LOAN AND SECURITY AGREEMENT


         THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made and entered into
as of the day of acceptance by and between the DEBTOR GROUP and BANK ONE, TEXAS,
NATIONAL ASSOCIATION:

                               W I T N E S S E T H

         1.       Definitions.  The following definitions shall apply:

                  (a)  "Affiliate"  shall mean any individual or entity directly
         or indirectly controlling, controlled by, or under common control with,
         or otherwise related to any member of the Debtor Group or any Obligated
         Party and shall  include but not be limited to any  partnership,  joint
         venture, joint stock company, corporation, parent company or subsidiary
         or other company or person in which any  Obligated  Party or any person
         related to any Obligated  Party by blood,  adoption or marriage no more
         remotely  than two  degrees  of  relationship  shall own,  directly  or
         indirectly, of record or beneficially, or hold, directly or indirectly,
         the power to control the vote of, more than 10% of the voting stock of,
         or other equity interest in, such entity.

                  (b) "Bank" shall mean BANK ONE, TEXAS,  NATIONAL  ASSOCIATION,
         of Dallas,  Texas,  whose mailing address is 1717 Main Street,  Dallas,
         Texas 75201.

                  (c)  "Borrower"  shall mean The Great  Train  Store  Partners,
         L.P., a limited  partnership  organized and existing  under the laws of
         the State of  Missouri,  whose  chief  executive  office is  located at
         141800 Dallas Parkway, Suite 618, Dallas, Texas 75240.

                  (d)   "Borrowing   Base"  shall  mean,   as  of  any  date  of
         determination, the lesser of (i) $3,000,000, or (ii) the sum of (1) the
         product of (A) the Inventory Advance Rate, and (B) Borrower's  Eligible
         Inventory,  less (2) the  Reserve,  and less (3) the  Letter  of Credit
         Exposure, all determined as of such date of determination.

                  (e)  "Business   Day"  shall  mean  any  calendar  day  except
         Saturday,  Sunday and those legal public holidays specified in 5 U.S.C.
         ss.6103(a), as may be amended from time to time.



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                  (f) "Code" shall mean the Uniform Commercial Code as in effect
         in the  State  of  Texas  on the  date of this  Agreement  or as it may
         hereafter be amended from time to time.

                  (g)   "Collateral"   shall  mean  all  that  certain  property
         described  in Addendum II attached  hereto and  incorporated  herein by
         reference; provided, however, the property described in Schedule 10 (g)
         shall be subject to the liens described in Schedule 10 (g) securing the
         indebtedness described in such schedule.

                  (h)  "Company"  shall mean The Great  Train Store  Company,  a
         Delaware corporation.

                  (i) "Contract  Rate" shall mean a rate calculated on the basis
         of actual days  elapsed but  computed as if each year  consisted of 360
         days,  equal to the sum of (i) the  Base  Rate  (the  "Base  Rate")  of
         interest  as  established  from time to time by Bank as its  commercial
         base rate of interest  publicly  announced from time to time (which may
         not be the lowest,  best or most  favorable rate of interest which Bank
         may  charge  on loans to its  customers),  plus  (ii) one and  one-half
         percent (1.50%) per annum.

                  (j)  "Current   Ratio"  shall  mean  the  ratio  of  Company's
         consolidated  current assets to its  consolidated  current  liabilities
         (including any amounts funded under the Revolving Loans)  determined in
         accordance with GAAP.

                  (k) "Debtor Group" shall mean Company, GTS Partner,  Inc., GTS
         Limited Partner, Inc. and Borrower,  jointly,  severally,  collectively
         and individually.


                  (l)  "Default"  shall  mean  any of the  events  specified  in
         Section 14, regardless of whether there shall have occurred any passage
         of time or giving of notice or both that would be necessary in order to
         constitute such event an Event of Default.

                  (m)  "Default  Rate"  shall mean at the time in question a per
         annum rate equal to the lesser of (i) the Base Rate then in effect plus
         four percent (4.0%), or (ii) the Maximum Rate.

                  (n) "Distributions" shall mean, in respect of any corporation,
         cash distributions or dividends or any other  distributions of property
         on, or in respect of, any class of capital  stock of such  corporation,



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         except  for  distributions  made  solely in shares of stock of the same
         class, and means, in respect of any partnership or other unincorporated
         entity,  cash distributions or any other  distributions of property on,
         or in respect of, any capital or profits  interest in such  partnership
         or other entity.

                  (o)  "Eligible  Inventory"  shall  mean,  as of  any  date  of
         determination (the value determined at the lower of cost or market on a
         first-in,  first-out  basis)  of  all  inventory  owned  by  and in the
         possession of Borrower and located in the United States of America that
         Secured Party,  in its sole credit  judgment,  deems to be eligible for
         borrowing  purposes.  Without limiting the generality of the foregoing,
         unless otherwise agreed by Secured Party, the following is not Eligible
         Inventory:  (a) work-in-progress;  (b) finished goods which do not meet
         the  specifications of the purchase order for such goods; (c) inventory
         which  Secured  Party  determines,   in  its  sole  discretion,  to  be
         unacceptable  for  borrowing  purposes  due  to  age,  quality,   type,
         category,  category margin deterioration and/or quantity; (d) inventory
         with  respect  to which  Secured  Party  does  not have a valid,  first
         priority and fully  perfected  security  interest;  (e) inventory  with
         respect to which  there  exists  any Lien in favor of any Person  other
         than Secured Party (unless such Lien has been  subordinated  upon terms
         and conditions acceptable to Secured Party in its sole discretion); and
         (f)  inventory  situated  at a location  for which there is no landlord
         waiver or mortgagee  waiver,  as appropriate,  in each instance in form
         and substance acceptable to Secured Party in its sole discretion.

                  (p) "Fixed Charge  Coverage  Ratio" means,  as of any date for
         Company on a  consolidated  basis,  the ratio of (i) Net  Income,  plus
         depreciation  and amortization  expense,  plus interest  expense,  plus
         operating lease expense,  to (ii) required  principal  payments made on
         Funded Debt  (excluding  principal  payments on the Revolving Loans but
         including without limitation the principal portion of required payments
         made on capital  leases),  plus operating lease expense,  plus interest
         expense, plus Unfunded Capital Expenditures.

                  (q)  "Funded  Debt"  means,  as of any  date,  the  sum of the
         following  (without  duplication) for Company on a consolidated  basis:
         (i) the  aggregate of all  indebtedness  for borrowed  money as of such
         date, other than current liabilities, (ii) all indebtedness which would
         be classified as "funded indebtedness" or "long-term  indebtedness" (or
         other  similar  classification)  on a  consolidated  balance  sheet  of
         Company  prepared as of such date in  accordance  with GAAP,  (iii) the
         aggregate of all indebtedness outstanding under any revolving credit or
         similar agreement  providing for borrowing (and renewals and extensions
         thereof) over a period of more than one year,  notwithstanding the fact
        


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         that any such indebtedness is created within one year of the expiration
         of such agreement, and (iv) the amount of all obligations in respect of
         capital leases booked in accordance with GAAP.

                  (r) "GAAP" means generally accepted accounting  principles and
         practices, consistently applied.

                  (s)  "Guarantors"  means  Company,  GTS Partner,  Inc. and GTS
         Limited  Partner,   Inc.,  each  of  whom  will  execute  unconditional
         guarantees of the Obligations.

                  (t) "Indemnified Persons" collectively means Secured Party and
         its officers, directors, shareholders, employees, agents, attorneys and
         representatives,  and any Person owned or controlled  by, or which owns
         or controls or is under common control or is otherwise affiliated with,
         Secured Party, and any other Person,  if any, who acquires a portion of
         the Collateral in any manner through Secured Party's exercise of rights
         and remedies under the Loan Documents.

                  (u)  "Inventory  Advance  Rate" shall mean the  percentage  of
         Borrower's  Eligible  Inventory  that  may be used in  determining  the



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         Borrowing  Base.  The Inventory  Advance Rate for each type of Eligible
         Inventory shall be the percentage set forth opposite such type below:

         Type of Eligible Inventory:                 Inventory Advance Rate:
         ---------------------------                 ----------------------
   
         Model and toy trains                                 55%

         Apparel, gifts, souvenirs, books
         videos and other items                               45%

                  Notwithstanding the foregoing,  the advance rate for inventory
         purchased with the proceeds of a commercial  Letter of Credit shall not
         exceed forty percent  (40%) until such time as such  inventory has been
         delivered  to Borrower  and is located at one or more of the  locations
         described on Addendum IV.

                  (v) "Letter of Credit" means, individually,  any commercial or
         standby letter of credit issued by Secured Party pursuant  hereto,  and
         any  renewal or  extension  of any of the  foregoing,  and  "Letters of
         Credit" means all such letters of credit collectively.

                  (w) "Letter of Credit  Exposure"  means,  as of any date,  the
         aggregate  undrawn  maximum  face  amount  of  all  Letters  of  Credit
         outstanding on such date.

                  (x) "Letter of Credit  Obligations"  means any  obligations of
         Borrower under this Agreement in connection with the Letters of Credit.

                  (y) "Loan  Documents"  shall mean this Agreement and all other
         documents and instruments  executed in connection  herewith  (including
         without limitation,  all notes,  documents,  agreements and instruments
         evidencing, securing, governing,  guaranteeing and/or pertaining to the
         indebtedness  created  or  arising  hereunder  and  all  documents  and
         agreements  relating  to any  Letter  of  Credit),  as the  same may be
         amended, restated, renewed, extended, or otherwise modified.

                  (z)      "Maturity Date" shall mean April 30, 1998.

                  (aa)  "Maximum  Rate"  shall  mean at any  particular  time in
         question  the maximum  rate of interest  which,  under  applicable  law
         (including  federal  laws),  may then be charged  on the sums  advanced
         hereunder.




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                  (bb) "Net  Income"  shall  mean,  with  respect to any period,
         consolidated net earnings of the Company for such period, determined in
         accordance with GAAP.

                  (cc)  "Obligated  Party"  shall  mean  any  party  other  than
         Borrower who secures,  guarantees and/or is otherwise  obligated to pay
         all or any portion of the Obligations.

                  (dd) "Obligations"  shall mean (i) all loans or other advances
         made by  Secured  Party  to  Borrower  pursuant  to this  Agreement  or
         otherwise   (including  without  limitation,   all  notes,   documents,
         agreements   and   instruments   evidencing,    securing,    governing,
         guaranteeing  and/or pertaining to the indebtedness  created or arising
         hereunder and all documents  and  agreements  relating to any Letter of
         Credit);  (ii) all future advances or other value, of whatever class or
         for whatever  purpose,  at any time  hereafter made or given by Secured
         Party to  Borrower,  whether  or not the  advances  or value  are given
         pursuant  to  commitment  and  whether or not  Borrower  is indebted to
         Secured  Party at the time of such  advance;  (iii)  any and all  other
         debts,  liabilities  and duties of every kind and character of Borrower
         to Secured Party, whether now or hereafter existing,  and regardless of
         whether such present or future debts,  liabilities or duties are direct
         or  indirect,  primary  or  secondary,  joint,  several,  or joint  and
         several, fixed or contingent, and regardless of whether such present or
         future debts,  liabilities or duties may, prior to their acquisition by
         Secured Party,  be or have been payable to, or be or have been in favor
         of,  some other  person or have been  acquired  by  Secured  Party in a
         transaction  with one other than Borrower (it being  contemplated  that
         Secured Party may make such acquisitions  from others),  howsoever such
         indebtedness shall arise or be incurred or evidenced;  (iv) interest on
         all of the debts,  liabilities  and duties set forth in (i),  (ii), and
         (iii) above; and (v) any and all renewals and extensions of such debts,
         liabilities and duties set forth in (i), (ii), (iii) and (iv) above, or
         any part thereof.

                  (ee) "Person" means an individual,  corporation,  partnership,
         joint venture,  association,  governmental  entity,  court or any other
         entity.

                  (ff)  "Reserve" at any time shall mean (i) an amount from time
         to time  established  by  Secured  Party  in its sole  discretion  as a
         reserve in reduction of the Borrowing Base in respect of  contingencies
         or other potential factors which, in the event they should occur, could
         adversely affect or otherwise reduce the anticipated amount of proceeds
         which could be realized upon  liquidation of Eligible  Inventory,  plus
         (ii) a shrinkage reserve equal to five percent (5%); provided,  however
         that Secured  Party may, in its sole  discretion,  change the shrinkage
         reserve by notice to Borrower. The "Reserve," if any from time to time,
         does not represent cash funds.



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                  (gg) "Revolving Line" means $3,000,000.00.

                  (hh) "Revolving  Loans" shall mean all loans and advances made
         by Secured Party to Borrower pursuant to Section 2 herein.

                  (ii) "Secured  Party" shall mean the Bank,  and its successors
         and assigns, including specifically, any party to whom the Bank, or its
         successors or assigns,  may assign its rights and interests  under this
         Agreement.

                  (jj)  "Tangible  Leverage  Ratio"  means  the  ratio  of Total
         Liabilities to Tangible Net Worth.

                  (kk)  "Tangible  Net Worth" means,  as of any date,  the total
         shareholders'  equity or partners' capital, as appropriate,  (including
         additional paid-in capital and retained earnings) which would appear on
         a balance  sheet of any Person  prepared as of such date in  accordance
         with GAAP, less the aggregate book value of intangible  assets shown on
         such balance sheet, less amounts due from Affiliates.

                  (ll) "Total Liabilities"  means, as of any date,  consolidated
         Funded Debt,  plus  consolidated  current  liabilities,  plus all other
         liabilities  which would be reflected on a  consolidated  balance sheet
         prepared in accordance with GAAP, of the Company.

                  (mm) "Unfunded Capital  Expenditures" means, as of each fiscal
         year end of Company,  the amount of consolidated  capital  expenditures
         for such year that are not financed by either (i) landlord  contractual
         adjustments  and  allowances,  (ii) the proceeds of an equity  infusion
         used for capital  expenditures  during such  period,  or (iii)  capital
         leases or loans.

                  (nn)  "Validity  Guarantors"  means  James H. Levi and  Cheryl
         Taylor, each of whom shall execute validity guarantees.

All words and phrases used herein which are  expressly  defined in Section 1.201
or in Chapter 9 of the Code shall have the meaning  provided for therein.  Other
such words and phrases  defined  elsewhere  in the Code shall have the  meanings
specified  therein  except to the extent  such  meaning is  inconsistent  with a
definition in Section 1.201 or Chapter 9.

         2.       Revolving Loans.

         (a) Revolving  Loans.  Subject to the terms and  provisions  hereof and
provided that no Default or Event of Default has occurred and is continuing  and



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that the aggregate  principal  outstanding on the Revolving  Loans does not then
exceed the Borrowing Base, Secured Party shall, from time to time, make loans to
Borrower secured by the Collateral and evidenced by one or more promissory notes
in the form of  Exhibit  A  hereto.  The  maximum  aggregate  principal  balance
outstanding  at any one time  under  this  Section 2 (a) shall  not  exceed  the
Borrowing  Base as then  determined by the Bank in its sole  discretion.  Unless
accelerated in accordance with the terms hereof,  all outstanding  principal and
unpaid accrued interest constituting Revolving Loans shall be due and payable in
full on the Maturity Date.

         (b) Letters of Credit. Subject to the terms hereof, Secured Party will,
from time to time,  upon  request by Borrower,  issue  Letters of Credit for the
account of Borrower  provided that (i) the Letter of Credit Exposure at any time
(including  the  amount of the  requested  Letter  of  Credit)  does not  exceed
$500,000.00, (ii) Borrower would be entitled to an advance under Section 2(a) in
the amount of the requested Letter of Credit,  (iii) the Letter of Credit is for
the  importation of inventory by Borrower,  and (iv) any Letter of Credit issued
hereunder  shall terminate on or before the Maturity Date. As a condition to the
issuance of any Letter of Credit,  Borrower shall execute and deliver to Secured
Party its customary application and agreement for Letter of Credit and shall pay
to Secured Party, in addition to clerical issuance and transaction costs charged
by Secured Party, a Letter of Credit fee as provided therein, in an amount equal
to one sixth (1/6) of one  percent  (1%) per month of the  unfunded  face amount
thereof.  Each Letter of Credit and each application and agreement for Letter of
Credit shall be issued in form  satisfactory  to Secured Party.  The amount,  if
any, from time to time funded by Secured Party for the account of Borrower under
any Letter of Credit shall be  reimbursed  and paid by Borrower to Secured Party
on demand,  or, at Secured  Party's  option,  charged to Borrower as a Revolving
Loan,  whether or not  Borrower  would be entitled to an advance for such amount
pursuant to Section 2(a).

         3. Security Interest.  As security for all Obligations,  Borrower,  for
value  received,  hereby  transfers  and assigns,  and grants to Secured Party a
continuing  security interest in, all of Borrower's right, title and interest in
and to the Collateral,  whether now owned or hereafter  acquired.  Secured Party
may hold for security any property, securities, guaranties or monies of Borrower
which may at any time come into the  possession  of Secured  Party and may apply
same or the  proceeds  thereof to payment of any  Obligations  then due,  as the
Secured  Party  shall  elect.  To the  extent  that a security  interest  in the
inventory  and/or  the  equipment  of  Borrower  is  granted  to  Secured  Party
hereunder,   such  security  interest  shall  continue  through  all  stages  of
manufacture  and shall,  without  further  act,  attach to the accounts or other
proceeds  resulting from the sale or other  disposition  thereof and to all such
Collateral  as  may  be  returned  to  Borrower  by  its  account  debtors.  The
designation  of  proceeds  does not  authorize  Borrower  to sell,  transfer  or


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otherwise convey any of the Collateral except finished goods inventory  intended
for sale in the ordinary course of Borrower's business.

         4. Interest.  (a) Contract Rate. Borrower agrees to pay, in addition to
all other amounts  payable  hereunder,  interest on the principal  amount of all
sums now or hereafter loaned or advanced by Secured Party to Borrower hereunder,
irrespective  of whether  such  indebtedness  of  Borrower  to Secured  Party be
evidenced  by  promissory  notes,  drafts,   acceptances  or  otherwise,   at  a
fluctuating  rate per annum  from the date any such  indebtedness  is created in
favor of Secured Party until  maturity,  which shall from day to day be equal to
the lesser of (a) the Maximum Rate, or (b) the Contract Rate, each change in the
rate to be charged  hereunder to be effective  without notice to Borrower on the
effective  date of each change in the Maximum Rate or the Base Rate, as the case
may be;  provided,  however,  that if at any time the Contract Rate shall exceed
the Maximum  Rate,  thereby  causing the interest on the  Revolving  Loans to be
limited to the Maximum Rate, then any subsequent  reduction in the Contract Rate
shall not reduce the rate of interest on the  Revolving  Loans below the Maximum
Rate until the total amount of interest  accrued on the  Revolving  Loans equals
the amount of interest which would have accrued thereon if the Contract Rate had
at all times been in effect.

         (b)  General.  If  applicable  law ceases to provide for such a maximum
rate of interest,  the Maximum Rate shall be equal to eighteen percent (18%) per
annum.  Interest accrued  hereunder shall be payable monthly on the first day of
each calendar month. To the extent that any interest due by Borrower is not paid
on the first day of each  month,  Secured  Party may,  at its  option,  add such
accrued  interest  to the  principal  indebtedness  due by  Borrower  under  the
Revolving Loans.  After the occurrence and during the continuance of an Event of
Default,  the  outstanding  principal  balance of the Revolving Loans shall bear
interest at a rate of interest  equal to the Default Rate.  Notwithstanding  any
provisions  contained  iuments,  the  Secured  Party  shall never be entitled to
receive,  collect or apply, as interest on the indebtedness  arising  hereunder,
any amount in excess of the Maximum  Rate and,  in the event the  Secured  Party
ever  receives,  collects or applies as interest  any such  excess,  such amount
which  could be  excessive  interest  shall be applied to the  reduction  of the
unpaid principal  balance of the  indebtedness  arising  hereunder,  and, if the
principal  balance of such  indebtedness  is paid in full, any remaining  excess
shall  forthwith  be paid to the  Borrower.  In  determining  whether or not the
interest  paid or payable  under any  specific  contingency  exceeds the Maximum
Rate,  Borrower and the Secured  Party shall,  to the maximum  extent  permitted
under applicable law, (i) characterize  any  non-principal  payment as a standby
fee, commitment fee, prepayment charge,  delinquency charge or reimbursement for
a third  party  expense,  (ii)  exclude  voluntary  prepayments  and the  effect
thereof,  and (iii)  amortize,  prorate,  allocate  and  spread  in equal  parts
throughout the entire period during which the  indebtedness  was outstanding the



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total  amount of  interest  at any time  contracted  for,  charged or  received.
Subject  to the terms of this  section,  all  non-credit  card  inventory  sales
proceeds  received  by  Secured  Party in payment  of the  Obligations  shall be
subject to a clearance period of two (2) Business Days.

         5. Conditions to Closing.  Prior to or simultaneous  with the execution
and delivery  hereof and as  conditions  precedent to the  obligation of Bank to
make any loan hereunder,  Debtor Group shall deliver,  or cause to be delivered,
to Bank, the following,  all in form and substance  satisfactory to Bank and its
counsel or the following shall be fulfilled to the  satisfaction of Bank, as the
case may be:

                  (a) A Revolving Loan note in the form of Exhibit A executed by
         Borrower.

                  (b)  Unconditional  guaranties of all Obligations  executed by
         the  Guarantors  and  collateral  validity  guarantees  executed by the
         Validity Guarantors.

                  (c)  An  opinion  of  legal   counsel  for  the  Debtor  Group
         satisfactorily  addressing  such matters as may be required by Bank and
         its counsel.

                  (d) A copy of the  partnership  agreement,  and all amendments
         thereto,  forming  Borrower  accompanied  by a  certificate  of limited
         partnership  for  Borrower  duly  filed  in  the  state  of  Borrower's
         formation together with a certificate of the Secretary of State of such
         state  bearing a date no more than  thirty  (30) days prior to the date
         hereof, to the effect that Borrower is a partnership,  validly existing
         in such state.

                  (e)  A  copy  of  the  articles  of  incorporation,   and  all
         amendments  thereto,  of each  member of the Debtor  Group  (other than
         Borrower),  accompanied by the certificate of the Secretary of State of
         the state of incorporation of such member of the Debtor Group bearing a
         date no more than  thirty  (30) days prior to the date  hereof,  to the
         effect that each such copy is correct and complete and that such member
         of the Debtor  Group is a  corporation  duly  incorporated  and validly
         existing in such state,  and  certified by the  corporate  secretary or
         assistant  secretary  of such member of the Debtor Group dated the date
         hereof, as being correct and complete as of the date hereof.

                  (f) A copy of the bylaws, and all amendments  thereto, of each
         member of the Debtor  Group  (other  than  Borrower)  accompanied  by a
         certificate  from  such  Person's  corporate   secretary  or  assistant
         secretary,  dated  the date  hereof,  to the  effect  that such copy is
         correct and complete as of the date hereof.



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                  (g)  Certification of incumbency of officers of each member of
         the Debtor  Group  (other  than  Borrower)  executed  by such  Person's
         president  or vice  president  and  corporate  secretary  or  assistant
         secretary, as of the date hereof,  certifying the name and signature of
         each such officer.

                  (h) A copy of  corporate  resolutions  of each  member  of the
         Debtor Group  approving this Agreement,  authorizing  the  transactions
         contemplated  hereby,  and authorizing and directing a named officer or
         officers  of each  member of the Debtor  Group to sign and  deliver all
         Loan  Documents  to be  executed  by such  Person (or by such Person on
         behalf of Borrower),  duly adopted by such Person's board of directors,
         accompanied by the  certificate of the corporate  secretary,  dated the
         date hereof,  that such copy is a true and complete copy of resolutions
         duly adopted by the board of directors,  and that such resolutions have
         not been amended,  modified,  or revoked in any respect and are in full
         force and effect as of the date hereof.

                  (i) All  financing  statements  required  by Secured  Party in
         connection with perfection of Secured Party's security interests in the
         Collateral  and all  termination  statements  and other  amendments  to
         financing  statements required by Secured Party to make Secured Party's
         security interest in the Collateral a first priority security interest.

                  (j) Evidence of insurance in compliance with the  requirements
         of Section 11(g) and such loss payable  endorsements as may be required
         by Secured Party.

                  (k) Executed landlord's waivers and consents for each location
         leased by Borrower to the extent reasonably obtainable.

                  (l) Receipt  and  satisfactory  review by Secured  Party of an
         acceptable  orderly   liquidation  value  analysis  of  the  inventory,
         machinery, equipment, furniture, and fixtures of Borrower, completed by
         an analyst acceptable to Secured Party.

                  (m) Borrower shall have implemented  administrative procedures
         reasonably  satisfactory to Secured Party,  including,  but not limited
         to,  matters  relating to financial  statements,  cash  concentrations,
         inventory   summaries,   customer  and  employee  lists,   collections,
         borrowing base reporting, projections, and eligibility determination.

                  (n) Complete,  current financial  statements of each Guarantor
         including cash flow and contingent liabilities.



                                    Page 11

<PAGE>

                  (o)  A   subordination   agreement,   in  form  and  substance
         acceptable  to  Secured  Party  in its  sole  discretion,  executed  by
         Company,  Stanley  R.  Herndon,  Michael  D.  Glazer  and James H. Levi
         subordinating  payment of all  indebtedness and obligations of Borrower
         to such Persons to the payment by Borrower of the Obligations.

                  (p)  Such  other  agreements,  instruments,  certificates  and
         financing  statements as Secured Party may reasonably  request in order
         to perfect or protect its  interests and rights in the  Collateral  and
         under the Loan Documents.

                  (q) There shall have  occurred no material  adverse  change in
         the financial condition of any member of the Debtor Group.

                  (r) There  shall not have  occurred  any  default  or event of
         default by any member of the Debtor  Group on any of their  obligations
         to Secured party or to any third parties.

                  (s) No litigation or other legal  proceedings shall be pending
         or  threatened  against any member of the Debtor  Group  which  Secured
         Party  determines,  in  its  sole  discretion,   might  materially  and
         adversely  affect the financial  condition of such Person.  A list, and
         brief explanation,  of all currently pending litigation is set forth in
         Schedule 5(s).

                  (t) A life insurance policy issued by The Travelers  Insurance
         Company for the benefit of Borrower  insuring the life of James H. Levi
         in the amount of $1,000,000.00.

                  (u) Collateral  Assignment of Life Insurance Policy,  executed
         by Borrower and acknowledged by the issuer of the policies described in
         clause (t) above.

                  (v)  Security  agreements  and  assignments  executed  by each
         Guarantor granting to Secured Party a security interest in all property
         described  therein  (including,   without  limitation,  all  agreements
         between  Borrower  and  such  Persons)   together  with  all  financing
         statements and other documents necessary or appropriate to perfect such
         security interests and assignments.

                  (w) Evidence that the Company has converted to equity at least
         $2,000,000.00 in intercompany indebtedness owed by Borrower to Company.



                                    Page 12

<PAGE>

                  (x) Evidence that immediately  after closing and giving effect
         to the initial advance under the Revolving Loan, there remains at least
         $600,000.00 in availability under the Revolving Loan.

                  (y) A trademark  collateral  assignment and security agreement
         executed by Company.

                  (z) UCC-3 partial releases that release all security interests
         held by Stanley R. Herndon,  Michael D. Glazer and James H. Levi except
         for  a  subordinate  security  interest  in  furniture,   fixtures  and
         equipment.

                  (aa) A copy  of each  license  agreement,  royalty  agreement,
         management agreement, fee agreement or other agreement between Borrower
         and any member of the Debtor Group.

                  (bb)  A  payment  account  agreement,  in  form  an  substance
         acceptable to Secured Party in its sole  discretion,  from each bank or
         other financial  institution where Borrower maintains any bank accounts
         or with whom  Borrower has a merchants  service  agreement  relative to
         credit cards accepted by Borrower.

         6. Unused Facility Fee; Collateral  Administration Fee. Borrower agrees
to pay to Secured Party an unused facility fee equal to one-half percent (0.50%)
per annum of the average daily unused  portion of the  Revolving  Line in effect
from  time to time,  payable  monthly  in  arrears,  beginning  July 1, 1996 and
continuing  on the first (1st) day of each month  thereafter  during the term of
this Agreement and upon the termination hereof.  Further, on the first (1st) day
of each  calendar  month  Borrower  shall  pay to  Secured  Party  a  collateral
administration fee equal to $1,250.00 per month.

         7. Assignment of Accounts. The execution and delivery of this Agreement
shall constitute,  with respect to the accounts hereby assigned and pledged,  an
agreement, representation and warranty by Borrower to Secured Party that, except
for the security interest of Secured Party therein:

                  (a)  Borrower  is the sole owner of and has full  unrestricted
         power and right to assign and pledge such  accounts free from any lien,
         security interest or encumbrance.

                  (b) Each account is in existence, unconditional and valid, and
         arose from a bona fide outright sale of personal  property usually sold
         by Borrower,  or for  services  usually  performed by Borrower,  in the



                                    Page 13

<PAGE>

         ordinary course of its business, for liquidated amounts and maturing as
         set forth on its face and that such personal  property has been shipped
         to respective  account debtors or such services have been performed for
         respective account debtors.

                  (c) No account is  subject to any sale,  assignment,  claim or
         security  interest of any character and Borrower will not make any sale
         or other  assignment  thereof  or create  any other  security  interest
         therein.

                  (d) No account is subject to any claim for credit,  deduction,
         allowance  or  adjustment  by an  account  debtor,  or to any  defense,
         dispute,  set-off  or  counterclaim,  and  there  is  no  extension  or
         indulgence with respect thereto.

                  (e) Each  account  will be paid in full at maturity and if not
         paid,  Borrower will, upon demand,  promptly pay the amount represented
         to be owing  thereon  to  Secured  Party for  application  against  the
         Obligations  in such manner as Secured  Party may elect,  or at Secured
         Party's option such unpaid amount may be deducted from any payment then
         or thereafter due from Secured Party to Borrower, and Secured Party may
         retain such account as collateral for any of the Obligations.

         8.  Establishment  of Lock Box. So long as this  Agreement  shall be in
effect or any  Obligations  shall be  outstanding,  Borrower agrees that, at the
request of Secured Party,  all sums payable by any account debtor to Borrower in
payment or on account of any of  Borrower's  accounts  shall be  deposited  in a
payment account (the "Payment Account")  established pursuant to Secured Party's
standard form of Lock Box Agreement  ("Lock Box  Agreement") and maintained with
Secured  Party in the name of Borrower,  marked  "Payment  Account,"  over which
Secured Party alone has power of withdrawal. Such sums shall be deposited in the
form received,  except for the endorsement of Borrower where necessary to permit
collection  of items,  which  endorsement  Borrower  agrees  to make,  and which
Secured Party is also hereby authorized to make on Borrower's  behalf.  Borrower
hereby  agrees,  at the request of Secured  Party,  immediately  upon receipt of
checks,  drafts,  cash and other remittances and payment of or on account of any
of Borrower's accounts,  to immediately deposit all of the same into the Payment
Account.  Borrower hereby also agrees,  upon request by Secured Party, to notify
all of Borrower's present and future account debtors to send all amounts payable
to Borrower to the address indicated in the Lock Box Agreement. Secured Party is
authorized,  empowered  and  directed  to apply any and all funds in the Payment
Account toward the payment of the outstanding  principal amount of, and interest
on, the Obligations then due in such order as Secured Party may determine in its
sole  discretion,  with  any  balance  remaining  after  payment  in full of the
Obligations to be deposited into an account maintained with Secured Party in the
name of Borrower,  marked  "Operating  Account" and over which  Borrower has the
right of withdrawal.



                                    Page 14


<PAGE>


         9.  Establishment of Blocked Account; Collection Account.

                  (a) Blocked  Account.  So long as this  Agreement  shall be in
         effect or any of the Obligations shall be outstanding,  Borrower agrees
         that, at the request of Secured Party, all funds payable by any account
         debtor to Borrower shall be deposited in special deposit accounts (each
         a "Blocked Account") of Borrower set up in one or more banks acceptable
         to Secured Party. In addition,  all funds payable to Borrower under any
         merchants  service  agreements  with any such bank  relating  to credit
         cards  accepted by Borrower  shall also be  deposited  into the Blocked
         Account  maintained  at  such  bank.  Each  Blocked  Account  shall  be
         established  pursuant to a tri-party agreement among Borrower,  Secured
         Party, and such bank (each a "Blocked Account Agreement"),  in form and
         substance   satisfactory  to  Secured  Party,   which  Blocked  Account
         Agreements shall include the following provisions:

                           (1)  Agreement  by  Borrower  that it has no power of
                  withdrawal over the funds in the Blocked Account;

                           (2) Agreement by the bank that it shall neither claim
                  nor exercise any right of off-set or banker's lien against the
                  funds in the Blocked Account;

                           (3) Waiver and  release by the bank to Secured  Party
                  of any  right or claim  which  such bank may have in or to the
                  funds in the Blocked Account;

                           (4) Agreement by the bank to forward daily to Secured
                  Party by wire  transfer  (or by such other  manner of transfer
                  acceptable to Secured Party) all funds in the Blocked  Account
                  to the Collections Account (hereinafter defined) maintained by
                  Borrower with Secured Party;

                           (5)  Assignment  and  pledge by  Borrower  to Secured
                  Party, as additional  collateral security for the Obligations,
                  of all  funds  in  each  Blocked  Account,  and  direction  by
                  Borrower  to each bank  maintaining  a Blocked  Account (i) to
                  hold  such  funds as bailee  for  Secured  Party,  and (ii) to
                  distribute  the funds  daily to  Secured  Party in the  manner
                  specified by Secured Party from time to time;

                           (6)  Agreement  by Borrower  to pay  directly to each
                  bank  maintaining  a Blocked  Account  all costs and  expenses
                  associated with such Blocked Account; and



                                    Page 15

<PAGE>

                           (7)   Agreement   by   Borrower   that   it  may  not
                  unilaterally  terminate  any  Blocked  Account or any  Blocked
                  Account Agreement.

         All funds forwarded to Secured Party from a Blocked Account pursuant to
         this Section shall be deposited in the Collections  Account and applied
         as set forth in Section 9 (b).  The  provisions  of this Section are in
         addition to and not in limitation of the provisions of Section 8.

                  (b) Collection  Account. So long as this Agreement shall be in
         effect  or any  Obligations  shall be  outstanding,  all  funds in each
         Blocked  Account shall be wire  transferred to (or transferred by other
         manner of transfer  acceptable to Secured  Party),  and all collections
         and proceeds of  Collateral  shall be deposited  in, a special  account
         (the "Collections  Account")  maintained with Secured Party in the name
         of Borrower,  marked  "Collections  Account,"  over which Secured Party
         alone has power of withdrawal. Such sums shall be deposited in the form
         received,  except for the  endorsement of Borrower  where  necessary to
         permit collection of items, which endorsement  Borrower agrees to make,
         and which Secured Party is also hereby authorized to make on Borrower's
         behalf.  Borrower  hereby  agrees  immediately  upon receipt of checks,
         drafts,  cash and other remittances and payment of or on account of any
         of Borrower's accounts, to immediately deposit all of the same into the
         Collections  Account.  Borrower  hereby also  agrees,  upon  request by
         Secured Party,  to notify all of Borrower's  present and future account
         debtors  to send to  Secured  Party  any and  all  amounts  payable  to
         Borrower  for  deposit in the  Collections  Account.  Secured  Party is
         authorized,  empowered  and  directed to apply any and all funds in the
         Collections  Account  toward the payment of the  outstanding  principal
         amount of, and interest on, the  Obligations  then due in such order as
         Secured  Party may determine in its sole  discretion,  with any balance
         remaining after payment in full of the Obligations to be deposited into
         an  account  maintained  with  Secured  Party in the name of  Borrower,
         marked  "Operating  Account"  and over which  Borrower has the right of
         withdrawal.

         10. Other  Representations  and Warranties of Borrower.  Each member of
the Debtor  Group,  jointly and  severally,  represents  and warrants to Secured
Party that:

                  (a) Borrower is conducting,  transacting,  and carrying on its
         business  under the name shown  above,  or such  other  names as may be
         specified in Addendum III attached  hereto and  incorporated  herein by
         reference,  and is not  engaged in business  under any other name;  and
         Borrower's  chief  executive  office is that set forth in Section  1(c)
         above, at which office  Borrower keeps,  and will continue to keep, its
         records  concerning  accounts.  Borrower will promptly  notify  Secured
  


                                    Page 16

<PAGE>



         Party in writing of any  change in (i) the name of  Borrower  or any of
         the names under which it is carrying on its  business as  specified  on
         Addendum  III  attached  hereto,  (ii) the address of  Borrower,  (iii)
         Borrower's  primary place of business,  (iv) the location of the office
         where records concerning  accounts are kept, (v) the opening of any new
         place of business, or (vi) the closing of any of its existing places of
         business.

                  (b) Borrower is duly organized and validly  existing under the
         laws  of the  State  of  Missouri,  is  duly  qualified  and is in good
         standing in each and every state in which it is doing business, and has
         all the requisite power and authority to execute this Agreement and the
         other Loan Documents to be executed by Borrower.

                  (c) The execution,  delivery and performance of this Agreement
         and all of the other Loan  Documents by each member of the Debtor Group
         have been duly authorized by all necessary corporate or partnership, as
         the case  may be,  action  by such  member  of the  Debtor  Group,  and
         constitute the legal,  valid and binding  obligations of each member of
         the Debtor  Group,  enforceable  in  accordance  with their  respective
         terms,  except as limited by bankruptcy,  insolvency or similar laws of
         general  application  relating to the enforcement of creditors'  rights
         and except to the extent specific  remedies may generally be limited by
         equitable principles.

                  (d) The execution,  delivery and performance of this Agreement
         and the other Loan Documents,  and the consummation of the transactions
         contemplated  hereby and thereby, do not (i) conflict with, result in a
         violation of, or constitute a default under any provision of any member
         of  the  Debtor   Group's   partnership   agreement   or   Articles  of
         Incorporation  or Bylaws,  as  appropriate,  or any  agreement or other
         instrument  binding upon such member of the Debtor  Group,  or any law,
         governmental  regulation,  court  decree,  or order  applicable to such
         member of the Debtor  Group,  or (ii) require the consent,  approval or
         authorization of any third party.

                  (e) There are no actions, suits or proceedings, pending or, to
         the knowledge of any member of the Debtor Group,  threatened against or
         affecting  any  member of the  Debtor  Group or the  properties  of any
         member  of  the  Debtor  Group,   before  any  court  or   governmental
         department, commission or board, which, if determined adversely to such
         member of the Debtor Group, would have a material adverse effect on the
         financial  condition,  properties,  or operations of such member of the
         Debtor Group.


                                    Page 17

<PAGE>
                  (f) Borrower has not  executed  any other  security  agreement
         currently affecting the Collateral or any financing statement regarding
         the  Collateral,  and  no  financing  statement  executed  by  Borrower
         regarding the Collateral is now on file.

                  (g) Except as  otherwise  set forth on  Schedule  10 (g),  all
         Collateral  is and  will be owned by  Borrower,  free and  clear of all
         other liens, encumbrances,  security interests or claims, shall be kept
         at Borrower's  address  noted above and such other  addresses as may be
         listed in  Addendum  IV  attached  hereto  and  incorporated  hereby by
         reference,  and Borrower shall not (without the prior written  approval
         of  Secured  Party)  remove  the  Collateral  therefrom  except for the
         purpose of sale or use in the ordinary course of business.

                  (h) Each  member of the  Debtor  Group  owns all of the assets
         reflected on its most recent balance sheet  delivered to Secured Party,
         free and clear of all liens,  security interests or other encumbrances,
         except as disclosed in writing to Secured Party on Schedule 10(g).

                  (i) As of the date  hereof,  and after  giving  effect to this
         Agreement and the completion of all other transactions  contemplated by
         Borrower  at the time of its  execution,  (i)  Borrower  is and will be
         solvent,  (ii) the fair saleable value of Borrower's assets exceeds and
         will  continue  to  exceed  Borrower's   liabilities  (both  fixed  and
         contingent),  (iii) Borrower is and will continue to be able to pay its
         debts as they mature,  and (iv)  Borrower has and will have  sufficient
         capital  to carry on its  business  and all  businesses  in which it is
         about to engage.

                  (j) Each  member of the  Debtor  Group has filed all  federal,
         state  and  local  tax  reports  and  returns  required  by any  law or
         regulation to be filed by it and has either duly paid all taxes, duties
         and charges indicated due on the basis of such returns and reports,  or
         made adequate provision for the payment thereof,  and the assessment of
         any  material  amount of  additional  taxes in excess of those paid and
         reported  is not  reasonably  expected.  There  is no tax  lien  notice
         against  any member of the Debtor  Group  presently  on file,  judgment
         entered against any member of the Debtor Group or levy on or attachment
         of its property outstanding.

                  (k)  Borrower  (i)  does not  maintain  or  contribute  to any
         defined  benefit  pension plan ("Plan")  under the Employee  Retirement
         Income Security Act of 1974, as amended from time to time ("ERISA"), or
         (ii) is not in  violation  of any  provisions  of  ERISA,  or any other
         applicable  state or  federal  law  with  respect  to any Plan  that it
         contributes to or maintains.


                                    Page 18

<PAGE>

                  (l) Except as  disclosed  in writing  to  Secured  Party:  (i)
         Borrower is conducting  Borrower's  businesses  in material  compliance
         with  all  applicable   federal,   state  and  local  laws,   statutes,
         ordinances,  rules,  regulations,   orders,  determinations  and  court
         decisions,  including without limitation, those pertaining to health or
         environmental matters such as the Comprehensive Environmental Response,
         Compensation,  and  Liability  Act of 1980, as amended by the Superfund
         Amendments and Reauthorization Act of 1986 (collectively, together with
         any subsequent amendments,  hereinafter called "CERCLA"),  the Resource
         Conservation  and  Recovery  Act of 1976,  as  amended  by the Used Oil
         Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980,
         and the Hazardous  Substance  Waste  Amendments of 1984  (collectively,
         together with any subsequent  amendments,  hereinafter  called "RCRA");
         (ii) none of the  operations  of  Borrower is the subject of a federal,
         state or local  investigation  evaluating whether any material remedial
         action is needed to respond to a release  or  disposal  of any toxic or
         hazardous substance or solid waste into the environment; (iii) Borrower
         has not  filed  any  notice  under  any  federal,  state or  local  law
         indicating  that  Borrower  is  responsible  for the  release  into the
         environment,  the  disposal  on  any  premises  in  which  Borrower  is
         conducting  its  businesses  or the improper  storage,  of any material
         amount of any toxic or  hazardous  substance or solid waste or that any
         such toxic or  hazardous  substance  or solid waste has been  released,
         disposed of or is improperly stored, upon any premise on which Borrower
         is conducting its businesses; and (iv) Borrower otherwise does not have
         any known material contingent  liability in connection with the release
         into the  environment,  disposal or the improper  storage,  of any such
         toxic or  hazardous  substance  or solid  waste.  The terms  "hazardous
         substance"  and  "release",  as used  herein,  shall have the  meanings
         specified in CERCLA,  and the terms "solid  waste" and  "disposal",  as
         used herein, shall have the meanings specified in RCRA.

                  (m) There is no fact  known to any  executive  officer  of any
         member of the  Debtor  Group  that such  Person  has not  disclosed  to
         Secured  Party in  writing  which may  result in any  material  adverse
         change in such member of the Debtor  Group's  business,  properties  or
         operations.

                  (n)  No  certificate  or  statement   herewith  or  heretofore
         delivered  by any  member  of the  Debtor  Group  to  Secured  Party in
         connection herewith, or in connection with any transaction contemplated
         hereby,  contains any untrue  statement of a material  fact or fails to
         state any  material  fact  necessary to keep the  statements  contained
         therein from being misleading.

                  (o) The  representations,  warranties,  and  covenants of each
         member of the  Debtor  Group set forth in this  Agreement  are true and


                                    Page 19

<PAGE>



         correct  as of the  time of the  making  of this  Agreement,  and  each
         request by Borrower for a loan or advance  hereunder shall  constitute,
         without  the  necessity  of  a  written  certificate  or  agreement,  a
         representation and warranty by each member of the Debtor Group that, as
         of the date of such  request and at and as of the time of the making of
         each loan or  advance  hereunder,  (i) all of the  representations  and
         warranties  of  each  member  of the  Debtor  Group  contained  in this
         Agreement are true and correct,  (ii) no material adverse change in any
         member of the Debtor Group's  financial  condition  since the effective
         date of the most recent financial statements furnished to Secured Party
         by  such  member  of  the  Debtor  Group  shall  have  occurred  and be
         continuing, and (iii) no event has occurred and is continuing, or would
         result  from  the  requested  advance,  which  constitutes  an Event of
         Default under this Agreement.

                  (p) Each  financial  statement  of each  member of the  Debtor
         Group  previously  supplied to Secured Party was prepared in accordance
         with GAAP in effect on the date of such  statements  were  prepared and
         truly  discloses and fairly  presents such member of the Debtor Group's
         financial  condition  as of the date of each  statement,  and there has
         been no material adverse change in such financial  condition or results
         of operations of any member of the Debtor Group subsequent to March 31,
         1996,  which  is the  date of the most  recent  consolidated  financial
         statements of the Company supplied to Secured Party.

         11. Affirmative Covenants. So long as this Agreement shall be in effect
or any of the Obligations shall be outstanding, the members of the Debtor Group,
jointly and severally,  agree and covenant that,  unless the Secured Party shall
otherwise consent in writing:

                  (a) Borrower  shall  promptly  inform Secured Party of (i) any
         and all material  adverse  changes in any member of the Debtor  Group's
         financial  condition,  and (ii) all litigation and claims affecting any
         member of the Debtor Group which could materially  affect the financial
         condition of such member of the Debtor Group;

                  (b) Company and each member of the Debtor Group shall maintain
         its books and records in accordance with GAAP,  applied on a consistent
         basis.

                  (c) Borrower  shall  execute and deliver to Secured Party such
         financing  statement or  statements,  in form  satisfactory  to Secured
         Party,  which  Secured Party may at any time desire to file in order to
         perfect and preserve its security  interest in the  Collateral and will
         reimburse  Secured Party for the costs of filing the same; and Borrower
         will take any action  and/or  execute and deliver to Secured  Party any
         instrument,  document,  assignment or other writing which Secured Party
      

                                    Page 20

<PAGE>


         in its reasonable  discretion may deem necessary or appropriate  (i) to
         carry out the terms of this Agreement,  (ii) to perfect Secured Party's
         security  interest in the Collateral,  (iii) to comply with the Federal
         Assignment  of Claims Act, as amended,  and/or (iv) to  facilitate  the
         collection  of  Borrower's  accounts.  Further,  each  Guarantor  shall
         execute  and  deliver to  Secured  Party such  financing  statement  or
         statements,  in form satisfactory to Secured Party, which Secured Party
         may at any time desire to file in order to perfect and preserve secured
         Party's security interest in the collateral in which such Guarantor has
         granted a security interest to Secured Party and will reimburse Secured
         Party for the costs of filing the same;  and each  Guarantor  will take
         any action and/or execute and deliver to Secured Party any  instrument,
         document,  assignment  or other writing which Secured Party in its sole
         discretion may deem necessary or appropriate (i) to carry out the terms
         of this Agreement, (ii) to perfect Secured Party's security interest in
         such collateral,  (iii) to comply with the Federal Assignment of Claims
         Act,  as amended,  and/or (iv) to  facilitate  the  collection  of such
         Person's accounts.

                  (d) Borrower shall,  at its sole cost and expense,  defend any
         action  which might  affect  Secured  Party's  security  interest in or
         Borrower's title to the Collateral.

                  (e) If  sales  of  Collateral  are  made  by  Borrower  in the
         ordinary  course of its business for cash,  Borrower shall  immediately
         deliver to Secured  Party the  identical  checks,  cash or the forms of
         payment which Borrower receives.

                  (f) Borrower shall perform, at its sole cost and expense,  any
         and all steps  requested by Secured  Party to protect  Secured  Party's
         security  interest in the  Collateral,  such as leasing  warehouses  to
         Secured  Party  or  its  designee,   placing  and  maintaining   signs,
         appointing  custodians,  executing and filing financing or continuation
         statements  in  form  and  substance  satisfactory  to  Secured  Party,
         maintaining stock records and transferring Collateral to warehouses. If
         any  Collateral  is in the  possession  or control of any of Borrower's
         agents or processors, Borrower shall notify such agent or processors of
         Secured Party's security  interest  therein,  and upon request instruct
         them to hold all such  Collateral  for the account of Secured Party and
         subject  to Secured  Party's  instructions.  A physical  listing of all
         Collateral,  wherever  located,  shall be taken  by  Borrower  whenever
         requested by Secured  Party,  and a copy of each such physical  listing
         shall be  supplied  to Secured  Party.  Secured  Party may  examine and
         inspect the Collateral at any time.

                  (g) Borrower shall keep or cause to be kept adequately insured
         by financially sound and reputable insurers all of its property usually
         insured  by  persons  or  entities  engaged  in  the  same  or  similar



                                    Page 21

<PAGE>

         businesses.  Without  limiting the foregoing,  Borrower will insure the
         Collateral  in Secured  Party's  name  against  loss or damage by fire,
         theft, burglary,  pilferage, loss in transit, and such other hazards as
         Secured  Party may  specify in amounts  and under  policies by insurers
         acceptable to Secured Party,  and all premiums thereon shall be paid by
         Borrower and the policies delivered to Secured Party. If Borrower fails
         to do so,  Secured Party may procure such insurance and charge the cost
         to Borrower's account. Each policy of insurance covering the Collateral
         shall  provide  that at least ten (10)  days  prior  written  notice of
         cancellation  or notice of lapse must be given to Secured  Party by the
         insurer.

                  (h)  Borrower  shall  keep the  Collateral  in good  order and
         repair and will not waste or destroy the Collateral or any part thereof
         and  will  not  use the  Collateral  in  violation  of any  statute  or
         ordinance.

                  (i)  Borrower  shall  use good  faith  efforts  to cause  each
         mortgagee of real property  owned by Borrower and each landlord of real
         property   leased  by  Borrower  to  execute  and  deliver   agreements
         satisfactory  in form and  substance  to  Secured  Party by which  such
         mortgagee or landlord waives or subordinates  any rights it may have in
         the Collateral.

                  (j) If any  account  debtor  rejects,  returns  or  refuses to
         accept or receive property  represented by any account,  Borrower shall
         notify  Secured Party,  and at the request of Secured Party,  hold such
         property  separate  and apart  from  Borrower's  property  in trust for
         Secured  Party and  subject to its order or  immediately  deliver  such
         property  to  Secured  Party.  Secured  Party  may  accept a return  of
         property  represented by any account  without  discharging or affecting
         the Obligations. Secured Party may take and sell such property for such
         prices  and upon such  terms at public or  private  sale in the  manner
         provided  in the  Code.  At  Secured  Party's  option,  Borrower  shall
         forthwith pay Secured Party the original invoice price of such property
         for application against the Obligations in such manner as Secured Party
         may elect.  In the event such property is resold,  any account  created
         thereby  shall  be  deemed   assigned  and  pledged  to  Secured  Party
         hereunder.

                  (k)  Borrower   shall  give  Secured   Party  or  any  persons
         designated by it, at any time and from time to time, full access to all
         records available to Borrower from any credit reporting service, bureau
         or other similar agency and Secured Party and any persons designated by
         it shall have the right to inspect and make and take away copies of any
         such records.

                  (l) Borrower  shall furnish such  additional  information  and
         statements,  lists of assets and  liabilities,  tax returns,  and other


                                    Page 22

<PAGE>

         reports  with  respect to each member of the Debtor  Group's  financial
         condition  and business  operations  as Secured  Party may request from
         time to time.

                  (m) Secured  Party shall have the right  without  hindrance or
         delay to conduct field  examinations,  to inspect the Collateral and to
         inspect,  audit  and copy  each  member of the  Debtor  Group's  books,
         records,  journals,  correspondence and other records and data relating
         to the  Collateral  or each  member  of the  Debtor  Group's  business.
         Secured  Party is  authorized  to  discuss  each  member of the  Debtor
         Group's affairs with any Person, including without limitation employees
         of such Person,  as Secured Party may deem necessary in relation to the
         Collateral,  the Debtor Group's financial  condition or Secured Party's
         rights under the Loan Documents. Prior to the occurrence of an Event of
         Default,  Secured Party shall not disclose any such  information to any
         third  party  other than its  accountants,  attorneys,  potential  loan
         participants and purchasers, and in response to credit inquiries in the
         ordinary course of business and as may otherwise be required by law.

                  (n)  Borrower  shall  pay and  discharge  when  due all of its
         indebtedness  and  obligations,   including  without  limitation,   all
         assessments,  taxes, governmental charges and levies, of every kind and
         nature,  imposed upon Borrower or its  properties  (including,  without
         limitation,  the Collateral),  income, or profits, prior to the date on
         which  penalties  would attach,  and all lawful claims that, if unpaid,
         might  become  a lien or  charge  upon  any of  Borrower's  properties,
         income, or profits; provided, however, Borrower will not be required to
         pay and discharge  any such  assessment,  tax charge,  levy or claim so
         long as (i) the  legality of the same shall be  contested in good faith
         by appropriate proceedings, and (ii) Borrower shall have established on
         its books adequate reserves with respect to such contested  assessment,
         tax,  charge,  levy or claim in accordance  with GAAP.  Borrower,  upon
         demand of Secured  Party,  will  furnish to Secured  Party  evidence of
         payment of all assessments,  taxes, charges,  levies and claims against
         Borrower or its  properties,  income or profits and will  authorize the
         appropriate  governmental  official to deliver to Secured  Party at any
         time a written statement of any assessments, taxes, charges, levies and
         claims against Borrower or its properties, income or profits.

                  (o)  Borrower  shall  conduct  its  business in an orderly and
         efficient manner consistent with good business  practices,  and perform
         and comply with all  statutes,  rules,  regulations  and/or  ordinances
         imposed by any  governmental  unit upon Borrower and its businesses and
         operations,   including,   without  limitation,   those  pertaining  to
         environmental matters.


                                    Page 23

<PAGE>

                  (p)  Borrower  shall  execute  and  deliver,  or  cause  to be
         executed and delivered,  any and all other  agreements,  instruments or
         documents  which Secured Party may reasonably  request in order to give
         effect to the  transactions  contemplated  under this Agreement and the
         other Loan Documents.

                  (q) Each  member of the Debtor  Group shall do and perform all
         acts required of it under this  Agreement and the other Loan  Documents
         and  furnish to Secured  Party such other  information  respecting  the
         business,  properties or  condition,  or the  operations,  financial or
         otherwise,  of the Debtor Group as Secured  Party may from time to time
         reasonably  request.  Prior to the  occurrence  of an Event of Default,
         Secured  Party shall not  disclose  any such  information  to any third
         party other than its accountants,  attorneys and loan participants, and
         in response to credit  inquiries in the ordinary course of business and
         as may otherwise be required by law.

                  (r)  Company  shall  maintain,  as of the end of  each  fiscal
         quarter and at the end of each fiscal  year,  a  consolidated  Tangible
         Leverage Ratio of no more than 2.0 to 1.0.

                  (s) Company shall maintain, as of each date set forth below, a
         consolidated Tangible Net Worth equal to or greater than the amount set
         forth opposite such date below:

                        Period                 Tangible Net Worth
                        ------                 ------------------

                  June 29, 1996                   $3,600,000.00
                  September 28, 1996              $3,400,000.00
                  December 28, 1996               $5,300,000.00
                  March 29, 1997                  $4,300,000.00
                  June 28, 1997                   $3,300,000.00
                  September 27, 1997              $2,700,000.00
                  December 27, 1997               $6,000,000.00
                  March 28, 1998                  $5,000,000.00

                  (t) Borrower shall at all times  maintain a positive  Tangible
         Net Worth.

                  (u) Company  shall  maintain a Current  Ratio of not less than
         1.5 to 1.0 at each  fiscal  year  end and 1.1 to 1.0 at the end of each
         fiscal quarter (other than the last) of each fiscal year of Company.



                                    Page 24

<PAGE>

                  (v) At the end of each  fiscal  quarter of each fiscal year of
         Borrower,  the ratio of (A) the cost of goods sold by Borrower  for the
         previous 12 months to (B)  Borrower's  average  inventory at book value
         for the same period, shall be greater than or equal to 2.0 to 1.0.

                  (w) Borrower will furnish to Secured Party:

                           (1) As soon as possible  and in any event  within ten
                  (10) days  after the  occurrence  of each  Event of Default or
                  Default  continuing  on  the  date  of  such  statement,   the
                  statement of the President or the Chief  Financial  Officer of
                  the general  partner of Borrower  setting forth the details of
                  such Event of Default or Default and the action which Borrower
                  proposes to take with respect thereto.

                           (2) As soon as  available,  and in any  event  within
                  thirty (30) days after the end of each calendar  month,  (i) a
                  balance sheet,  income statement and statement of cash flow of
                  Company as of the end of such month,  and (ii) a statement  of
                  all  contingent  liabilities  of  Company,  all  in  form  and
                  substance and in  reasonable  detail  satisfactory  to Secured
                  Party  and  duly   certified   (subject  to   year-end   audit
                  adjustments) by the Chief Financial  Officer of Company (A) as
                  being true and correct in all material  aspects to the best of
                  his or her  knowledge,  and (B) as  having  been  prepared  in
                  accordance with GAAP.  Further,  as soon as available,  and in
                  any  event  within  thirty  (30)  days  after  the end of each
                  calendar  month,  (i) a balance  sheet,  income  statement and
                  statement  of  cash  flow  of  Borrower  as of the end of such
                  month,  and (ii) a statement of all contingent  liabilities of
                  Borrower,  all in form and substance and in reasonable  detail
                  satisfactory  to Secured Party and duly certified  (subject to
                  year-end audit  adjustments) by the Chief Financial Officer of
                  the general  partner of Borrower (A) as being true and correct
                  in all material  aspects to the best of his or her  knowledge,
                  and (B) as having been prepared in accordance with GAAP.

                           (3) As soon as  available,  and in any  event  within
                  forty-five  (45) days after the end of each fiscal  quarter of
                  Company,  (i) a consolidated and consolidating  balance sheet,
                  income  statement  and statement of cash flow of Company as of
                  the  end  of  such  quarter,  and  (ii)  a  statement  of  all
                  contingent  liabilities of Company,  all in form and substance
                  and in  reasonable  detail  satisfactory  to Secured Party and
                  duly certified  (subject to year-end audit adjustments) by the

                                    Page 25

<PAGE>

                  Chief  Financial  Officer  of  Company  (A) as being  true and
                  correct  in all  material  aspects  to the  best of his or her
                  knowledge,  and (B) as having been prepared in accordance with
                  GAAP.

                           (4) As soon as available, and in any event within ten
                  (10) days after the filing thereof,  a copy of each 10Q or 10K
                  prepared by Company.

                           (5) As soon as available  and in any event within one
                  hundred  and twenty  (120)  days after the end of each  fiscal
                  year  of  Company,   certified,   audited   consolidated   and
                  consolidating  balance sheet,  income statement,  statement of
                  cash flow and  reconciliation  of capital of Company as of the
                  end of  such  fiscal  year,  together  with a  certificate  of
                  independent   public   accountants   of  recognized   standing
                  acceptable  to  Secured  Party  stating  that in the course of
                  their audit of Company, such accountants obtained no knowledge
                  that an Event of  Default  or  Default,  has  occurred  and is
                  continuing,  or if, in the  opinion  of such  accountants,  an
                  Event of Default or Default has occurred and is continuing,  a
                  statement as to the nature thereof.  For purposes hereof, Peat
                  Marwick  shall  be  deemed   satisfactory   certified   public
                  accountants.

                           (6) As soon as the same is  received  by  Company,  a
                  copy of any  management  letter  delivered  to  Company by its
                  independent accountants.

                           (7) As soon as  available,  and in any event at least
                  30 days  prior  to the  commencement  of each  fiscal  year of
                  Company,  the following financial statements on a one (1) year
                  pro forma basis: (i) consolidated  and  consolidating  balance
                  sheet and  income  statement  of  Company,  and (ii) cash flow
                  statement,  all in form and substance and in reasonable detail
                  satisfactory to Secured Party.

                           (8) Promptly after the commencement  thereof,  notice
                  of all actions,  suits and proceedings before any court or any
                  governmental  department,  commission  or board  involving any
                  member of the Debtor Group.

                           (9) Within forty-five (45) days after the end of each
                  fiscal  quarter  of  Company,  a  certificate  from the  Chief
                  Financial  Officer of Company  stating that each member of the
                  Debtor Group is in full compliance with all of its obligations
                  under this Agreement and the other Loan Documents,  and is not
                  in default  of any term or  provision  hereof or  thereof  and
                  demonstrating compliance (with calculations provided) with all
                  financial  ratios and covenants  set forth in this  Agreement.
                  Such  certificate  shall be in the form of  Exhibit B attached
                  hereto.


                                    Page 26

<PAGE>

                           (10)  Within  thirty  (30) days after the end of each
                  month (i) if  requested  by  Secured  Party,  an  analysis  of
                  Borrower's  accounts  showing an aging of accounts as follows:
                  accounts 30 days old and less;  accounts over 30 days and less
                  than 61 days old;  accounts  over 60 days old and less than 91
                  days  old;  accounts  over 90 days old and less  than 120 days
                  old;  and  accounts  120 days old and older,  (ii) an aging of
                  Borrower's  payables,  (iii) a listing of Borrower's inventory
                  and  inventory  analysis  in such  form as  Secured  Party may
                  request.

                           (11) Daily during any periods in which any  Revolving
                  Loans or Letters of Credit are  outstanding  and weekly at all
                  other times, an activity report setting forth (i) inventory by
                  store,  (ii) inventory by type,  (iii)  inventory  received in
                  dollars and units by store, and (iv) inventory sold in dollars
                  and units by store. Such report shall be in form and substance
                  reasonably acceptable to Secured Party.

                           (12) With each  request for an advance or a Letter of
                  Credit  (but in any  event  not less  often  than  weekly),  a
                  borrowing base report and certificate  signed by the President
                  or Chief Financial Officer of the general partner of Borrower,
                  along with  supporting  documentation,  in form and  substance
                  satisfactory to Secured Party.

                           (13) Upon the request of Secured Party,  an appraisal
                  of all inventory.  Such appraisal shall be at the sole expense
                  of Borrower after the  occurrence and during the  continuation
                  of any Event of Default but otherwise  shall be at the expense
                  of Secured Party.

                           (14)  Such   additional   information   and   reports
                  regarding  inventory  as  Secured  Party may from time to time
                  reasonably request.

                  (x) Company will deliver to its independent public accountants
         contemporaneously   with   the   execution   hereof   the   irrevocable
         instructions, in the form attached as Addendum V, that such accountants
         are to  send  to  Secured  Party  copies  of all  financial  statements
         (whether  preliminary  or final) and  reports  which are  prepared as a
         result  of any  audit  or other  review  of the  operations,  business,
         finances  or  internal   controls   of  Company,   including,   without
         limitation,  any management reports and any reports concerning improper
         accounting  practices,  defalcations,  financial  reporting  errors  or
         misstatements or fraud.


                                    Page 27

<PAGE>

                  (y)  Borrower  will use all  advances  made by  Secured  Party
         pursuant  hereto for working  capital  purposes only and no part of any
         advance  shall  be  used,  directly  or  indirectly,  to pay any  fees,
         royalties or other obligations or indebtedness of Borrower to Company.

                  (z)  Borrower   shall  give  Secured  Party   written   notice
         immediately  upon the occurrence of a default or event of default under
         any  real  property  lease  to  which  the  Borrower  is a party or the
         occurrence of any event or condition  which,  with the giving of notice
         or lapse of time or both, could become a default or event of default.

                  (aa) Unless he dies or becomes permanently disabled,  James H.
         Levi shall at all times be the President and Chief Executive Officer of
         the Company.

         12. Negative Covenants. So long as this Agreement shall be in effect or
any of the Obligations  shall be  outstanding,  each member of the Debtor Group,
jointly and severally, agrees that, without the prior written consent of Secured
Party:

                  (a)  Borrower   shall  not  permit  any  financing   statement
         regarding the  Collateral to be filed other than a financing  statement
         or statements in favor of Secured Party and those described on Schedule
         10 (g).

                  (b) Borrower shall not liquidate, merge or consolidate with or
         into any other entity.

                  (c) Borrower shall not sell,  transfer or otherwise dispose of
         its  inventory  or any of its assets or  properties,  other than in the
         ordinary course of its business.

                  (d) Borrower shall not grant, create,  incur, assume or permit
         to exist  any  security  interest,  lien or  encumbrance  on any of its
         assets or properties,  including the Collateral, except with respect to
         capital leases and liens to secure  indebtedness for tenant  finish-out
         of retail stores,  not to exceed  $2,400,000.00 in the aggregate in any
         fiscal year.

                  (e)   Borrower   shall  not   create,   incur  or  assume  any
         indebtedness  for  borrowed  money or issue or assume  any other  note,
         debenture,  bond or other evidences of indebtedness,  or enter into any
         operating or capital leases, or guarantee any such indebtedness or such
         evidences of  indebtedness  of others,  other than (i)  borrowing  from
         Secured Party,  (ii) capital leases and indebtedness for tenant finish-
         out of retail stores,  not to exceed  $2,400,000.00 in the aggregate in
         any fiscal year, and (iii) other indebtedness (the "Subordinated Debt")



                                    Page 28

<PAGE>

         that has been subordinated to the Obligations pursuant to subordination
         agreements  in form and  substance  acceptable  to Secured Party in its
         sole discretion.

                  (f)  Borrower shall not change its primary line of business.

                  (g)  Borrower  shall not declare or pay any  Distributions  or
         make any other  distribution  with respect to any payment on account of
         the purchase,  redemption,  or other  acquisition  or retirement of any
         interest in Borrower,  or make any payments upon the Subordinated Debt;
         provided,  however,  so long as no  Default  or  Event of  Default  has
         occurred and is  continuing  or will exist after giving  effect to such
         payment,   Borrower  may  make   Distributions   and,  subject  to  the
         limitations set forth in the subordination agreements,  payments on the
         Subordinated Debt.

                  (h)  Except  for  credit  card   transactions   and   accounts
         receivable in the ordinary course of business,  Borrower shall not make
         or permit to exist any loans or advances to any person or entity.

                  (i) Except in the ordinary course of business,  Borrower shall
         not pay or  cause  to be  paid  any  advance  rentals  for  any  leased
         property,  real or  personal,  utilized  by Borrower in the conduct and
         operation of its business.

                  (j)  Borrower  shall not enter  into any  transaction  with an
         Affiliate except on arms-length terms that are as favorable to Borrower
         as could have been obtained from a non-Affiliate.

                  (k)  Borrower  shall  not  make any  Investments  (hereinafter
         defined) except for the following:

                           (i)  loans,  advances  or  investments  the  material
                  details  of  which  have  been  set  forth  in  the  financial
                  statements  of Borrower  heretofore  furnished  to the Secured
                  Party;

                           (ii) investments in direct  obligations of the United
                  States of America or any agency thereof;

                           (iii)  investments in  certificates of deposit issued
                  by Secured Party or certificates of deposit with maturities of
                  less  than one year  issued by other  commercial  banks in the
                  United  States  having   capital  and  surplus  in  excess  of
                  $500,000,000; and


                                    Page 29

<PAGE>

                           (iv) money  market  accounts  established  at Secured
                  Party.

                   As  used  herein,   "Investment"  in  any  Person  means  any
         investment, whether by means of share purchase, loan, advance, purchase
         of debt instrument, extension of credit (other than accounts receivable
         arising  from the sale of goods or services in the  ordinary  course of
         business), capital contribution or otherwise, in or to such Person, the
         guaranty of any indebtedness of such Person or the subordination of any
         claim  against  such  Person to other  indebtedness  of such  person or
         entity.

                  (l) Company shall not permit its Fixed Charge  Coverage Ratio,
         as of the end of any  fiscal  year of  Company,  to be less than 1.2 to
         1.0.

         13.  Rights of  Secured  Party.  Secured  Party  shall  have the rights
contained in this Section at all times during the period of time this  Agreement
is effective.

                  (a) Borrower hereby authorizes  Secured Party to file, without
         the  signature  of  Borrower,  one or more  financing  or  continuation
         statements,   and  amendments  thereto,  relating  to  the  Collateral.
         Borrower   further  agrees  that  a  carbon,   photographic   or  other
         reproduction  of this Agreement or any financing  statement  describing
         any Collateral is sufficient as a financing  statement and may be filed
         in any jurisdiction Secured Party may deem appropriate.

                  (b) Borrower  hereby  irrevocably  appoints  Secured  Party as
         Borrower's attorney-in-fact and proxy, with full authority in the place
         and stead of Borrower  and in the name of Borrower or  otherwise,  from
         time to time in Secured Party's  discretion,  to take any action and to
         execute  any  instrument  which  Secured  Party may deem  necessary  or
         appropriate  to accomplish  the purposes of this  Agreement,  including
         without  limitation:  (i) to obtain and adjust  insurance  required  by
         Secured Party hereunder;  (ii) to demand,  collect,  sue for,  recover,
         compound,  receive and give acquittance and receipts for moneys due and
         to become due under or in respect of the Collateral;  (iii) to receive,
         endorse and collect any checks, drafts or other instruments,  documents
         and chattel paper in connection with clause (i) or (ii) above; and (iv)
         to file any  claims or take any  action or  institute  any  proceedings
         which Secured Party may deem  reasonably  necessary or appropriate  for
         the collection  and/or  preservation  of the Collateral or otherwise to
         enforce the rights of Secured Party with respect to the Collateral.

                  (c) If Borrower  fails to perform any  agreement or obligation
         provided  herein  (including  without   limitation,   the  payment  and
         discharge  of  any  taxes,   liens  or   encumbrances   affecting   the


                                    Page 30

<PAGE>

         Collateral), Secured Party may itself perform, or cause performance of,
         such  agreement  or  obligation,  and the  expenses  of  Secured  Party
         incurred in connection  therewith  shall be a part of the  Obligations,
         secured by the Collateral and payable by Borrower on demand.

                  (d) Secured  Party or any persons  designated by it shall have
         the right to call at each member of the Debtor  Group's place or places
         of business during normal business hours to inspect,  audit,  check and
         make and take away  copies or  extracts  from such member of the Debtor
         Group's   books,   records,   journals,   orders,   receipts   and  any
         correspondence  and other data  relating  to such  member of the Debtor
         Group's  business  or to any other  transactions  between  the  parties
         hereto, without hindrance or delay. Prior to the occurrence of an Event
         of Default,  Secured Party shall not disclose any such  information  to
         any third party other than its  accountants,  attorneys  and  potential
         loan participants and purchasers and in response to credit inquiries in
         the  ordinary  course of business  and as may  otherwise be required by
         law.

                  (e)  All  amounts  and  proceeds  (including  instruments  and
         writings)  received by Borrower  in respect of  Borrower's  accounts or
         general  intangibles  shall be  received  in trust for the  benefit  of
         Secured Party  hereunder and, upon request of Secured  Party,  shall be
         segregated  from other  property  of  Borrower  and shall be  forthwith
         delivered  to Secured  Party in the same form as so received  (with any
         necessary  endorsement),  deposited  in  the  Collections  Account  and
         applied in accordance with Section 9 (b).

                  (f) Secured Party shall have the right of set-off against each
         member of the Debtor  Group for all of the  Obligations  at any and all
         times and in any and all proceedings and instances  including,  but not
         limited to, bankruptcy,  reorganization,  receivership or insolvency of
         Borrower.

         14.  Events  of  Default.  The  occurrence  of any  one or  more of the
following events shall constitute an Event of Default hereunder:

                  (a) The  failure,  refusal  or  neglect  of  Borrower  to make
         payment of the  Obligations or any portion  thereof,  as the same shall
         become due and payable;

                  (b) The  failure  of any  member  of the  Debtor  Group or any
         Obligated  Party to timely and  properly  observe,  keep or perform any
         covenant,  agreement,  warranty  or  condition  required  (i)  in  this
         Agreement,  (ii) in any of the other Loan Documents, or (iii) in any of
         the  Agreements  (as defined  hereinbelow);  and,  with  respect to the
         covenants  set forth in Sections 11 (b),  (d), (i), (j), (k), (l), (o),
         (p), (q), (v) (2),  (6), (7), (13) and (14),  such failure shall not be


                                    Page 31
<PAGE>

         cured  within ten (10) days after the earlier of (A) the date when such
         member of the Debtor Group or such Obligated  Party knew or should have
         known of such failure or (B) Secured Party's notice to Borrower or such
         Obligated Party of such failure;

                  (c) The occurrence of an event of default under (i) any of the
         other Loan Documents, or (ii) any of the Agreements;

                  (d) Any representation  made by any member of the Debtor Group
         or any  Obligated  Party  contained  herein or  contained in any of the
         other Loan  Documents or the  Agreements  is false or misleading in any
         material respect;

                  (e) Any  member of the  Debtor  Group or any  Obligated  Party
         shall  (i) apply  for or  consent  to the  appointment  of a  receiver,
         trustee,  custodian,  intervenor or liquidator of such Person or of all
         or a substantial  part of such Person's  assets,  (ii) file a voluntary
         petition in bankruptcy,  admit in writing that such Person is unable to
         pay such  Person's  debts as they  become  due,  (iii)  make a  general
         assignment for the benefit of creditors, (iv) file a petition or answer
         seeking  reorganization  or an  arrangement  with  creditors or to take
         advantage of any  bankruptcy  or  insolvency  proceeding,  or (vi) take
         corporate or partnership action for the purpose of effecting any of the
         foregoing;

                  (f) An  involuntary  petition  or  complaint  shall  be  filed
         against any member of the Debtor Group or any  Obligated  Party seeking
         bankruptcy or  reorganization  of such Person or the  appointment  of a
         receiver,  custodian, trustee, intervenor or liquidator of such Person,
         or of all or  substantially  all of  such  Person's  assets,  and  such
         petition or complaint  shall not have been dismissed  within sixty (60)
         days of the filing thereof; or an order, order for relief,  judgment or
         decree shall be entered by any court of competent jurisdiction or other
         competent   authority   approving  a  petition  or  complaint   seeking
         reorganization  of such intervenor or liquidator of such Person,  or of
         all or substantially all of such Person's assets;

                  (g) the  failure  of any  member  of the  Debtor  Group or any
         Obligated Party to pay any money judgment  against such Person at least
         thirty (30) days prior to the date on which such Person's assets may be
         sold to satisfy such judgment;

                  (h) the  failure,  within a period of ten (10) days  after the
         commencement thereof, to have discharged any attachment, sequestration,
         or similar  proceedings against any member of the Debtor Group's or any
         Obligated Party's assets;


                                    Page 32

<PAGE>
                  (i) the guaranty agreement executed by any Guarantor shall for
         any reason  cease to be in full force and effect,  or be declared  null
         and void or  unenforceable  in whole or in  part;  or the  validity  or
         enforceability of such guaranty agreement shall be challenged or denied
         by such Guarantor;

                  (j) The filing of a tax lien notice by the United States,  any
         state  or  any  governmental  subdivision  thereof  against  any of the
         property of any member of the Debtor Group;

                  (k)  The  Collateral  or  any  portion  thereof  is  taken  on
         execution or other process of law in any action against Borrower;

                  (l) Borrower  abandons the  Collateral or any portion  thereof
         except for obsolete or unsalable  items of nominal value disposed of in
         the ordinary course of Borrower's business;

                  (m) The holder of any lien or security  interest on any of the
         assets  of  Borrower,  including  without  limitation,  the  Collateral
         (without  hereby implying the consent of Secured Party to the existence
         or creation of any such lien or security  interest on the  Collateral),
         declares  a  default  thereunder  or  institutes  foreclosure  or other
         proceedings for the enforcement of its remedies thereunder;

                  (n) The  occurrence of a default or event of default under any
         other  indebtedness of any member of the Debtor Group or the occurrence
         of any event or condition which,  with the giving of notice or lapse of
         time or both,  could  become a default or event of  default  under such
         other indebtedness;

                  (o) The liquidation,  dissolution,  merger or consolidation of
         any member of the Debtor Group or any Obligated Party;

                  (p)  Should  any  party  to  a  subordination  agreement  that
         subordinates  any indebtedness to the Obligations fail to fully perform
         the terms of such subordination agreement; or

                  (q) The  occurrence of a default or event of default under any
         real property  lease to which the Borrower is a party or the occurrence
         of any event or condition which,  with the giving of notice or lapse of
         time or both could become a default or event of default.


                                    Page 33

<PAGE>

         15. Remedies.  Upon the occurrence of any Event of Default,  and at any
time  thereafter,  Secured Party shall have, in addition to all other rights and
remedies  provided  herein,  in any other  agreement  between  Secured Party and
Borrower or by law, the remedies of a secured  party under the Code,  including,
but not limited to, the right to take possession of the Collateral, and for that
purpose,  Secured  Party may, so far as Borrower  can give  authority  therefor,
enter upon any premises on which the  Collateral  may be situated and remove the
same  therefrom.  The rights and  remedies  referred  to in this  Agreement  are
cumulative,  and in addition to the general  remedies set forth  above,  Secured
Party shall have the following specific remedies upon the occurrence of an Event
of Default:

                  (a) At its option,  Secured  Party may  terminate  any further
         loans or  advances to  Borrower  hereunder  and may refuse to issue any
         Letters of Credit.  Further,  Secured  Party may require that  Borrower
         deposit with Secured Party in cash the Letter of Credit Exposure.

                  (b) The entire unpaid balance of the Obligations then owing by
         Borrower to Secured Party (including, without limitation, the Revolving
         Loans) shall,  at the option of Secured Party,  become  immediately due
         and payable without notice of default, presentment, demand for payment,
         notice of intent to  accelerate,  notice of  acceleration  or dishonor,
         protest or notice of protest or non-payment, or any other notice of any
         kind  whatsoever,  all of  which  are  expressly  waived,  jointly  and
         severally, by each member of the Debtor Group; provided,  however, upon
         the occurrence of any of the Events of Default  described in Section 14
         (e) or (f), the entire unpaid balance of the Obligations shall, without
         any action by Secured Party, immediately become due and payable without
         notice of default, presentment, demand for payment, notice of intent to
         accelerate,  notice of acceleration  or dishonor,  protest or notice of
         protest or non-payment, or any other notice of any kind whatsoever, all
         of which are expressly waived, jointly and severally, by each member of
         the Debtor Group.

                  (c) At its  option,  Secured  Party may  require  Borrower  to
         assemble the  Collateral  and make it  available to Secured  Party at a
         place to be designated by Secured Party which is reasonably  convenient
         to Secured  Party.  Unless the Collateral is perishable or threatens to
         decline  speedily  in  value  or is of a  type  customarily  sold  on a
         recognized market,  Secured Party will give Borrower  reasonable notice
         of the time and place of any public  sale  thereof or of the time after
         which any private sale or any other intended  disposition thereof is to
         be made.  The  requirements  of reasonable  notice shall be met if such
         notice is mailed,  postage prepaid,  to Borrower at least five (5) days
         before  the  time  of  sale  or  other  intended   disposition  of  the
         Collateral.


                                    Page 34

<PAGE>

                  (d) Secured Party may at any time in its  discretion  transfer
         any other property  constituting  the  Collateral  into its own name or
         that of its nominee and receive the income thereon and hold the same as
         security for the  Obligations  or apply it to the principal or interest
         due on the Obligations,  as the Secured Party may elect.  Secured Party
         may demand, collect, receipt for, settle, compromise,  adjust, sue for,
         foreclose,  or  realize  upon  the  Collateral  as  Secured  Party  may
         determine,  whether or not any of the Obligations are then due; and for
         the  purpose  of  asserting,  protecting  or  enforcing  any of Secured
         Party's rights therein, Secured Party may receive, open, and dispose of
         mail addressed to Borrower and endorse  notes,  checks,  drafts,  money
         orders, documents of title, or other evidences of payment, shipment, or
         storage of any part of the  Collateral  on behalf of and in the name of
         Borrower.

                  (e) Borrower  shall pay to Secured Party on demand any and all
         reasonable expenses,  including legal expenses,  attorneys' fees, court
         costs,  collection costs, and traveling  expenses,  incurred or paid by
         Secured Party in  protecting or enforcing any of its rights  hereunder,
         including  its right to take  possession  of the  Collateral,  to hold,
         store,  prepare for sale, sell, or otherwise dispose of the Collateral,
         and in collecting  the proceeds  thereof.  After  deducting all of such
         expenses,  the  residue of any  proceeds of  collection  or sale of the
         Collateral  shall be applied to the payment of the  Obligations in such
         order of preference as Secured Party may  determine,  proper  allowance
         for  interest on  Obligations  not then due being made,  and any excess
         shall be returned to Borrower, and Borrower shall remain liable for any
         deficiency.  Secured  Party is hereby  authorized  to add, from time to
         time, all such expenses to the balance of indebtedness  due by Borrower
         to  Secured  Party,  and  such  expenses  shall  become  a part  of the
         Obligations.

         16. Other Agreements. If at any time any member of the Debtor Group and
Secured  Party  are  parties  to any  other  financing  agreements  (all of such
agreements,   whether  one  or  more,  being  hereinafter  referred  to  as  the
"Agreements"),  and if the  Agreements (or any of them, if more than one) should
be  breached  in whole or in part by any  member of the  Debtor  Group or should
terminate  for any reason  whatsoever,  such event shall  constitute an Event of
Default hereunder. Any sums due hereunder or under the Agreements, or any one or
more of them,  may be  collected  by Secured  Party out of sums or  credits  due
Secured Party under the terms of this Agreement or the Agreements, or any one or
more of  them,  and any  collateral  or  security  for the  performance  of this
Agreement or any of the Agreements may be realized upon by Secured Party for the
satisfaction of any  indebtedness  arising with respect to this Agreement or any
of the  Agreements.  The Debtor  Group and Secured  Party  hereby agree that all
indebtedness,  securities  and remedies  available  to Secured  Party under this
Agreement or the Agreements may be utilized by Secured Party for the enforcement
of its rights and the collection of any  indebtedness  due it under the terms of


                                    Page 35

<PAGE>

this  Agreement  or the  Agreements,  the rights and  remedies of Secured  Party
hereunder  being  cumulative of all other rights and remedies of Secured  Party,
and not in substitution thereof or as an alternative thereto.

         17. Term.

                  (a) This Agreement  shall become  effective upon acceptance by
         Secured Party, as of the date hereinafter set forth, and shall continue
         in full force and effect until the Maturity Date (the  "Initial  Term")
         unless  earlier  terminated  by Secured  Party in  connection  with the
         exercise  of its rights and  remedies  under  this  Agreement  upon the
         occurrence of an Event of Default.

                  (b) If Borrower  terminates this Agreement prior to the end of
         the Initial Term, Borrower acknowledges that (i) such termination would
         result in the loss to Secured  Party of the benefits of this  Agreement
         and that the  damages  incurred  by  Secured  Party as a result of such
         termination  are and would be  difficult of  ascertainment  and (ii) no
         such termination  shall be effective until Borrower has paid to Secured
         Party all of the Obligations in immediately  available funds,  together
         with a sum certain as liquidated damages,  being Borrower's and Secured
         Party's best and fairest  estimate of Secured Party's damages caused by
         such  termination,  equal to two  percent  (2.0%) of the  average  loan
         balance of the Revolving Loans for the twelve consecutive months ending
         on the date the  Revolving  Loans  are paid in full if the  termination
         occurs on or before the first  anniversary  of this  Agreement  and one
         percent  (1.0%) of the average loan balance of the Revolving  Loans for
         the twelve  consecutive  months ending on the date the Revolving  Loans
         are paid in full if the termination  occurs after the first anniversary
         but before the second anniversary of this Agreement.

                  (c)  Notwithstanding  anything to the  contrary,  any proposed
         termination of this  Agreement,  shall not be effective,  and shall not
         release or affect the Collateral  already  assigned to Secured Party or
         any Obligations incurred or rights accrued hereunder,  unless and until
         all  Obligations,  whether  incurred  pursuant  to  this  Agreement  or
         otherwise, have been paid in full and all Letters of Credit have either
         expired by their terms or have been returned to Secured Party undrawn.

                  (d)  Upon  the  payment  in  full of the  Obligations  and the
         expiration  or return of all  Letters of Credit,  Secured  Party  shall
         release all collateral (including the Collateral) for the Obligations.


                                    Page 36

<PAGE>


         18. Miscellaneous.

                  (a) Waiver of Rights.  Each member of the Debtor  Group waives
         notice of default, nonpayment,  presentment,  notice of demand, demand,
         notice of intention to accelerate,  notice of acceleration,  protest or
         notice thereof and all other notices of any kind whatsoever.

                  (b)  Entire  Agreement.  This  Agreement  contains  the entire
         agreement of Secured Party and the Debtor Group.  If the parties hereto
         are parties to any prior agreement, either written or oral, relating to
         the subject matter hereof,  the terms of this Agreement shall amend and
         supersede the terms of such prior  agreements as to  transactions on or
         after  the  effective  date  of  this   Agreement,   but  all  security
         agreements,  financing  statements,  guaranties,  other  contracts  and
         notices for the benefit of Secured  Party shall  continue in full force
         and effect to secure all Obligations of Borrower to Secured Party under
         the terms hereof or thereof unless Secured Party specifically  releases
         its rights thereunder by separate release.

                  (c) Fees and  Expenses.  Borrower  agrees that all  reasonable
         fees and expenses,  including,  without limitation,  legal, accounting,
         audit and field  examination  fees and  expenses,  incurred  by Secured
         Party in  connection  with the  preparation  of this  Agreement and the
         other Loan Documents,  the closing of any loan secured  hereby,  and in
         administering this Agreement and the matters referenced herein shall be
         paid and borne by Borrower,  and Secured Party is hereby  authorized by
         Borrower to deduct all such fees and expenses  from the proceeds of any
         loan  secured  hereby or to add,  from time to time,  all such fees and
         expenses  to the  balance  of the  Revolving  Loan due by  Borrower  to
         Secured Party hereunder, with such fees and expenses becoming a part of
         the Obligations. Field examination expenses will be charged to Borrower
         as  follows:  actual  out of pocket  expenses  for  examiner's  travel,
         lodging and meals plus $500.00 per day per examiner; provided, however,
         so  long  as no  Default  or  Event  of  Default  has  occurred  and is
         continuing,  Borrower  shall not be  required to pay for more than four
         (4) field exams in year one nor more than two (2) exams in year two and
         fees for  exams in year one shall not  exceed  $20,000.00  and fees for
         exams in year two  shall  not  exceed  $15,000.00.  Secured  Party  may
         conduct such additional examinations as it may desire at the expense of
         Secured Party.  After the occurrence and during the  continuation of an
         Event of Default,  there is no limit on the number of examinations that
         may be conducted by Secured Party and Borrower  shall be liable for all
         reasonable fees and expenses  arising in connection  therewith.  Actual
         costs for the initial  field  examination  conducted  prior to the date
         hereof shall be  reimbursed to Secured Party by Borrower at closing and
         shall not be  included  in  examinations  fees paid by Borrower in year
         one.


                                    Page 37

<PAGE>

                  (d) Account  Debtor  Notification.  Borrower will  immediately
         notify  Secured Party in the event (i) that any account debtor fails to
         accept,  refuses to accept,  returns,  offers to return or revokes  the
         acceptance  of  any  personal  property  which  is the  subject  of any
         account, (ii) of the bankruptcy,  insolvency or financial embarrassment
         of any account  debtor,  and (iii) of any claim asserted by any account
         debtor  for  credit,   allowance,   adjustment,   dispute,  set-off  or
         counterclaim.  Borrower will immediately, upon receipt thereof, endorse
         and  deliver  to  Secured  Party  any  and  all  checks,  notes,  trade
         acceptances,  drafts or other instruments with respect to or in payment
         of any account or any chattel  paper with respect to personal  property
         or services performed giving rise to any account.

                  (e)  Effectiveness  of Agreement.  This Agreement shall become
         effective  only upon  acceptance  by  Secured  Party at its  offices in
         Dallas,  Texas. All transactions  hereunder shall take place at Secured
         Party's offices in Dallas, Texas.

                  (f)  Waiver.  Neither the failure nor any delay on the part of
         Secured Party to exercise any right, power or privilege herein or under
         any of the Loan Documents shall operate as a waiver thereof,  nor shall
         any  single or  partial  exercise  of such  right,  power or  privilege
         preclude any other or further  exercise  thereof or the exercise of any
         other right,  power or  privilege.  No waiver of any  provision in this
         Agreement  or in any of the other Loan  Documents  and no  departure by
         Borrower  therefrom  shall be  effective  unless  the same  shall be in
         writing and signed by Secured  Party,  and then shall be effective only
         in the specific instance and for the purpose for which given and to the
         extent specified in such writing.

                  (g) Amendment.  No modification or amendment to this Agreement
         or to any of the  other  Loan  Documents  shall be  valid or  effective
         unless the same is signed by the party  against whom it is sought to be
         enforced.

                  (h) Parties In Interest.  This Agreement shall be binding upon
         the parties  and their  successors  or assigns,  and shall inure to the
         benefit of the parties and the  successors or assigns of Secured Party,
         but shall  not  inure to the  benefit  of any  heirs,  representatives,
         successors or assigns of Borrower.

                  (i) Venue.  All warranties and  representations  of the Debtor
         Group  contained  herein and any  payment on any  indebtedness  secured
         hereby  have been or shall be made in  Dallas  County,  Texas,  and all
         parties  hereto  agree that venue is proper only in such  county,  that
         such  county  is a  convenient  forum in which to  decide  any  dispute
         arising hereunder and to submit themselves to the personal jurisdiction
         of the courts located in such county.


                                    Page 38
<PAGE>

                  (j)  Governing  Law.  The  laws  of  Texas  shall  govern  the
         construction  of this  Agreement and the rights,  remedies,  duties and
         obligations  of the  parties  hereto with  respect to all  transactions
         hereunder and any and all Collateral, to the extent that federal law is
         not applicable.

                  (k) Cumulative  Rights.  All rights of Secured Party under the
         terms of this Agreement shall be cumulative of, and in addition to, the
         rights of Secured Party under any and all other agreements  between any
         member  of the  Debtor  Group and  Secured  Party  (including,  but not
         limited  to,  the  other  Loan  Documents  and  any  other   agreements
         referenced herein), and not in substitution or diminution of any rights
         now or  hereafter  held by Secured  Party  under the terms of any other
         agreement.

                  (l)  Notices.  Any notice or other  communication  required or
         permitted  hereunder  shall be in  writing  and shall be deemed to have
         been given when  personally  delivered or when  deposited in the United
         States mail, registered or certified, postage prepaid, and addressed as
         follows:

             If to Borrower or any
             member of the Debtor

             Group:                    The Great Train Store Partners, L.P.
                                       14180 Dallas Parkway, Suite 618
                                       Dallas, Texas 75240
                                       Attention:  Ms. Cheryl Taylor

             with a copy to:           Michael E. Long, Esq.
                                       Blumenfeld, Kaplan & Sandweiss, P.C.
                                       168 North Meramec Avenue, Suite 400
                                       St. Louis, Missouri 63105

             If to Secured Party:      BANK ONE, TEXAS, NATIONAL ASSOCIATION
                                       P.O. Box 660094
                                       Dallas, Texas 75266-0094
                                       Attn:  Asset Based Lending Group

         Each of the  parties  hereto  shall be  entitled to specify a different
         address  by  giving  written  notice  to  the  other  party  hereto  in
         accordance with this Subsection.

                  (m) Indemnification. Borrower hereby indemnifies and agrees to
         hold harmless and defend all  Indemnified  Persons from and against any
         and all Indemnified  Claims.  Upon  notification  and demand,  Borrower


                                    Page 39

<PAGE>

         agrees to provide  defense of any  Indemnified  Claim and pay all costs
         and reasonable  expenses of counsel selected by any Indemnified  Person
         in respect thereof. The indemnification  provided for in this paragraph
         shall survive any  termination of this Agreement and shall continue for
         the benefit of all Indemnified Persons. Except as specifically provided
         in this  paragraph,  Borrower  waives all notices from any  Indemnified
         Person  with   respect  to  such   indemnification.   As  used  herein,
         "Indemnified Claims" means any and all claims, demands, actions, causes
         of action,  judgments,  obligations,  liabilities,  losses, damages and
         consequential  damages,  penalties,  fines,  costs, fees,  expenses and
         disbursements  (including  without  limitation,   reasonable  fees  and
         expenses of attorneys and other professional consultants and experts in
         connection  with  investigation  or defense)  of every  kind,  known or
         unknown,  existing or hereafter arising,  foreseeable or unforeseeable,
         which may be imposed upon,  threatened or asserted against, or incurred
         or paid by, any  Indemnified  Person at any time and from time to time,
         because of,  resulting from, in connection  with, or arising out of any
         transaction,  act, omission, event or circumstance in any way connected
         with the  Collateral or the Loan  Documents  (including  enforcement of
         Secured Party's rights thereunder or defense of Secured Party's actions
         thereunder and  specifically  including any and all Indemnified  Claims
         arising  from Secured  Party's  ordinary  negligence,  but in any event
         excluding Secured Party's gross negligence or intentional misconduct or
         breach of any Loan  Document) or any breach by any member of the Debtor
         Group or any Obligated Party of any representation, warranty, covenant,
         agreement or condition contained in any Loan Document.

                  (n) Descriptive  Headings.  The captions in this Agreement are
         for  convenience  only and  shall not  define  or limit the  provisions
         hereof.

                  (o)  Participation  of Obligations.  Each member of the Debtor
         Group agrees that Secured Party may, at its option,  sell  interests in
         the  Obligations  and its rights  under this  Agreement  to a financial
         institution  or  institutions  and, in connection  with each such sale,
         Secured  Party  may  disclose  any  financial  and  other   information
         available  to  Secured  Party  concerning  the  Debtor  Group  to  each
         prospective  purchaser.  Secured  Party  shall  require  that  any such
         purchaser  (or  potential  purchaser)  agree to keep  such  information
         confidential to the same extent that Secured Party is required to do so
         hereunder; provided, however, Secured Party shall have no liability for
         the failure of such Person to comply with such agreement.

                  (p) Invalid Provisions.  If any provision of this Agreement or
         any of the other  Loan  Documents  is held to be  illegal,  invalid  or
         unenforceable  under present or future laws,  such  provision  shall be
         fully  severable and the remaining  provisions of this Agreement or any


                                    Page 40

<PAGE>



         of the other Loan  Documents  shall remain in full force and effect and
         shall  not  be  affected  by  the  illegal,  invalid  or  unenforceable
         provision or by its severance.

         IN WITNESS THEREOF,  this Agreement is executed,  to be effective as of
the date of acceptance by Secured Party.

                                            BORROWER:

                                            The Great Train Store Partners, L.P.

                                            By:  GTS Partner, Inc.



                                            By:_________________________________
                                               Cheryl Taylor, Vice President

                                            ADDITIONAL MEMBERS OF THE
                                            DEBTOR GROUP:

                                            The Great Train Store Company


                                            By:_________________________________
                                               Cheryl Taylor, Vice President


                                            GTS Partner, Inc.


                                            By:_________________________________
                                               Cheryl Taylor, Vice President





                                    Page 41

<PAGE>



                                            GTS Limited Partner, Inc.

                                            
                                            By:_________________________________
                                               Cheryl Taylor, Vice President


ACCEPTED at Dallas, Texas, 
this 7th day of June, 1996:

BANK ONE, TEXAS, NATIONAL ASSOCIATION


By:_______________________________
   Mark Champion, Vice President



                                    Page 42

<PAGE>

                                   ADDENDUM I
                                       TO
                           LOAN AND SECURITY AGREEMENT
                               Dated June 7, 1996
                                 By and Between
                      BANK ONE, TEXAS, NATIONAL ASSOCIATION
                                       AND
                      THE GREAT TRAIN STORE PARTNERS, L.P.

      This Addendum I intentionally left blank.



                                    Page 43


<PAGE>

                                   ADDENDUM II
                                       TO
                           LOAN AND SECURITY AGREEMENT
                               Dated June 7, 1996
                                 By and Between
                      BANK ONE, TEXAS, NATIONAL ASSOCIATION
                                       AND
                      THE GREAT TRAIN STORE PARTNERS, L.P.


      The Collateral, as defined and referred to in Section 1(g), shall mean:

      See Schedule A attached hereto and incorporated herein by reference.





                                    Page 44

<PAGE>

                                   SCHEDULE A
                                       TO
                           LOAN AND SECURITY AGREEMENT
                               Dated June 7, 1996
                                 By and Between
                      BANK ONE, TEXAS, NATIONAL ASSOCIATION
                                       AND
                      THE GREAT TRAIN STORE PARTNERS, L.P.

All of the following property, whether now owned or hereafter acquired:

         1. All present and future  accounts,  chattel paper,  contract  rights,
documents, instruments, investment property, security accounts, security deposit
accounts and general intangibles  (including,  without limitation,  any right to
payment for goods sold or services  rendered arising out of the sale or delivery
of personal property or work done or labor performed by Borrower and any and all
income tax  refunds),  now or hereafter  owned,  held,  or acquired by Borrower,
together with any and all books of account,  customer lists (including,  without
limitation,  the  Conductors  Club  database and member list) and other  records
relating in any way to the  foregoing,  and in any case where an account  arises
from the sale of goods,  the interest of Borrower in such goods;  together  with
any and all  PROCEEDS  of any of the  foregoing  property,  including  insurance
payable by reason of loss or damage to such property.

         2. All present and  hereafter  acquired  inventory  (including  without
limitation,  all  raw  materials,  work-in-process  and  finished  goods)  held,
possessed,  owned, held on consignment,  or held for sale or return, in whole or
in part, by Borrower  wherever  located,  and further including all PRODUCTS and
all PROCEEDS of the foregoing,  including insurance payable by reason of loss or
damage to such property. The designation of proceeds does not authorize Borrower
to sell,  transfer or  otherwise  convey any of the  property  described  herein
except  finished  goods  intended  for sale in the usual  course  of  Borrower's
business.

         3. All equipment  and fixtures of whatsoever  kind and character now or
hereafter possessed, held, acquired by Borrower and used or usable in Borrower's
business together with all replacements,  accessories,  additions, substitutions
and  accessions to all of the  foregoing,  and all PROCEEDS  thereof,  including
insurance payable by reason of loss or damage to such property.  The designation
of proceeds does not authorize  Borrower to sell,  transfer or otherwise  convey
any of the property  described herein. To the extent that the foregoing property


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<PAGE>

is located on, attached to, annexed to, related to, or used in connection  with,
or  otherwise  made a part  of,  and is or  shall  become  fixtures  upon,  real
property,  such real  property  and the record  owner  thereof is  described  on
Exhibit B attached hereto.

         4. All computer programs,  software,  management  information  systems,
firmware,  routines, systems,  algorithms,  codes, printouts and instructions of
any  kind,  whether  now  owned or  after-acquired,  for use on any  variety  of
computing machinery, whether in machine or human-readable form, and stored in or
on media of any kind, including,  without limitation, tape, disk, card, strip or
cartridge  (whether  paper,  magnetic or  optical),  and  electronic  circuitry,
together with all instruction manuals or documentation of any kind, stored in or
on media of any kind,  pertaining in any way to the property  described  herein,
and all  PROCEEDS  thereof,  including  insurance  payable  by reason of loss or
damage to such property. The designation of proceeds does not authorize Borrower
to sell, transfer or otherwise convey any of the property described herein.

         5. Borrower's  merchants  service  agreement(s)  relating to all credit
cards accepted by Borrower.

         6.  All  trademarks,  trade  names,  licenses  and  other  intellectual
property of Borrower.



                                    Page 46

<PAGE>

                                  ADDENDUM III
                                       TO
                           LOAN AND SECURITY AGREEMENT
                               Dated June 7, 1996
                                 By and Between
                      BANK ONE, TEXAS, NATIONAL ASSOCIATION
                                       AND
                      THE GREAT TRAIN STORE PARTNERS, L.P.

         The other names referenced in Section 10(a) are:


         The Great Train Store



                                    Page 47

<PAGE>

                                   ADDENDUM IV
                                       TO
                           LOAN AND SECURITY AGREEMENT
                               Dated June 7, 1996
                                 By and Between
                      BANK ONE, TEXAS, NATIONAL ASSOCIATION
                                       AND
                      THE GREAT TRAIN STORE PARTNERS, L.P.


         The other addresses referenced in Section 10(g) are:

St. Louis Union Station
122 St. Louis Union Station
St. Louis, MO   63103

Indianapolis Union Station
39 W. Jackson Place, #147
Indianapolis, IN   46225

Riverwalk Marketplace
1 Poydras Street, #114
New Orleans, LA   70130

Union Station
50 Massachusetts Ave., N.E., #109
Washington, DC   20002

Mall of America
166 E. Broadway
Bloomington, MN   55425

Mall at Steamtown
211 The Mall at Steamtown
Scranton, PA   18503

North Point Mall
1000 North Point Circle, #1030
Alpharetta, GA   30202




                                    Page 48

<PAGE>


Downtown Plaza
545 Downtown Plaza, #1001
Sacramento, CA   95814

Natick Mall
1245 Worcester Street, #2172
Natick, MA   01760

The Great Mall of the Bay Area
150 Great Mall Dr.
Milpitas, CA   95035

The Woodlands Mall
1201 Lake Woodlands Dr., #2140
The Woodlands, TX   77380

Crossgates Mall
#1 Crossgates Mall Rd., #B-129
Albany, NY   12203

Ramada Express Hotel
2121 S. Casino Dr.
Laughlin, NV   89029

Broadway at the Beach
1211 Celebrity Circle, #H-136
Myrtle Beach, SC   29577

Avenue at Tower City
230 Huron Rd., NW, #85.85
Cleveland, OH   44113

Crabtree Valley Mall
4325 Glenwood Avenue
Raleigh, NC   27612

Holyoke Mall at Ingleside
50 Holyoke Street, #B312
Holyoke, MA   01040



                                    Page 49

<PAGE>


The Plaza at King of Prussia
160 N. Gulph Rd., #5211
King of Prussia, PA   19406

Tysons Corner Center
8045 Tysons Corner Center
McLean, VA   22101

Oxmoor Center
Louisville, KY

Regency Square
Federal Street Joint Venture
Richmond, VA

Florida Mall Shopping Center
Sand Lake Road and Orange Blossom Trail
Orlando, FL

Woodbridge Center
Woodbridge Township, NJ

Country Club Plaza
J. C. Nichols
Kansas City, MO



                                    Page 50


<PAGE>

                                   ADDENDUM V
                                       TO
                           LOAN AND SECURITY AGREEMENT
                               Dated June 7, 1996
                                 By and Between
                      BANK ONE, TEXAS, NATIONAL ASSOCIATION
                                       AND
                      THE GREAT TRAIN STORE PARTNERS, L.P.


                             [LETTERHEAD OF COMPANY]

         [NAME AND ADDRESS OF
         Borrower'S OUTSIDE AUDITOR]

         Ladies and Gentlemen:

                  This letter  instructs you to send to BANK ONE, TEXAS NATIONAL
         ASSOCIATION  ("Bank") all financial  statements (whether preliminary or
         final) and reports  which you prepare as a result of any audit or other
         review of our  operations,  business,  finances or  internal  controls,
         including without  limitation,  any management  reports and any reports
         concerning  improper  accounting  practices,  defalcations,   financial
         reporting errors or misstatements or fraud  perpetrated on us or by any
         of our employees or agents.

                  The  undersigned  further  authorizes  and  instructs  you  to
         communicate  and  discuss its  financial  condition  and the  financial
         condition  of  its  subsidiaries   (including  The  Great  Train  Store
         Partners, L.P.), if any, with the Bank and to disclose to the Bank upon
         request any  information in your  possession  relating to its financial
         condition and the financial  condition of its  subsidiaries  (including
         The Great Train Store Partners,  L.P.).  The undersigned  hereby agrees
         that such discussions or  communications  will be without  liability to
         the Bank or to you.

                  All of the foregoing  which is reduced to writing must be sent
         to the Bank at the following address prior to or contemporaneously with
         the sending of said written information to us :

                           BANK ONE, TEXAS, NATIONAL ASSOCIATION
                           1717 Main Street
                           Dallas, Texas  75201
                           Attn:  Secured Lending Group




                                    Page 51


<PAGE>

                  These  instructions may only be revoked by the Bank's delivery
         to you of a revocation notice signed by an officer of the Bank.



                                    Page 52

<PAGE>


                                    EXHIBIT A
                                       TO
                           LOAN AND SECURITY AGREEMENT
                               Dated June 7, 1996
                                 By and Between
                      BANK ONE, TEXAS, NATIONAL ASSOCIATION
                                       AND
                      THE GREAT TRAIN STORE PARTNERS, L.P.

                          [Form of Revolving Loan Note]



                                    Page 53