THIRD AMENDMENT TO CREDIT AGREEMENT

         This THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated as
of December 19, 1997 by and among  HOMEBASE,  INC.,  THE FIRST  NATIONAL BANK OF
CHICAGO,  BANKBOSTON,  N.A.,  WELLS  FARGO BANK,  N.A.  and THE  SUMITOMO  BANK,
LIMITED.

                               RECITALS

                  WHEREAS, the parties hereto are parties to that certain Credit
Agreement  dated as of July 9,  1997 (as from  time to time  amended,  restated,
supplemented or otherwise modified,  the "Credit  Agreement";  capitalized terms
used but not otherwise  defined herein having the definitions  provided therefor
in the Credit Agreement); and

                  WHEREAS,  the  parties  hereto  desire  to  amend  the  Credit
Agreement on the terms and conditions herein set forth.

                  NOW,  THEREFORE,  in  consideration  of the  premises  and the
mutual  covenants  hereinafter  contained,  and  for  other  good  and  valuable
consideration,  the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:

1. Amendment to Credit Agreement.  Subject to the terms and conditions set forth
in  Section  2 of this  Amendment,  upon  the  Effective  Time  (as  hereinafter
defined), the Credit Agreement is hereby amended as follows:

                  (i) The  definition of  "Aggregate  Available  Commitment"  in
         Article I of the Credit  Agreement is hereby  amended by deleting  such
         definition and inserting the following in its stead:

                           "Aggregate Available  Commitment" means, at any time,
                  (a) the lesser of (i) the  Aggregate  Commitment  at such time
                  and (ii) the Borrowing Base at such time,  less (b) the sum of
                  (i) the outstanding  Facility Letter of Credit  Obligations at
                  such  time  plus  (ii)  the  aggregate   principal  amount  of
                  outstanding Loans at such time.

                  (ii) The definition of "Commitment" in Article I of the Credit
         Agreement  is hereby  amended by  inserting  the words "or  Documentary
         Facility Acceptances" after the words "Facility Letters of Credit".

                  (iii)   The   definition   of   "Facility   Letter  of  Credit
         Obligations" in Article I of the Credit  Agreement is hereby amended by
         deleting such definition and inserting the following in its stead:



<PAGE>
                                      -18-

                           "Facility Letter of Credit  Obligations" means, as at
                  the time of determination  thereof,  all liabilities,  whether
                  actual or contingent, of the Borrower with respect to Facility
                  Letters  of  Credit  and  Documentary  Facility   Acceptances,
                  including   the  sum   of,   without   duplication,   (a)  the
                  Reimbursement  Obligations plus (b) the aggregate undrawn face
                  amount of the then outstanding Facility Letters of Credit plus
                  (c) the aggregate  unmatured  amount of  Documentary  Facility
                  Acceptances.

                  (iv) The  definition  of  "Issuing  Bank" in  Article I of the
         Credit  Agreement is hereby  amended by deleting  such  definition  and
         inserting the following in its stead.

                           "Issuing  Bank" means,  with respect to each Facility
                  Letter of Credit or  Documentary  Facility  Acceptance,  First
                  Chicago or such other Lender selected by the Borrower to issue
                  such  Facility  Letter  of  Credit  or  Documentary   Facility
                  Acceptance  so long as such other  Lender  consents  to act in
                  such capacity.

                  (v) The  definition  of "LC Factor" in Article I of the Credit
         Agreement is hereby  amended by deleting such  definition and inserting
         the following in its stead:

                  "LC Factor" is a fraction  (i) the  numerator  of which is (y)
                  for the initial  payment of the Facility  Letter of Credit Fee
                  for any specific Facility Letter of Credit or for any specific
                  Documentary Facility Acceptance, the number of days subsequent
                  to the  Issuance  Date of such  Facility  Letter  of Credit or
                  Drawing Date of such  Documentary  Facility  Acceptance to and
                  including  the  first  Payment  Date  and (z)  for  subsequent
                  payments of the Facility Letter of Credit Fee for any specific
                  Facility  Letter  of Credit  or for any  specific  Documentary
                  Facility  Acceptance,  the  number of days  subsequent  to the
                  Payment  Date on which the  Facility  Letter of Credit Fee was
                  last paid for such  Facility  Letter of Credit or  Documentary
                  Facility  Acceptance  to and  including the next Payment Date,
                  the  Termination  Date or the expiration date of such Facility
                  Letter  of  Credit  or  Documentary  Facility  Acceptance,  as
                  applicable, and (ii) the denominator of which is 360.

                  (vi) The definition of "Permitted Investments" in Article I of
         the Credit  Agreement is hereby amended by deleting such definition and
         inserting the following in its stead:

                  "Permitted Investments" means Investments in any of the 
                   following:

                  (a)  Short-term  obligations  of, or fully  guaranteed  by, 
                  the United States of America;  or its agencies;

                  (b)  Commercial  paper  rated A-2 or better  by  Standard  and
                  Poor's  Corporation  or P-2 or  better  by  Moody's  Investors
                  Service,  Inc. and  securities  commonly  known as "short-term
                  bank notes" issued by any Lender  denominated in United States
                  dollars  which at the time of purchase have been rated and the
                  ratings  for which  are not less than P-2 if rated by  Moody's
                  Investors  Services,  Inc.,  and not less than A-2 if rated by
                  Standard and Poor's Corporation;

                  (c) Demand deposit accounts  maintained in the ordinary course
                  of business;

                  (d)  Certificates  of deposit issued by and time deposits with
                  commercial banks (whether  domestic or foreign) having capital
                  and surplus in excess of $100,000,000;

                  (e)  Municipal  securities  rated  "A" or  better  as rated by
                  Standard and Poor's  Corporation or Moody's Investors Service,
                  Inc.  and  municipal  securities  mutual  funds  which  have a
                  weighted average life of less than two (2) years;

                  (f) Corporate debt securities  rated "A" or better as rated by
                  Standard and Poor's  Corporation or Moody's Investors Service,
                  Inc.  that  mature  within  two (2)  years  from  the date the
                  Investment is made by the Borrower or any of its Subsidiaries;

                  (g) Asset or mortgage backed securities rated "A" or better as
                  rated by Standard and Poor's  Corporation or Moody's Investors
                  Service,  Inc.  with an average  life less than two (2) years;
                  provided that after giving effect to any such Investment,  the
                  aggregate  cost  of  all  such  Investments  does  not  exceed
                  $25,000,000;

                  (h) Auction  rate  securities  rated "A" or better as rated by
                  Standard and Poor's  Corporation or Moody's Investors Service,
                  Inc.;   provided   that  after  giving   effect  to  any  such
                  Investment,  the aggregate cost of all such  Investments  does
                  not exceed $25,000,000;

                  (i)  Repurchase  agreements  relating  to a security  which is
                  rated  "A"  or  better  as  rated  by   Standard   and  Poor's
                  Corporation  or Moody's  Investors  Service,  Inc. that mature
                  within two (2) years from the date the  Investment  is made by
                  the Borrower or any of its  Subsidiaries;  provided that after
                  giving effect to any such  Investment,  the aggregate  cost of
                  all such Investments does not exceed $25,000,000;

                  (j) Municipal securities rated "SP2" or better by Standard and
                  Poor's  Corporation  or "MIG2" or better by Moody's  Investors
                  Service, Inc. with an average life of less than two (2) years;
                  provided, that after giving effect to any such Investment, the
                  aggregate  cost  of  all  such  Investments  does  not  exceed
                  $25,000,000;

                  (k) Money market mutual funds regulated by rule 2a-7 under the
                  Investment Company Act of 1990;

                  (l)  Insurance  company  guaranteed  investment  contracts  or
                  funding  agreements  with  insurers  rated  A-2 or  better  by
                  Standard and Poor's Corporation; and

                  (m) Bond mutual  funds  investing in  securities  rated "A" or
                  better  by  Standard  and  Poor's  Corporation  which  have  a
                  weighted  average  life of two (2)  years or less.  (vii)  The
                  definition of  "Reimbursement  Obligation" in Article I of the
                  Credit Agreement is hereby amended by deleting such definition
                  and inserting the following in its stead:

                           "Reimbursement  Obligations"  means, at any time, the
                  aggregate of the  obligations  of the Borrower to the Lenders,
                  the Issuing Banks and the Agent in respect of all unreimbursed
                  payments or  disbursements  made by the  Lenders,  the Issuing
                  Banks  and the  Agent  under  or in  respect  of the  Facility
                  Letters of Credit or upon  maturity  of  Documentary  Facility
                  Acceptances.

                  (viii) Article I of the Credit  Agreement is hereby amended by
                  inserting the  following  definitions  in such Article in 
                  alphabetical order.

                           "Acceptance"  shall mean a Draft that is eligible for
                  discount  pursuant to paragraph 7 of Section 13 of the Federal
                  Reserve  Act and that has been duly  accepted  by the  Issuing
                  Bank pursuant to Article III and is a documentary acceptance.

                           "Draft" is defined in Section 3.4(B).

                           "Drawing Date" is defined in Section 3.4(B).

                           "Drawing"  shall mean a drawing of one or more Drafts
                           on any  Drawing Date.

                           "Discount Charge" is defined in Section 3.4(B).

                           "Documentary Facility Acceptance" means an Acceptance
                           issued by an Issuing Bank pursuant to Section 3.1(B).

                           "Notice of Drawing" is defined in Section 3.4(B).

                 (ix) Article III of the Credit  Agreement is hereby amended by
                 deleting  such Article in its entirety and  inserting  the 
                 following in its stead:

                                        ARTICLE III

                    THE LETTER OF CREDIT AND BANKER'S ACCEPTANCE  SUBFACILITY


                  3.1.     Obligation to Issue.

                           (A) Upon the terms and subject to the  conditions  of
                  this  Agreement  and  relying  upon  the  representations  and
                  warranties of the Borrower herein set forth, each Issuing Bank
                  hereby agrees to issue for the account of the Borrower through
                  such of the Issuing Bank's branches as it and the Borrower may
                  jointly agree,  one or more Facility Letters of Credit payable
                  on a sight or time basis,  in accordance with this Article III
                  from  time  to  time  during  the  period,  commencing  on the
                  Effective  Date and ending on date five  Business Day prior to
                  the   Termination   Date.   Upon   the   occurrence   of   the
                  Collateralization  Date,  undrawn  letters of credit issued by
                  BankBoston,  N.A.  in an  aggregate  amount of  $10,734,819.65
                  (which the Borrower  represents and warrants were at such time
                  the  only   letters  of  credit   issued  by  any  Lender  and
                  outstanding  under  Section  6.14(b)  or (c))  each  became  a
                  Facility Letter of Credit.  Borrower shall give written notice
                  to the Agent prior to using any Lender other than  BankBoston,
                  N.A. as an Issuing  Bank.  Each Issuing Bank shall comply with
                  the requirements  herein and any other reporting  requirements
                  reasonably requested by the Agent.

                           (B) Upon the terms and subject to the  conditions  of
                  this  Agreement  and  relying  upon  the  representations  and
                  warranties of the Borrower herein set forth, each Issuing Bank
                  agrees, from time to time during the period, commencing on the
                  Effective  Date and ending on date five  Business Day prior to
                  the Termination Date, to create Acceptances under time letters
                  of credit  maturing on a Business Day not less than 30 days or
                  more than 180 days after the creation thereof. Each Acceptance
                  shall  be  created  by  the  Issuing   Bank's   acceptance  of
                  beneficiaries' Drafts drawn on it in accordance with the terms
                  of this Agreement.

                  3.2.     Types and  Amounts.  The  issuance  of a  Facility 
                  Letter of Credit or  Documentary  Facility  Acceptance  shall 
                  be subject to the following conditions:

                                    (a)  the  aggregate   maximum   amount  then
                  available  for drawing  under  Facility  Letters of Credit and
                  Documentary  Facility Acceptances issued by such Issuing Bank,
                  after giving effect to the Facility Letter of Credit requested
                  hereunder,  shall  not  exceed  any  limit  imposed  by law or
                  regulation upon such Issuing Bank;

                                    (b) after giving effect thereto,  the sum of
                  (i) the aggregate  unpaid  principal  balance of the Revolving
                  Loans plus (ii) the aggregate unpaid balance of the Swing Line
                  Loans plus  (iii) the  Facility  Letter of Credit  Obligations
                  does not exceed the Aggregate Available  Commitment as then in
                  effect;

                                    (c) it does not have an expiration  date (if
                  a Letter  of  Credit)  or a  maturity  date (if a  Documentary
                  Facility  Acceptance)  later than five  Business Days prior to
                  the Termination Date;

                                    (d) if a Letter of Credit,  it does not have
                  an expiration date more than twelve (12) months after the date
                  of its issuance; provided, that it may provide for the renewal
                  thereof for additional twelve (12) month periods so long as no
                  renewal  shall  extend  beyond  the date  provided  in Section
                  3.2(c); or

                                    (e) the  amount  of the  Facility  Letter of
                  Credit Obligations, after giving effect to any Facility Letter
                  of  Credit  or  Documentary   Facility  Acceptance   requested
                  hereunder, does not exceed $40,000,000.

                           3.3. Conditions.  In addition to being subject to the
                  satisfaction  of the conditions  contained in Section 4.2, the
                  obligation of an Issuing Bank to issue any Facility  Letter of
                  Credit or  Documentary  Facility  Acceptance is subject to the
                  satisfaction in full of the following conditions:

                                    (a) the  Borrower  shall have  delivered  to
                  such  Issuing  Bank at such  times and in such  manner as such
                  Issuing  Bank may  reasonably  prescribe  such  documents  and
                  materials  as may be  required  pursuant  to the  terms of the
                  proposed  Facility Letter of Credit (it being  understood that
                  if any  inconsistency  exists  between such  documents and the
                  Loan Documents, the terms of the Loan Documents shall control)
                  and the  proposed  Facility  Letter of Credit and  Documentary
                  Facility  Acceptance  shall be reasonably  satisfactory to the
                  Issuing Bank as to form and content;

                                    (b) as of the date of  issuance,  no  order,
                  judgment or decree of any court,  arbitrator  or  governmental
                  authority  shall  purport  by its terms to enjoin or  restrain
                  such Issuing Bank from issuing the requested  Facility  Letter
                  of Credit or Documentary  Facility Acceptance and no law, rule
                  or  regulation  applicable to that Issuing Bank and no request
                  or directive (whether or not having the force of law) from any
                  Governmental  Authority  with  jurisdiction  over that Issuing
                  Bank shall  prohibit or request that such Issuing Bank refrain
                  from  the  issuance  of  Letters  of  Credit  or   Acceptances
                  generally or the issuance of the requested  Facility Letter or
                  Credit or Documentary Facility Acceptance in particular; and

                                    (c) the Issuing Bank and the Borrower having
                  agreed on the fee referred to in Section 3.8.
  
                  3.4.     Procedure for Issuance of Facility Letters of Credit.

                                    (a) The Borrower shall give the Issuing Bank
                  written or electronic  notice of any  requested  issuance of a
                  Facility  Letter of Credit under this  Agreement (a "Letter of
                  Credit Request") in the format  acceptable to the Issuing Bank
                  and the Agent. Such notice shall be irrevocable.

                                    (b) Subject to the terms and  conditions  of
                  this Article III and provided that the  applicable  conditions
                  set forth in Section  4.2  hereof  have been  satisfied,  such
                  Issuing  Bank shall,  on the Issuance  Date,  issue a Facility
                  Letter of Credit,  on a sight or time basis,  on behalf of the
                  Borrower  in  accordance  with the  Issuing  Bank's  usual and
                  customary  business  practices  unless  the  Issuing  Bank has
                  actually   received  (i)  written  notice  from  the  Borrower
                  specifically  revoking  the  Letter  of  Credit  Request  with
                  respect to such Facility Letter of Credit, (ii) written notice
                  from a Lender,  which  complies with the provisions of Section
                  3.6(a) or (iii)  written or  telephonic  notice from the Agent
                  stating  that the issuance of such  Facility  Letter of Credit
                  would violate Section 3.2.

                                    (c) Each  Issuing  Bank shall give the Agent
                  and the Borrower written or telex notice, or telephonic notice
                  confirmed promptly thereafter in writing, of the issuance of a
                  Facility Letter of Credit (the "Issuance Notice").

                                    (d) An  Issuing  Bank  shall  not  extend or
                  amend any  Facility  Letter  of  Credit or allow any  Facility
                  Letter of  Credit  to be  automatically  extended  unless  the
                  requirements  of  this  Agreement  are  met  as  though  a new
                  Facility Letter of Credit was being requested and issued.

                  3.4(B)   Preparation of Drafts and Creation of Acceptances

                                    (a)  The  Borrower  hereby   authorizes  the
                  Issuing Bank or its  designee to accept a Draft(s)  drawn by a
                  beneficiary under a time Facility Letter of Credit.  Not later
                  than 12:00 noon (Chicago  time) on the proposed  Drawing Date,
                  or such later time as maybe acceptable to the Borrower and the
                  Issuing  Bank,   the  Issuing  Bank  shall,   subject  to  the
                  satisfaction  of the  applicable  conditions set forth herein,
                  duly  accept and  discount  such Draft at a price equal to the
                  face amount  thereof  less the sum of the  bankers  acceptance
                  discount rate for such maturity then being generally quoted by
                  the Issuing Bank (the "Discount Charge"),  the Discount Charge
                  being  calculated on the face amount of each Draft so accepted
                  for the  actual  number  of days in the  period  from the date
                  thereof to the date of its maturity and on the basis of a year
                  of 360 days.  Not later than 1:00 p.m.  (Chicago  time) on the
                  Drawing  Date,  the Issuing  Bank shall make the amount of the
                  proceeds  of the  discount  of  each  Draft  so  accepted  and
                  discounted  available to the beneficiary.  Notwithstanding the
                  foregoing,  in the case of a Documentary  Facility  Acceptance
                  arising  out of Drafts  drawn by a  Facility  Letter of Credit
                  beneficiary,  such discounting shall be on terms acceptable to
                  the Issuing Bank and such  beneficiary  (or its  assignee) and
                  the  proceeds of any such  discount  shall be paid (after such
                  discounting charges) to such beneficiary or its assignee.

                                    (b)  Notwithstanding   the  foregoing,   the
                  Issuing  Bank  shall not be  obligated  to create or  discount
                  Acceptances hereunder if such Acceptance would not be eligible
                  for discount at a Federal Reserve Bank under  applicable rules
                  or regulations, would not meet the requirements of paragraph 7
                  of Section 13 of the Federal  Reserve Act, as amended,  or any
                  liability  or the  Issuing  Bank  that  would  arise  from the
                  creation of such  Acceptance  would  constitute  a deposit for
                  which the Issuing Bank would be required to maintain  reserves
                  under  Regulation D of the Federal  Reserve Board as from time
                  to  time  in  effect  or if the  Issuing  Bank,  in  its  sole
                  discretion,  chooses  not to  discount  such  Acceptance.  The
                  Borrower  acknowledges  that the  Issuing  Bank's  decision to
                  accept and  discount  any Draft  offered  for  acceptance  and
                  discount  hereunder will be made in reliance upon the truth of
                  the representations made by the Borrower in the related Notice
                  of Drawing  establishing  the  eligibility for discount of any
                  such  Acceptance.  The Borrower  will  indemnify  and save the
                  Agent, the Issuing Bank and each Lender harmless from any loss
                  or liability  incurred by the Agent,  the Issuing Bank or such
                  Lender if any  Acceptances are determined to be ineligible for
                  discount   or   subject   to   reserves   by   reason  of  any
                  misrepresentation  made by the Borrower or to the  beneficiary
                  of any Facility Letter of Credit.

                                    (c)  The  Borrower  hereby   unconditionally
                  agrees to pay to the  Issuing  Bank in  immediately  available
                  funds the face amount of each Draft as to which an  Acceptance
                  was created by such Issuing Bank on the maturity date thereof,
                  or on such earlier  date as may be required  pursuant to other
                  provisions of this Agreement.

                                    (d)  Acceptances  may not be prepaid without
                  the consent of the Issuing Bank.

                  3.5.     Reimbursement Obligations; Duties of Issuing Banks.

                                    (a) (i) Each  Issuing  Bank  shall  promptly
                  notify the Borrower and the Agent of any draw under a Facility
                  Letter of Credit and the Borrower shall reimburse such Issuing
                  Bank  in   accordance   with   Section   3.7;   and  (ii)  any
                  Reimbursement  Obligation  with respect to any Facility Letter
                  of  Credit  or  Documentary  Facility  Acceptance  shall  bear
                  interest  from the date of the relevant  drawings or maturity,
                  as applicable,  under the pertinent  Facility Letter of Credit
                  or Documentary  Facility  Acceptance  until payment in full is
                  received by the  pertinent  Issuing  Bank at (A) the  Floating
                  Rate  until  the  next  succeeding  Business  Day  and (B) the
                  default interest rate for Floating Rate Advances calculated in
                  accordance  with  Section 2.12 for each day  thereafter.  Each
                  Issuing  Bank  shall  report to the Agent  the  average  daily
                  Facility  Letter of Credit  Obligations  on a monthly basis no
                  later  than  the  fifth  Business  Day of the  month  for  the
                  preceding month.

                                    (b) Any action  taken or omitted to be taken
                  by an Issuing  Bank under or in  connection  with any Facility
                  Letter  of  Credit,  if taken or  omitted  in the  absence  of
                  willful  misconduct  or gross  negligence,  shall not put that
                  Issuing Bank under any  resulting  liability to any Lender or,
                  assuming   that  such  Issuing  Bank  has  complied  with  the
                  procedures  specified in Section 3.4,  all  conditions  to the
                  issuance of a Facility  Letter of Credit  have been  satisfied
                  and such Lender has not given a notice contemplated by Section
                  3.6(a) that  continues in full force and effect,  relieve that
                  Lender of its  obligations  hereunder to that Issuing Bank. In
                  determining  whether  to pay  under  any  Facility  Letter  of
                  Credit,  an Issuing Bank shall have no obligation  relative to
                  the Lenders other than to confirm that any documents  required
                  to be delivered  under such Facility  Letter of Credit appears
                  to have been delivered in compliance,  and that they appear to
                  comply on their face,  with the  requirements of such Facility
                  Letter of Credit.

                  3.6.     Participation.

                                    (A) (a)  Immediately  upon (i) the Effective
                  Date for those Facility Letters of Credit issued prior to such
                  date and (ii)  issuance  by an  Issuing  Bank of any  Facility
                  Letter of Credit in accordance  with the  procedures set forth
                  in  Section   3.4,   each  Lender  shall  be  deemed  to  have
                  irrevocably  and  unconditionally  purchased and received from
                  that  Issuing  Bank,   without  recourse,   representation  or
                  warranty, an undivided interest and participation equal to its
                  Percentage  in such  Facility  Letter  of  Credit  (including,
                  without  limitation,  all  obligations  of the  Borrower  with
                  respect  thereto)  and  any  security   therefor  or  guaranty
                  pertaining thereto;  provided,  that a Letter of Credit issued
                  by any  Issuing  Bank  shall not be  deemed  to be a  Facility
                  Letter of Credit for  purposes of this Section 3.6 if (A) such
                  Letter of Credit  has an  expiration  date which is later than
                  five Business Days prior to the  Termination  Date or (B) such
                  Issuing  Bank  shall have  received  written  notice  from any
                  Lender on or before the  Business Day prior to the date of its
                  issuance  of such  Letter  of  Credit  that one or more of the
                  conditions  to the issuance of a Facility  Letter of Credit is
                  not then satisfied, and, in the event an Issuing Bank receives
                  such a notice,  it shall have no further  obligation  to issue
                  any  Facility  Letter of Credit until such notice is withdrawn
                  by that  Lender or it  receives  a notice  from the Agent that
                  such  condition has been  satisfied or  effectively  waived in
                  accordance with the provisions of this Agreement.

                                    (b) In the event that any Issuing Bank makes
                  any  payment  under any  Facility  Letter  of  Credit  and the
                  Borrower  shall not have repaid  such  amount to such  Issuing
                  Bank  pursuant to Section 3.7 hereof,  such Issuing Bank shall
                  promptly  notify the Agent,  which shall promptly  notify each
                  Lender,  of such failure,  and each Lender shall  promptly and
                  unconditionally  pay to the  Agent  for  the  account  of such
                  Issuing  Bank the amount of such  Lender's  Percentage  of the
                  unreimbursed  amount  of such  payment,  and the  Agent  shall
                  promptly pay such amount to the Issuing  Bank.  The failure of
                  any Lender to make  available  to the Agent for the account of
                  any Issuing Bank its Percentage of the unreimbursed  amount of
                  any such  payment  shall not relieve  any other  Lender of its
                  obligation  hereunder  to make  available to the Agent for the
                  account  of  such   Issuing   Bank  its   Percentage   of  the
                  unreimbursed amount of any payment on the date such payment is
                  to be made, but no Lender shall be responsible for the failure
                  of any  other  Lender  to  make  available  to the  Agent  its
                  Percentage  of the  unreimbursed  amount of any payment on the
                  date such payment is to be made.

                                    (c)  Whenever  an  Issuing  Bank  receives a
                  payment on account of a  Reimbursement  Obligation,  including
                  any interest  thereon,  it shall promptly pay to the Agent and
                  the Agent shall  promptly  pay to each Lender which has funded
                  its participating  interest therein, in immediately  available
                  funds, an amount equal to such Lender's Percentage thereof.

                                    (d) Upon  the  request  of the  Agent or any
                  Lender,  an Issuing Bank shall furnish to such Agent or Lender
                  copies of any Facility  Letter of Credit to which that Issuing
                  Bank is party and such other  documentation  as may reasonably
                  be requested by the Agent or Lender.

                                    (e)  The  obligations  of a  Lender  to make
                  payments  to the Agent for the  account of each  Issuing  Bank
                  with respect to a Facility Letter of Credit shall be absolute,
                  unconditional   and   irrevocable,    not   subject   to   any
                  counterclaim,  set-off,  qualification or exception whatsoever
                  and shall be made in accordance  with the terms and conditions
                  of this Agreement under all circumstances.

                           (B) (a)  Immediately  upon  the  Drawing  Date of any
                  Documentary  Facility Acceptance issued in accordance with the
                  procedures set forth in Section  3.4(B),  each Lender shall be
                  deemed to have irrevocably and  unconditionally  purchased and
                  received   from   that   Issuing   Bank,   without   recourse,
                  representation   or  warranty,   an  undivided   interest  and
                  participation  equal  to its  Percentage  in such  Documentary
                  Facility  Acceptance  (including,   without  limitation,   all
                  obligations  of the  Borrower  with  respect  thereto) and any
                  security therefor or guaranty  pertaining  thereto;  provided,
                  that an  Acceptance  issued by any  Issuing  Bank shall not be
                  deemed to be a Documentary Facility Acceptance for purposes of
                  this Section 3.6 if (A) such Acceptance has an expiration date
                  which  is  later  than  five   Business   Days  prior  to  the
                  Termination  Date or (B) such Issuing Bank shall have received
                  written  notice from any Lender on or before the  Business Day
                  prior to the Drawing Date of such  Acceptance that one or more
                  of the  conditions to the issuance of a  Documentary  Facility
                  Acceptance is not then satisfied, and, in the event an Issuing
                  Bank  receives  such  a  notice,  it  shall  have  no  further
                  obligation to issue any Documentary  Facility Acceptance until
                  such  notice is  withdrawn  by that  Lender or it  receives  a
                  notice from the Agent that such  condition has been  satisfied
                  or  effectively  waived in accordance  with the  provisions of
                  this Agreement.

                                    (b) In the event that any Issuing Bank makes
                  any payment under any Documentary  Facility Acceptance and the
                  Borrower  shall not have repaid  such  amount to such  Issuing
                  Bank  pursuant  hereto on the maturity  date  specified in the
                  relevant  Notice of Drawing,  such Issuing Bank shall promptly
                  notify the Agent,  which shall promptly notify each Lender, of
                  such   failure,   and   each   Lender   shall   promptly   and
                  unconditionally  pay to the  Agent  for  the  account  of such
                  Issuing  Bank the amount of such  Lender's  Percentage  of the
                  unreimbursed  amount  of such  payment,  and the  Agent  shall
                  promptly pay such amount to the Issuing  Bank.  The failure of
                  any Lender to make  available  to the Agent for the account of
                  any Issuing Bank its Percentage of the unreimbursed  amount of
                  any such  payment  shall not relieve  any other  Lender of its
                  obligation  hereunder  to make  available to the Agent for the
                  account  of  such   Issuing   Bank  its   Percentage   of  the
                  unreimbursed amount of any payment on the date such payment is
                  to be made, but no Lender shall be responsible for the failure
                  of any  other  Lender  to  make  available  to the  Agent  its
                  Percentage  of the  unreimbursed  amount of any payment on the
                  date such payment is to be made.

                                    (c)  Whenever  an  Issuing  Bank  receives a
                  payment on account of a  Reimbursement  Obligation,  including
                  any interest  thereon,  it shall promptly pay to the Agent and
                  the Agent shall  promptly  pay to each Lender which has funded
                  its participating  interest therein, in immediately  available
                  funds, an amount equal to such Lender's Percentage thereof.

                                    (d) Upon  the  request  of the  Agent or any
                  Lender,  an Issuing Bank shall furnish to such Agent or Lender
                  copies of any  Documentary  Facility  Acceptance to which that
                  Issuing  Bank is party  and such  other  documentation  as may
                  reasonably be requested by the Agent or Lender.

                                    (e)  The  obligations  of a  Lender  to make
                  payments  to the Agent for the  account of each  Issuing  Bank
                  with respect to a  Documentary  Facility  Acceptance  shall be
                  absolute,  unconditional  and irrevocable,  not subject to any
                  counterclaim,  set-off,  qualification or exception whatsoever
                  and shall be made in accordance  with the terms and conditions
                  of this Agreement under all circumstances.

                  3.7.     Payment of Reimbursement Obligations.

                                    (a)  The  Borrower  agrees  to pay  to  each
                  Issuing  Bank the  amount  of all  Reimbursement  Obligations,
                  interest and other amounts  payable to such Issuing Bank under
                  or in  connection  with  any  Facility  Letter  of  Credit  or
                  Documentary  Facility Acceptance  immediately when due (and in
                  any event shall reimburse an Issuing Bank for drawings under a
                  Facility  Letter of Credit issued by it no later than the next
                  succeeding  Business  Day after the  payment  by that  Issuing
                  Bank),  irrespective of any claim,  set-off,  defense or other
                  right  which the  Borrower or any  Subsidiary  may have at any
                  time against any Issuing Bank or any other  Person,  under all
                  circumstances,   including  without   limitation  any  of  the
                  following circumstances:

                  (i) any lack of validity or  enforceability  of this Agreement
                      or any of the other Loan Documents;

                  (ii) the existence of any claim, setoff, defense or other 
                       right which the   Borrower   may  have  at  any  time
                       against a beneficiary  named in a Facility Letter of 
                       Credit or any transferee of any Facility  Letter of 
                       Credit or Documentary Facility Acceptance (or any Person
                       for whom any such transferee may be acting), the Agent, 
                       the Issuing Bank, any Lender, or any other Person,  
                       whether in connection with this Agreement, any Facility
                       Letter of Credit or Documentary Facility Acceptance, the
                       transactions contemplated herein or any  unrelated 
                       transactions (including any underlying transactions
                       between the Borrower or any  Subsidiary and the
                       beneficiary named in any Facility Letter of Credit or
                       Documentary Facility Acceptance);

                 (iii) any draft, certificate or any other document presented
                       under the Facility Letter  of Credit or  Documentary
                       Facility Acceptance proving to be forged,  fraudulent or
                       invalid in any respect or any statement therein being 
                       untrue or inaccurate in any respect;

                  (iv) the surrender or impairment of any security for the
                       performance  or  observance of any of the terms of any of
                       the Loan Documents; or

                   (v) the occurrence of any Default or Unmatured Default.

                   (b) In the event any payment by the Borrower or any 
                   Subsidiary  received by an Issuing Bank with respect to a 
                   Facility Letter of Credit or Documentary Facility Acceptance
                   and  distributed  by the Agent to the  Lenders  on  account
                   of their  participation  is  thereafter  set  aside,  avoided
                   or recovered from that Issuing Bank in connection with any
                   receivership,   liquidation,   reorganization or bankruptcy
                   proceeding,  each  Lender  which  received such distribution
                   shall,  upon  demand by that  Issuing  Bank, contribute such
                   Lender's  Percentage  of the  amount  set  aside, avoided or
                   recovered together with  interest at the rate required to be
                   paid by that Issuing Bank  upon the  amount  required  to be
                   repaid by it.

                   3.8.     Compensation.

                                    (a) The Borrower shall pay to the Agent, for
                  the ratable  account of the  Lenders,  based upon the Lenders'
                  respective Percentages,  a fee (the "Facility Letter of Credit
                  Fee") (i) with  respect to each  Standby  Letter of Credit and
                  each Documentary  Facility  Acceptance,  in an amount equal to
                  the  product  of the  average  daily  undrawn  amount  of such
                  Facility  Letter  of  Credit  or  unmatured   amount  of  each
                  Documentary Facility Acceptance times the percentage indicated
                  as the Applicable Margin for the Facility Letter of Credit Fee
                  times the LC Factor,  for the period from the Issuance Date or
                  Drawing Date  thereof;  as  applicable,  to but  including the
                  final  expiration  date  thereof and (ii) with respect to each
                  Commercial  Letter of  Credit,  50% of an amount  equal to the
                  product of the average daily  undrawn  amount of such Facility
                  Letter  of  Credit  times  the  percentage  indicated  as  the
                  Applicable  Margin for the Facility Letter of Credit Fee times
                  the LC  Factor,  for the  period  from  the  Issuance  Date or
                  Drawing Date  thereof,  as  applicable,  to but  including the
                  final  expiration date thereof.  The Facility Letter of Credit
                  Fee shall be due and payable in arrears on each  Payment  Date
                  and, to the extent any such fees are then due and  unpaid,  on
                  the  Termination  Date.  The Agent shall  promptly  remit such
                  Facility  Letter  of  Credit  Fees,  when  paid,  to the other
                  Lenders in accordance with their Percentages thereof.

                                    (b) Each  Issuing  Bank shall have the right
                  to receive  solely for its own account  such amounts as it and
                  the  Borrower  may agree,  in writing,  to pay to such Issuing
                  Bank with respect to issuance fees for any Facility  Letter of
                  Credit.  In  addition,  each Issuing Bank shall be entitled to
                  receive  its usual and  customary  costs and fees of  issuing,
                  fronting and servicing Facility Letters of Credit.

                                    (c) Each  Issuing  Bank shall have the right
                  to receive  solely for its own account  such amounts as it and
                  the  Borrower  may agree,  in writing,  to pay to such Issuing
                  Bank  with  respect  to  issuance  fees  for  any  Documentary
                  Facility Acceptance.  In addition,  each Issuing Bank shall be
                  entitled to receive its usual and customary  costs and fees of
                  issuing,   fronting   and   servicing   Documentary   Facility
                  Acceptance.

                  (x) The first paragraph of Section 4.2 of the Credit Agreement
                  is hereby  amended  by  inserting  the words "or  Documentary 
                  Facility Acceptance" after the words  "Facility  Letter of 
                  Credit" where such words appear in such paragraph.

                  (xi) The second  paragraph of Section 4.2 is hereby amended by
                  deleting such  paragraph in its entirety and inserting the 
                  following in its stead:

                  Each Borrowing Notice with respect to each such Advance,  each
                  Letter of Credit Request with respect to each Facility  Letter
                  of Credit  and each  Notice of  Drawing  with  respect to each
                  request for a Documentary Facility Acceptance shall constitute
                  a  representation  and  warranty  by  the  Borrower  that  the
                  conditions  contained  in  Sections  4.2(a)  and (b) have been
                  satisfied.  Any  Lender  or  Issuing  Bank may  require a duly
                  completed compliance  certificate in substantially the form of
                  Exhibit  "C"  hereto as a  condition  to  making  an  Advance,
                  issuing a Letter of Credit or discounting an Acceptance.

                  (xii) Sections 2.20.1,  2.20.2,  6.2, 7.1, 8.1, 8.3, 9.1, 9.7,
                  12.2.1,  12.2.2,  and 12.3.2 of the Credit Agreement are 
                  hereby amended by inserting the words "and Documentary 
                  Facility Acceptances" after the words "Facility  Letters of 
                  Credit" where such words appear throughout each such Section.

                  (xiii) The Credit  Agreement is hereby amended by inserting as
                  Exhibits H and I thereto,  the documents  attached  hereto as
                  Exhibit H and Exhibit I.

2. Conditions.  The  effectiveness of the amendments stated in this Amendment is
subject to on or prior to the date hereof,  that the following  conditions shall
have been satisfied in a manner, and in form and substance,  as the case may be,
reasonably acceptable to Requisite Lenders:

                  (i) Amendment. This Amendment shall have been duly executed by
                  the Requisite Lenders and the Borrower and delivered to Agent.

                  (ii) No  Default.  No Default  or Event of  Default  under the
                  Credit Agreement, as amended hereby, shall have occurred and 
                  be continuing.

                  (iii)  Warranties  and  Representations.  The  warranties  and
                  representations of the Borrower contained in this Amendment, 
                  the Credit Agreement, as amended hereby, and the other Loan 
                  Documents shall be true and correct as of the date hereof, 
                  with the same effect as though made on such  date,  except  to
                  the extent that such warranties and representations expressly 
                  relate to an earlier date, in which case such warranties and
                  representations  shall have been true and correct as of
                  such earlier date.

                  (iv)  Reaffirmation of Guaranty.  Each Real Estate  Subsidiary
                  and Operating Subsidiary shall have executed the Reaffirmation
                  of Guaranty in the form of Exhibit A hereto.

The date on which all of the above events have occurred is the "Effective Time".
If the  Effective  Time has not occurred by December 31,  1997,  this  Amendment
shall be of no force and effect.

3.  Continuing  Credits.  Notwithstanding  this  Amendment,  the Loans  owing to
Lenders by Borrower under the Credit Agreement that remain outstanding as of the
date hereof shall  constitute  continuing  Obligations of the Borrower under the
Credit Agreement and this Amendment shall not be deemed to evidence or result in
a novation, or repayment and reborrowing, of such Loans.



<PAGE>



4.       Miscellaneous.

         (a)  Captions.   Section  captions  used  in  this  Amendment  are  for
convenience only, and shall not affect the construction of this Amendment.

         (b) Governing  Law. THIS  AMENDMENT  SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED  AND ENFORCED IN  ACCORDANCE  WITH,  THE INTERNAL LAWS OF THE STATE OF
ILLINOIS,  WITHOUT  REGARD TO CONFLICT OF LAWS  PRINCIPLES  BUT GIVING EFFECT TO
FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.  Whenever  possible each provision of
this Amendment  shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Amendment shall be prohibited
by or invalid under such law, such provision  shall be ineffective to the extent
of such  prohibition or invalidity,  without  invalidating the remainder of such
provision or the remaining provisions of this Amendment.

         (c)  Counterparts.  This  Amendment  may be  executed  in any number of
counterparts  and by the different  parties on separate  counterparts,  and each
such counterpart  shall be deemed to be an original,  but all such  counterparts
shall together constitute but one and the same instrument.

         (d) Successors and Assigns.  This Amendment  shall be binding upon, and
shall inure to the sole benefit of the  Borrower,  Agent and Lenders,  and their
respective successors and assigns.

         (e) References.  Any reference to the Credit Agreement contained in any
notice,  request,  certificate,  or other document executed concurrently with or
after the  execution and delivery of this  Amendment  shall be deemed to include
this Amendment unless the context shall otherwise require.

         (f) Continued Effectiveness. Notwithstanding anything contained herein,
the terms of this  Amendment  are not  intended  to and do not serve to effect a
novation as to the Credit Agreement; instead, it is the express intention of the
parties hereto to reaffirm the  Obligations  created under the Credit  Agreement
which is evidenced by the Notes. The Credit  Agreement,  as amended hereby,  and
each of the other Loan Documents remain in full force and effect.

         (g) Costs and Expenses.  Borrower affirms and acknowledges that Section
9.7 of the Credit  Agreement  applies to this Amendment and the transactions and
agreements and documents contemplated hereunder.

5. Representations and Warranties. The Borrower represents and warrants to Agent
and Lenders that the execution, delivery and performance by the Borrower of this
Amendment are within the Borrower's  corporate powers, have been duly authorized
by all necessary corporate action (including,  without limitation, all necessary
shareholder   approval)  of  the  Borrower,  do  not  require  any  governmental
approvals,  consents or filings and do not and will not  contravene  or conflict
with any  provision  of law  applicable  to the  Borrower,  the  certificate  of
incorporation or bylaws of the Borrower or any order,  judgment or decree of any
court or other agency of government or any contractual  obligation  binding upon
the Borrower, and this Amendment,  the Credit Agreement,  as amended hereby, and
each Loan  Document is the legal,  valid and binding  obligation of the Borrower
enforceable  against  the  Borrower  in  accordance  with its terms and that the
conditions  set forth in Sections  2(ii) and (iii) hereof are true,  correct and
complete as of the Effective Time.

                                              [signature pages follow]


<PAGE>




         IN WITNESS  WHEREOF,  this Third Amendment to Credit Agreement has been
duly executed and delivered as of the day and year first above written.

                                       HOMEBASE, INC.

                                       By:________________________________

                                       Print Name: _________________________

                                       Title: ______________________________

                                       3345 Michelson Drive
                                       Irving, California 92715
                                       Phone: (714) 442-7000
                                       Fax:   (508) 442-5127


                                       THE FIRST NATIONAL BANK OF CHICAGO,
                                       Individually and as Agent

                                       By:________________________________

                                       Print Name: _________________________

                                       Title: ______________________________

                                       One First National Plaza
                                       Chicago, Illinois  60670
                                       Phone:  (312) 732-7101
                                       Fax:      (312) 732-1117

                                       Attention:  John D. Runger, 
                                                   Managing Director


                                       BANKBOSTON, N.A.,
                                       Individually and as Syndication Agent

                                       By: _________________________

                                       Print Name: Linda Thomas
                                       Title: Managing Director
                                       100 Federal Street
                                       Mail Stop 01-09-04
                                       Boston, Massachusetts 0210
                                       Phone: (617) 434-7000
                                       Fax:      (617) 434-7980

                                       WELLS FARGO BANK, N.A.
                                       Individually and as Documentation Agent

                                       By:

                                       Print Name: Kathleen Barnes
                                       Title: Vice President

                                       By:_________________________________

                                       Print Name:__________________________

                                       Title:_______________________________
                                       707 Wilshire Boulevard, 16th Floor
                                       MAC 2818-163
                                       Los Angeles, California 90017
                                       Phone: (213) 614-7782
                                       Fax:     (213) 614-2569


                                       THE SUMITOMO BANK, LIMITED

                                       By:

                                       Print Name:__________________

                                       Title:

                                       By:

                                       Print Name:__________________

                                       Title:


<PAGE>

                                    EXHIBIT A


                            REAFFIRMATION OF GUARANTY


                  Each of the undersigned  acknowledges receipt of a copy of the
Third  Amendment  to  the  Credit  Agreement  (the  "Amendment")   dated  as  of
December 19,  1997,  consents to such amendment,  and each of the  transactions
referenced  therein and hereby  reaffirms its  obligations  under the Subsidiary
Guaranty  dated  as of July 9,  1997 in  favor  of The  First  National  Bank of
Chicago, as Agent, and the Lenders (as defined in the Amendment).


Dated as of December 19, 1997

                                                     [GUARANTOR]


                                                     By:

                                                     Title:





<PAGE>



                                EXHIBIT H

                           [FORM OF NOTICE OF DRAWING]

                                NOTICE OF DRAWING


                          Dated___________________________


TO: ________________________________(the "Issuing Bank")

FROM:    HomeBase, Inc. (the "Borrower")

RE:      Credit  Agreement  (the  "Credit  Agreement")  dated as of July 9, 1997
         by and among HOMEBASE, INC., THE FIRST NATIONAL BANK OF CHICAGO, 
         BANKBOSTON,  N.A., WELLS FARGO BANK, N.A., FLEET NATIONAL BANK, 
         SUMITOMO BANK, LTD. and UNION BANK OF CALIFORNIA, N.A.

         We hereby  give you notice  pursuant  to  Section  3.4(B) of the Credit
Agreement of the Borrower's  request that the Issuing Bank create Acceptances on
_________________________  (the "Drawing  Date") by accepting and discounting in
accordance  with Section  3.4(B) of the Credit  Agreement  our Drafts (or Drafts
drawn by a beneficiary  under  Facility  Letter of Credit No.  _________) in the
aggregate  face amount of  $____________  payable  _____________  days after the
Drawing Date.

         The Drafts to be accepted by the Issuing  Bank shall be duly  completed
by the Issuing Bank in accordance with the  information  provided in this Notice
of Drawing and otherwise in accordance  with the provision of Section  3.4(B) of
the Credit Agreement:

         We hereby certify to you and each Lender as follows:

         1. No other  financing  for the  transaction  underlying  the Drafts is
outstanding,  the goods which are the subject of the transaction  underlying the
Drafts are free of any lien and are not being used as  collateral  for any other
form of financing, and the transaction will produce payments to us exceeding the
face amount of all drafts  (including  the Drafts  which are the subject to this
certificate) accepted by you arising out of said transaction.

         2.                |_|    The transaction which gives rise to the Draft
                           is the importation/exportation/domestic shipment
                           of ________________________________ from
(name of commodity)
                           ________________ to __________________________
                             (point of shipment)     (place of destination)

                           pursuant to an existing contract;

                  |_|      the Drafts were secured at the time of acceptance
                           by independent warehouse, terminal, or other
                           similar receipt conveying security title to
                           ------------------------------------------
                                    (name of readily marketable staple)
                           stored in _______________________________.
                                            (country where stored)

         3. The transaction underlying the Draft has a remaining term of term of
180 days or less, and will be concluded no later than, and at approximately  the
same time as, the maturity date of the Draft.

         4. The acceptance requested complies with the applicable regulations of
the Board of  Governors  of the  Federal  Reserve  System of the  United  States
governing  bankers  acceptances and shall be eligible under such regulations for
rediscount by a Federal Reserve Bank.

         Proceeds of the Issuing  Bank's  discount of Acceptance  arising out of
Drafts  drawn by a Facility  Letter of Credit  beneficiary  shall be paid (after
discounting charges) to such beneficiary or its assignee.

         We confirm that on the date hereof the applicable  conditions precedent
set forth in Article III and Section 4.2 of the Credit Agreement relating to, or
to be satisfied by, the Borrower are satisfied as of the date hereof.

         Unless otherwise defined herein, capitalized terms used herein have the
meanings assigned to them in the Agreement.

                                           HomeBase, Inc.


                                           By_________________________________
                                           Authorized Signature



<PAGE>





                                   EXHIBIT I

                                 [FORM OF DRAFT]


                                 CUSTOMER DRAFT


                                No-.___________________
                                Date __________________
                                Location: ______________


                                $---------------------


         On ____________________________ pay to the order of

         [Issuing Bank]

___________________________________________________________________ Dollars

         Value Received and Charge to Account of


To:      __________________________
         --------------------------


                                 HomeBase, Inc.

                                                     By:_______________________
                                                        Authorized Signature