period"  shall mean any period  designated  by the  Committee
during  which the Common Stock  subject to a  Restricted  Stock Award may not be
sold, transferred,  assigned,  pledged,  hypothecated or otherwise encumbered or
disposed of, except as provided in this Plan or the  Agreement  relating to such
award.

     "SAR" shall mean a stock  appreciation  right which may be a  Free-Standing
SAR or a Tandem SAR.

     "Stock Award" shall mean a Restricted Stock Award or a Bonus Stock Award.

     "Tandem  SAR"  shall mean an SAR which is  granted  in tandem  with,  or by
reference to, an option (including a Non-Statutory Stock Option granted prior to
the date of grant of the SAR),  which  entitles  the holder  thereof to receive,
upon exercise of such SAR and surrender for  cancellation of all or a portion of
such option,  shares of Common Stock (which may be Restricted Stock),  cash or a
combination  thereof  with an  aggregate  value  equal to the excess of the Fair
Market Value of one share of Common Stock on the date of exercise  over the base
price of such SAR, multiplied by the number of shares of Common Stock subject to
such option, or portion thereof, which is surrendered.

     "Tax Date" shall have the meaning set forth in Section 6.5.

     "Ten Percent Holder" shall have the meaning set forth in Section 2.1(a).

     1.3  Administration.  This Plan  shall be  administered  by the  Committee.
Subject to Section 6.1, any one or a combination of the following  awards may be
made under this Plan to eligible  persons:  (a)  options to  purchase  shares of
Common  Stock in the form of  Incentive  Stock  Options or  Non-Statutory  Stock
Options,  (b) in the form of Tandem SARs or Free-Standing SARs, (c) Stock Awards
in the form of Restricted Stock or Bonus Stock and (d) Performance  Shares.  The
Committee shall,  subject to the terms of this Plan, select eligible persons for
participation  in this Plan and  determine  the form,  amount and timing of each
award to such persons and, if applicable,  the number of shares of Common Stock,
the  number of SARs and the  number of  Performance  Shares  subject  to such an
award,  the exercise price or base price associated with the award, the time and
conditions  of  exercise  or  settlement  of the award  and all other  terms and
conditions  of  the  award,  including,  without  limitation,  the  form  of the
Agreement  evidencing the award.  The Committee  shall,  subject to the terms of
this Plan, interpret this Plan and the application thereof,  establish rules and
regulations it deems necessary or desirable for the  administration of this Plan
and may impose,  incidental to the grant of an award, conditions with respect to
the award, such as limiting competitive employment or other activities. All such
interpretations,  rules,  regulations  and  conditions  shall be conclusive  and
binding on all parties.

     The Committee may delegate some or all of its power and authority hereunder
to the Chief Executive  Officer or other executive officer of the Company as the
Committee  deems  appropriate;  provided,  however,  that the  Committee may not
delegate its power and authority  with regard to (a) the grant of an award under
this Plan to any  person  who is a  "covered  employee"  within  the  meaning of
Section 162(m) of the Code or who, in the Committee's  judgment, is likely to be
a covered  employee  at any time  during the period an award  hereunder  to such
employee  would be outstanding  or (b) the selection for  participation  in this
Plan of


<PAGE>



an  officer  or other  person  subject  to  Section  16 of the  Exchange  Act or
decisions  concerning  the  timing,  pricing  or  amount  of an award to such an
officer or other person.

     No member of the Board of  Directors  or  Committee,  and neither the Chief
Executive  Officer  nor  any  other  executive  officer  to whom  the  Committee
delegates any of its power and authority hereunder, shall be liable for any act,
omission, interpretation,  construction or determination made in connection with
this Plan in good  faith,  and the  members  of the Board of  Directors  and the
Committee  and the  President  and Chief  Executive  Officer or other  executive
officer shall be entitled to indemnification and reimbursement by the Company in
respect  of any  claim,  loss,  damage or expense  (including  attorneys'  fees)
arising  therefrom to the full extent  permitted by law, except as otherwise may
be provided in the Company's Certificate of Incorporation and/or By-laws, as the
same may be amended or restated from time to time,  and under any directors' and
officers' liability insurance that may be in effect from time to time.

     A majority of the  Committee  shall  constitute  a quorum.  The acts of the
Committee shall be either (a) acts of a majority of the members of the Committee
present at any  meeting at which a quorum is  present  or (b) acts  approved  in
writing by a majority of the members of the Committee without a meeting.

     Notwithstanding  anything to the contrary herein,  any grant of awards to a
Non-Employee  Director (not including  awards under Article V) shall require the
approval of the Board.

     1.4 Eligibility. Participants in this Plan shall consist of such directors,
officers  or other key  employees  of the Company  and its  Subsidiaries  as the
Committee, in its sole discretion, may select from time to time. The Committee's
selection of a person to  participate in this Plan at any time shall not require
the  Committee  to select such person to  participate  in this Plan at any other
time.  Non-Employee Directors shall also be eligible to participate in this Plan
in accordance with Article V.

     1.5 Shares Available. Subject to adjustment as provided in Sections 6.7 and
6.8, 400,000 shares of Common Stock shall be available under this Plan,  reduced
by the sum of the aggregate number of shares of Common Stock (a) that are issued
upon the grant of a Stock  Award and (b) which  become  subject  to  outstanding
options,  including  Directors'  Options,  outstanding  Free-Standing  SARs  and
outstanding  Performance  Shares.  To the  extent  that  shares of Common  Stock
subject to an outstanding  option (other than in connection with the exercise of
a  Tandem  SAR),  Free-Standing  SAR or  Performance  Share  are not  issued  or
delivered by reason of the expiration,  termination,  cancellation or forfeiture
of such award or by reason of the  delivery or  withholding  of shares of Common
Stock to pay all or a portion of the exercise  price of an award,  if any, or to
satisfy  all or a portion  of the tax  withholding  obligations  relating  to an
award,  then such shares of Common  Stock shall  again be  available  under this
Plan.

     Shares of  Common  Stock to be  delivered  under  this  Plan  shall be made
available from authorized and unissued shares of Common Stock, or authorized and
issued  shares  of  Common  Stock  reacquired  and held as  treasury  shares  or
otherwise or a combination thereof.

     To the  extent  required  by  Section  162(m) of the Code and the rules and
regulations  thereunder,  the  maximum  number of shares  of Common  Stock  with
respect to which options or SARs, Stock Awards or Performance Share Awards, or a
combination  thereof may be granted during any calendar year to any person shall
be 200,000 subject to adjustment as provided in Section 6.7.

                 II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

     2.1 Stock Options.  The Committee may, in its discretion,  grant options to
purchase  shares of Common Stock to such eligible  persons as may be selected by
the Committee.  Each option, or portion thereof,  that is not an Incentive Stock
Option, shall be a Non-Statutory Stock Option. Each Incentive Stock Option shall
be granted  within ten years of the  effective  date of this Plan. To the extent
that the  aggregate  Fair Market Value  (determined  as of the date of grant) of
shares of Common Stock with  respect to which  options  designated  as Incentive
Stock Options are  exercisable  for the first time by a  participant  during any
calendar  year (under this Plan or any other plan of the Company,  or any parent
or Subsidiary) exceeds


<PAGE>



the amount  (currently  $100,000)  established  by the Code,  such options shall
constitute Non-Statutory Stock Options.

     Options shall be subject to the following  terms and  conditions  and shall
contain such additional terms and conditions, not inconsistent with the terms of
this Plan, as the Committee shall deem advisable:

     (a) Number of Shares and Purchase Price. To the extent required, the number
of shares of Common  Stock  subject  to an  option  shall be  determined  by the
Committee.  The  purchase  price  per  share of Common  Stock  purchasable  upon
exercise of the option shall be determined by the Committee;  provided, however,
that the purchase price per share of Common Stock  purchasable  upon exercise of
an Option  shall not be less  than 100% of the Fair  Market  Value of a share of
Common Stock on the date of grant of such option;  provided further,  that if an
Incentive  Stock  Option  shall be granted to any person  who,  at the time such
option is granted,  owns capital stock  possessing  more than ten percent of the
total  combined  voting power of all classes of capital stock of the Company (or
of any parent or  Subsidiary) (a "Ten Percent  Holder"),  the purchase price per
share of Common Stock shall be the price  (currently  110% of Fair Market Value)
required by the Code in order to constitute an Incentive Stock Option.

     (b) Option Period and Exercisability. The period during which an option may
be exercised shall be determined by the Committee;  provided,  however,  that no
Incentive Stock Option shall be exercised later than ten years after its date of
grant; provided further, that if an Incentive Stock Option shall be granted to a
Ten Percent  Holder,  such option shall not be  exercised  later than five years
after  its date of  grant.  The  Committee  may,  in its  discretion,  establish
Performance Measures which shall be satisfied or met as a condition to the grant
of an option or to the  exercisability  of all or a portion  of an  option.  The
Committee  shall  determine  whether  an  option  shall  become  exercisable  in
cumulative or non-cumulative installments and in part or in full at any time. An
exercisable  option,  or portion thereof,  may be exercised only with respect to
whole  shares  of  Common  Stock,  except  that  if the  remaining  option  then
exercisable  is for  less  than a whole  share,  such  remaining  amount  may be
exercised.

     (c) Method of Exercise.  An option may be exercised  (i) by giving  written
notice to the Company  specifying  the number of whole shares of Common Stock to
be purchased and accompanied by payment  therefor in full (or  arrangement  made
for such  payment to the  Company's  satisfaction)  either  (1) in cash,  (2) by
delivery of Mature Shares having a Fair Market Value,  determined as of the date
of exercise,  equal to the  aggregate  purchase  price payable by reason of such
exercise,  (3) by  authorizing  the Company to withhold  whole  shares of Common
Stock which would  otherwise be delivered  upon  exercise of the option having a
Fair Market Value, determined as of the date of exercise, equal to the aggregate
purchase  price  payable  by  reason  of  such  exercise,   (4)  in  cash  by  a
broker-dealer  acceptable  to the Company to whom the optionee has  submitted an
irrevocable notice of exercise or (5) a combination of (1), (2) and (3), in each
case to the extent set forth in the  Agreement  relating to the option,  (ii) if
applicable, by surrendering to the Company any Tandem SARs which are canceled by
reason of the  exercise of the option and (iii) by executing  such  documents as
the Company may reasonably request.  The Committee shall have sole discretion to
disapprove of an election pursuant to any of clauses (2)-(5).  Any fraction of a
share of Common Stock which would be required to pay such  purchase  price shall
be  disregarded  and  the  remaining  amount  due  shall  be paid in cash by the
optionee. No certificate  representing Common Stock shall be delivered until the
full purchase price therefor has been paid.

     (d) Additional  Options.  The Committee shall have the authority to include
in any Agreement relating to an option a provision  entitling the optionee to an
additional option in the event such optionee exercises the option represented by
such option agreement, in whole or in part, by delivering previously owned whole
shares of Common Stock in payment of the purchase price in accordance  with this
Plan and such  Agreement.  Any such  additional  option shall be for a number of
shares of Common  Stock equal to the number of  delivered  shares,  shall have a
purchase price  determined by the Committee in accordance with this Plan,  shall
be  exercisable  on the terms and  subject  to the  conditions  set forth in the
Agreement relating to such additional option.


<PAGE>



     2.2 Stock Appreciation Rights. The Committee may, in its discretion,  grant
SARs to such eligible persons as may be selected by the Committee. The Agreement
relating  to an  SAR  shall  specify  whether  the  SAR  is a  Tandem  SAR  or a
Free-Standing SAR.

     SARs shall be  subject  to the  following  terms and  conditions  and shall
contain such additional terms and conditions, not inconsistent with the terms of
this Plan, as the Committee shall deem advisable:

     (a) Number of SARs and Base Price.  The number of SARs  subject to an award
shall be  determined  by the  Committee.  Any Tandem SAR related to an Incentive
Stock Option shall be granted at the same time that such Incentive  Stock Option
is granted. The base price of a Tandem SAR shall be the purchase price per share
of Common Stock of the related  option.  The base price of a  Free-Standing  SAR
shall be determined by the Committee;  provided,  however,  that such base price
shall not be less than 100% of the Fair Market  Value of a share of Common Stock
on the date of grant of such SAR.

     (b) Exercise Period and Exercisability.  The Agreement relating to an award
of SARs  shall  specify  whether  such  award may be settled in shares of Common
Stock (including shares of Restricted  Stock) or cash or a combination  thereof.
The period for the  exercise  of an SAR shall be  determined  by the  Committee;
provided,  however,  that no  Tandem  SAR  shall  be  exercised  later  than the
expiration, cancellation, forfeiture or other termination of the related option.
The Committee may, in its discretion, establish Performance Measures which shall
be  satisfied  or met  as a  condition  to the  exercisability  of an  SAR.  The
Committee  shall  determine  whether an SAR may be  exercised in  cumulative  or
non-cumulative  installments  and in part or in full at any time. An exercisable
SAR, or portion  thereof,  may be  exercised,  in the case of a Tandem SAR, only
with respect to whole shares of Common Stock and, in the case of a Free-Standing
SAR,  only with  respect to a whole number of SARs.  If an SAR is exercised  for
shares of Restricted  Stock, a certificate  or  certificates  representing  such
Restricted  Stock  shall be issued in  accordance  with  Section  3.2(c) and the
holder of such  Restricted  Stock shall have such rights of a stockholder of the
Company as determined  pursuant to Section  3.2(d).  Prior to the exercise of an
SAR for shares of Common Stock,  including  Restricted Stock, the holder of such
SAR shall have no rights as a  stockholder  of the Company  with  respect to the
shares of Common Stock subject to such SAR.

     (c) Method of Exercise. A Tandem SAR may be exercised (i) by giving written
notice  to the  Company  specifying  the  number of whole  SARs  which are being
exercised, (ii) by surrendering to the Company any options which are canceled by
reason of the exercise of the Tandem SAR and (iii) by executing  such  documents
as the Company may reasonably  request. A Free-Standing SAR may be exercised (i)
by giving written  notice to the Company  specifying the whole number (or if the
remaining SAR then exercisable is for less then one whole share,  such remaining
amount) of SARs which are being  exercised and (ii) by executing  such documents
as the Company may reasonably request.

     2.3 Termination of Employment or Service with the Company.

     (a) Disability.  Subject to paragraph (f) below and Section 6.8, and unless
otherwise  specified in the Agreement  relating to an option or SAR, as the case
may be, if the employment or service with the Company of the holder of an option
or SAR  terminates  by reason of  Disability,  each  option and SAR held by such
holder shall be  exercisable  only to the extent that such option or SAR, as the
case may be, is exercisable  on the effective date of such holder's  termination
of employment or service and may thereafter be exercised by such holder (or such
holder's  legal  representative  or  similar  person)  until and  including  the
earliest to occur of (i) the date which is three months (or such other period as
set forth in the  Agreement  relating to such option or SAR) after the effective
date of such  holder's  termination  of  employment  or  service  and  (ii)  the
expiration date of the term of such option or SAR.

     (b) Retirement.  Subject to paragraph (f) below and Section 6.8, and unless
otherwise  specified in the Agreement  relating to an option or SAR, as the case
may be, if the employment or service with the Company of the holder of an option
or SAR terminates by reason of retirement on or after age 65 with the consent of
the Company,  each option and SAR held by such holder shall be exercisable  only
to the extent that such option or SAR, as the case may be, is exercisable on the
effective date of such holder's termination of


<PAGE>



employment  or service and may  thereafter  be exercised by such holder (or such
holder's  legal  representative  or  similar  person)  until and  including  the
earliest  to occur of (i) the date which is six months (or such other  period as
set forth in the  Agreement  relating to such option or SAR) after the effective
date of such  holder's  termination  of  employment  or  service  and  (ii)  the
expiration date of the term of such option or SAR.

     (c) Death.  Subject to  paragraph  (f) below and  Section  6.8,  and unless
otherwise  specified in the Agreement  relating to an option or SAR, as the case
may be, if the employment or service with the Company of the holder of an option
or SAR  terminates  by reason of death,  each option and SAR held by such holder
shall be exercisable only to the extent that such option or SAR, as the case may
be, is  exercisable  on the date of such holder's  death,  and may thereafter be
exercised  by  such  holder's  executor,  administrator,  legal  representative,
beneficiary  or similar  person,  as the case may be,  until and  including  the
earliest to occur of (i) the date which is one year (or such other period as set
forth in the  Agreement  relating to such option or SAR) after the date of death
and (ii) the expiration date of the term of such option or SAR.

     (d) Other Termination. If the employment or service with the Company of the
holder of an option or SAR is terminated  by the Company for Cause,  each option
and SAR held by such holder shall terminate  automatically on the effective date
of such holder's termination of employment or service.

     Subject to paragraph (f) below and Section 6.8, and unless specified in the
Agreement relating to an option or SAR, as the case may be, if the employment or
service  with the Company of the holder of an option or SAR  terminates  for any
reason other than Disability,  retirement on or after age 65 with the consent of
the  Company,  death or Cause,  each option and SAR held by such holder shall be
exercisable  only to the extent  that such option or SAR is  exercisable  on the
effective  date of such  holder's  termination  of employment or service and may
thereafter be exercised by such holder (or such holder's legal representative or
similar  person) until and including the earliest to occur of (i) the date which
is three months (or such other period as set forth in the Agreement  relating to
such option or SAR) after the  effective  date of such holder's  termination  of
employment or service and (ii) the expiration date of the term of such option or
SAR.

     (e) Death  Following  Termination  of  Employment  or  Service.  Subject to
paragraph  (f) below and Section  6.8,  and unless  otherwise  specified  in the
Agreement  relating to an option or SAR, as the case may be, if the holder of an
option or SAR dies  during  the  three-month  period  following  termination  of
employment or service by reason of Disability,  or if the holder of an option or
SAR dies during the three-month  period  following  termination of employment or
service  by reason of  retirement  on or after  age 65 with the  consent  of the
Company, or if the holder of an option or SAR dies during the three-month period
following  termination  of  employment  or  service  for any  reason  other than
Disability or retirement on or after age 65 with the consent of the Company (or,
in each case,  such other period as set forth in the Agreement  relating to such
option  or  SAR),  each  option  and SAR  held by such  holder  shall  be  fully
exercisable   and  may  thereafter  be  exercised  by  the  holder's   executor,
administrator, legal representative,  beneficiary or similar person, as the case
may be, until and  including  the earliest to occur of (i) the date which is one
year (or such other period as set forth in the Agreement relating to such option
or SAR) after the date of death and (ii) the expiration date of the term of such
option or SAR.

     (f) Termination of Employment or Service - Incentive Stock Options. Subject
to Section 6.8 and unless otherwise  specified in the Agreement  relating to the
option,  if the  employment  or  service  with the  Company  of a  holder  of an
incentive  stock option  terminates by reason of Permanent and Total  Disability
(as defined in Section  22(e)(3) of the Code),  each incentive stock option held
by such  optionee  shall be  exercisable  only to the extent that such option is
exercisable on the effective date of such  optionee's  termination of employment
or service by reason of Permanent and Total  Disability,  and may  thereafter be
exercised by such optionee (or such optionee's legal  representative  or similar
person) until and including the earliest to occur of (i) the date which is three
months  (or such  other  period  no  longer  than  one year as set  forth in the
Agreement  relating to such option) after the effective date of such  optionee's
termination of employment or service by reason of Permanent and Total Disability
and (ii) the expiration date of the term of such option.

     Subject to Section  6.8 and unless  otherwise  specified  in the  Agreement
relating  to the  option,  if the  employment  or service  with the Company of a
holder of an Incentive Stock Option terminates by reason


<PAGE>



of death, each Incentive Stock Option held by such optionee shall be exercisable
only  to the  extent  that  such  option  is  exercisable  on the  date  of such
optionee's  death and may thereafter be exercised by such  optionee's  executor,
administrator,  legal  representative,  beneficiary  or similar person until and
including  the  earliest  to occur  of (i) the  date  which is one year (or such
shorter period as set forth in the Agreement  relating to such  option)after the
date of death and (ii) the expiration date of the term of such option.

     If the  employment  or  service  with the  Company  of the  optionee  of an
Incentive  Stock Option is terminated by the Company for Cause,  each  Incentive
Stock  Option  held  by  such  optionee  shall  terminate  automatically  on the
effective date of such optionee's termination of employment or service.

     If the  employment  or service with the Company of a holder of an Incentive
Stock  Option   terminates  for  any  reason  other  than  Permanent  and  Total
Disability,  death or Cause,  each Incentive  Stock Option held by such optionee
shall be  exercisable  only to the  extent  such  option is  exercisable  on the
effective date of such optionee's  termination of employment or service, and may
thereafter be exercised by such holder (or such holder's legal representative or
similar  person) until and including the earliest to occur of (i) the date which
is three months  after the  effective  date of such  optionee's  termination  of
employment or service and (ii) the expiration date of the term of such option.

     If the holder of an  Incentive  Stock  Option dies  during the  three-month
period following termination of employment or service by reason of Permanent and
Total Disability (or such shorter period as set forth in the Agreement  relating
to such option),  or if the holder of an Incentive  Stock Option dies during the
three-month period following termination of employment or service for any reason
other than Permanent and Total Disability,  death or Cause, each Incentive Stock
Option held by such optionee shall be exercisable only to the extent such option
is  exercisable  on the  date of the  optionee's  death  and may  thereafter  be
exercised  by the  optionee's  executor,  administrator,  legal  representative,
beneficiary  or similar  person until and including the earliest to occur of (i)
the date which is one year (or such shorter period as set forth in the Agreement
relating to such option) after the date of death and (ii) the expiration date of
the term of such option.


                                III. STOCK AWARDS

     3.1 Stock Awards. The Committee may, in its discretion,  grant Stock Awards
to such  eligible  persons  as may be  selected  by the  Committee.  Subject  to
adjustment  as  provided  in Sections  6.7 and 6.8 of this Plan,  the  aggregate
number of shares of Common Stock available under this Plan pursuant to all Stock
Awards  shall not  exceed  100,000 of the  aggregate  number of shares of Common
Stock available  under this Plan. The Agreement  relating to a Stock Award shall
specify  whether  the Stock  Award is a  Restricted  Stock  Award or Bonus Stock
Award.

     3.2 Terms of Stock  Awards.  Stock Awards shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem advisable.

     (a) Number of Shares and Other Terms.  The number of shares of Common Stock
subject to a  Restricted  Stock Award or Bonus  Stock Award and the  Performance
Measures (if any) and Restriction  Period applicable to a Restricted Stock Award
shall be determined by the Committee.

     (b) Vesting and Forfeiture.  The Agreement  relating to a Restricted  Stock
Award  shall  provide,  in  the  manner  determined  by  the  Committee,  in its
discretion,  and subject to the  provisions of this Plan, for the vesting of the
shares of Common  Stock  subject  to such  award  (i) if  specified  Performance
Measures are satisfied or met during the specified Restriction Period or (ii) if
the holder of such award remains  continuously  in the  employment or service of
the Company during the specified Restricted Period and for the forfeiture of the
shares of Common  Stock  subject  to such  award  (x) if  specified  Performance
Measures are not satisfied or met during the specified Restriction Period or (y)
if the holder of such award does not remain  continuously  in the  employment or
service of the Company during the specified Restriction Period.


<PAGE>



     Bonus  Stock  Awards  shall not be subject to any  Performance  Measures or
Restriction Periods.

     (c) Share  Certificates.  During the Restriction  Period,  a certificate or
certificates  representing  a Restricted  Stock Award shall be registered in the
holder's  name and may bear a legend,  in  addition  to any legend  which may be
required pursuant to Section 6.6, indicating that the ownership of the shares of
Common Stock  represented by such  certificate  is subject to the  restrictions,
terms and  conditions of this Plan and the Agreement  relating to the Restricted
Stock Award. All such certificates shall be deposited with the Company, together
with stock  powers or other  instruments  of  assignment  (including  a power of
attorney),  each  endorsed  in blank with a  guarantee  of  signature  if deemed
necessary or appropriate, which would permit transfer to the Company of all or a
portion of the shares of Common Stock subject to the  Restricted  Stock Award in
the event such award is forfeited in whole or in part.  Upon  termination of any
applicable  Restriction Period (and the satisfaction or attainment of applicable
Performance  Measures),  or upon the grant of a Bonus Stock Award,  in each case
subject to the  Company's  right to require  payment of any taxes in  accordance
with Section 6.5, a  certificate  or  certificates  evidencing  ownership of the
requisite  number of shares of Common  Stock shall be delivered to the holder of
such award.

     (d) Rights with Respect to Restricted  Stock Awards.  Unless  otherwise set
forth in the Agreement  relating to a Restricted Stock Award, and subject to the
terms and conditions of a Restricted Stock Award, the holder of such award shall
have all rights as a stockholder of the Company,  including, but not limited to,
voting  rights,  the right to receive  dividends and the right to participate in
any capital  adjustment  applicable  to all holders of Common  Stock;  provided,
however,  that a distribution with respect to shares of Common Stock, other than
a distribution in cash, shall be deposited with the Company and shall be subject
to the same  restrictions  as the shares of Common  Stock with  respect to which
such distribution was made.

     (e)  Awards  to  Certain  Executive  Officers.  Notwithstanding  any  other
provision of this  Article  III, and only to the extent  necessary to ensure the
deductibility  of the award to the Company,  the Fair Market Value of the number
of shares  of Common  Stock  subject  to a Stock  Award  granted  to a  "covered
employee"  within the  meaning  of  Section  162(m) of the Code shall not exceed
$2,000,000  (i) at the time of grant in the case of a Stock Award  granted  upon
the attainment of Performance Measures or (ii) in the case of a Restricted Stock
Award with  Performance  measures which shall be satisfied or met as a condition
to the holder's  receipt of the shares of Common Stock subject to such award, on
the earlier of (x) the date on which the  Performance  Measures are satisfied or
met and (y) the date the holder  makes an election  under  Section  83(b) of the
Code.

     3.3 Termination of Employment or Service. Subject to Section 6.8 and unless
otherwise set forth in the Agreement  relating to a Restricted  Stock Award,  if
the  employment  or  service  with  the  Company  of the  holder  of such  award
terminates,  the portion of such award which is subject to a Restriction  Period
shall  terminate  as of the  effective  date of  such  holder's  termination  of
employment  or service  shall be forfeited and such portion shall be canceled by
the Company.


                          IV. PERFORMANCE SHARE AWARDS

     4.1 Performance Share Awards.  The Committee may, in its discretion,  grant
Performance  Share  Awards to such  eligible  persons as may be  selected by the
Committee.

     4.2 Terms of Performance  Share Awards.  Performance  Share Awards shall be
subject to the following  terms and conditions and shall contain such additional
terms and  conditions,  not  inconsistent  with the terms of this  Plan,  as the
Committee shall deem advisable.

     (a) Number of Performance  Shares and Performance  Measures.  The number of
Performance  Shares  subject  to any  award  and the  Performance  Measures  and
Performance  Period  applicable  to  such  award  shall  be  determined  by  the
Committee.


<PAGE>



     (b) Vesting and Forfeiture.  The Agreement  relating to a Performance Share
Award  shall  provide,  in  the  manner  determined  by  the  Committee,  in its
discretion,  and subject to the provisions of this Plan, for the vesting of such
award,  if  specified  Performance  Measures  are  satisfied  or met  during the
specified Performance Period, and for the forfeiture of such award, if specified
Performance  Measures are not satisfied or met during the specified  Performance
Period.

     (c) Settlement of Vested  Performance Share Awards.  The Agreement relating
to a Performance Share Award (i) shall specify whether such award may be settled
in shares of Common Stock  (including  shares of Restricted  Stock) or cash or a
combination  thereof and (ii) may specify  whether the holder  thereof  shall be
entitled to receive, on a current or deferred basis, dividend equivalents,  and,
if determined by the Committee,  interest on any deferred dividend  equivalents,
with respect to the number of shares of Common Stock subject to such award. If a
Performance  Share Award is settled in shares of Restricted Stock, a certificate
or certificates representing such Restricted Stock shall be issued in accordance
with  Section  3.2(c) and the holder of such  Restricted  Stock  shall have such
rights of a stockholder of the Company as determined pursuant to Section 3.2(d).
Prior to the settlement of a Performance  Share Award in shares of Common Stock,
including  Restricted  Stock, the holder of such award shall have no rights as a
stockholder of the Company with respect to the shares of Common Stock subject to
such award.

     4.3 Termination of Employment or Service. Subject to Section 6.8 and unless
otherwise set forth in the Agreement  relating to a Performance  Share Award, if
the  employment  or  service  with  the  Company  of the  holder  of such  award
terminates,  the portion of such award which is subject to a Performance  Period
on the  effective  date of such  holder's  termination  of employment or service
shall be forfeited and such portion shall be canceled by the Company.


                V. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS

     5.1  Eligibility.  Each  Non-Employee  Director shall be granted options to
purchase  shares of Common Stock in accordance with this Article V (collectively
"Directors Options").  All options granted under this Article V shall constitute
Non-Statutory Stock Options.

     5.2 Grants of Stock Options.  Each  Non-Employee  Director shall be granted
Non- Statutory Stock Options as follows:

     (a) Time of Grant. On the date on which a person is first elected or begins
to serve as a  Non-Employee  Director  (other than by reason of  termination  of
employment)  he or she shall be granted an option to purchase  10,000  shares of
Common  Stock at a purchase  price per share equal to the Fair Market Value of a
share of Common  Stock on the date of grant of such option;  provided,  however,
that no such grant will be made to the extent an automatic option grant is being
or has been made to such  Non-Employee  Director  as of or with  respect to such
date pursuant to another incentive compensation plan of the Company.

     (b) Option Period and Exercisability.  Except as otherwise provided herein,
each option  granted  under this Article V shall not be  exercisable  during the
first  year  following  its  date  of  grant.  Thereafter,  such  option  may be
exercised: (i) on or after the first anniversary of its date of grant, for up to
one-third  of the shares of Common  Stock  subject to such option on its date of
grant,  (ii) on or after the second  anniversary of its date of grant, for up to
an  additional  one-third  (two-thirds  on a cumulative  basis) of the shares of
Common Stock subject to such option on its date of grant,  and (iii) on or after
the third  anniversary of its date of grant,  for up to the remaining  one-third
(all shares on a cumulative basis) of the shares of Common Stock subject to such
option on its date of grant.  Each  option  granted  under this  Article V shall
expire ten years  after its date of grant.  An  exercisable  option,  or portion
thereof,  may be exercised in whole or in part only with respect to whole shares
of Common Stock.  Options  granted under this Article V shall be  exercisable in
accordance with Section 2.1(c).

     5.3 Termination of Directorship.


<PAGE>



     (a) Disability.  Subject to Section 6.8, if the holder of an option granted
under  this  Article  V ceases  to be a  director  of the  Company  by reason of
Disability,  each such option held by such holder shall be  exercisable  only to
the  extent  that  such  option is  exercisable  on the  effective  date of such
holder's ceasing to be a director and may thereafter be exercised by such holder
(or such holder's  guardian,  legal  representative or similar person) until the
earliest to occur of the (i) date which is three months after the effective date
of such holder's  ceasing to be a director and (ii) the  expiration  date of the
term of such option.

     (b) Retirement.  Subject to Section 6.8, if the holder of an option granted
under this  Article V ceases to be a director of the Company on or after age 65,
each such  option held by such holder  shall be  exercisable  only to the extent
that such option is exercisable  on the effective date of such holder's  ceasing
to be a  director  and may  thereafter  be  exercised  by such  holder  (or such
holder's legal  representative or similar person) until the earliest to occur of
the (i) date which is three months  after the  effective  date of such  holder's
ceasing  to be a  director  and  (ii)  the  expiration  date of the term of such
option.

     (c) Death. Subject to Section 6.8, if the holder of an option granted under
this  Article V ceases to be a director of the Company by reason of death,  each
such option held by such holder shall be fully exercisable and may thereafter be
exercised  by  such  holder's  executor,  administrator,  legal  representative,
beneficiary or similar  person,  as the case may be, until the earliest to occur
of the (i)  date  which  is one  year  after  the  date of  death  and  (ii) the
expiration date of the term of such option.

     (d) Other  Termination.  Subject to Section 6.8, if the holder of an option
granted  under this  Article V ceases to be a director  of the  Company  for any
reason other than Disability,  retirement on or after age 65 or death, each such
option held by such holder shall be  exercisable  only to the extent such option
is exercisable  on the effective date of such holder's  ceasing to be a director
and may  thereafter  be  exercised  by  such  holder  (or  such  holder's  legal
representative  or similar  person)  until the earliest to occur of the (i) date
which is three months after the effective date of such holder's  ceasing to be a
director and (ii) the expiration date of the term of such option.

     (e) Death Following Termination of Directorship. Subject to Section 6.8, if
the holder of an option granted under this Article V dies during the three-month
period following such holder's ceasing to be a director of the Company by reason
of Disability,  or if such a holder dies during the three-month period following
such holder's  ceasing to be a director of the Company on or after age 65, or if
such a holder dies during the three-month period following such holder's ceasing
to be a director for any reason other than by reason of Disability or retirement
on or after age 65, each such option  held by such holder  shall be  exercisable
only to the extent that such option is  exercisable  on the date of the holder's
death and may thereafter be exercised by the holder's  executor,  administrator,
legal  representative,  beneficiary or similar person, as the case may be, until
the  earliest to occur of the (i) date one year after the date of death and (ii)
the expiration date of the term of such option.

     5.4  Directors  Options.  Each  Directors  Option  shall be  subject to the
following  terms and  conditions  and shall  contain such  additional  terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem advisable:

     (a) Option  Period  and  Exercisability.  Directors  Options  shall  become
exercisable as provided in Section 5.2(b). If at any time prior to the time that
a Directors Option becomes exercisable,  a Non-Employee Director shall no longer
be a member of the Board,  such  Directors  Option  shall  become void and of no
further force or effect.

     (b)  Purchase  Price.  The  purchase  price for the shares of Common  Stock
subject to any Directors  Option shall be equal to 100% of the Fair Market Value
of a share of Common Stock on the date of grant of such Directors  Option.  Such
Directors Options shall be exercisable in accordance with Section 2.1(c).

     (c)  Restrictions  on Transfer.  Directors  Options shall be subject to the
transfer restrictions and other provisions of Section 6.4.


<PAGE>



     (d) Expiration. Each Directors Option which has become exercisable pursuant
to Section 5.4(a), to the extent not theretofore exercised,  shall expire on the
first to occur of (i) the date  which is three  months  after the first  date on
which the Non-Employee  Director shall no longer be a member of the Board or the
Board of Directors of a Subsidiary and (ii) the tenth anniversary of the date of
grant of such option; provided, however, that if the Non-Employee Director shall
die within such  three-month  period  following  the date on which he shall have
ceased to serve as such a  director,  such option may be  exercised  at any time
within  the  one-year  period  following  the date of death  to the  extent  not
theretofore  exercised (but in no event later than the tenth  anniversary of the
date of grant).


                                   VI. GENERAL

     6.1 Effective Date and Term of Plan; Submission to Stockholders.  This Plan
is  effective  immediately  upon its  approval  by the  Board.  This Plan  shall
terminate ten years after its effective  date unless  terminated  earlier by the
Board.  Termination of this Plan shall not affect the terms or conditions of any
award granted  prior to  termination.  Awards  hereunder may be made at any time
prior to the termination of this Plan,  provided that no award may be made later
than ten years after the effective date of this Plan.

     This  Plan  shall be  submitted  to the  stockholders  of the  Company  for
approval.  Unless the Plan is approved by the affirmative  vote of a majority of
the voting power of the shares of capital stock of the Company  represented at a
meeting  in which the Plan is  considered  for  approval,  no awards may be made
under the Plan to any  director  or officer of the  Company;  provided  that (a)
awards  with  respect  to not more than  25,000  shares  of Common  Stock in the
aggregate  may be granted to  directors  or  officers  of the Company and (b) in
addition,  awards may be made to a person not previously employed by the Company
as an inducement essential to such person's entering into an employment contract
with the Company.

     6.2  Amendments.  The Board may amend this Plan as it shall deem advisable,
subject to any requirement of stockholder  approval  required by applicable law,
rule or regulation including Section 162(m) of the Code; provided, however, that
no amendment shall be made without stockholder  approval if such amendment would
(a) reduce the minimum purchase price in the case of an option or the base price
in the case of an SAR,  (b) effect any change  inconsistent  with Section 422 of
the Code or (c) extend the term of this Plan. No amendment may impair the rights
of a holder of an outstanding award without the consent of such holder.

     6.3  Agreement.  Each  award  under  this  Plan  shall be  evidenced  by an
Agreement  setting forth the terms and conditions  applicable to such award.  No
award  shall be valid  until an  Agreement  is  executed  by the Company and the
recipient  of such award and,  upon  execution by each party and delivery of the
Agreement to the Company, such award shall be effective as of the effective date
set forth in the Agreement.

     6.4  Non-Transferability  of Stock Options, SARs and Performance Shares. No
option,  SAR or Performance Share shall be transferable  other than (i) by will,
the laws of descent and  distribution  or pursuant  to  beneficiary  designation
procedures  approved  by the  Company  or (ii) as  otherwise  set  forth  in the
Agreement  relating to such award. Each option,  SAR or Performance Share may be
exercised or settled during the participant's lifetime only by the holder or the
holder's  legal  representative  or similar  person.  Except as permitted by the
second  preceding  sentence,  no option,  SAR or Performance  Share may be sold,
transferred,  assigned, pledged, hypothecated,  encumbered or otherwise disposed
of  (whether  by  operation  of law or  otherwise)  or be subject to  execution,
attachment or similar process.  Upon any attempt to so sell,  transfer,  assign,
pledge,  hypothecate,  encumber  or  otherwise  dispose  of any  option,  SAR or
Performance Share, such award and all rights thereunder shall immediately become
null and void.

     6.5 Tax Withholding.  The Company shall have the right to require, prior to
the  issuance or  delivery  of any shares of Common  Stock or the payment of any
cash pursuant to an award made hereunder, payment by the holder of such award of
any Federal, state, local or other taxes which may be required to be


<PAGE>



withheld or paid in  connection  with such award.  An Agreement may provide that
(i) the  Company  shall  withhold  whole  shares of  Common  Stock  which  would
otherwise  be  delivered  to a holder,  having an  aggregate  Fair Market  Value
determined  as of the date the  obligation  to withhold  or pay taxes  arises in
connection  with an award (the "Tax Date"),  or withhold an amount of cash which
would otherwise be payable to a holder,  in the amount  necessary to satisfy any
such obligation or (ii) the holder may satisfy any such obligation by any of the
following means: (1) a cash payment to the Company,  (2) delivery to the Company
of Mature Shares having an aggregate Fair Market Value, determined as of the Tax
Date,  equal  to the  amount  necessary  to  satisfy  any such  obligation,  (3)
authorizing  the Company to withhold  whole  shares of Common  Stock which would
otherwise be delivered  having an aggregate Fair Market Value,  determined as of
the Tax Date, or withhold an amount of cash which would  otherwise be payable to
a holder,  equal to the amount necessary to satisfy any such obligation,  (4) in
the  case of the  exercise  of an  option,  a cash  payment  by a  broker-dealer
acceptable  to the Company to whom the  optionee has  submitted  an  irrevocable
notice of exercise or (5) any  combination  of (1), (2) and (3), in each case to
the extent set forth in the Agreement relating to the award; provided,  however,
that the  Committee  shall have sole  discretion  to  disapprove  of an election
pursuant  to any of clauses  (2)-(5).  An  Agreement  may  provide for shares of
Common Stock to be delivered or withheld  having an aggregate  Fair Market Value
in excess of the minimum amount required to be withheld. Any fraction of a share
of Common Stock which would be required to satisfy such an  obligation  shall be
disregarded and the remaining amount due shall be paid in cash by the holder.

     6.6  Restrictions on Shares.  Each award made hereunder shall be subject to
the  requirement  that if at any time the Company  determines  that the listing,
registration  or  qualification  of the shares of Common  Stock  subject to such
award upon any securities  exchange or under any law, or the consent or approval
of any  governmental  body,  or the taking of any other  action is  necessary or
desirable  as a condition  of, or in  connection  with,  the  delivery of shares
thereunder,   such  shares   shall  not  be  delivered   unless  such   listing,
registration,  qualification,  consent, approval or other action shall have been
effected or obtained,  free of any conditions not acceptable to the Company. The
Company  may  require  that  certificates  evidencing  shares  of  Common  Stock
delivered pursuant to any award made hereunder bear a legend indicating that the
sale,  transfer or other disposition  thereof by the holder is prohibited except
in compliance  with the  Securities  Act of 1933, as amended,  and the rules and
regulations thereunder.

     6.7  Adjustment.  Except as  provided  in Section  6.8, in the event of any
stock  split,   stock  dividend,   recapitalization,   reorganization,   merger,
consolidation,  combination,  exchange of shares, liquidation, spin-off or other
similar change in  capitalization  or event,  or any  distribution to holders of
Common  Stock  other  than a regular  cash  dividend,  the  number  and class of
securities available under this Plan, the number and class of securities subject
to each  outstanding  option and the purchase price per security,  the number of
securities  subject  to each  option to be  granted  to  Non-Employee  Directors
pursuant to Article V, the terms of each  outstanding  SAR, the number and class
of securities  subject to each  outstanding  Stock Award,  and the terms of each
outstanding  Performance Share shall be appropriately adjusted by the Committee,
such adjustments to be made in the case of outstanding  options and SARs without
an increase in the aggregate  purchase price or base price.  The decision of the
Committee regarding any such adjustment shall be final,  binding and conclusive.
If any such adjustment would result in a fractional security being (a) available
under this Plan, such fractional  security shall be disregarded,  or (b) subject
to an award under this Plan, the Company shall pay the holder of such award,  in
connection  with the first  vesting,  exercise or settlement  of such award,  in
whole or in part, occurring after such adjustment,  an amount in cash determined
by  multiplying  (i) the  fraction  of such  security  (rounded  to the  nearest
hundredth)  by (ii) the  excess,  if any,  of (1) the Fair  Market  Value on the
vesting,  exercise or  settlement  date over (2) the exercise or base price,  if
any, of such award.

     6.8 Change in Control.

          (a) (i)  Notwithstanding  any provision in this Plan or any Agreement,
     in the event of a Change in Control  pursuant  to Section  (b)(iii) or (iv)
     below,  (1) all  outstanding  options  and SARS  shall  immediately  become
     exercisable  in  full,  (2)  the  Restriction   Period  applicable  to  any
     outstanding  Restricted Stock Award shall lapse, (3) the Performance Period
     applicable  to any  outstanding  Performance  Share shall lapse and (4) the
     Performance Measures applicable to any outstanding


<PAGE>



     Restricted  Stock Award (if any) and to any outstanding  Performance  Share
     shall be deemed to be satisfied  at the maximum  level.  If, in  connection
     with such Change in Control,  holders of Common Stock receive solely shares
     of common stock that are  registered  under Section 12 of the Exchange Act,
     there shall be substituted  for each share of Common Stock  available under
     this Plan,  whether or not then subject to an outstanding award, the number
     and class of shares into which each outstanding share of Common Stock shall
     be converted  pursuant to such Change in Control.  If, in  connection  with
     such Change in Control,  holders of Common  Stock  receive  solely cash and
     shares of common stock that are registered under Section 12 of the Exchange
     Act, each  outstanding  award shall be  surrendered  to and canceled by the
     Company, and the holder shall receive, within ten days of the occurrence of
     such  Change in  Control,  a  proportionate  amount  of cash in the  manner
     provided in Section  (a)(ii) below,  and there shall be substituted for the
     award surrendered a similar award reflecting a proportionate  number of the
     class of shares into which each outstanding  share of Common Stock shall be
     converted to such Change in Control. In the event of any such substitution,
     the  proportion of cash and common stock,  the purchase  price per share in
     the case of an  option  and the base  price in the case of an SAR,  and any
     other terms of outstanding  awards shall be  appropriately  adjusted by the
     Committee,  such adjustments to be made in the case of outstanding  options
     and SARs without an increase in the aggregate purchase price or base price;
     provided,  that the  proportion  of cash and common stock  substituted  for
     outstanding  awards shall  reflect the  approximate  proportion of cash and
     common stock received by holders of Common Stock in such Change in Control.
     If, in connection with a Change in Control, holders of Common Stock receive
     any  portion  of the  consideration  in a form other than cash or shares of
     common stock that are registered under Section 12 of the Exchange Act, each
     share of Common  Stock  available  under  this  Plan,  whether  or not then
     subject to an outstanding  award,  shall be substituted or surrendered  for
     such proportion of common stock,  cash or other  consideration  as shall be
     determined by the Committee pursuant to Section 6.7.

          (ii)  Notwithstanding any provision in this Plan or any Agreement,  in
     the event of a Change in Control  pursuant to Section (b)(i) or (ii) below,
     or in the event of a Change in Control pursuant to Section (b)(iii) or (iv)
     below in  connection  with which the holders of Common Stock  receive cash,
     each  outstanding  award shall be  surrendered to the Company by the holder
     thereof,  and each such award shall immediately be canceled by the Company,
     and the holder shall receive, within ten days of the occurrence of a Change
     in Control  pursuant to Section  (b)(i) or (ii) below or within ten days of
     the approval of the  stockholders  of the Company  contemplated  by Section
     (b)(iii) or (iv) below,  a cash payment from the Company in an amount equal
     to (1) in the case of an option,  the number of shares of Common Stock then
     subject to such option, multiplied by the excess, if any, of the greater of
     (A) the highest per share price offered to  stockholders  of the Company in
     any  transaction  whereby the Change in Control takes place or (B) the Fair
     Market  Value of a share of Common Stock on the date of  occurrence  of the
     Change in  Control,  over the  purchase  price  per  share of Common  Stock
     subject to the option;  (2) in the case of a Free-Standing  SAR, the number
     of shares of Common  Stock  then  subject  to such SAR,  multiplied  by the
     excess,  if any, of the greater of (A) the highest per share price  offered
     to  stockholders  of the Company in any  transaction  whereby the Change in
     Control takes place or (B) the Fair Market Value of a share of Common Stock
     on the date of occurrence of the Change in Control,  over the base price of
     the SAR;  and (3) in the case of a  Restricted  Stock Award or  Performance
     Share  Award,  the  number  of  shares  of  Common  Stock or the  number of
     Performance  Shares,  as the  case  may be,  then  subject  to such  award,
     multiplied  by the greater of (A) the  highest  per share price  offered to
     stockholders  of the  Company  in any  transaction  whereby  the  Change in
     Control takes place or (B) the Fair Market Value of a share of Common Stock
     on the date of  occurrence  of the  Change  in  Control.  In the event of a
     Change in  Control,  each  Tandem  SAR shall be  surrendered  by the holder
     thereof and shall be canceled  simultaneously  with the cancellation of the
     related  option.  Except as may be provided in an agreement  relating to an
     award,  the Company may, but is not required to,  cooperate with any person
     who is subject to Section 16 of the  Exchange  Act to assure  that any cash
     payment  in  accordance  with  the  foregoing  to  such  person  is made in
     compliance with Section 16 and the rules and regulations thereunder.

               (b) "Change in Control" shall mean:


<PAGE>



          (i) the acquisition by any  individual,  entity or group (a "Person"),
     including any "person"  within the meaning of Section  13(d)(3) or 14(d)(2)
     of the Exchange Act, of  Beneficial  Ownership of 25% or more of either (1)
     the  then   outstanding   shares  of  common  stock  of  the  Company  (the
     "Outstanding Company Common Stock") or (2) the combined voting power of the
     then  outstanding  securities of the Company  entitled to vote generally in
     the election of directors (the  "Outstanding  Company Voting  Securities");
     excluding,  however,  the following:  (A) any acquisition directly from the
     Company  (excluding  any  acquisition  resulting  from the  exercise  of an
     exercise,  conversion or exchange  privilege  unless the security  being so
     exercised,  converted or exchanged was acquired directly from the Company),
     (B) any  acquisition  by the Company,  (C) any  acquisition  by an employee
     benefit plan (or related  trust)  sponsored or maintained by the Company or
     any corporation controlled by the Company, (D) any acquisition by an Exempt
     Person or (E) any acquisition by any corporation  pursuant to a transaction
     which  complies with clauses (1), (2) and (3) of  subsection  (iii) of this
     Section 6.8(b);  provided further,  that for purposes of clause (2), if any
     Person (other than an Exempt  Person,  the Company or any employee  benefit
     plan (or  related  trust)  sponsored  or  maintained  by the Company or any
     corporation controlled by the Company) shall become the Beneficial Owner of
     50% or more of the  Outstanding  Company Common Stock or 50% or more of the
     Outstanding  Company  Voting  Securities by reason of an acquisition by the
     Company,  and such Person  shall,  after such  acquisition  by the Company,
     become the  Beneficial  Owner of any additional  shares of the  Outstanding
     Company  Common  Stock  or  any  additional   Outstanding   Company  Voting
     Securities  and such  Beneficial  Ownership  is  publicly  announced,  such
     additional Beneficial Ownership shall constitute a Change in Control;

          (ii) individuals who, as of the effective date hereof,  constitute the
     Board  of  Directors  (the  "Incumbent  Board")  cease  for any  reason  to
     constitute at least a majority of such Board;  provided that any individual
     who becomes a director  of the Company  subsequent  to the  effective  date
     hereof  whose  election,  or  nomination  for  election  by  the  Company's
     stockholders,  was  approved  by the  vote of at  least a  majority  of the
     directors then  comprising the Incumbent  Board shall be deemed a member of
     the Incumbent  Board;  and provided  further,  that any  individual who was
     initially  elected as a director of the Company as a result of an actual or
     threatened  election  contest,  as such  terms  are used in Rule  14a-11 of
     Regulation 14A  promulgated  under the Exchange Act, or any other actual or
     threatened  solicitation  of  proxies  or  consents  by or on behalf of any
     Person  other than the Board shall not be deemed a member of the  Incumbent
     Board;

          (iii) approval by the stockholders of the Company of a reorganization,
     merger  or   consolidation   or  sale  or  other   disposition  of  all  or
     substantially all of the assets of the Company (a "Corporate Transaction");
     excluding,  however, a Corporate  Transaction  pursuant to which (1) all or
     substantially  all of the  individuals  or entities who are the  Beneficial
     Owners,  respectively,  of the  Outstanding  Company  Common  Stock and the
     Outstanding  Company Voting Securities  immediately prior to such Corporate
     Transaction will Beneficially  Own,  directly or indirectly,  more than 50%
     of, respectively,  the outstanding shares of common stock, and the combined
     voting power of the outstanding  securities of such corporation entitled to
     vote  generally  in the election of  directors,  as the case may be, of the
     corporation resulting from such Corporate Transaction  (including,  without
     limitation,  a corporation  which as a result of such  transaction owns the
     Company or all or substantially all of the Company's assets either directly
     or indirectly) in substantially the same proportions relative to each other
     as  their  Beneficial  Ownership,   immediately  prior  to  such  Corporate
     Transaction,  of the  Outstanding  Company Common Stock and the Outstanding
     Company Voting Securities, as the case may be, (2) no Person (other than an
     Exempt Person;  the Company;  any employee  benefit plan (or related trust)
     sponsored or maintained by the Company or any corporation controlled by the
     Company; the corporation resulting from such Corporate Transaction; and any
     Person  which  Beneficially  Owned,  immediately  prior  to such  Corporate
     Transaction, directly or indirectly, 50% or more of the Outstanding Company
     Common Stock or the Outstanding Company Voting Securities,  as the case may
     be)  will  Beneficially  Own,  directly  or  indirectly,  50% or  more  of,
     respectively,  the  outstanding  shares of common stock of the  corporation
     resulting from such Corporate  Transaction or the combined  voting power of
     the outstanding  securities of such corporation  entitled to vote generally
     in the election of directors and (3)


<PAGE>



     individuals  who were members of the  Incumbent  Board will  constitute  at
     least  a  majority  of  the  members  of  the  board  of  directors  of the
     corporation resulting from such Corporate Transaction; or

          (iv) approval by the stockholders of the Company of a plan of complete
     liquidation or dissolution of the Company.

     Notwithstanding anything to the contrary herein, no Change of Control shall
be deemed to have taken  place as a result of the  issuance  of shares of Common
Stock by the Company or the sale of shares of Common  Stock by its  stockholders
in connection with the Company's initial public offering.

     6.9 No Right of Participation or  Employment/Service.  No person shall have
any right to  participate  in this  Plan.  Neither  this Plan nor any award made
hereunder  shall  confer upon any person any right to  continued  employment  or
service by the Company, any Subsidiary or any affiliate of the Company or affect
in any manner the right of the Company,  any  Subsidiary or any affiliate of the
Company to terminate the employment or service of any person at any time without
liability hereunder.

     6.10 Rights as Stockholder. No person shall have any right as a stockholder
of the  Company  with  respect  to any  shares of Common  Stock or other  equity
security of the Company which is subject to an award hereunder  unless and until
such  person  becomes a  stockholder  of record  with  respect to such shares of
Common Stock or equity security.

     6.11  Governing  Law.  This Plan,  each  award  hereunder  and the  related
Agreement,  and all determinations  made and actions taken pursuant thereto,  to
the extent not otherwise  governed by the Code or the laws of the United States,
shall  be  governed  by the laws of the  State  of  Delaware  and  construed  in
accordance therewith without giving effect to principles of conflicts of laws.


<PAGE>



                                                                   EXHIBIT 10.14


                      FOURTH AMENDMENT TO CREDIT AGREEMENT


     FOURTH  AMENDMENT  TO  REVOLVING  CREDIT,  TERM  LOAN AND GOLD  CONSIGNMENT
AGREEMENT dated as of March 14, 1997 (this "Amendment"),  by and among (a) MARKS
BROS.  JEWELERS,  INC.  (the  "Borrower"),  a  Delaware  corporation  having its
principal  place of  business at 155 North  Wacker  Drive,  Suite 500,  Chicago,
Illinois  60606;  (b) the lending  institutions  (the  "Banks") set forth on the
signature  pages hereto;  and (c) THE FIRST NATIONAL BANK OF BOSTON,  a national
banking  association and RHODE ISLAND HOSPITAL TRUST NATIONAL BANK as agents for
themselves  and the  other  Banks (in such  capacity,  the  "Agents"),  amending
certain  provisions  of the  Revolving  Credit,  Term Loan and Gold  Consignment
Agreement  dated as of May 3, 1996 (as amended  and in effect  prior to the date
hereof, the "Credit  Agreement"),  by and among the Borrower,  the Banks and the
Agents.  Terms not  otherwise  defined  herein  which are  defined in the Credit
Agreement  shall have the respective  meanings  herein assigned to such terms in
the Credit Agreement.

     WHEREAS,  the Borrower has requested that the Agents and the Banks agree to
amend the terms of the Credit  Agreement in several  respects all as hereinafter
more fully set forth; and

     WHEREAS,  the  Agents  and the Banks are  willing to amend the terms of the
Credit  Agreement in such respects upon the terms and subject to the  conditions
contained herein;

     NOW, THEREFORE,  in consideration of the mutual agreements contained in the
Credit Agreement,  and herein,  and other good and valuable  consideration,  the
receipt and  sufficiency  of which are hereby  acknowledged,  the parties hereto
hereby agree as follows:

     ss.1.  Amendment  of  ss.1.1  of  the  Credit  Agreement.  Subject  to  the
satisfaction of the conditions set forth in section 19 of this Amendment, ss.1.1
of the Credit Agreement is hereby amended as follows:

          (a) by amending the definitions of "Commitment",  "Consignment Limit",
     "Consolidated  Total Funded Debt",  "Consolidated  Total Interest Expense",
     "Dollar  Borrowing Base", and "Total Revolver  Commitment" to read in their
     respective entireties as follows:

               "Commitment.  With  respect to each Dollar  Bank,  the amount set
          forth on Part 1 of  Schedule  1 hereto as the  amount  of such  Dollar
          Bank's   commitment  to  make  Revolving   Credit  Loans  to,  and  to
          participate  in the  issuance,  extension  and  renewal  of Letters of
          Credit for the  account of, the  Borrower,  as the same may be reduced
          from time to time; or if such commitment is terminated pursuant to the
          provisions hereof, zero."

               "Consignment  Limit.  Either (a) 50,000  troy  ounces of Precious
          Metal (the  "Consignment  Ounce Cap") or (b) Consigned  Precious Metal
          having a Fair Market Value equal to $20,000,000.00 minus the aggregate
          outstanding  amount of Gold Loans (after  giving effect to all amounts
          requested) (the "Consignment Dollar Cap")."

               "Consolidated  Total  Funded  Debt.  With  respect  to any fiscal
          period,  an amount  equal to the  daily  average  aggregate  principal
          amount  outstanding  during such period in respect of all Indebtedness
          of the  Borrower  and its  Subsidiaries  pursuant to any  agreement or
          instrument to which the Borrower or any of its Subsidiaries is a party
          relating  to the  borrowing  of  money  or  the  obtaining  of  credit
          (including, without limitation, Obligations


<PAGE>



          under this Credit  Agreement  and all  Indebtedness  in respect of the
          Senior Subordinated Notes) or in respect of Capitalized Leases."

               "Consolidated  Total  Interest  Expense.   For  any  period,  the
          aggregate  amount of  interest  required  to be paid or accrued by the
          Borrower and its  Subsidiaries  during such period on all Indebtedness
          of the Borrower  and its  Subsidiaries  outstanding  during all or any
          part of such period,  whether  such  interest was or is required to be
          reflected  as an item of expense or  capitalized,  including  payments
          consisting of interest in respect of Capitalized  Leases and including
          commitment fees, agency fees, facility fees, Consignment Fees, balance
          deficiency  fees and similar fees or expenses in  connection  with the
          borrowing of money, but excluding any prepayment penalties incurred in
          connection with any redemption of Senior  Subordinated  Notes with the
          net  cash  proceeds  from  any  public  offering  to the  extent  such
          redemption is permitted hereby."

               "Dollar  Borrowing  Base.  At  the  relevant  time  of  reference
          thereto,  an amount determined by the Dollar Agent by reference to the
          most  recent  Borrowing  Base  Report  delivered  to the Banks and the
          Agents pursuant to ss.11.4(f), which is equal to (a) 55% of the result
          of (i) the net book  value  (determined  on an  average  cost basis at
          lower of cost or market) of  Eligible  Inventory  minus (ii) an amount
          equal to 111% of the sum of (A) the  Fair  Market  Value of  Consigned
          Precious  Metal   outstanding  plus  (B)  the  amount  of  Gold  Loans
          outstanding  minus (iii) the Inventory  Shrink Reserve plus (b) 75% of
          Eligible  Accounts  Receivable  minus (c) at all times  during any Low
          Availability Period, the amount of any Landlord Lien Reserve."

               "Total  Revolver  Commitment.  The sum of the  Commitments of the
          Dollar Banks, as in effect from time to time."

          (b) by inserting the following new  definitions  "Commitment Fee Rate"
     and "Low Availability Period" therein in proper alphabetical order:

               "Commitment  Fee Rate. At all times from the Closing Date through
          the first Performance  Adjustment Date, one half of one percent (1/2%)
          per annum, and thereafter,  the percentage  determined by reference to
          the provisions of ss.8.21."

               "Low  Availability  Period.  All times during which the excess of
          (a) the  lesser  of (i) the  Total  Revolver  Commitment  and (ii) the
          Dollar Borrowing Base (for purposes of this definition  only,  without
          making any deduction  pursuant to this clause (c) of the definition of
          Dollar  Borrowing  Base)  over  (b) the  Outstanding  Dollar  Facility
          Amounts, shall be less than $7,500,000."

     ss.2.  Amendment  of  ss.2.2  of  the  Credit  Agreement.  Subject  to  the
satisfaction of the conditions set forth in section 19 of this Amendment, ss.2.2
of the Credit Agreement is hereby amended to read in its entirety as follows:

          "2.2.  Commitment  Fee. The Borrower agrees to pay to the Dollar Agent
     for the accounts of the Dollar Banks in  accordance  with their  respective
     Commitment  Percentages a commitment  fee  calculated at the Commitment Fee
     Rate per annum on the average daily amount  during each  calendar  month or
     portion  thereof from the Closing  Date to the  Maturity  Date by which the
     Total Revolver  Commitment  minus the sum of the Maximum Drawing Amount and
     all Unpaid  Reimbursement  Obligations  exceeds the  outstanding  amount of
     Revolving Credit Loans during such calendar month. The commitment fee shall
     be payable  monthly in arrears on the first day of each calendar  month for
     the immediately  preceding calendar month commencing on the first such date
     following the date hereof, with a final payment on the Maturity Date or any
     earlier date on which the Commitments shall terminate."


<PAGE>



     ss.3.  Amendment  of  ss.2.3  of  the  Credit  Agreement.  Subject  to  the
satisfaction of the conditions set forth in section 19 of this Amendment, ss.2.3
of the Credit Agreement is hereby amended to read in its entirety as follows:

          "2.3. Reduction of Total Revolver Commitment.  The Borrower shall have
     the right at any time and from time to time  upon  five (5)  Business  Days
     prior written notice to the Dollar Agent to reduce by  $1,000,000.00  or an
     integral  multiple  thereof  or  terminate   entirely  the  Total  Revolver
     Commitment,  whereupon the Commitments of the Dollar Banks shall be reduced
     pro rata in accordance with their respective Commitment  Percentages of the
     amount  specified  in such  notice  or,  as the  case  may be,  terminated.
     Promptly after receiving any notice of the Borrower  delivered  pursuant to
     this ss.2.3, the Dollar Agent will notify the Dollar Banks of the substance
     thereof. Upon the effective date of any such reduction or termination,  the
     Borrower shall pay to the Dollar Agent for the  respective  accounts of the
     Dollar  Banks the full  amount of any  commitment  fee then  accrued on the
     amount of the reduction. No reduction or termination of the Commitments may
     be reinstated."

     ss.4.  Amendment  of  ss.7.1  of  the  Credit  Agreement.  Subject  to  the
satisfaction of the conditions set forth in section 19 of this Amendment, ss.7.1
of the Credit Agreement is hereby amended to read in its entirety as follows:

          "7.1.  Commitment  Fee. The Borrower  agrees to pay to the Gold Agent,
     for the accounts of the Gold Banks in accordance with their respective Gold
     Commitment  Percentages,  a commitment fee calculated at the Commitment Fee
     Rate per annum on the average daily amount  during each  calendar  month or
     portion  thereof from the Closing  Date to the  Maturity  Date by which the
     Dollar  amount of the Total  Gold  Commitment  exceeds  the sum of the Fair
     Market Value of Consigned  Precious  Metal plus the  aggregate  outstanding
     amount of Gold Loans during such calendar  month.  The commitment fee shall
     be payable  monthly in arrears on the first day of each calendar  month for
     the immediately  preceding calendar month commencing on the first such date
     following the date hereof, with a final payment on the Maturity Date or any
     earlier date on which the Gold Commitments shall terminate."

     ss.5.  Amendment  of  ss.8.21  of  the  Credit  Agreement.  Subject  to the
satisfaction  of the  conditions  set  forth in  section  19 of this  Amendment,
ss.8.21 of the Credit  Agreement  is hereby  amended to read in its  entirety as
follows:

          "8.21. Performance  Adjustments.  Based upon, and following receipt by
     the Banks of (a)  beginning  with the  Borrower's  financial  statements as
     hereafter  described for the fiscal quarter of the Borrower  ending January
     31,  1997,  (i) with  respect to the first  three  fiscal  quarters of each
     fiscal year,  the Borrower's  quarterly  unaudited  consolidated  financial
     statements  pursuant to ss.11.4(b) and (ii) with respect to the last fiscal
     quarter of each fiscal year,  the Borrowers'  annual  audited  consolidated
     financial  statements pursuant to ss.11.4(a),  and (b) a certificate of the
     chief financial  officer of the Borrower setting forth  calculations of the
     financial  information set forth below,  (the Borrower also hereby agreeing
     to  provide  to the  Agents,  simultaneously  with  the  delivery  of  such
     certificate,  telephonic  notice of any Performance  Adjustments based upon
     such  calculations),  the  Base  Rate  Applicable  Margin,  the  Eurodollar
     Applicable  Margin and the Commitment Fee Rate shall be subject to possible
     adjustment in accordance  with the provisions of this paragraph  (each such
     adjustment, a "Performance  Adjustment").  Performance Adjustments shall be
     effective (the date of the effectiveness of any Performance  Adjustment,  a
     "Performance Adjustment Date") with respect to adjustments to the Base Rate
     Applicable Margin, the Eurodollar  Applicable Margin and the Commitment Fee
     Rate,  three (3) Business Days  following  receipt by the Agents of (y) (i)
     with  respect to the first three fiscal  quarters of each fiscal year,  the
     Borrower's quarterly unaudited  consolidated  financial statements pursuant
     to  ss.11.4(b)  and (ii) with  respect to the last  fiscal  quarter of each
     fiscal  year,  the  Borrower's   annual  audited   consolidated   financial
     statements  pursuant  to  ss.11.4(a),  and (z) a  certificate  of the chief
     financial  officer  of  the  Borrower  setting  forth  calculations  of the
     financial  information  set forth below (the Borrowers also hereby agreeing
     to  provide  to the  Agents,  simultaneously  with  the  delivery  of  such
     certificate,  telephonic  notice of any Performance  Adjustments based upon
     such  calculations).  The  Eurodollar  Applicable  Margin,  the  Base  Rate
     Applicable Margin


<PAGE>



     and the  Commitment  Fee Rate with  respect  to any  period  following  any
     Performance   Adjustment  Date  until  the  next   succeeding   Performance
     Adjustment  Date  shall  be as set  forth  in the  table  below on the line
     furthest down in such table with respect to which the  Borrower's  ratio of
     (A)  Consolidated  Total Funded Debt for the fiscal  quarter most  recently
     ended  prior  to  such  possible   Performance   Adjustment   Date  to  (B)
     Consolidated EBITDA for the period of four consecutive fiscal quarters most
     recently ended prior to such possible Performance Adjustment Date, shall be
     less than the ratio set forth on such line in such table:


<TABLE>
<CAPTION>
         Ratio of Total                                        Base Rate
         Funded Debt to                  Eurodollar            Applicable          Commitment
             EBITDA                  Applicable Margin           Margin             Fee Rate
             ------                  -----------------           ------             --------
       <S>                                 <C>                   <C>                 <C>
          greater than
           or equal to                     2.250%                0.250%              0.500%
            3.00:1.00

            less than
          3.00:1.00 but                    2.000%                    0%              0.500%
         greater than or
       equal to 2.75:1.00

            less than
          2.75:1.00 but                    1.625%                    0%              0.375%
         greater than or
       equal to 2.50:1.00

            less than
          2.50:1.00 but                    1.500%                    0%              0.375
         greater than or
       equal to 2.25:1.00

            less than
          2.25:1.00 but                    1.375%                    0%              0.250%
         greater than or
       equal to 2.00:1.00

            less than
            2.00:1.00                      1.250%                    0%             0.250%"
</TABLE>

     ss.6.  Amendment  of  ss.10.19  of the  Credit  Agreement.  Subject  to the
satisfaction  of the  conditions  set  forth in  section  19 of this  Amendment,
ss.10.19 of the Credit  Agreement  is hereby  amended to read in its entirety as
follows:

          "10.19.  Subsidiaries,  etc.  Except  as set forth on  Schedule  10.19
     hereto,  the Borrower has no Subsidiaries.  Except as set forth on Schedule
     10.19  hereto,  neither the Borrower nor any  Subsidiary of the Borrower is
     engaged in any joint venture or partnership with any other Person."

     ss.7.  Amendment  of  ss.11.4(f)  of the Credit  Agreement.  Subject to the
satisfaction  of the  conditions  set  forth in  section  19 of this  Amendment,
ss.11.4(f) of the Credit  Agreement is hereby amended to read in its entirety as
follows:


<PAGE>



          "(f) (i) within ten (10)  Business Days after the end of each calendar
     month or at such earlier time as the Agents may reasonably  request and, in
     addition,  within two (2)  Business  Days after the end of each week at all
     times  during any Low  Availability  Period,  (A) a  Borrowing  Base Report
     setting forth the Borrowing  Base and the Dollar  Borrowing  Base as at the
     end of such  calendar  month  (or,  as  applicable,  week) or other date so
     requested by the Agents,  and (B) a Consigned Precious Metal Report setting
     forth (1) the amount of Consigned  Precious Metal and  Borrower's  Precious
     Metal as of the end of such  calendar  month (or, as  applicable,  week) or
     other  date  so  requested  by the  Agents,  and (2) a  calculation  of the
     Consignment Advance Rate Percentage  multiplied by the Fair Market Value of
     the sum of (y) Borrower's  Precious Metal plus (z) Consigned Precious Metal
     as of the end of such  calendar  month (or, as  applicable,  week) or other
     date so requested by the Agents,  with each such  Borrowing Base Report and
     Consigned Precious Metal Report to be accompanied by a certification by the
     Vice President of Finance or the principal  financial or accounting officer
     of the Borrower that the information contained therein is true and accurate
     in all  respects,  and (ii) within ten (10)  Business Days after the end of
     each  calendar  month or at such earlier time as the Agents may  reasonably
     request,  a Monthly Inventory Report, in each case together with supporting
     schedules and documentation;"

     ss.8.  Amendment  of  ss.11.16  of the  Credit  Agreement.  Subject  to the
satisfaction  of the  conditions  set  forth in  section  19 of this  Amendment,
ss.11.16  of the Credit  Agreement  is hereby  amended by  replacing  the phrase
"twenty-five  percent (25%)"  contained  therein with the phrase "twenty percent
(20%)".

     ss.9. New ss.11.18 to the Credit Agreement.  Subject to the satisfaction of
the  conditions  set forth in section 19 of this  Amendment,  the  following new
ss.11.18 is hereby added to the Credit Agreement  immediately following ss.11.17
thereof:

          "11.18.  New  Subsidiaries.  The Borrower shall,  immediately upon any
     Investment in a new Subsidiary  permitted by ss.12.3(f)  hereof,  pledge to
     the  Collateral  Agent,  for the benefit of the Banks and the  Agents,  the
     capital stock of each new Subsidiary in which the Borrower invests pursuant
     to a stock  pledge  agreement  in form and  substance  satisfactory  to the
     Agents and the Banks, and such new Subsidiary shall grant to the Collateral
     Agent  a  perfected  first  priority  security  interest  (subject  only to
     Permitted  Liens entitled to priority under  applicable  law) in all of its
     personal  property  assets (with such  exceptions  are as acceptable to the
     Majority  Banks)  pursuant to an  instrument  of  adherence to the Security
     Agreement in form and substance  satisfactory  to the Agents and the Banks.
     In addition,  the Borrower shall  immediately upon such Investment,  revise
     Schedule 10.19 hereto to reflect the  acquisition  of each new  Subsidiary.
     Each new Subsidiary in which the Borrower  invests shall,  immediately upon
     such  Investment,  execute and  deliver to the  Collateral  Agent,  for the
     benefit  of the  Banks  and the  Agents,  a  guaranty  of the  payment  and
     performance of all of the Obligations,  in form and substance  satisfactory
     to the Agents and the Banks,  together with acceptable  security  documents
     including without limitation, the aforementioned instrument of adherence to
     the Security Agreement, legal opinions, and other documents and instruments
     necessary to demonstrate the due  authorization,  execution and delivery by
     such new  Subsidiary of such  guaranty and such  security  documents and to
     perfect  the  Collateral  Agent's  security  interest  in all of  such  new
     Subsidiary's  assets,  including  (a)  the  resolutions  of  the  Board  of
     Directors or  equivalent  body of such new  Subsidiary  and the charter and
     by-laws (or the equivalent thereof) of such new Subsidiary, certified by an
     officer of such new Subsidiary, (b) a good standing certificate of such new
     Subsidiary in its jurisdiction of  incorporation,  (c) a certificate of the
     Secretary or an Assistant  Secretary of such new Subsidiary  certifying the
     names and true signatures of the officers of such new Subsidiary authorized
     to sign such  guaranty and such  security  documents,  (d) UCC-1  financing
     statements,  and (e) such  other  documents  as the  Collateral  Agent  may
     reasonably request. Upon delivery of the aforementioned documents, such new
     Subsidiary  shall  become a guarantor  of the  Obligations  hereunder  and,
     except as otherwise agreed to by the Majority Banks,  shall comply with and
     be bound by all of the  terms and  conditions  of the Loan  Documents  as a
     Subsidiary of the Borrower  thereunder,  and the Borrower  shall cause such
     new  Subsidiary  to take all actions  which it would have been  required to
     make or take had it been a Subsidiary  of the Borrower on the Closing Date,
     including  making all  representations  and warranties as a guarantor under
     each of the Loan Documents."


<PAGE>



     ss.10.  Amendment  of  ss.12.3  of the  Credit  Agreement.  Subject  to the
satisfaction  of the  conditions  set  forth in  section  19 of this  Amendment,
ss.12.3 of the Credit  Agreement is hereby  amended by adding the  following new
ss.12.3(f) thereto immediately following ss.12.3(e):

          "(f)  Investments by the Borrower in the assets of any other Person or
     in all of the  stock of any other  Person,  provided  that (i) the  maximum
     aggregate  amount of all such Investments made during any fiscal year shall
     not  exceed  the  lesser of (A)  $10,000,000,  and (B) 10% of  Consolidated
     Tangible  Net  Worth  immediately  prior  to  giving  effect  to  any  such
     Investment (the Borrower agreeing to deliver to the Agents a calculation of
     Consolidated  Tangible  Net  Worth  demonstrating   satisfaction  with  the
     foregoing limitation prior to making any such Investment) plus the net cash
     proceeds  received by the Borrower in any year from public offerings of the
     Borrower's stock, (ii) after giving effect to any such proposed Investment,
     in the case of any stock  acquisition,  the Borrower  shall own 100% of the
     issued  and  outstanding   capital  stock  of  such  other  Person,   (iii)
     immediately  before each such proposed  Investment  and after giving effect
     thereto, there shall be no Default or Event of Default, (iv) any Investment
     which results in a change in control of the Person in which the  Investment
     is made shall have been  approved by the Board of  Directors of such Person
     prior to the making of such  Investment,  and (v) the  Borrower  shall have
     complied in all respects with ss.11.18 hereof."

     ss.11.  Amendment  of  ss.12.5.1  of the Credit  Agreement.  Subject to the
satisfaction  of the  conditions  set  forth in  section  19 of this  Amendment,
ss.12.5.1 of the Credit  Agreement is hereby  amended to read in its entirety as
follows:

          "12.5.1. Mergers and Acquisitions. The Borrower will not, and will not
     permit  any of its  Subsidiaries  to,  become  a  party  to any  merger  or
     consolidation  except  the  merger or  consolidation  of one or more of the
     Subsidiaries  of the Borrower with and into the Borrower,  or the merger or
     consolidation  of two or more  Subsidiaries  of the Borrower.  The Borrower
     will not,  and will not  permit  any of its  Subsidiaries  to,  agree to or
     effect  any  asset  acquisition  or  stock   acquisition   except  (a)  the
     acquisition of assets in the ordinary  course of business  consistent  with
     past practices or (b) asset or stock acquisitions to the extent Investments
     in respect thereof are permitted  under  ss.12.3(f)  hereof,  provided that
     concurrently  with any such  stock  acquisition,  the  Borrower  shall also
     comply with ss.11.18 hereof."

     ss.12.  Amendment  of  ss.12.8  of the  Credit  Agreement.  Subject  to the
satisfaction  of the  conditions  set  forth in  section  19 of this  Amendment,
ss.12.8 of the Credit  Agreement  is hereby  amended to read in its  entirety as
follows:

          "12.8 Indentures. The Borrower will not amend, supplement or otherwise
     modify the terms of the Indentures or any of the Senior  Subordinated Notes
     or prepay,  redeem, cause the defeasance of or repurchase any of the Senior
     Subordinated Notes; provided, however, (a) the Borrower may amend or modify
     the Senior  Subordinated  Notes or refinance,  refund or replace the Senior
     Subordinated Notes with new notes (any such amended,  modified or new notes
     resulting from any such amendment, modification,  refinancing, refunding or
     replacement  being  herein  referred to as the "New  Notes") so long as (i)
     such  New  Notes  are  on  substantially  identical  terms  as  the  Senior
     Subordinated  Notes  (including  without  limitation,   terms  relating  to
     subordination  and  covenants),  provided  that  such New  Notes may have a
     longer maturity,  lower interest rates, less restrictive covenants,  slower
     sinking  fund  payments and lower  prepayment  premiums and (ii) the Agents
     shall  have  reviewed  such New  Notes  prior to  their  issuance,  (b) the
     Borrower may redeem those Senior Subordinated Notes constituting the 15.00%
     Series D Senior  Subordinated  Notes due 2004 at a redemption  price not to
     exceed  $8,960,000  plus the amount of interest  accrued  thereon,  (c) the
     Borrower  may  repurchase  a portion  of those  Senior  Subordinated  Notes
     constituting  the 12.15% Series C Senior  Subordinated  Notes due 2004 at a
     repurchase price (including any prepayment premiums payable thereon) not to
     exceed an amount,  up to $5,000,000,  equal to the aggregate  amount of net
     cash proceeds, if any, to the Borrower in excess of $20,000,000  (exclusive
     of any amounts  received by any stockholders of the Borrower) in connection
     with its planned  public  offering of its common stock to be consummated on
     or prior to December 31, 1996, and (d) the Borrower may redeem Senior


<PAGE>



     Subordinated  Notes  during any fiscal year solely to the extent of (i) the
     aggregate amount of net cash proceeds  received by the Borrower during such
     fiscal  year in  connection  with any other  public  offering of its Common
     Stock  entered  into after March 15, 1997 minus (ii) the amount of any such
     net cash  proceeds  from any such  public  offerings  which are used by the
     Borrower  during  such  fiscal  year to make  Capital  Expenditures  and/or
     Investments as permitted by ss.ss.13.2 and 12.3, respectively,  hereof. The
     Borrower will not pay any interest in cash on the Senior Subordinated Notes
     in excess of  fifteen  percent  (15%) per annum in the  aggregate  with any
     interest in excess of fifteen percent (15%) per annum to be payable only in
     Senior Subordinated Notes."

     ss.13.  Deletion  of  ss.12.13  of the  Credit  Agreement.  Subject  to the
satisfaction  of the  conditions  set  forth in  section  19 of this  Amendment,
ss.12.13 of the Credit Agreement is hereby deleted in its entirety.

     ss.14.  Amendment  of  ss.13.1  of the  Credit  Agreement.  Subject  to the
satisfaction  of the  conditions  set  forth in  section  19 of this  Amendment,
ss.13.1 of the Credit  Agreement  is hereby  amended to read in its  entirety as
follows:

          "13.1.  Total Funded Debt to EBITDA.  The Borrower will not permit the
     ratio of  Consolidated  Total Funded Debt for any fiscal  quarter ending at
     any time to  Consolidated  EBITDA  for any the  period of four  consecutive
     fiscal quarters also ending at such time to exceed 3.5 to 1."

     ss.15.  Amendment  of  ss.13.2  of the  Credit  Agreement.  Subject  to the
satisfaction  of the  conditions  set  forth in  section  19 of this  Amendment,
ss.13.2 of the Credit  Agreement  is hereby  amended to read in its  entirety as
follows:

          "13.2. Capital Expenditures. The Borrower will not make, or permit any
     Subsidiary of the Borrower to make, Capital  Expenditures during any fiscal
     year set forth in the table below that exceed, in the aggregate, the amount
     set forth opposite such fiscal year in such table;  provided,  however, (a)
     if during  any such  fiscal  year set forth  below  the  amount of  Capital
     Expenditures  permitted for that fiscal year is not so utilized,  a portion
     of such unutilized  amount not to exceed  $1,500,000 may be utilized in the
     next  succeeding  fiscal  year set forth  below  but not in any  subsequent
     fiscal year;  provided  further,  that in no event shall the amount carried
     forward  from any prior fiscal  years ever exceed  $1,500,000  for any such
     fiscal  year set forth  below and (b) in  addition to the amounts set forth
     below,  the Borrower may make additional  Capital  Expenditures  during any
     fiscal year (including the amount of any  Investments  permitted by ss.12.3
     which constitute Capital  Expenditures and which are made with the net cash
     proceeds of any public offerings) solely to the extent of (i) the aggregate
     amount of net cash  proceeds  received by the  Borrower  during such fiscal
     year in connection  with any public offering of its Common Stock minus (ii)
     the amount of any such net cash  proceeds  from any such  public  offerings
     which  are  used  by  the  Borrower  during  such  fiscal  year  to  redeem
     Subordinated  Notes  and  to  make  Investments  not  constituting  Capital
     Expenditures as permitted by ss.ss.12.8 and 12.3, respectively, hereof:


               Fiscal Year                           Amount
               -----------                           -----
               2/1/97 - 1/31/98                      $12,500,000
               2/1/98 - 1/31/99                      $15,000,000
               2/1/99 - 1/31/00                      $18,000,000
               2/1/00 - 1/31/01                      $18,000,000
               2/1/01 - Maturity Date                $4,500,000"

     ss.16.  Amendment  of  ss.13.4  of the  Credit  Agreement.  Subject  to the
satisfaction  of the  conditions  set  forth in  section  19 of this  Amendment,
ss.13.4 of the Credit  Agreement  is hereby  amended to read in its  entirety as
follows:


<PAGE>



          "13.4.  Fixed Charge Coverage Ratio. The Borrower will not permit, for
     any period of four consecutive fiscal quarters, the ratio of (a) the sum of
     (i)  Consolidated  EBITDA for such  period plus (ii)  Consolidated  Minimum
     Store Rent for such period to (b) the sum of (i) Consolidated Minimum Store
     Rent for such period plus (ii)  Consolidated Cash Interest Expense for such
     period, to be less than 1.7 to 1."

     ss.17.  Amendment  of  ss.16.1  of the  Credit  Agreement.  Subject  to the
satisfaction  of the  conditions  set  forth in  section  19 of this  Amendment,
ss.16.1 of the Credit  Agreement is hereby  amended by (a)  replacing the dollar
amount "$750,000"  appearing in ss.16.1(i) with the dollar amount  "$1,500,000",
(b)  replacing  the dollar amount  "$750,000"  appearing in ss.16.1(k)  with the
dollar amount  "$1,500,000",  and (c)  replacing  the dollar  amount  "$500,000"
appearing in ss.16.1(o) with the dollar amount "$1,500,000".

     ss.18.Concerning  Schedule  1 to  the  Credit  Agreement.  Subject  to  the
satisfaction  of the  conditions  set  forth in  section  19 of this  Amendment,
Schedule  1 to the  Credit  Agreement  is hereby  deleted  in its  entirety  and
replaced with Schedule 1 attached hereto.

     ss.19.  Conditions to  Effectiveness.  The  effectiveness of this Amendment
shall be  subject  to the  delivery  by (or on behalf  of) the  Borrower  of the
following, in form and substance satisfactory to the Agents and the Banks:

          (a) this Amendment  signed by each of the Borrower,  the Banks and the
     Agents;

          (b) a new Gold Note for RIHT, signed by the Borrower, in substantially
     in the form of Exhibit H to the Credit Agreement, and in the maximum amount
     of RIHT's Gold Commitment as set forth on Schedule 1 hereto;

          (c) a  certificate  of the  Secretary  or  Assistant  Secretary of the
     Borrower  certifying as to (a) the  Certificate of  Incorporation  or other
     incorporation  documents  of the  Borrower  as in  effect  on such  date of
     certification,  (b) the by-laws of the  Borrower as in effect on such date,
     (c) the corporate  resolutions of the Borrower approving this Amendment and
     the other documents and instruments  required to be delivered  hereunder by
     the  Borrower,  and (d) the names,  titles,  incumbency,  and true specimen
     signatures  of the  officers  of  the  Borrower  authorized  to  sign  this
     Amendment and the other documents and instruments  required to be delivered
     hereunder by the Borrower;

          (d) a certificate, as of a recent date, from the Secretary of State of
     Delaware  as to the legal  existence  and  corporate  good  standing of the
     Borrower;

          (e) a  favorable  opinion  of  counsel  to the  Borrower  in form  and
     substance satisfactory to the Agents and the Banks;

          (f) the  Borrower  shall have paid to the Agents,  for the  respective
     accounts of the Banks,  an amendment fee as set forth on Schedule 2 hereto;
     and

          (g) any other  document  or  instrument  the  Agents and the Banks may
     reasonably request.

     ss.20.  Representations  and  Warranties;  No Default;  Authorization.  The
Borrower hereby represents and warrants to the Banks and the Agents as follows:

          (a)  Each  of the  representations  and  warranties  made by it in the
     Credit  Agreement  was  true as of the  date as of which it was made and is
     true as and at the date of this Amendment  (except to the extent of changes
     resulting  from  transactions  contemplated  or  permitted  by  the  Credit
     Agreement  and the  other  Loan  Documents  and  changes  occurring  in the
     ordinary  course  of  business  that in the  aggregate  are not  materially
     adverse,  and to the extent that such representations and warranties relate
     expressly to an earlier date),  and, after the execution of this Amendment,
     no Default or Event of Default has  occurred  and is  continuing  as of the
     date of this Amendment; and


<PAGE>



          (b) This Amendment has been duly authorized, executed and delivered by
     the  Borrower  and is in full  force and  effect,  and the  agreements  and
     obligations of the Borrower  contained  herein and in the Credit  Agreement
     respectively  constitute  the legal,  valid and binding  obligations of the
     Borrower,  enforceable  against  the  Borrower  in  accordance  with  their
     respective  terms,  except as  enforceability  is  limited  by  bankruptcy,
     insolvency,  reorganization,  moratorium  or  other  laws  relating  to  or
     affecting  generally the enforcement of creditors' rights and except to the
     extent  that  availability  of  the  remedy  of  specific   performance  or
     injunctive  relief is subject to the  discretion  of the court before which
     any proceeding therefor may be brought.

     ss.21. Certain Transitional Arrangements.  Effective as of the date hereof,
each Bank shall make such  dispositions  and  arrangements  with each other Bank
with respect to the then  outstanding  Revolving  Credit  Loans,  Gold Loans and
Purchases and Consignments  (the  "Adjustment") as shall result in the amount of
Revolving Credit Loans,  Gold Loans and Purchases and Consignments  owed to each
Bank being equal to the product of such Bank's Commitment  Percentage or, as the
case may be, Gold Commitment Percentage, in each case as set forth on Schedule 1
hereto,  multiplied by the aggregate  Revolving Credit Loans,  Gold Loans or, as
the case may be, Purchases and Consignments, outstanding on the date hereof (the
"Adjusted Amount").  The Borrower hereby agrees that each Bank's Adjusted Amount
shall be Revolving  Credit Loans,  Gold Loans or, as the case may be,  Purchases
and Consignments, owed by the Company to such Bank as if such Bank had initially
made Revolving  Credit Loans,  Gold Loans or, as the case may be,  Purchases and
Consignments,  to the  Company in the amount of the  Adjusted  Amount.  Upon the
occurrence of the Adjustment,  the Agents shall appropriately adjust its records
to reflect each Bank's Adjusted Amount.

     ss.22.  Ratification,  etc. Except as expressly amended hereby,  the Credit
Agreement and all  documents,  instruments  and agreements  related  thereto are
hereby  ratified and  confirmed in all  respects.  All  references in the Credit
Agreement or any related  agreement or instrument to the Credit  Agreement shall
hereafter refer to the Credit Agreement as amended hereby.

     ss.23.  No Implied Waiver.  Except as expressly  provided  herein,  nothing
contained  herein shall  constitute a waiver of, impair or otherwise  affect any
Obligations, or any right of any of the Agents or the Banks consequent thereon.

     ss.24.  Counterparts.  This  Amendment  may be  executed  in  one  or  more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.

     ss.25. Governing Law. THIS AMENDMENT SHALL FOR ALL PURPOSES BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE  WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICTS OF LAW).

     IN WITNESS WHEREOF,  the undersigned have duly executed this Amendment as a
sealed instrument as of the date first above written.

                                        MARKS BROS. JEWELERS, INC.
                                       
                                       
                                        By:    /s/ John R. Desjardins
                                               ---------------------------------
                                        Name:  John R. Desjardins
                                        Title: Executive Vice President, Finance
                                                 & Administration, Treasurer and
                                                 Secretary
                                       
                                        THE FIRST NATIONAL BANK OF
                                          BOSTON, individually and as Agent


<PAGE>



                                        By:    /s/ Ellen Heath
                                               ---------------------------------
                                        Name:  Ellen Heath
                                        Title: Director

                                        RHODE ISLAND HOSPITAL TRUST
                                          NATIONAL BANK, individually and
                                          as Agent


                                        By:    /s/ Denis D. Hamboyan
                                               ---------------------------------
                                        Name:  Denis D. Hamboyan
                                        Title: Senior Vice President

                                        LASALLE NATIONAL BANK


                                        By:    /s/ Samir Desai
                                               ---------------------------------
                                        Name:  Samir Desai
                                        Title: Assistant Vice President

                                        ABN AMRO BANK, N.V.


                                        By:    /s/ Jeffrey Sarfaty
                                               ---------------------------------
                                        Name:  Jeffrey Sarfaty
                                        Title: Vice President


<PAGE>


                                                    SCHEDULE 1
                                                    ----------


<TABLE>
<CAPTION>
                          Part 1 - Dollar Banks - Commitments and Commitment Percentages


--------------------------------------------------------------  ------------------------------  ------------------------------------
                                                                                                            Commitment
                      Dollar Banks                                        Commitment                        Percentage
--------------------------------------------------------------  ------------------------------  ------------------------------------
<S>                                                                     <C>                                   <C>
The First National Bank of Boston
Domestic Lending Office:
  100 Federal Street
  Boston, MA  02110
  Telefax Number: (617) 434-2309                                        $17,500,000.00                        43.75%
  Attention:      Ellen Heath, Director
Eurodollar Lending Office:
  100 Federal Street
  Boston, MA  02110
  Telefax Number: (617) 434-2309
  Attention:      Ellen Heath, Director

--------------------------------------------------------------  ------------------------------  ------------------------------------
LaSalle National Bank
Domestic Lending Office
  135 South LaSalle Street
  Chicago, IL  60603
  Telefax Number: (312) 904-6225                                        $22,500,000.00                        56.25%
  Attention:      Vanja St. Clar, Vice President
Eurodollar Lending Office:
  135 South LaSalle Street
  Chicago, IL  60603
  Telefax Number: (312) 904-6225
  Attention:      Vanja St. Clar, Vice President

--------------------------------------------------------------  ------------------------------  ------------------------------------
</TABLE>


<PAGE>



                                                    SCHEDULE 1


<TABLE>
<CAPTION>
                      Part 2 - Gold Banks - Gold Commitments and Gold Commitment Percentages

--------------------------------------------------------------  ------------------------------  ------------------------------------
                                                                                                        Gold Commitment
                        Gold Banks                                      Gold Commitment                    Percentage
--------------------------------------------------------------  ------------------------------  ------------------------------------
<S>                                                                     <C>                                   <C>
Rhode Island Hospital Trust National Bank
Domestic Lending Office:
  One Hospital Trust Plaza, R-W09-01
  Providence, Rhode Island 02903                                        $12,500,000.00                        62.50%
  Telefax Number: (401) 278-7329
  Attention:  Denis D. Hamboyan, Senior Vice President
Eurodollar Lending Office:
  One Hospital Trust Plaza, R-W09-01
  Providence, Rhode Island 02903
  Telefax Number: (401) 278-7329
  Attention:  Denis D. Hamboyan, Senior Vice President

--------------------------------------------------------------  ------------------------------  ------------------------------------
</TABLE>


<PAGE>



<TABLE>
--------------------------------------------------------------  ------------------------------  ------------------------------------
<S>                                                                     <C>                                   <C>
ABN AMRO Bank, N.V.
Domestic Lending Office:
  335 Madison Avenue
  New York, NY  10017
  Telefax Number: (212) 644-6905                                        $7,500,000.00                         37.50%
  Attention:  Jeffrey Sarfaty, Vice President
Eurodollar Lending Office:
  335 Madison Avenue
  New York, NY  10017
  Telefax Number: (212) 644-6905
  Attention:  Jeffrey Sarfaty, Vice President
--------------------------------------------------------------  ------------------------------  ------------------------------------
</TABLE>


<PAGE>



                                   Schedule 2
                                   ----------

                                  Amendment Fee

     The  Borrower  shall pay to the  Agents an  amendment  fee in the amount of
$100,000,  such  amendment fee to be for the accounts of the Banks in accordance
with the respective portions of the Total Commitment.


<PAGE>



                                                                   EXHIBIT 10.15





                           MARKS BROS. JEWELERS, INC.
                          EMPLOYEE STOCK OWNERSHIP PLAN

                            (As Amended and Restated
                        Effective as of February 1, 1997)



<PAGE>


                                TABLE OF CONTENTS
                                -----------------

SECTION                                                                     PAGE
-------                                                                     ----

   1     General........................................................     1
              History, Purpose and Effective Date.......................     1
              Employers and Related Companies...........................     1
              Plan Administration, Trust Agreement......................     2
              Plan Year.................................................     2
              Applicable Laws...........................................     2
              Gender and Number.........................................     2
              Notices...................................................     2
              Evidence..................................................     2
              Action by Employer........................................     2
              No Reversion to Employers.................................     2
              Plan Supplements..........................................     3
              Defined Terms.............................................     3

   2     Participation in Plan..........................................     3
              Eligibility for Participation.............................     3
              Restricted Participation..................................     3
              Participation Not Guarantee of Employment.................     3
              Leased Employees..........................................     4
              Inactive Participation....................................     4

   3     Service........................................................     5
              Year of Service...........................................     5
              Hour of Service...........................................     5
              One-Year Break in Service.................................     6

   4     No Participant Contributions...................................     6


                                      - i -


<PAGE>


SECTION                                                                     PAGE
-------                                                                     ----

   5     Employer Contributions.........................................     6
              Employer Contributions....................................     6
              Limits on Employer Contributions..........................     7
              Payment of Employer Contributions.........................     7

   6     Investment in Company Stock....................................     7
              Investment in Company Stock...............................     7
              Use Dividends.............................................     8
              Valuation.................................................     8

   7     Plan Accounting................................................     8
              Participant Accounts......................................     8
              Adjustment of Participants' Accounts......................     8
              Allocation and Crediting of Earnings
                and Losses..............................................     9
              Allocation and Crediting of Employer
                Contributions and Forfeitures...........................     9
              Stock Dividends, Splits and Other
                Capital Reorganizations.................................    10
              Compensation..............................................    10
              Statement of Plan Interest................................    12

   8     Limitations....................................................    12
              Restricted Participants...................................    12
              Limitations Applicable to Restricted
                Participants............................................    12
              Exception for Lineal Descendants..........................    13
              Section 415 Limitation on Allocations
                to Participant Accounts.................................    13
              Annual Additions..........................................    13
              Excess Annual Additions...................................    14


                                     - ii -


<PAGE>


SECTION                                                                     PAGE
-------                                                                     ----


              Limitations Applicable to Highly Compensated
                Employees...............................................    14
              Combined Plan Limitation..................................    15

    9    Vesting and Termination Dates..................................    16
              Determination of Vested Interest..........................    16
              Accelerated Vesting.......................................    l6
              Termination Dates.........................................    l7

   10    Distributions..................................................    17
              Distributions to Participants After
                Termination of Employment...............................    17
              Distributions to Beneficiaries............................    19
              Form of Distributions.....................................    19
              Limits on Commencement and Duration
                 of Distributions.......................................    19
              Beneficiary Designations..................................    20
              Forfeitures and Restorations of
                Unvested Accounts.......................................    21
              Application of Forfeitures................................    22
              Cash Dividends on Company Stock...........................    22
              Withdrawals by Qualified Participants.....................    23
              Facility of Payment.......................................    23
              Interests Not Transferable................................    23
              Absence of Guaranty.......................................    24
              Missing Participants or Beneficiaries.....................    24

   11    Voting and Other Shareholder Rights............................    24

   12    Rights and Restrictions With Respect To
          Company Stock.................................................    24


                                     - iii -


<PAGE>


SECTION                                                                     PAGE
-------                                                                     ----


              Put Option................................................    24
              Legends...................................................    26

   13    The Committee..................................................    27
              Membership................................................    27
              Rights, Powers and Duties.................................    27
              Application of Rules......................................    28
              Remuneration and Expenses.................................    28
              Indemnification of the Committee..........................    28
              Exercise of Committee's Duties............................    28
              Information to be Furnished to Committee..................    29
              Resignation or Removal of Committee Member................    29
              Appointment of Successor Committee Members................    29

   14    Amendment and Termination......................................    29
              Amendment.................................................    29
              Termination...............................................    29
              Merger and Consolidation of the Plan,
                Transfer of Plan Assets.................................    30
              Distribution on Termination and Partial
                Termination.............................................    30
              Notice of Amendment, Termination or
                Partial Termination.....................................    30

Appendix A - Defined Terms

Supplement A - Top-Heavy Provisions


                                     - iv -


<PAGE>



                           MARKS BROS. JEWELERS, INC.
                          EMPLOYEE STOCK OWNERSHIP PLAN

                            (As Amended and Restated
                        Effective as of February 1, 1997)

                                     SECTION
                                        1

                                     General

     1.1 History, Purpose and Effective Date. Effective as of February 1, 1988,
Marks Bros. Jewelers, Inc., a Delaware corporation (the "Company"), established
the Marks Bros. Jewelers, Inc. Employee Stock Ownership Plan (the "Plan") to
promote the mutual interests of the Company, its shareholders, its eligible
employees and the eligible employees of any Related Company (as defined in
subsection 1.2) which adopts the Plan, (i) by providing such employees with an
opportunity to acquire equity interests in the Company, (ii) by causing the Plan
to be a long-term investor in stock of the Company, and (iii) by providing the
Company and the eligible employees with the tax benefits and other benefits
provided under applicable laws to employee stock ownership plans, including use
of the Plan as a technique of corporate finance and as a vehicle for the
transfer of ownership of stock of the Company. The following provisions
constitute an amendment, restatement and continuation of the Plan as in effect
on February 1, 1996, the "Effective Date" of the Plan as set forth herein. The
Plan is intended to qualify as a stock bonus plan under section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and to constitute an
employee stock ownership plan under section 4975(e)(7) of the Code, and shall be
invested primarily in shares of the Company's common and preferred stock which
qualify as "employer securities" under section 409(1) of the Code ("Company
Stock"); provided, howevever, that (i) the assets of the Plan may be invested in
cash or cash equivalents, as required for administrative and other allowable
purposes; and (ii) the proceeds of the sale of a number of shares of the
Company's common stock in a secondary public offering of such common stock need
not be invested in Company Stock and shall be invested in accordance with the
provisions of the Trust Agreement (as defined in subsection 1.3) and the
investment policy established with respect to the Plan by the Committee (as
described in subsection 13.1).

     1.2 Employers and Related Companies. The Company and each corporation which
is a Related Company and which, with the consent of the Company, adopts the Plan
are referred to below collectively as the "Employers" and individually as an
"Employer", The term "Related Company" means any corporation, trade or business
during any period during which it is, along with the Company, a member of a
controlled group of corporations or a controlled group of trades or businesses,
as described in sections 414(b) and 414(c), respectively, of the Code.


<PAGE>



     1.3 Plan Administration, Trust Agreement. The authority to control and
manage the operation and administration of the Plan is vested in a Committee as
described in subsection 13.1. The Company shall have the rights, duties and
obligations of an "administrator" as that term is defined in section 3(16)(A) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and of
a "plan administrator" as that term is defined in section 414(g) of the Code.
All contributions made under the Plan will be held, managed and controlled by
one or more trustees (the "Trustees") acting under a Trust (the "Trust") which
forms a part of the Plan. The terms of the Trust are set forth in a Trust
Agreement (the "Trust Agreement") known as Marks Bros. Jewelers, Inc. Employee
Stock Ownership Trust.

     1.4 Plan Year. The term "Plan Year" means the twelve- consecutive-month
period ending each January 31.

     1.5 Applicable Laws. The Plan shall be construed and administered according
to the laws of the State of Illinois to the extent that such laws are not
preempted by the laws of the United States of America.

     1.6 Gender and Number. Where the context admits, words in any gender shall
include each other gender, words in the singular shall include the plural, and
the plural shall include the singular.

     1.7 Notices. Any notice or document required to be filed with the Committee
under the Plan will be properly filed if delivered or mailed by registered mail,
postage prepaid, to the Committee, in care-of the Company at its principal
executive offices. Any notice required under the Plan may be waived by the
person entitled to notice.

     1.8 Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers to be pertinent and reliable, and signed, made or presented by the
proper party or parties.

     1.9 Action by Employer. Any action required or permitted to be taken by an
Employer under the Plan shall be by resolution of its Board of Directors, or by
a person or persons authorized by its Board of Directors.

     1.10 No Reversion to Employers. No part of the corpus or income of the
Trust shall revert to any Employer or be used for, or diverted to, purposes
other than for the exclusive benefit of Participants and other persons entitled
to benefits under the Plan, except as specifically provided in the Trust
Agreement.

     1.11 Plan Supplements. The provisions of the Plan as applied to any
Employer or any group of employees of any Employer may, with the consent of the
Company, be modified or supplemented from time to time by the adoption of one or
more


                                      - 2 -


<PAGE>



Supplements. Each Supplement shall form a part of the Plan as of the
Supplement's effective date. In the event of any inconsistency between a
Supplement and the Plan document, the terms of the Supplement shall govern.

     1.12 Defined Terms. Terms used frequently with the same meaning are
indicated by initial capital letters, and are defined throughout the Plan.
Appendix A contains an alphabetical listing of such terms and the subsections in
which they are defined.


                                    SECTION 2

                              Participation in Plan

     2.1 Eligibility for Participation. Subject to the provisions of subsection
2.2 and the conditions and limitations of the Plan, each individual who was a
Participant in the Plan immediately prior to February 1, 1996 will continue as
such on and after that date, and each other employee of an Employer will become
a Participant in the Plan on the six (6) month anniversary of his first day of
employment with an Employer; provided, however, that an employee who is a member
of a unit of employees covered by a collective bargaining agreement between
employee representatives and an Employer shall not be eligible to participate if
retirement benefits were the subject of good faith bargaining between his
Employer and such representatives, unless the Plan has been extended to the
collective bargaining unit under a currently effective collective bargaining
agreement. Effective as of February 1, 1996, no individual may become a
Participant in the Plan.

     2.2 Restricted Participation. If the Plan acquires Company Stock in a
transaction to which Code section 1042 (dealing with nonrecognition of gain b y
the seller) or Code section 2057 (dealing with estate tax deductions for sales
to employee stock ownership plans) applies, Restricted Participants (as defined
in subsection 8.1) shall have their rights to receive allocations of Company
Stock limited in accordance with the provisions of subsection 8.2.

     2.3 Participation Not Guarantee of Employment. Participation in the Plan
does not constitute a guarantee or contract of employment, and will not give any
employee the right to be retained in the employ of any Employer or Related
Company nor any right or claim to any benefit under the Plan unless such right
or claim has specifically accrued under the terms of the Plan.

     2.4 Leased Employees. If, pursuant to one or more agreements between an
Employer or Related Company and one or more leasing organizations (within the
meaning of section 414(n) of the Code), a person provides services to the
Employer or Related Company, in a capacity other than as an employee, on a
substantially full-time basis for a period of


                                      - 3 -


<PAGE>



at least one year, and such services are of a type historically performed by
employees in the business field of the Employer or Related Company, such person
shall be a "Leased Employee." Leased Employees shall not be eligible to
participate in this Plan or in any other plan maintained by an Employer or a
Related Company which is qualified under section 401(a) of the Code, but, to the
extent required by section 414(n) of the Code and applicable Treasury
regulations, such person shall be treated as if the services performed by him in
such capacity including service performed during such initial one-year period)
were performed by him as an employee of a Related Company which has not adopted
the Plan; provided, however, that no such service shall be credited:

     (a)  for any period during which less than 20% of the workforce of the
          Employers and the Related Companies consists of Leased Employees and
          the Leased Employee is a participant in a money purchase pension plan
          maintained by the leasing organization which (i) provided for a
          nonintegrated employer contribution of at least 10 percent of
          compensation, (ii) provides for full and immediate vesting, and (iii)
          covers all employees of the leasing organization (beginning with the
          date they become employees), other than those employees excluded under
          section 414(n)(5) of the Code; or

     (b)  for any other period unless the Leased Employee provides satisfactory
          evidence to the Employer or Related Company that he meets all of the
          conditions of this subsection 2.4 and applicable law required for
          treatment as a Leased Employee.

     2.5 Inactive Participation. Subject to the terms and conditions of the
Plan, when distribution of the benefits to which a Participant is entitled under
the Plan is deferred beyond, or cannot be made until after, his Termination Date
and during any period that a Participant does not meet the eligibility
requirements of subsection 2.1, the Participant or, in the event of the
Participant's death, his Beneficiary (as defined in subsection 10.5), will be
considered and treated as an "Inactive Participant." An Inactive Participant
shall be treated as a Participant for all purposes of the plan, except that

     (a)  he will not share in the allocation of Employer Contributions and
          Forfeitures provided under subsection 7.4, except for Plan Years in
          which he meets the requirements of an "Eligible Participant" under
          subsection 7.4, and

     (b)  the Beneficiary of a deceased Participant cannot designate a
          Beneficiary under subsection 10.5.


                                      - 4 -


<PAGE>



                                    SECTION 3

                                     Service

     3.1 Year of Service. The term "Year of Service" means, with respect to any
employee or Participant, any Plan Year during which he completes at least 1,000
Hours of Service (as defined in subsection 3.2), subject to the following:

     (a)  An employee or Participant's number of Years of Service for the period
          ended January 31, 1988 shall be equal to the number, including
          fractional portions thereof, of his Years of Service, if any, as
          determined as of that date for vesting purposes under the terms of
          Marks Bros. Jewelers, Inc. Profit Sharing Plan.

     (b)  For purposes of determining the nonforfeitable percentage of a
          Participant's benefit under the Plan accrued prior to the date on
          which he incurs his fifth consecutive One-Year Break in Service (as
          defined in subsection 3.3), a Participant's number of Years of Service
          accrued after such date shall be disregarded.

     3.2 Hour of Service. The term "Hour of Service" means, with respect to any
employee or Participant, each hour for which he is paid or entitled to payment
for the performance of duties for an Employer or a Related Company or for which
back pay, irrespective of mitigation of damages, has been awarded to the
employee or Participant or agreed to by an Employer or a Related Company,
subject to the following:

     (a)  An employee or Participant shall be credited with 8 Hours of Service
          per day (to a maximum of 40 Hours of Service per week) for any period
          during which he performs no duties for an Employer or a Related
          Company (irrespective of whether the employment relationship has
          terminated) by reason of a vacation, holiday,. illness, incapacity
          (including disability), layoff, jury duty, military duty or leave of
          absence but for which he indirectly or indirectly paid or entitled to
          payment by an Employer or Related Company. Payments considered for
          purposes of the foregoing shall include payments unrelated to the
          length of the period during which no duties are performed but shall
          not include payments made solely as reimbursement for medically
          related expenses or solely for the purpose of complying with
          applicable worker's compensation, unemployment compensation or
          disability insurance laws.

     (b)  Solely for purposes of determining whether he has incurred a One-Year
          Break in Service, an employee or Participant shall be credited, to the
          extent not credited in accordance with the foregoing provisions


                                      - 5 -


<PAGE>



          of this subsection 3.2, with 8 Hours of Service per day (to a maximum
          of 40 Hours of Service per week) that he is absent from active
          employment with an Employer or a Related Company (i) by reason of a
          leave of absence approved and granted by the Employer or the Related
          Company in accordance with rules uniformly applied by it or (ii) by
          reason of the employee's or Participant's pregnancy, the birth of the
          employee's or Participant/s child, the adoption of a child or
          placement of a child for adoption and, in each case, the care of such
          child immediately after its birth or placement; provided, however,
          that in no event shall more than 501 Hours of Service be credited
          under this clause (ii). Hours of Service credited in accordance with
          clause (ii) above shall be credited for the Plan Year during which the
          absence begins to the extent that such crediting would prevent the
          employee or Participant from incurring a One Year Break in Service
          and, in each other case, shall be credited in the immediately
          following Plan Year.

     3.3 One-Year Break in Service. The term "One-Year Break in Service" means,
with respect to any employee or Participant, any Plan Year during which he is
credited with less than 501 Hours of Service.


                                    SECTION 4

                          No Participant Contributions

     Participants are not required or permitted to make contributions under the
Plan.


                                    SECTION 5

                             Employer Contributions

     5.1 Employer Contributions. Subject to the conditions and limitations of
the Plan, for each Plan Year, the Company shall contribute to the Trustees as an
"Employer Contribution", in cash or Company Stock, or any combination thereof,
such amount, if any, as the Company shall determine. Each other Employer shall
contribute to the Trustees an amount equal to the product of X multiplied by the
aggregate amount of Compensation (as defined in subsection 7.6) paid by that
Employer to the Eligible Participants (as defined in paragraph 7.4(c)) for that
Plan Year. For purposes of the preceding sentence, "X" shall mean a fraction,
the numerator of which is the amount contributed by the Company to the Trustee
for that Plan Year as an Employer Contribution, and the denominator of which is
the aggregate amount of Compensation paid by the Company to the Eligible
Participants for that Plan Year. Notwithstanding the foregoing provisions of
this subsection 5.1, no contributions shall be required of Employers other


                                      - 6 -


<PAGE>



than the Company on account of the Company making cash contributions to the
Trustees, to the extent that the Company designates to the Trustees that such
cash contributions are to be applied to pay expenses of the Plan and Trust.
Notwithstanding the foregoing, the Plan is frozen effective as of February 1,
1996, and no further contributions will be made to the Plan on or after such
date.

     5.2 Limits on Employer Contributions. In no event will any Employer's
contribution under the Plan for any Plan Year exceed the lesser of:

     (a)  the maximum amount deductible by that Employer under section 404 of
          the Code for that year; or

     (b)  the maximum amount that can be allocated to Participants' Accounts in
          accordance with the limitations of Section 8.

     5.3 Payment of Employer Contributions. Employer Contributions for any Plan
Year shall be paid to the Trustees, without interest, no later than the time
prescribed by law, including extensions thereof, for filing the Employer's
federal income tax returns for the Employer's tax year ending with or within the
Plan Year, and, if made within that period, shall be treated as having been made
on the last day of the Plan Year for all Plan purposes.


                                    SECTION 6

                           Investment in Company Stock

     6.1 Investment in Company Stock. All Employer Contributions and all
earnings thereon shall be invested primarily in Company Stock; provided,
however, that (i) such Employer Contributions may be invested in cash or cash
equivalents in such reasonable amounts as may be necessary from time to time for
administration of the Trust, and (ii) the proceeds of the sale of a number of
shares of the Company's common stock in a secondary public offering of such
common stock need not be invested in Company Stock and shall be invested in
accordance with the provisions of the Trust Agreement and the investment policy
established with respect to the Plan by the Committee.

     6.2 Use of Dividends. Cash dividends received on shares of Company Stock
shall, at the direction of the Committee, either be distributed to Participants
and Beneficiaries (to the extent attributable to shares of Company Stock
allocated to their Accounts) no later than 90 days after the close of the Plan
Year in which such dividend was paid or be reinvested in shares of Company
Stock. Pending use in accordance with the foregoing provisions of this
subsection 6.3, cash dividends may be retained in cash or cash equivalents.


                                      - 7 -


<PAGE>



     6.3 Valuation. For all purposes of the Plan, valuations of Company stock
shall be made no less frequently than the last day of each Plan Year and the
date of each such valuation shall be a "Valuation Date." For all purposes of the
Plan, the "Fair Market Value" of a share of Company Stock as of any date means
the fair market value of a share of Company stock as determined as of the date
on which such a determinate is necessary.


                                    SECTION 7

                                 Plan Accounting

     7.1 Participant Accounts. The Committee shall maintain or cause to be
maintained an "Account" in the name of each Participant which will reflect his
interest under the Plan. Each Participant's Account shall be adjusted as
provided in the following provisions of this Section 7. All accounting with
respect to shares of Company Stock, including all adjustments and allocations
under this Section 7, shall be in whole and fractional shares of such stock, in
accordance with such procedures and methods as are adopted from time to time by
the Committee.

     7.2 Adjustment of Participants' Accounts. As of the last day of each Plan
Year the Committee shall:

     (a)  First, charge to the Account of each Participant all distributions and
          payments made to him, or on his account, that have not been charged
          previously;

     (b)  Next, adjust each Participant's Account for dividends, shares of
          Company Stock, and earnings and losses, if any, that are to be
          allocated or credited as of that date in accordance with the
          provisions of subsection 7.3; and

     (c)  Finally, allocate and credit to each Participant's Account his
          portion, if any, of Employer Contributions and Forfeitures (as defined
          in subsection 10.6) that are to be allocated and credited as of that
          date in accordance with the provisions of subsection 7.4.

     7.3 Allocation and Crediting of Earnings and Losses. Participants' Accounts
shall be adjusted for earnings and losses as follows:

     (a)  As of the last day of each Plan Year, each Participant's Account shall
          be adjusted to reflect any appreciation or depreciation in the Fair
          Market Value of shares of Company Stock allocated to his Account.

     (b)  As of the last day of each Plan Year, each Participant's Account shall
          be credited with any


                                      - 8 -


<PAGE>



          cash dividends or in-kind dividends (or shares of Company Stock
          acquired on account of the reinvestment of such dividends) paid to the
          Trustees since the last day of the preceding Plan Year with respect to
          shares of Company Stock credited to the Participant's Account (other
          than dividends which have been distributed.

     (c)  If, pending investment in shares of Company Stock, cash contributions
          by the Employers are invested in cash equivalents, earnings, if any,
          accrued thereon prior to the last day of the Plan Year for which the
          contributions are made shall be allocated and credited to the Accounts
          of all Participants as of the same date and on the same basis as such
          Employer Contributions are allocated under the provisions of
          subsection 7.4.

     (d)  All other earnings or losses, if any, of the Trust assets shall be
          allocated to Participants' Accounts as of the last day of each Plan
          Year pro rata, according to their Account balances as determined as of
          the last day of the immediately preceding Plan Year after adjustment
          in accordance with paragraph 7.3 (a) to reflect distributions and
          payments.

     7.4 Allocation and Crediting of Employer Contributions and Forfeitures.
Subject to the provisions of paragraph 7.3(b) and Section a, allocation of
Employer Contributions and Forfeitures shall be made in accordance with the
following provisions of this subsection 7.4.

     (a)  As of the last day of each Plan Year, all Employer Contributions for
          that Plan Year and any Forfeitures arising under the Plan during that
          year that are to be allocated pursuant to subsection 10.7 shall be
          allocated among the Accounts of Eligible Participants in accordance
          with the following provisions:

          (i)  In the case of Employer Contributions made in the form of shares
               of Company Stock, Employer Contributions made in cash and used to
               acquire shares of Company Stock and any shares of Company Stock
               forfeited during that year, each Participant's Account shall be
               credited with the number of shares of Company Stock equal to the
               product of:

               (A)  the number of such shares contributed, acquired or forfeited

                                        MULTIPLIED BY

               (B)  the Participant's Allocation Fraction.


                                      - 9 -


<PAGE>



          (ii) In the case of all other Employer Contributions and any
               Forfeitures not consisting of Company Stock, each Participant's
               Account shall be credited with an amount equal to the product of:

               (A)  such Employer Contributions and Forfeitures

                                        MULTIPLIED BY

               (B)  the Participant's Allocation Fraction.

     (b)  An Eligible Participant's "Allocation Fraction" for any Plan Year
          means a fraction, the numerator of which is the Eligible Participant's
          Compensation for such Plan Year, and the denominator of which is the
          aggregate Compensation for all Eligible Participants for such Plan
          Year.

     (c)  The term "Eligible Participant" for any Plan Year means any
          Participant employed by the Employers during that year who is credited
          with 1,000 or more Hours of Service for that Plan Year.

     7.5 Stock Dividends, Splits and Other Capital Reorganizations. Any stock
received by the Trustees as a stock split or dividend or as a result of a
reorganization or other recapitalization of the Company shall be allocated as of
the date such stock is receivable by the Trustees in the same manner as the
Company Stock to which it is attributable is then allocated.

     7.6 Compensation. A Participant's "Compensation" for any Plan Year means:

     (i)  the Participant's wages and any other compensation payments for such
          Plan Year required to be reported for him on any Form W-2 issued by an
          Employer or Related Company pursuant to sections 6041(d) and
          6051(a)(3) of the Code, determined without regard to any rules that
          limit remuneration included in wages based on the nature or location
          of the employment or the services performed,

     (ii) plus all elective contributions made on the Participant's behalf for
          the Plan Year by an Employer or Related Company that are not
          includible in gross income under sections 125, 402(a)(8), 402(h) and
          403(b),

    (iii) reduced by any reimbursement or other expense allowances, fringe
          benefits (cash and noncash), moving expenses, deferred compensation
          and welfare benefits;


                                     - 10 -


<PAGE>



up to a maximum limit of $200,000 or such larger amount as may be permitted for
any Plan Year under section 401(a)(17) of the Code, taking into account any
proration of such amount required under applicable Treasury regulations on
account of family member aggregation or a short Plan Year.

     In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000 as
adjusted by the Commissioner for increases in the cost of living in accordance
with section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination period, and
the denominator of which is 12.

     For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision.

     If compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current Plan Year, the
compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.

     7.7 Statement of Plan Interest. As soon as practicable after the close of
each Plan Year, the Committee shall provide each Participant with a statement
reflecting the value of his interest in the Plan.


                                    SECTION 8

                                   Limitations

     8.1 Restricted Participants. If the Plan acquires shares of Company Stock
in a transaction described in subsection 2.2, such shares shall be "Restricted
Shares" and a Participant shall be a "Restricted Participant" with respect to
such Restricted Shares if the Participant is:

     (a)  a selling shareholder who makes a nonrecognition election under
          section 1042(a) of the Code;


                                     - 11 -


<PAGE>



     (b)  the decedent, if the executor of the decedent's estate makes a
          qualified sale to the Plan under section 2057 of the Code;

     (c)  an individual who is related to a person described in paragraph (a) or
          (b) above within the meaning of section 267(b) of the Code, including
          the spouse, brothers and sisters (whether by whole or half blood),
          ancestors and lineal descendants of any such person; and

     (d)  a person who, at any time during the one-year period ending on the
          date of sale, or on the date such Restricted Shares are allocated
          under the Plan, owns (after application of the constructive ownership
          rules of section 318(a) of the Code but without regard to the
          exception in paragraph (2)(B)(i) thereof) more than 25 percent of (i)
          any class of outstanding stock of the Company or of any Related
          Company or of any entity which would be a Related Company if such
          relationship were determined under the 50 percent control test
          described in section 409(1)(4) of the Code or (ii) the total value of
          any class of outstanding stock of any such corporation.

     8.2 Limitations Applicable to Restricted Participants. Except as provided
in subsection 8.3, no Restricted Shares or assets attributable to (or allocable
in lieu of) Restricted Shares may accrue (or be allocated directly or indirectly
under any plan of an Employer or Related Company which is qualified under
section 401(a) of the Code) during the Nonallocation Period (as defined below)
for the benefit of any Participant who is a Restricted Participant with respect
to such shares. The term "Nonallocation Period" means the period beginning on
the date of the sale of the Restricted Shares to the Plan and ending on the
later of the tenth anniversary of such date or the date of the Plan allocation
of any assets attributable to the final payment of any acquisition indebtedness
incurred in connection with such sale.

     8.3 Exception for Lineal Descendants. The restrictions of subsection 8.2
shall not apply to a lineal descendant of a person described in paragraph (a) of
subsection 8.1 to the extent that the aggregate amount allocated to all such
lineal descendants does not exceed 5 percent of the Restricted Shares held by
the Plan which are attributable to a sale to the Plan by any brother or sister
(whether by the whole or half blood), spouse, ancestor, or lineal descendant of
such descendant in a transaction to which section 1042 of the Code applies. If
the allocations which would otherwise be made to any such lineal descendants
during any Plan Year would cause such 5 percent limit to be exceeded, such
excess shall be avoided by proportionately reducing the allocation to each such
descendant.

     8.4 Section 415 Limitation on Allocations to Participant Accounts.
Notwithstanding any other provision of the Plan,


                                     - 12 -


<PAGE>



allocations to Participant Accounts shall be subject to the provisions of
section 415 of the Code. Consistent with the limitations set forth in such
section, a Participant's Annual Additions (as defined in subsection 8.5) for any
Plan Year shall not exceed an amount equal to the lesser of:

     (a)  25 percent of the Section 415 Compensation (as defined below) paid to
          the Participant in that Plan Year; or

     (b)  $30,000 (or, if greater, 1/4 of the dollar limitation in effect under
          section 415(b)(1)(A) of the Code.

A Participant's "Section 415 Compensation" for any Plan Year means his total
compensation (as described in Treas. Reg. ss.1.4152(d)(1)) paid during that year
for services rendered to the Employers or to any Related Company or Section 415
Affiliate (as defined below), exclusive of deferred compensation and other
amounts which receive special tax treatment (as described in Treas. Reg. ss.
1.415-2(d)(2)). "Section 415 Affiliate" means any entity that would be a Related
Company if the ownership test of sections 414(b) and (c) of the Code were "more
than 50 percent" rather than "at least 80 percent".

     8.5 Annual Additions. A Participant's "Annual Additions" for any Plan Year
means the sum of (i) the amount of all Employer Contributions allocated to his
Account during that year and (ii) the amount of Forfeitures allocated to his
Account during that year. The term Annual Additions shall also include employer
contributions allocated for a Plan Year to any individual medical account (as
defined in section 415(1) of the Code) of a Participant under a defined benefit
plan and any amount allocated for a Plan Year to the separate account of a
Participant for payment of post-retirement medical benefits under a funded
welfare benefit plan (as described in section 419A(d) (2) of the Code), which
was maintained by an Employer or a Related Company or a Section 415 Affiliate.
Plan earnings shall not constitute Annual Additions.

     8.6 Excess Annual Additions. In the event that a Participant's Annual
Additions for any Plan Year would otherwise exceed the limitations imposed by
the provisions of subsection 8.4, the amount of the Employer Contributions which
would otherwise be allocated to his Account for that year shall be reduced to
the extent necessary to comply with such limitation. and shall be allocated and
reallocated to the Accounts of all remaining Participants in accordance with the
provisions of subsection 7.4. If, as a result of the allocation of Forfeitures,
a reasonable error in estimating a Participant's compensation or such other
mitigating circumstances as the Commissioner of Internal Revenue shall
prescribe, the allocations and reallocations pursuant to the foregoing
provisions of this subsection would cause the limitations of Code section 415 to
be exceeded with respect to


                                     - 13 -


<PAGE>



all Participants for the Plan Year, then any remaining excess amounts shall be
held unallocated in a "Section 415 Suspense Account." All amounts in the Section
415 Suspense Account must be allocated and reallocated to Participants' Accounts
in the next Plan Year (subject to the limitations of Code section 415) before
any Employer Contributions which would constitute Annual Additions may be made
for that Plan Year.

     8.7 Limitations Applicable to Highly Compensated Employees. In no event
shall more than one-third of the Employer Contributions for any Plan Year be
allocated to Highly Compensated Employees. A "Highly Compensated Employee" for
any Plan Year shall mean any employee or Participant who, during that Plan Year
or the preceding Plan Year:

     (a)  was at any time a 5 percent owner of an Employer or Related Company;

     (b)  received Compensation that was in excess of $75,000 (indexed for
          cost-of-living adjustments under section 415(d) of the Code);

     (c)  received Compensation that was in excess of $50,000 (indexed for
          cost-of-living adjustments under section 415(d) of the Code), and was
          in the top-paid group of employees (as described below) for such year;

     (d)  was at any time an officer and received Compensation greater than 50
          percent of the amount in effect under section 415(b) (l)(A) of the
          Code for such year, provided that the officers taken into account
          under this paragraph (d) shall be limited to 50, or if less, the
          greater of 3 or 10% of the employees of all the Employers and Related
          Companies;

provided, however, that an employee in category (b), (c) or (d) above for the
current Plan Year who does not fall within at least one such category for the
preceding Plan Year shall not be considered a Highly Compensated Employee for
the current Plan Year unless he is also among the 100 most highly-paid employees
of all the Employers and Related Companies for such current year. An employee
shall be considered to be in the "top-paid group" of employees for any Plan Year
if such employee is in the group consisting of the top 20 percent of the active
employees of all the Employers and Related companies when ranked on the basis of
Compensation paid during such Plan Year. In determining the total number of
active employees in a Plan Year, the following provisions shall apply:

          (i)  the term "employee" shall include a Leased Employee, other than a
               Leased Employee who is covered by a safe-harbor plan described in
               section 414(n) (5) of the Code; and


                                     - 14 -


<PAGE>



          (ii) the following employees shall be disregarded: employees who
               normally work less than 17-1/2 hours per week; employees who
               normally work less than 6 months during any year and non-resident
               aliens with no U.S. source income.

If, after application of the provisions of subsections 8.1 through 8.6, the
limitation provided under the first sentence of this subsection 8.7 would be
exceeded, Employer Contributions allocated to each Highly Compensated Employee
shall be proportionately reduced to the extent necessary to eliminate such
excess and, subject to the provisions of this Section 8, the amount of such
reduction shall be allocated and reallocated to all remaining Participants in
accordance with the provisions of subsection 7.4.

     8.8 Combined Plan Limitation. If a Participant participates or has
participated in any qualified defined benefit plan maintained by an Employer,
then for any Plan Year the sum of the defined benefit plan fraction (as defined
in section 415(e) (2) of the Code) and the defined contribution plan fraction
(as defined in section 415(e)(3, of the Code) for such Participant shall not
exceed 1.0 (his "combined fraction"). If his combined fraction exceeds 1.0, then
his defined benefit plan faction shall be reduced by limiting his annual
benefits payable from the defined benefit plan to the extent necessary to reduce
his combined fraction to 1.0.


                                    SECTION 9

                          Vesting and Termination Dates

     9.1 Determination of Vested Interest.

     (a)  The interest of a Participant in his Account shall become fully vested
          and nonforfeitable in accordance with the following schedule:


         Years of Service                   Vested Percentage
         ----------------                   -----------------
            Less than 1                              0%
         2 but less than 2                          20%
         3 but less than 3                          40%
         4 but less than 5                          60%
             5 or more                             100%

     (b)  Each Participant employed on or after February 1, 1993 shall be vested
          in his Account in accordance with the following schedule:


          Years of Service                    Vested Percentage
          ----------------                    -----------------


                                     - 15 -


<PAGE>


            Less than 1                                0%
         1 but less than 2                            20%
         2 but less than 3                            40%
         3 but less than 4                            60%
             4 or more                               100

     (c)  Notwithstanding any other provision of this Section 9, effective as of
          February 1, 1996, each Participant shall have a 100%, fully vested,
          nonforfeitable interest in his entire Account.

     9.2 Accelerated Vesting. Notwithstanding the foregoing provisions of this
Section 9, a Participant shall have a fully vested, nonforfeitable interest in
his entire Account when he attains his Normal Retirement Age (as defined in
paragraph 9.3(a)), dies or becomes permanently disabled (as described in
paragraph 9.3(b)) while employed by an Employer or a Related Company. In
addition, in the event of the Plan's termination (in accordance with subsection
14.2) or partial termination (as determined under applicable law and
regulations), each affected Participant shall be fully vested in his Account.

     9.3 Termination Dates. A Participant's "Termination Date" will be the date
on which his employment with the Employers and the Related Companies is
terminated because of the first to occur of the following events:

     (a)  Normal or Late Retirement. The Participant retires or is retired from
          the employ of the Employers and the Related Companies on or after the
          date on which he attains his "Normal Retirement Age" of 65 years.

     (b)  Disability Retirement. The Participant is retired from the employ of
          the Employers and the Related Companies at any age because of
          permanent disability. A Participant will be considered permanently
          disabled for purposes of the Plan if, on account of physical or mental
          disability, he no longer is capable of performing the duties assigned
          to him by his Employer and, in the opinion of a physician selected or
          approved by the Company, such disability is likely to be permanent and
          continuous during the remainder of the Participant's lifetime.

     (c)  Death. The Participant's death.

     (d)  Resignation or Dismissal. The Participant resigns or is dismissed from
          the employ of the Employers and the Related Companies before
          retirement in accordance with paragraph (a) or (b) next above.


                                     - 16 -


<PAGE>



                                   SECTION 10

                                  Distributions

     10.1 Distributions to Participants After Termination of Employment. Subject
to the provisions of subsections 10.2 and 10.4, (i) a Participant may elect to
commence distribution of the vested portion of his Account at his Normal
Retirement Age and (ii) if a Termination Date occurs with respect to a
Participant for a reason other than his death, the vested portion of his Account
shall be distributed (or shall begin to be distributed) to the Participant in
accordance with the following provisions of this subsection 10.1:

     (a)  Unless the Participant elects to commence his benefit payments at an
          earlier date as permitted in accordance with the provisions of
          paragraph (b) next below, the Participant's vested Account balance
          shall commence to be distributed to him as soon as practicable after
          the last day of the Plan Year in which the Participant attains his
          Normal Retirement Age or, if later, in which occurs such Termination
          Date.

     (b)  A Participant who has incurred a Termination Date under paragraph
          9.3(a) or 9.3(b) may elect to have payment of his vested benefits
          commence as soon as practicable after the last day of the Plan Year in
          which the Participant retires, and a Participant who incurs a
          Termination Date under paragraph 9.3(d) may elect to have payment of
          his vested Account balance commence as soon as practicable after the
          last day of the fifth Plan Year following the Plan Year in which the
          Participant's Termination Date occurs (regardless of whether such
          Participant returns to the employ of an Employer or Related Company
          prior to that date); provided, however, that the provisions of this
          paragraph (b) shall not apply to any shares of Company Stock acquired
          with the proceeds of an ESOP Loan until the close of the Plan Year in
          which such loan is repaid in full, and provided further that in no
          event shall the actual commencement of payments under this paragraph
          (b) occur later than one year after the end of the applicable Plan
          Year.

     (c)  Distribution of a Participant' 9 vested Account balance shall be by
          one of the following methods chosen by the Participant:

          (i)  by payment in a lump sum; or

          (ii) by payment in a series of substantially equal annual or more
               frequent installments for a period not exceeding five years.


                                     - 17 -

<PAGE>



               After December 31, 1992, a Participant who is entitled to a
               distribution may elect, at the time and in the manner prescribed
               by the Committee, to have the Trustees directly transfer any
               portion of an "eligible rollover distribution" to an "eligible
               retirement plan" specified by the Participant (as those terms are
               defined in Section 401(a)(31) of the Code); provided, that any
               such transfer shall be through a method of transfer that the
               Trustees deem reasonable and shall in any event be made in
               accordance with Section 401(a)(31) of the Code and the
               regulations thereunder.

          (d)  Distributions to be made to any Participant as of the last day of
               any Plan Year shall commence to be made after all adjustments to
               the Participant's Account have been made as required Section 7.

     10.2 Distributions to Beneficiaries. Subject to the provisions of
subsection 10.4, the following rules shall apply if a Participant dies while any
vested portion of his Account balance remains undistributed:

          (a)  If the Participant dies before benefit payments to him have
               commenced, the vested balance of his Account shall be distributed
               as soon as practicable after the last day of the Plan Year in
               which his death occurs to his Beneficiary, by one of the methods
               provided in paragraph 10.1(c). A Participant may direct how his
               benefits are to be paid to his Beneficiary; provided, however,
               that if the deceased Participant did not file a direction with
               the Committee, the Committee shall determine the method of
               distributing the Participant's benefits to his Beneficiary. In no
               event shall the actual commencement of payments under this
               paragraph (a) occur later than one year after the end of the Plan
               Year of the Participant's death.

          (b)  If a Participant dies after benefit payments to him have
               commenced, the vested balance, if any, of his Account shall
               continue to be distributed to his Beneficiary in accordance with
               the method of distribution selected by the Participant.

     10.3 Form of Distributions. All distributions under the Plan shall be made
solely in whole and fractional shares of Company Stock; provided, however, that
the portion of a Participant's Account that is not invested in Company Stock at
the time of distribution shall be distributed in cash, unless such Participant
elects to receive such distribution in the form of shares of Company Stock.

     10.4 Limits on Commencement and Duration of Distributions. The following
distribution rules shall be applied in accordance with sections 401(a) (9) and
401(a)(14) of the Code and applicable regulations thereunder, including


                                     - 18 -


<PAGE>



the minimum distribution incidental benefit requirement of Treas. Reg. ss. Reg.
1.401(a)(9)-2, and shall supersede any other provision of the Plan to the
contrary:

     (a)  In no event shall distributions to a Participant commence later than
          60 days after the close of the Plan Year in which occurs the latest of
          the Participant's attainment of age 65, the 10th anniversary of the
          year in which the Participant began participating in the Plan, or the
          Participant's Termination Date; provided however, that if the amount
          of the payment required to commence on such date cannot be ascertained
          by such date, payment retroactive to such date shall be made no later
          than 60 days after the date on which the distribution amount can be
          ascertained.

     (b)  Notwithstanding any other provision herein to the contrary,
          distribution of a Participant's Account shall commence by lump sum
          payment of his entire Account balance on or before his Required
          Beginning Date (defined below) and each December 31 thereafter. A
          Participant's "Required Beginning Date" shall mean April 1 of the
          calendar year following the calendar year in which he attains age
          70-1/2.

     (c)  Distribution of a Participant's Account balance shall not be made over
          a period extending beyond the life expectancy of such Participant or
          the joint life expectancy of such Participant and his Beneficiary.

     (d)  If a Participant dies after distribution of his vested interest in the
          Plan has begun, the remaining portion of such vested interest, if any,
          shall be distributed to his Beneficiary at least as rapidly as under
          the method of distribution used prior to the Participant's death.

     (e)  If a Participant dies before distribution of his vested interest in
          the Plan has begun, distribution of such vested interest to his
          Beneficiary shall be completed by December 31 of the calendar year in
          which the fifth anniversary of the Participant's death occurs.

     (f)  If the Participant's spouse is his Beneficiary and such spouse dies
          before the distribution to such spouse begins, paragraph (e) shall be
          applied as if the surviving spouse were the Participant.

     (g)  For purposes of this subsection 10.4, the life expectancy of a
          Participant or a Beneficiary will be determined in accordance with
          Tables V and VI of Treas. Reg. ss. 1.72-9, and will not be
          recalculated.


                                     - 19 -


<PAGE>



     10.5 Beneficiary Designations. Each Participant, from time to time by
signing a form furnished by the Committee, may designate any legal or natural
person or persons (who may be designated contingently or successively) to whom
his benefits are to be paid if he dies before he receives all of his benefits;
provided, however, that if a Participant is legally married on the date of his
death, designation of a Beneficiary other than his spouse shall be effective
only if:

     (a)  the Participant's spouse acknowledges the effect of that designation
          and consents to it in a writing which is filed with the Committee in
          such form as it may require, is witnessed by either a Notary Public or
          a Plan representative appointed or approved by the Committee, and is
          effective only with respect to such consenting spouse; or

     (b)  it is established to the satisfaction of a Plan representative
          appointed or approved by the Committee that the consent required under
          paragraph (a) next above cannot be obtained because there is no
          spouse, because the spouse cannot be located or because of such other
          circumstances as the Secretary of the Treasury may prescribe in
          regulations.

A Beneficiary designation form will be effective only when the signed form is
filed with the Committee while the Participant is alive and will cancel all
Beneficiary designation forms filed earlier. Except as otherwise specifically
provided in this Section 10, if a deceased Participant failed to designate a
beneficiary as provided above, or if the designated beneficiary of a deceased
Participant dies before him or before complete payment of the Participant's
vested benefits, his vested benefits shall be paid to the Participant's
surviving spouse or, if there is no surviving spouse, to the legal
representative or representatives of the estate of the last to die of the
Participant and his Beneficiary. The term "Beneficiary" as used in the Plan
means the person or persons to whom a deceased Participant's benefits are
payable under this subsection.

     10.6 Forfeitures and Restorations of Unvested Accounts. If a Termination
Date occurs with respect to a Participant who is not fully vested in his Account
(as determined under Section 9), the following rules shall apply:

     (a)  The unvested portion of his Account shall be forfeited as of the
          earlier of the date as of which the vested portion of his Account is
          distributed to him or the date the Participant incurs five consecutive
          One-Year Breaks in Service. The amount so forfeited is referred to
          herein as a "Forfeiture".

     (b)  If a Forfeiture occurs due to the distribution of the vested portion
          of the Participant's Account, and the Participant is reemployed by an
          Employer or a


                                     - 20 -


<PAGE>



          Related Company before he incurs five consecutive One-Year Breaks in
          Service, the amount of the Forfeiture (determined on the basis of the
          Fair Market Value of the shares of Company Stock forfeited and the
          value of all other assets in his Account on the date of Forfeiture,
          without adjustment for appreciation or depreciation or for earnings
          and losses after the Forfeiture occurred) shall be restored as soon as
          practicable after his reemployment.

     (c)  If a Forfeiture occurs due to the distribution of the vested portion
          of the Participant's Account, and the Participant is reemployed by an
          Employer or Related Company after he incurs five consecutive One-Year
          Breaks in Service, such reemployment shall have no effect on the
          Forfeiture under paragraph (a) above.

     (d)  The restoration referred to in paragraph (b) above shall be made first
          from current Forfeitures, if any, under the Plan and then, if
          necessary, from a special Employer Contribution to the Plan.

     (e)  A restoration pursuant to paragraph (b) above shall not be considered
          an Annual Addition for purposes of subsection 8.5.

     (f)  If a Participant who is reemployed by an Employer or Related Company
          prior to incurring five consecutive One-Year Breaks in Service
          received a distribution of the vested portion of his Account, the
          amount restored under paragraph (b) above shall be maintained in a
          separate subaccount within the Participant's Account and his vested
          interest in such subaccount shall be determined by adding the amount
          of the prior distribution to the subaccount balance before applying
          the vesting provisions set forth in Section 9 and then subtracting the
          amount of the prior distribution from the amount derived after
          application of such vesting provisions.

     10.7 Application of Forfeitures. Any Forfeitures arising during a Plan Year
shall first be used to restore any prior Forfeitures as required by subsection
10.6 and then, on the last day of such Plan Year, the Forfeitures remaining
shall be allocated to the Accounts of Eligible Participants in accordance with
the provisions of subsection 7.4. If during any Plan Year dividends are paid or
payable on any forfeited shares of Company Stock prior to the time such
forfeited shares are applied to restore prior Forfeitures, the amount of such
dividends shall become part of the pool of Forfeitures available for restoration
or allocation during the remainder of such Plan Year.

     10.8 Cash Dividends on Company Stock. Cash dividend shares of Company Stock
allocated to a Participant's Account


                                     - 21 -


<PAGE>



will be distributed to the Participant if directed by the Committee in
accordance with the provisions of subsection 6.3.

     10.9 Withdrawals by Qualified Participants. Notwith standing any other
provision of the Plan, during the 90-day period following the last day of each
Plan Year in a Participant's Qualified Election Period (as defined below), the
Participant may, by writing filed with the Committee in such form as it may
require, elect to withdraw:

     (a)  a portion of his Account balance not exceeding 25 percent (50 percent
          with respect to the Participant's election following the last Plan
          Year in his Qualified Election Period) of the sum of:

          (i)  his Account balance at the end of the immediately preceding Plan
               Year; and

          (ii) prior withdrawals during his Qualified Election Period;

                                   REDUCED BY

     (b)  the aggregate amount of prior withdrawals made in accordance with this
          subsection.

Any amount required to be distributed pursuant to a withdrawal election made
during any Plan Year in accordance with this subsection shall be distributed no
later than the 180th day of that Plan Year. A Participant's "Qualified Election
Period" means the six-Plan-Year period beginning with the first Plan Year in
which he has both completed ten years of participation in the Plan and has
attained at least age 55 years. The provisions of this subsection 10.9 shall not
apply to any Participant to the extent the value of the Company Stock allocated
to his Account (determined as of the first day on which the Participant would
otherwise be entitled to make a withdrawal election under this subsection) is
$500 or less.

     10.10 Facility of Payment. If the Committee, in its sole discretion,
determines that a Participant or other person entitled to benefits under the
Plan is under a legal disability or is in any way incapacitated so as to be
unable to manage his financial affairs, the Committee may, until claim is made
by a conservator or other person legally charged with the care of his person or
of his estate, direct the Trustees to make payment to a relative or friend of
such person for his benefit. Thereafter, any benefits under the Plan to which
such Participant or other person is entitled shall be paid to such conservator
or other person legally charged with the care of his person or his estate.

     10.11 Interests Not Transferable. The interests of Participants and other
persons entitled to benefits under the Plan are not subject to the claims of
their creditors and may not be voluntarily or involuntarily assigned, alienated
or encumbered, except in the case of certain qualified domestic


                                     - 22 -


<PAGE>



relations orders which relate to the provision of child support, alimony
payments or marital rights of a spouse, child or other dependent of a
Participant and which meet such other requirements as may be imposed by section
414(p) of the Code or regulations issued thereunder.

     10.12 Absence of Guaranty. None of the Trustees, the Employers or the
Committee in any way guarantee the assets of the Trust from loss or
depreciation. Neither the Employers nor the Committee guarantees any payment to
any person. The liability of the Trustees to make any payment is limited to the
available assets of the Trust.

     10.13 Missing Participants or Beneficiaries. Each Participant and each
Beneficiary must file with the Committee from time to time in writing his post
office address and each change of post office address. Any communication,
statement or notice addressed to a Participant or Beneficiary at his last post
office address filed with the Committee, or if no address is filed with the
Committee then, in the case of a Participant, at his last post office address as
shown on the Employers' records, will be binding on the Participant and his
Beneficiary for all purposes of the Plan. None of the Employers, the Committee
or the Trustees will be required to search for or locate a Participant or
Beneficiary.


                                   SECTION 11

                       Voting and Other Shareholder Rights

     Voting and other shareholder rights with respect to shares of Company Stock
shall be exercised by the Trustees in accordance with the provisions of Article
III of the Trust.


                                   SECTION 12

              Rights and Restrictions With Respect To Company Stock

     12.1 Put Option. Each recipient of shares of Company Stock distributed from
the Trust shall have the option to put the shares to the Company if they are not
readily tradable on an established market (within the meaning of section
409(h)(1)(B) of the Code), subject to the following:

     (a)  Such put option may be exercised during the 60-day period immediately
          following the date of distribution of such shares from the Trust and,
          if the put option is not exercised within such period, the put option
          will temporarily lapse. The put option may again be exercised during a
          second 60-day period in the following Plan Year, as provided in
          regulations promulgated by the Secretary of the Treasury of the United
          States; provided, however, that in the absence of such regulations,
          such period shall be determined by the Committee and


                                     - 23 -


<PAGE>



          communicated in advance to the persons entitled to exercise the put
          option. If for any reason the exercise price cannot be ascertained, or
          such determination is delayed, the second put option period shall not
          terminate until 60 days after the date on which the price for the
          shares can be ascertained and communicated to the persons entitled to
          exercise the put option. The period during which a put option may be
          exercised shall be extended by the amount of time during which the
          Company is unable to honor the put by reason of applicable Federal or
          state law. If not exercised, the put option shall permanently
          terminate at the end of the second 60-day period.

     (b)  A put option shall be exercisable by giving written notice to the
          Company of the election to exercise. The Company may permit the
          Trustees, acting on behalf of the Plan, to purchase any shares of
          Company Stock tendered to the Company under the put option.

     (c)  The price at which a put option is exercisable with respect to any
          shares of Company Stock shall be the Fair Market Value of each share
          of Company Stock determined as of the Valuation Date (as defined in
          Subsection 6.5) immediately preceding the first day of the 60-day
          period during which the put option may be exercised (provided, that if
          an option period is left open beyond a succeeding Valuation Date
          because of a delay in the determination of the exercise price, as
          provided in Section 12.1(a), such shares shall be valued as of the
          preceding Valuation Date), multiplied by the number of shares to be
          sold under the put option, with appropriate adjustments to reflect
          intervening stock dividends, stock splits, stock redemptions, or
          similar changes to the number of outstanding shares.

     (d)  Payment of the purchase price shall commence no later than 30 days
          after the date on which the put option is exercised and shall be paid
          in a lump sum; provided, however, that, in the case of a total
          distribution of a Participant's interest under the Plan, in the
          discretion of the Company or of the Trustees, as the case may be,
          payment may be made in substantially equal annual or more frequent
          installments over a period not exceeding 5 years. If payment is made
          in installments, such payment shall be adequately secured and shall
          bear interest at the prime rate of interest in effect at the First
          National Bank of Chicago on the date the put option is exercised.

     (e)  The put option shall not be assignable by any recipient other than to
          the recipient's donees or to


                                     - 24 -


<PAGE>



          a person to whom the Company Stock passes by reason of the death of
          the recipient.

     (f)  Payment under the put option must not be restricted by the terms of
          any loan or other arrangement, including the terms of the Company's
          articles of incorporation, unless so required by applicable state law.
          If it is known at the time an ESOP Loan is made that Federal or state
          law will be violated by the Company honoring a put option with respect
          to the shares of Company Stock acquired with the proceeds of such
          loan, the put option shall permit the shares to be put to a third
          party that has substantial net worth at the time the loan is made and
          whose net worth is reasonably expected to remain substantial.

     (g)  The Committee will notify each recipient of Company Stock who is
          eligible to exercise a put option in accordance with this subsection
          12.1 of the Fair Market Value of each share of Company Stock as soon
          as practicable following its determination. The Committee will send
          all notices required under this subsection to the last known address
          of such recipient, and it will be the duty of those persons to inform
          the Committee of any changes in address.

     (h)  The Trustees, acting on behalf of the Plan, may offer to purchase any
          shares of Company Stock not sold pursuant to the foregoing put option
          from any Participant or Beneficiary at any time in the future, at the
          shares' then Fair Market Value.

The provisions of this subsection 12.1 shall continue to be applicable to
distributions of Company Stock even if the Plan ceases to be an employee stock
ownership plan under section 4975(e)(7) of the Code. As of the date of this
amendment and restatement, the Company Stock held by the Plan is readily
tradeable on an established market (within the meaning of section 409(h)(1)(B)
of the Code), and such Company Stock is not, therefore, subject to the put
option set forth in this Section 12.1.

     12.2 Legends. The Company shall have the right to place a legend on
certificates representing shares of Company Stock which are distributed under
the Plan to reflect all restrictions to which the shares are subject under the
terms of the Plan and applicable state and federal law.



                                   SECTION 13

                                  The Committee

     13.1 Membership. The "Committee" referred to in subsection 1.3 shall
consist of one or more members appointed


                                     - 25 -


<PAGE>



by the Board of Directors of the Company. The members of the Committee shall be
the "named fiduciaries" (as described in section 402 of ERISA) under the Plan.
In controlling and aging the operation and administration of the Plan, the
Committee shall act by the concurrence of a majority of its then members by
meeting or by writing without a meeting. The Committee may authorize any one of
its members to execute any document, instrument or direction on its behalf. A
written statement by a majority of the Committee members or by an authorized
Committee member shall be conclusive in favor of any person (including the
Trustees) acting in reliance thereon.

     13.2 Rights, Powers and Duties. The Committee shall have such authority as
may be necessary to discharge its responsibilities under the Plan and Trust,
including the following discretionary authority, powers, rights and duties:

     (a)  to adopt such rules of procedure and regulations as, in its opinion,
          may be necessary for the proper and efficient administration of the
          Plan and as are consistent with the provisions of the Plan;

     (b)  to enforce the Plan in accordance with its terms and with such rules
          and regulations as may be adopted by the Committee;

     (c)  to determine conclusively all questions arising under the Plan,
          including questions relating to the eligibility, benefits and other
          Plan rights of Participants and other persons entitled to benefits
          under the Plan and to remedy any ambiguities, inconsistencies or
          omissions of whatever kind;

     (d)  to maintain and keep adequate records concerning the Plan and
          concerning its proceedings and acts in such form and detail as the
          Committee may decide;

     (e)  to direct all payments of benefits under the Plan;

     (f)  to furnish the Employers with such information with respect to the
          Plan as may be required by them for tax or other purposes;

     (g)  to employ agents, attorneys, accountants or other persons (who also
          may be employed by or represent the Employers or the Trustees) for
          such purposes as the Committee considers necessary or desirable to
          discharge its duties;

     (h)  to delegate to employees of the Employers and the agents or counsel
          employed by the Committee such powers as the Committee considers
          desirable; and

     (i)  to establish a claims procedure in accordance with section 503 of
          ERISA.


                                     - 26 -


<PAGE>



     13.3 Application of Rules. In operating and administering the Plan, the
Committee shall uniformly apply all rules of procedure and regulations adopted
by it to persons similarly situated.

     13.4 Remuneration and Expenses. No remuneration shall be paid to any
Committee member as such. However, the reasonable expenses (including the fees
and expenses of persons employed by it in accordance with paragraph 13.2(g)) of
a Committee member incurred in the performance of a Committee function shall be
reimbursed by the Company.

     13.5 Indemnification of the Committee. To the maximum extent permitted by
law, the Committee and the individual members thereof and any employees to whom
the Committee has delegated responsibility in accordance with paragraph 13.2(h)
shall be indemnified by the Employers against any and all liabilities, losses,
costs and expenses (including legal fees and expenses) of whatsoever kind and
nature which may be imposed on, incurred by or asserted against the Committee,
its members or such employees by reason of the performance of a Committee
function if the Committee, such members or employees did not act dishonestly or
in willful violation of the law or regulation under which such liability, loss,
cost or expense arises.

     13.6 Exercise of Committee's Duties. Notwithstanding any other provisions
of the Plan, the Committee shall discharge its duties hereunder solely in the
interests of the Participants in the Plan and other persons entitled to benefits
thereunder, and:

     (a)  for the exclusive purpose of providing benefits to Participants and
          other persons entitled to benefits thereunder; and

     (b)  with the care, skill, prudence and diligence under the circumstances
          then prevailing that a prudent man acting in a like capacity and
          familiar with such matters would use in the conduct of an enterprise
          of a like character and with like aims.

     13.7 Information to be Furnished to Committee. The Employers and Related
Companies shall furnish the Committee such data and information as may be
required for it to discharge its duties. The records of the Employers and
Related Companies as to an employee's or Participant's period of employment,
termination of employment and the reasons therefor, leave of absence,
reemployment and Compensation will be conclusive on all persons unless
determined to be incorrect. Participants and other persons entitled to benefits
under the Plan must furnish to the Committee such evidence, data or information
as it considers desirable to carry out the Plan.

     13.8 Resignation or Removal of Committee Member. A Committee member may
resign at any time by giving fifteen days' advance written notice to the
Company, the Trustees and


                                     - 27 -


<PAGE>



the other Committee members.  The Board of Directors of the Company may remove a
Committee  member by giving  written  notice to him,  the Trustees and the other
Committee members.

     13.9 Appointment of Successor Committee Members. The Company's Board of
Directors may appoint additional Committee members and may fill any vacancy in
the membership of the Committee and shall give prompt written notice thereof to
the other Committee members, the other Employers and the Trustees. While there
is a vacancy in the membership of the Committee, the remaining Committee members
shall have the same powers as the full Committee until the vacancy is filled.


                                   SECTION 14

                            Amendment and Termination

     14.1 Amendment. While the Company expects to continue the Plan, it must
necessarily reserve and reserves the right, subject to the provisions of Article
V of the Trust Agreement, to amend the Plan from time to time, except that no
amendment will reduce a Participant's interest in the Plan to less than an
amount equal to the amount he would have been entitled to receive if he had
resigned from the employ of the Employers and the Related Companies on the day
of the amendment and no amendment will eliminate an optional form of benefit
with respect to a Participant or Beneficiary except as otherwise permitted by
law.

     14.2 Termination. The Plan will terminate as to all of the Employers on any
day specified by the Company if advance written notice of the termination is
given to the other Employers. Employees of any Employer shall cease active
participation in the Plan and will be treated as Inactive Participants in
accordance with subsection 2.5 on the first to occur of the following:

     (a)  the date on which that Employer, by appropriate action communicated in
          writing to the Company, ceases to be a contributing sponsor of the
          Plan;

     (b)  the date that Employer is judicially declared bankrupt or insolvent;
          or

     (c)  the dissolution, merger, consolidation or reorganization of that
          Employer, or the sale by that Employer of all or substantially all of
          its assets, except that, subject to the provisions of subsection 14.3,
          with the consent of the Company, in any such event arrangements may be
          made whereby the Plan will be continued by any successor to that
          Employer or any purchaser of all or substantially all of that
          Employer's assets, in which case the successor or purchaser will be
          substituted for the Employer under the Plan.


                                     - 28 -


<PAGE>



     14.3 Merger and Consolidation of the Plan, Transfer of Plan Assets. The
Committee in its discretion may direct the Trustees to transfer all or a portion
of the assets of this Plan to another defined contribution plan of the Employers
or Related Companies which is qualified under section 401(a) of the Code or, in
the event of the sale of stock of an Employer or all or a portion of the assets
of an Employer, to a qualified plan of an employer which is not a Related
Company. In the case of any merger or consolidation with, or transfer of assets
and liabilities to, any other plan, provisions shall be made so that each
affected Participant in the Plan on the date thereof (if the Plan, as applied to
the Participant, then terminated) would receive a benefit immediately after the
merger, consolidation or transfer which is equal to or greater than the benefit
he would have been entitled to receive immediately prior to the merger,
consolidation or transfer if the Plan, as applied to him, had then terminated.

     14.4 Distribution on Termination and Partial Termination. Upon termination
or partial termination of the Plan, all benefits under the Plan shall continue
to be paid in accordance with the provisions of Section 10 as such section may
be amended from time to time.

     14.5 Notice of Amendment, Termination or Partial Termination. Affected
Participants will be notified of an amendment, termination or partial
termination of the Plan as required by law.

     IN WITNESS WHEREOF, the Company has executed this Plan as of the day and
year first above written.

                                        MARKS BROS. JEWELERS, INC.


By:__________________________

                                        Title:______________________________


                                     - 29 -


<PAGE>



                                   APPENDIX A

                                  Defined Terms

7.1          -         Account
7.4          -         Allocation Fraction
8.5          -         Annual Additions
10.5         -         Beneficiary
1.1          -         Code
13.1         -         Committee
1.1          -         Company
1.1          -         Company Stock
7.6          -         Compensation
1.1          -         Effective Date
7.4          -         Eligible Participant
1.2          -         Employer
5.1          -         Employer Contribution
1.3          -         ERISA
6.3          -         Fair Market Value
10.6         -         Forfeiture
8.7          -         Highly Compensated Employee
3.2          -         Hour of Service
2.5          -         Inactive Participant
8.2          -         Nonallocation Period
9.3          -         Normal Retirement Age
3.3          -         One-Year Break in Service
1.1          -         Plan
1.4          -         Plan Year
10.9         -         Qualified Election Period
1.2          -         Related Company
10.4         -         Required Beginning Date
8.1          -         Restricted Participant
8.1          -         Restricted Shares
8.4          -         Section 415 Affiliate
8.4          -         Section 415 Compensation
8.6          -         Section 415 Suspense Account
9.3          -         Termination Date
1.3          -         Trust
1.3          -         Trust Agreement
1.3          -         Trustees
6.3          -         Valuation Date
3.1          -         Year of Service


                                     - 30 -


<PAGE>



                                  SUPPLEMENT A
                          TO MARKS BROS. JEWELERS, INC.
                          EMPLOYEE STOCK OWNERSHIP PLAN

                             (Top-Heavy Provisions)

Application         A-1. This Supplement A to Marks Bros. Jewelers, Inc.
                    Employee Stock Ownership Plan (the "Plan") shall be
                    applicable on and after the date on which the Plan becomes
                    Top- Heavy (as described in subsection A-5).

Effective Date      A-2. The Effective Date of this Supplement A is February 1,
                    1988.

Definitions         A-3. Unless the context clearly implies or indicates the
                    contrary, a word, term or phrase used or defined in the Plan
                    is similarly used or defined for purposes of this Supplement
                    A.

Affected            A-4.  For purposes of this Supplement A, the term
Participant         "Affected Participant" means each Participant who is
                    employed by an Employer or a Related Company during any Plan
                    Year for which the Plan is Top-Heavy; provided, however,
                    that the term "Affected Participant" shall not include any
                    Participant who is covered by a collective bargaining
                    agreement if retirement benefits were the subject of good
                    faith bargaining between his Employer and his collective
                    bargaining representative.

Top-Heavy           A-5. The Plan shall be "Top-Heavy" for any Plan Year if, as
                    of the Determination Date for that year (as described in
                    paragraph (a) next below), the present value of the benefits
                    attributable to Key Employees (as defined in subsection A-6)
                    under all Aggregation Plans (as defined in subsection A-9)
                    exceeds 60% of the present value of all benefits under such
                    plans. The foregoing determination shall be made in
                    accordance with the provisions of section 416 of the


                                       A-1


<PAGE>



                    Code. Subject to the preceding sentence:

                    (a)  The Determination Date with respect to any plan for
                         purposes of determining Top-Heavy status for any plan
                         year of that plan shall be the last day of the
                         preceding plan year or, in the case of the first plan
                         year of that plan, the last day of that year. The
                         present value of benefits as of any Determination Date
                         shall be determined as of the accounting date or
                         valuation date coincident with or next preceding the
                         Determination Date. If the plan years of all
                         Aggregation Plans do not coincide, the Top-Heavy status
                         of the Plan on any Determination Date shall be
                         determined by aggregating the present value of Plan
                         benefits on that date with the present value of the
                         benefits under each other Aggregation Plan determined
                         as of the Determination Date of such other Aggregation
                         Plan which occurs in the same calendar year as the
                         Plan's Determination Date.

                    (b)  Benefits under any plan as of any Determination Date
                         shall include the amount of any distributions from that
                         plan made during the plan year which includes the
                         Determination Date or during any of the preceding four
                         plan years, but shall not include any amounts
                         attributable to employee contributions which are
                         deductible under section 219 of the Code, any amounts
                         attributable to employee-initiated rollovers or
                         transfers made after December 31, 1983 from a plan
                         maintained by an unrelated employer, or, in the case of
                         a defined contribution plan, any amounts attributable
                         to contributions made after the Determination Date
                         unless such contributions are required by section 412
                         of the Code or are made for the plan's first plan year.

                    (c)  Benefits attributable to a participant shall include
                         benefits paid or payable to a beneficiary of the
                         participant, but shall not include benefits paid or
                         payable to any participant who has not performed


                                       A-2


<PAGE>



                         services for an Employer or Related Company during any 
                         of the five plan years ending on the applicable 
                         Determination Date; provided however, that if a 
                         participant performs no services for five years and 
                         then performs services, the benefits attributable to 
                         such participant shall be included.

                    (d)  The accrued benefit of any participant who is a Non-Key
                         Employee with respect to a plan but who was a Key
                         Employee with respect to such plan for any prior plan
                         year shall not be taken into account.

                    (e)  The accrued benefit of a Non-Key Employee shall be
                         determined under the method which is used for accrual
                         purposes for all plans of the Employer and Related
                         Companies; or, if there is not such method, as if the
                         benefit accrued not more rapidly than the slowest
                         accrual rate permitted under section 411(b)(1)(C) of
                         the Code.

                    (f)  The present value of benefits under all defined benefit
                         plans shall be determined on the basis of a 6% per
                         annum interest factor and the 1984 Unisex Pension
                         Mortality Table, with a one-year setback.

Key Employee        A-6. The term "Key Employee" means an employee or deceased
                    employee (or beneficiary of such deceased employee) who is a
                    Key Employee within the meaning ascribed to that term by
                    section 416(i) of the Code. Subject to the preceding
                    sentence, the term Key Employee includes any participant in
                    such plan (or beneficiary of such a participant) who at any
                    time during the plan year which includes the Determination
                    Date or during any of the four preceding plan years was:

                    (a)  an officer of any Employer or Related Company with
                         Section 415 Compensation for that year in excess of 50
                         percent of the amount in effect under section Related
                         Company


                                       A-3


<PAGE>



                         during any of the five plan years ending on the 
                         applicable Determination Date; provided however, that 
                         if a participant performs no services for five years 
                         and then performs services, the benefits attributable 
                         to such participant shall be included.

                    (d)  The accrued benefit of any participant who is a Non-Key
                         Employee with respect to a plan but who was a Key
                         Employee with respect to such plan for any prior plan
                         year shall not be taken into account.

                    (e)  The accrued benefit of a Non-Key Employee shall be
                         determined under the method which is used for accrual
                         purposes for all plans of the Employer and Related
                         Companies; or, if there is not such method, as if the
                         benefit accrued not more rapidly than the slowest
                         accrual rate permitted under section 411(b)(1)(C) of
                         the Code.

                    (f)  The present value of benefits under all defined benefit
                         plans shall be determined on the basis of a 6% per
                         annum interest factor and the 1984 Unisex Pension
                         Mortality Table, with a one-year setback.

Key Employee        A-6. The term "Key Employee" means an employee or deceased
                    employee (or beneficiary of such deceased employee) who is a
                    Key Employee within the meaning ascribed to that term by
                    section 416(i) of the Code. Subject to the preceding
                    sentence, the term Key Employee includes any participant in
                    such plan (or beneficiary of such a participant) who at any
                    time during the plan year which includes the Determination
                    Date or during any of the four preceding plan years was:

                    (a)  an officer of any Employer or Related Company with
                         Section 415 Compensation for that year in excess of 50
                         percent of the amount in effect under section
                         415(b)(1)(A) of the Code for the calendar year in which
                         that year


                                       A-4


<PAGE>



                         ends; provided, however, that the maximum number of
                         employees who shall be considered Key Employees under 
                         this paragraph (a) shall be the lesser of 50 or 10% of 
                         the total number of employees of the Employers and the 
                         Related Companies disregarding excludable employees 
                         under Code section 414(q)(8);

                    (b)  one of the 10 employees owning the largest interests in
                         any Employer or any Related Company (disregarding any
                         ownership interest which is less than 1/2 of one
                         percent), excluding any employee for any plan year
                         whose Compensation for that year did not exceed the
                         applicable amount in effect under section 415(c)(1)(A)
                         of the Code for the calendar year in which that year
                         ends;

                    (c)  a 5% owner of any Employer or of any Related Company or

                    (d)  a 1% owner of any Employer or any Related Company
                         having Compensation in excess of $150,000.

Compensation        A.7. The term "Compensation" for purposes of this Supplement
                    A generally means compensation within the meaning of section
                    415(c)(3) of the Code for that year, not exceeding $200,000
                    or such larger amount as may be permitted for any year under
                    Code section 401(a)(17). However, for Plan Years beginning
                    on or after January 1, 1989, solely for purposes of
                    determining who is a Key Employee, the term "Compensation"
                    means compensation as defined in Code section 414(q)(7).

Non-Key Employee    A-8. The term "Non-Key Employee" means any employee (or
                    beneficiary of a deceased employee) who is not a Key
                    Employee. 

Aggregation Plan    A-9.  The term  "Aggregation  Plan"  means Plan the Plan and
                    each other  retirement plan (including any terminated  plan)
                    maintained by an Employer or Related Company which qualified
                    under section 401(a) of the Code and which:

                    (a)  during the plan year which includes the


                                       A-5


<PAGE>



                         applicable Determination Date, or during any of the 
                         preceding four plan years, includes a Key Employee as a
                         participant;

                    (b)  during the plan year which includes the applicable
                         Determination Date or, during any of the preceding four
                         plan years, enables the Plan or any plan in which a Key
                         Employee participates to meet the requirements of
                         sections 401(a)(4) or 410 of the Code; or

                    (c)  at the election of the Employer, would meet the
                         requirements of sections 401(a)(4) and 410 if it were
                         considered together with he Plan and all other plans
                         described in paragraphs (a) and (b) next above.

Required            A-10.  The term "Required Aggregation Plan" means a plan
Aggregation         described in either paragraph (a) or (b) of subsection A-9.
Plan                

Permissive          A-11.  The term "Permissive Aggregation Plan" means a plan
Aggregation         described in paragraph (c) of subsection A-9.
Plan                                

Vesting             A-12. For any Plan Year during which the Plan is Top-Heavy,
                    the Account balances of any Affected Participant who has
                    completed at least 3 Years of Service shall be 100% vested.
                    If the Plan ceases to be Top-Heavy for any Plan Year, the
                    provisions of this subsection A-8 shall continue to apply to
                    (i) the portion of an Affected Participant's Account balance
                    which was accrued and vested prior to such Plan Year
                    (adjusted for subsequent earnings and losses) and (ii) in
                    the case of an Affected Participant who had completed at
                    least 3 Years of Service, the portion of his Account and
                    balance which accrues thereafter.

Minimum             A-13.  For any Plan Year during which the Plan is 
Contribution        Top-Heavy, the minimum amount of Employer contributions and
                    Forfeitures allocated to the Accounts of each Affected
                    Participant who is employed by an Employer or Related
                    Company on the last day of that year (whether or not he has
                    completed 1,000 Hours of Service during that year),


                                       A-6


<PAGE>



                    who is not a Key Employee and who is not entitled to a
                    minimum benefit for that year under any defined benefit
                    Aggregation Plan which is Top-Heavy shall, when expressed as
                    a percentage of the Affected Participant's Compensation be
                    equal to the lesser of:

                    (a)  3%; or

                    (b)  the percentage at which Employer contributions and
                         Forfeitures are allocated to the Accounts of the Key
                         Employee for whom such percentage (when expressed as a
                         percentage of Section 415 Compensation not in excess of
                         $200,000) is greatest.

                    For purposes of the preceding sentence, compensation earned
                    while a member of a group of employees to whom the Plan has
                    not been extended shall be disregarded. Paragraph (b) next
                    above shall not be applicable for any Plan Year if the Plan
                    enables a defined benefit plan described in paragraph A-9(a)
                    or A-9(b) to meet the requirements of sections 401(a)(4) or
                    410 for that year. Employer contributions for any Plan Year
                    during which the Plan is Top-Heavy shall be allocated first
                    to non-Key Employees until the requirements of this
                    subsection A-13 have been met and, to the extent necessary
                    to comply with the provisions of this subsection A-13,
                    additional contributions shall be required of the Employers.

Aggregate           A-14.  For any Plan Year during which the Plan is Top-Heavy,
Benefit Limit       paragraph (2)(B) and (3)(B) of Section 415(e) of the Code
                    shall be applied by substituting "1.0" for "1.25."


                                       A-7