AGREEMENT AND RELEASE OF ALL CLAIMS


         This  AGREEMENT AND RELEASE OF ALL CLAIMS (the  "Agreement")  is by and
between  HomeBase,  Inc., a Delaware  corporation  (the  "Company") and Allan P.
Sherman, an individual ("Sherman"), as of March 2, 2000.

                                    RECITALS

         Sherman was employed by the Company from February 1991 through March 2,
2000.

         Sherman served as President and Chief Executive  Officer of the Company
from July 1997 until his voluntary  resignation from those and all other officer
positions  and  directorships  with the  Company  and any  affiliated  entities,
effective March 2, 2000.

         The Company and Sherman are parties to an Employment  Agreement,  dated
as of June 1, 1998,  attached hereto as Exhibit A (the  "Employment  Agreement")
certain provisions of which are expressly modified by the terms hereof.

         In consideration of the mutual  agreements set forth below, the parties
agree as follows:

         1. Resignation of Employment.  Sherman acknowledges that he voluntarily
resigned his employment  and all officer  positions and  directorships  with the
Company and any affiliated entities, effective March 2, 2000.

         2. Forgiveness of Home Purchase Debt and Reconveyance of Deed of Trust.
On the third  business day following the seventh day after the execution of this
Agreement by the parties,  and so long as the Company  receives from Sherman the
assurances  set forth in  Section  18  below,  the  Company  shall  forgive  the
remaining  $100,000 of principal balance  outstanding (the "Home Purchase Debt")
pursuant to that certain  Promissory Note dated January 19, 1994 from Sherman to
the Company in the original  principal  amount of $700,000 (the "Note").  Within
three business days thereafter,  the Company shall return to Sherman marked paid
in full the  original  Note and deliver to Sherman a document  reconveying  that
certain Deed of Trust in favor of the Company encumbering Sherman's residence in
Laguna Beach, California.

         3.       Tax Obligations.

                  (a) On the third  business day following the seventh day after
the  execution  of this  Agreement  by the  parties  and so long as the  Company
receives from Sherman the assurances set forth in Section 18 below,  the Company
shall pay to the  applicable  tax  authorities  a total of  $72,000 on behalf of
Sherman,  $62,000 of which shall relate to state and federal  withholding  taxes
arising in connection with the forgiveness of Note indebtedness  under Section 2
of this Agreement, and $10,000 of which shall relate to additional consideration
under this Agreement.

                  (b) Sherman shall be responsible  for the payment of all taxes
arising out of the execution of this Agreement and the transactions contemplated
hereby.

                  (c) The Company  reserves  the right to  withhold  payroll and
income taxes from any payments made to Sherman,  as required by  applicable  law
and regulations.

         4.  Retiree  Health Plan  Coverage.  The parties  agree that solely for
purposes of determining  Sherman's  eligibility for coverage under the Company's
Retiree Health Plan,  Sherman shall be credited with his period of employment by
Zayre Corp.  from  September  1986 through  October 28, 1988,  during which time
Zayre Corp. and HomeClub, Inc. (the predecessor to the Company) were part of the
same  affiliated  group  which  filed  consolidated  federal  income tax returns
pursuant to Section 1501 of the Internal Revenue Code. The parties further agree
that as a result of this credit for his employment with Zayre Corp., Sherman has
satisfied the 10-year service  requirement of the Company's Retiree Health Plan.
Sherman  may thus  elect to  receive  coverage  under the  Retiree  Health  Plan
immediately  upon termination of the health plan coverage  provided  pursuant to
Section 5(a)(ii) of the Employment Agreement.

         5. No Changes Concerning Stock Options. This Agreement shall not modify
or in any way change the existing terms and conditions  governing  stock options
previously granted by the Company to Sherman.

         6. Continuing  Obligations  under the Employment  Agreement.  Excepting
only as expressly  provided in this Agreement,  the parties agree to be bound by
any and all  surviving  terms of the  Employment  Agreement  including,  without
limitation,  Section  6 of the  Employment  Agreement;  provided,  however:  (a)
Section  5(a)(i)  of  the  Employment  Agreement  shall  hereby  be  amended  by
continuing the first sentence thereof as follows: ", and for 13 weeks thereafter
the Company will pay to Executive the weekly gross amount of $7,000  (subject to
reduction  pursuant to the next  sentence as if such  payments  were Base Salary
thereunder), and the period for all such payments made pursuant to this sentence
shall be deemed  'the period of Base Salary  payments'  for  purposes of Section
5(a)(ii) of this Agreement.",  and (b) Section 6(b) of the Employment  Agreement
shall hereby be amended by adding the  following  sentence  after the end of the
fourth  sentence of such  Section  6(b):  "Notwithstanding  the  foregoing,  the
provisions  of this Section 6(b) shall  terminate  and no longer be effective at
the time, if ever, the Company no longer  operates any retail stores in the home
improvement business."

         7. Release by Sherman.  In  consideration  of the promises set forth in
this  Agreement and the complete  release of claims given by the Company in this
Agreement,  Sherman,  for himself and his heirs,  successors  and assigns,  does
hereby and forever  release and discharge the Company and its past,  present and
future  affiliated  entities and the  directors,  officers,  employees,  agents,
attorneys, accountants, representatives,  successors and assigns of them and any
of  them  from  any  and  all  causes  of  action,  actions,  judgments,  liens,
indebtedness,  damages,  losses,  claims,  liabilities and demands of whatsoever
kind and  character in any manner  whatsoever  arising prior to the date of this
Agreement,  on any theory of pleading or proof, including but not limited to any
claim for  breach of  contract,  breach of implied  covenant,  breach of oral or
written  promise,  wrongful  termination,   infliction  of  emotional  distress,
defamation,   interference  with  contract  relations  or  prospective  economic
advantage,  negligence,  misrepresentation  or  employment  discrimination,  and
including without  limitation  alleged  violations of the California Labor Code,
the California  Family Rights Act, the Unruh Act, the  California  Constitution,
the California Fair Employment and Housing Act prohibiting  discrimination based
on race, religious creed, color, national origin, ancestry, physical disability,
mental disability,  medical condition, marital status, sex or age over 40, Title
VII of the 1964  Civil  Rights  Act  prohibiting  discrimination  based on race,
color,  religion,  sex or national origin,  the Americans With  Disabilities Act
prohibiting discrimination based on disability, the Family and Medical Leave Act
respecting  leaves of absence,  and the Age  Discrimination  in  Employment  Act
prohibiting  discrimination  based on age over 40, as these  statutes  have been
from  time to time  amended,  excepting  only (i)  those  obligations  expressly
recited herein or to be performed hereunder,  (ii) workers'  compensation claims
preserved by law notwithstanding this Agreement, (iii) obligations arising under
any  provisions  of  the  Employment  Agreement  which  survive  termination  of
employment and are not expressly varied by the terms of this Agreement, and (iv)
any rights  Sherman may have pursuant to the express  provisions of any employee
benefit plans identified in Exhibit B.

         8. Release by the Company.  In consideration of the complete release of
claims  promised  by Sherman in this  Agreement,  the  Company  does  hereby and
forever  release  and  discharge  Sherman  and his heirs,  successors,  assigns,
attorneys,  and  representatives  from any and all  causes of  action,  actions,
judgments, liens, indebtedness, damages, losses, claims, liabilities and demands
of whatsoever kind and character in any manner  whatsoever  arising prior to the
date of this  Agreement,  on any theory of pleading or proof,  including but not
limited to any claim for breach of contract,  breach of implied covenant, breach
of oral or  written  promise,  wrongful  termination,  infliction  of  emotional
distress,  defamation,  interference  with  contract  relations  or  prospective
economic advantage, negligence,  misrepresentation or employment discrimination,
and including  without  limitation  alleged  violations of the California  Labor
Code,  the  California  Family  Rights Act,  the  California  Constitution,  the
California Fair Employment and Housing Act prohibiting  discrimination  based on
race, religious creed, color,  national origin,  ancestry,  physical disability,
mental disability,  medical condition, marital status, sex or age over 40, Title
VII of the 1964  Civil  Rights  Act  prohibiting  discrimination  based on race,
color,  religion,  sex or national origin,  the Americans With  Disabilities Act
prohibiting discrimination based on disability, the Family and Medical Leave Act
respecting  leaves of absence,  and the Age  Discrimination  in  Employment  Act
prohibiting  discrimination  based on age over 40, as these  statutes  have been
from time to time amended,  excepting only those  obligations  expressly recited
herein or to be performed hereunder.

         9. Unknown  Claims  Released.  Sherman and the Company each assumes the
risk of any mistake of fact and of any facts which are unknown, and thereby each
waives  the  benefits  of  Section  1542  of the  Civil  Code  of the  State  of
California,  to the extent that such section may apply to this Agreement.  Civil
Code Section 1542 provides:

                  "A  general  release  does not  extend  to  claims  which  the
                  creditor does not know or suspect to exist in his favor at the
                  time of executing the release, which if known by him must have
                  materially affected his settlement with debtor."

         10. Mutual Agreement Regarding  Confidentiality  and  Nondisparagement.
Sherman and the Company agree not to make public the terms of this  Agreement or
negative matters pertaining to Sherman's  employment,  and not to disparage each
other or state  contentions  of  wrongful  conduct  by  Sherman  or his  agents,
relatives,  lawyers  or  representatives  or by the  Company  or its  directors,
officers,  employees,  agents,  lawyers  or  representatives  except:  as may be
required  by  applicable  law, as may be  necessary  in a  proceeding  to secure
compliance  with or  enforcement  of the terms of this  Agreement,  upon  lawful
inquiry by federal or state tax authorities or other governmental  agencies,  or
in response to a lawful subpoena or court order.

                  (a) Nothing in this Agreement shall be construed to affect the
obligations of the parties to testify  truthfully or to provide  truthful report
upon  lawful  inquiry  by  governmental  agencies,  or in  response  to a lawful
subpoena or court order.

                  (b)  Notwithstanding  any other  provision of this  Agreement,
Sherman  may  disclose  the  terms of this  Agreement  to his  immediate  family
members, attorneys and accountants,  provided he advises each such individual of
this  confidentiality  provision and such individual agrees that he or she shall
not further  disclose any of the terms of this Agreement except for the purposes
expressly provided in this Section 10.

                  (c) The  Company  shall refer  inquiries  about  Sherman  from
potential future employers to the Company's Vice President, Human Resources. The
Company further agrees to respond to such inquiries only by stating that Sherman
was employed by the Company from February  1991 to March 2000,  that he resigned
his  employment,  that  pursuant to the Company's  standard  policies no further
information  can be  provided,  and that all  matters  between  Sherman  and the
Company respecting his employment have been amicably resolved.

                  (d) Proof of breach of this  Section  10 shall be by clear and
convincing evidence in arbitration pursuant to this Agreement.

         11.  Continuing  Availability  to Consult on Certain  Matters.  Sherman
acknowledges  that he has information  that may be or may become relevant to the
Company's  operations  or claims that may be brought  against the Company.  As a
result,  Sherman agrees to make himself available at reasonable times and places
to provide the Company with his full and accurate  recollection  of such matters
at the request of the Company and further agrees to provide  truthful  testimony
at the Company's request in any court  proceedings on such matters.  The Company
agrees to  indemnify  and hold  Sherman  harmless  from and  against any and all
claims  concerning  his  provision of such  consulting  services to the Company;
provided,  however, that the indemnification obligations of the Company pursuant
to this sentence shall not apply to Sherman's acts or omissions which constitute
willful misconduct or gross negligence.

         12.  Arbitration.  Sherman  and the Company  agree that,  to the extent
permitted by law and to the extent the  enforceability  of this Agreement is not
thereby impaired, any and all disputes, controversies or claims between Sherman,
his heirs, successors, attorneys, and assigns, on the one hand, and the Company,
its  past  and  present  directors,   officers,  employees,  agents,  attorneys,
accountants, representatives, successors and assigns, on the other hand, arising
from  this  Agreement  shall be  determined  exclusively  by final  and  binding
arbitration  before a single  arbitrator in Los Angeles,  California,  under the
National  Rules  For the  Resolution  of  Employment  Disputes  of the  American
Arbitration  Association  and the  provisions  of the  California  Code of Civil
Procedure  governing  arbitrations.  Sherman and the Company  further agree that
judgment upon the award  rendered by the  arbitrator may be entered in any court
of competent jurisdiction.

                  (a) Claims subject to exclusive final and binding  arbitration
under this Agreement include, without limitation, claims that otherwise could be
tried in court  to a jury in the  absence  of this  Agreement.  Sherman  and the
Company  expressly  waive  all  rights  to a jury  trial in court on all  claims
arising under this Agreement.

                  (b) The  arbitration  shall be  administered  by the  American
Arbitration  Association,  and the  arbitrator  shall be selected from a list of
arbitrators provided by the American Arbitration Association following a request
by the party seeking  arbitration  for a list of retired or former  jurists with
substantial professional experience in employment matters.

                  (c) This Agreement shall be construed  according to California
law without  reference to California law governing  conflict of laws. Each party
has had the  assistance of legal counsel in connection  with this Agreement and,
accordingly, this Agreement shall be construed according to its fair meaning and
not for or against any party. The arbitrator's  authority and jurisdiction shall
be limited to determining  the dispute in arbitration in conformity with law, to
the same extent as if such  dispute  were  determined  as to  liability  and any
remedy by a court  without a jury.  The  arbitrator  shall render an award which
shall  include a written  statement of opinion  setting  forth the  arbitrator's
findings of fact and conclusions of law.

                  (d) To the  extent  permitted  by law  and to the  extent  the
enforceability  of this  Agreement  is not  thereby  impaired,  each party shall
initially pay its or his own costs of arbitration including, without limitation,
attorneys'  fees and  costs  and fees and  costs of any  experts.  However,  the
arbitrator shall award reasonable  attorneys' fees (with or without expert fees)
and costs to the prevailing party.

                  (e) Any  controversy  over whether a dispute is an  arbitrable
dispute or as to the  interpretation  or  enforceability of this Section 12 with
respect to such arbitration shall be determined by the arbitrator.

                  (f) Notwithstanding  the foregoing  provisions of this Section
12, Sherman and the Company agree that breaches of continuing  obligations under
the Employment Agreement or this Agreement concerning  confidential  information
and trade secrets and concerning restrictions on competition and solicitation of
employees of the Company by Sherman  cannot  adequately be remedied at law or in
arbitration,  and that  Sherman or the  Company  may seek and  obtain  otherwise
available  injunctive relief,  including ancillary monetary relief, in Court for
any  violation  or breach of such  obligations;  provided,  however,  that final
resolution  of disputes  shall be by  arbitration  and neither the grant nor the
denial of injunctive relief shall prejudice the result of such arbitration.

         13. No  Admissions.  Neither this Agreement nor any statement or action
of any of the parties to this  Agreement  constitutes  any admission of wrongful
act or omission, and no finding of any wrongful act or omission has been made by
any person, entity or agency.

         14. No Assignments.  Each of the parties hereby represents and warrants
that he or it has not heretofore  assigned or transferred or purported to assign
or transfer to any person or entity not a signatory to this Agreement any claim,
including fee or cost claims, or matter herein released, disclaimed,  discharged
or  terminated.  Each party also  represents  and warrants  that he or it has no
knowledge of any such  assignment to any individual or entity who is not a party
to the Agreement.  In the event of any such  assignment or transfer of any claim
to  another  individual  or  entity  of  matters  herein  released,  discharged,
terminated or disclaimed, the party making such assignment or transfer agrees to
indemnify  and hold  harmless the other party from and against any  liability or
loss,  and for any cost,  expense or  judgment or  settlement  arising out of or
occasioned by, or arising in connection with any such assignment or transfer.

         15.  Sherman  and the  Company  Each  Relies  On Own  Judgment  and Own
Counsel. Each party to this Agreement respectively  represents and declares that
in  executing  this  Agreement  such party  relies  solely upon such party's own
judgment,  belief and  knowledge,  and the advice  and  recommendations  of such
party's  independently  selected  counsel,  concerning  the  nature,  extent and
duration of such  party's  rights and claims.  Each party  acknowledges  that no
other party nor any agent or  attorney of any other party has made any  promise,
representation or warranty,  express or implied, not expressly contained in this
Agreement,  to induce  acceptance or execution of this Agreement.  Each party to
this  Agreement  further  acknowledges  that such  party is not  executing  this
Agreement in reliance on any promise,  representation  or warranty not expressly
contained in this Agreement.  Sherman  acknowledges that neither the Company nor
any of its directors, officers, employees, agents, attorneys, accountants or any
other  person  associated  with the Company  has  advised  Sherman as to the tax
consequence  of his  receipt of  payments  under this  Agreement  and that he is
solely  responsible  for any and all taxes  resulting  from his  receipt of such
payments, unless otherwise provided by this Agreement.

         16. Integrated Complete Agreement.  This Agreement integrates,  cancels
and supersedes all other prior and  contemporaneous  written and oral agreements
and  understandings  of every  character  between  Sherman  and the  Company and
comprises  the entire  agreement  between  Sherman  and the  Company;  provided,
however,  that the parties shall  continue to be bound by Sherman's  resignation
letter  to the  Company  dated  March  2,  2000,  that  certain  Indemnification
Agreement by and between  Sherman and the Company dated as of May 25, 1993,  any
and all surviving terms of the Employment  Agreement and the express  provisions
of the employee  benefit plans identified in Schedule B. Sherman and the Company
understand  and  agree  that this  Agreement  may be  amended  only by a further
express written agreement between Sherman and the Company, signed by Sherman and
the Chief  Executive  Officer of the Company and stating an  intention  to amend
this  Agreement,  and that this  Agreement  cannot be amended by oral or written
statements or communications.

         17.  Partial  Invalidity.  The  invalidity or  unenforceability  of any
provision  or portion of this  Agreement,  including,  without  limitation,  any
provision  or  portion  of  Section  12 of this  Agreement,  will not affect the
validity  or  enforceability  of  the  other  provisions  or  portions  of  this
Agreement.  The parties  intend that this  Agreement  be  construed  in favor of
arbitration  as the final and binding means for  resolving any disputes  between
them arising out of the matters settled herein that are not resolved informally.

         18.  Revocation of  Acceptance.  Sherman  acknowledges  that he has had
twenty-one (21) days within which to consider this Agreement if he has wished to
do so,  that he has  seven  (7) days  from the  date of his  acceptance  of this
Agreement  within which to revoke his  acceptance,  that he is hereby advised to
consult with a lawyer  representing him concerning this Agreement and has had an
opportunity  to do so,  and  that no  payments  will be made to  Sherman  by the
Company  hereunder  until  after  such  seven (7) days and until  after  Sherman
provides reasonable written assurances that he has not revoked his acceptance of
this Agreement.

         19.  THE  PARTIES  FURTHER  STATE THAT  HE/IT HAS  CAREFULLY  READ THIS
AGREEMENT, THAT IT HAS BEEN FULLY EXPLAINED TO THEM BY THEIR LEGAL COUNSEL, THAT
THEY FULLY UNDERSTAND ITS FINAL AND BINDING EFFECT,  THAT THE ONLY PROMISES MADE
TO THEM TO SIGN THIS AGREEMENT ARE THOSE STATED ABOVE, AND THAT THEY ARE SIGNING
THIS AGREEMENT VOLUNTARILY.

<PAGE>

         IN WITNESS  WHEREOF,  the parties have executed  this  Agreement on the
date and at the location set forth below.



         Dated March 21, 2000 at Laguna Beach California.


                                                         /s/ ALLAN P. SHERMAN
                                                         -----------------------
                                                             Allan P. Sherman



         Dated March 21, 2000 at Irvine, California.


                                                              HomeBase, Inc.

                                                By:      /s/ HERBERT J ZARKIN
                                                         -----------------------
                                                             Herbert J Zarkin
                                             Title:      Chairman of the Board,
                                                         President and Chief
                                                         Executive Officer


<PAGE>



         I RECEIVED THIS AGREEMENT AND RELEASE OF ALL CLAIMS on March 2, 2000.
I understand  that I have had twenty-one (21) days within which to consider this
Agreement  if I wished to do so,  that I have been  encouraged  to consult  with
legal counsel,  that I have seven (7) days from the date of my execution of this
Agreement  within which to revoke my  acceptance,  and that no payments  will be
made to me under this Agreement until after such seven (7) days.

         No promises have been made to me other than as expressly  stated in the
Agreement  and Release of All  Claims,  which I  voluntarily  accept on the date
shown by my signature.

         Dated:  March 21, 2000 at Laguna Beach, California.


                                                         /s/ ALLAN P. SHERMAN
                                                         -----------------------
                                                             Allan P. Sherman