=============================================
                        2001 LOAN AND SECURITY AGREEMENT

                  =============================================

                            FLEET RETAIL FINANCE INC.
                                    AGENT FOR
                          THE LENDERS REFERENCED HEREIN

                    ---------------------------------------

                      THE CIT GROUP/ BUSINESS CREDIT, INC.
                               DOCUMENTATION AGENT

                          FOOTHILL CAPITAL CORPORATION
                                SYNDICATION AGENT

                    ---------------------------------------

                                 HOMEBASE, INC.
                                THE LEAD BORROWER
                                      FOR:

                                 HOMEBASE, INC.
                             HOMECLUB INC. OF TEXAS
                                 HOMECLUB, INC.
                                  THE BORROWERS

                  =============================================

                              Fleet Securities Inc.
                                 THE SYNDICATOR

                  =============================================

                               February 23, 2001


<PAGE>


                                TABLE OF CONTENTS


Article 1: - DEFINITIONS:......................................................1


Article 2: - THE REVOLVING CREDIT:............................................27

         21 -ESTABLISHMENT OF REVOLVING CREDIT................................27

         22 -DESIGNATION OF ELIGIBLE REAL ESTATE..............................28

         23 -INITIAL RESERVES. CHANGES TO RESERVES............................28

         24 -ADVANCES IN EXCESS OF BORROWING BASE (OVERLOANS).................29

         25 -RISKS OF VALUE OF COLLATERAL.....................................29

         26 -COMMITMENT TO MAKE REVOLVING CREDIT LOANS AND
                    SUPPORT LETTERS OF CREDIT.................................29

         27 -REVOLVING CREDIT LOAN REQUESTS...................................30

         28 -MAKING OF REVOLVING CREDIT LOANS.................................31

         29 -SWINGLINE LOANS..................................................31

         210 -THE LOAN ACCOUNT................................................32

         211 -THE REVOLVING CREDIT NOTES......................................33

         212 -PAYMENT OF THE LOAN ACCOUNT.....................................33

         213 -INTEREST ON REVOLVING CREDIT LOANS..............................34

         214 -REVOLVING CREDIT COMMITMENT FEE.................................34

         215 -AGENT'S FEE.....................................................34

         216 -UNUSED LINE FEE.................................................35

         217 -EARLY TERMINATION FEE...........................................35

         218 -CONCERNING FEES.................................................35

         219 -AGENT'S AND REVOLVING CREDIT LENDERS' DISCRETION................35

         220 -PROCEDURES FOR ISSUANCE OF L/C'S................................36

         221 -FEES FOR L/C'S..................................................37

         222 -CONCERNING L/C'S................................................38

         223 -CHANGED CIRCUMSTANCES...........................................39

         224 -DESIGNATION OF LEAD BORROWER AS BORROWERS'  AGENT...............39

         225 -LENDERS' COMMITMENTS............................................40


Article 3: - CONDITIONS PRECEDENT:............................................41

         31 -CORPORATE DUE DILIGENCE..........................................41

         32 -OPINION..........................................................42

         33 -ADDITIONAL DOCUMENTS.............................................42

         34 -OFFICERS' CERTIFICATES...........................................42

         35 -REPRESENTATIONS AND WARRANTIES...................................42

         36 -ALL FEES AND EXPENSES PAID.......................................43

         37 -NO BORROWER INDEFAULT............................................43

         38 -NO ADVERSE CHANGE................................................43

         39 -BENEFIT OF CONDITIONS PRECEDENT..................................43


Article 4: - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:...............43

         41 -PAYMENT AND PERFORMANCE OF LIABILITIES...........................43

         42 -DUE ORGANIZATION. AUTHORIZATION. NO CONFLICTS....................44

         43 -TRADE NAMES......................................................45

         44 -INFRASTRUCTURE...................................................45

         45 -LOCATIONS........................................................45

         46 -STORES...........................................................46

         47 -TITLE TO ASSETS..................................................47

         48 -INDEBTEDNESS.....................................................47

         49 -INSURANCE........................................................47

         410 -LICENSES........................................................48

         411 -LEASES..........................................................48

         412 -REQUIREMENTS OF LAW.............................................48

         413 -LABOR RELATIONS.................................................49

         414 -PROPERTIES......................................................49

         415 -TAXES...........................................................50

         416 -NO MARGIN STOCK.................................................51

         417 -ERISA...........................................................51

         418 -HAZARDOUS MATERIALS.............................................51

         419 -LITIGATION......................................................52

         420 -DIVIDENDS. INVESTMENTS. CORPORATE ACTION........................52

         421 -LOANS...........................................................53

         422 -PROTECTION OF ASSETS............................................53

         423 -LINE OF BUSINESS................................................53

         424 -AFFILIATE TRANSACTIONS..........................................53

         425 -FURTHER ASSURANCES..............................................53

         426 -ADEQUACY OF DISCLOSURE..........................................54

         427 -NO RESTRICTIONS ON LIABILITIES..................................55

         428 -OTHER COVENANTS.................................................55


Article 5: FINANCIAL REPORTING AND PERFORMANCE COVENANTS:.....................55

         51 -MAINTAIN RECORDS.................................................55

         52 -ACCESS TO RECORDS................................................56

         53 -NOTICE TO AGENT..................................................56

         54 -BORROWING BASE CERTIFICATE.......................................57

         55 -MONTHLY REPORTS..................................................57

         56 -QUARTERLY REPORTS................................................57

         57 -ANNUAL REPORTS...................................................58

         58 -OFFICERS' CERTIFICATES...........................................58

         59 -INVENTORIES, APPRAISALS, AND AUDITS..............................58

         510 -ADDITIONAL FINANCIAL INFORMATION................................59

         511 -FINANCIAL PERFORMANCE COVENANTS.................................60


Article 6: - USE OF COLLATERAL:...............................................61

         61 -USE OF INVENTORY COLLATERAL......................................61

         62 -INVENTORY QUALITY................................................61

         63 -ADJUSTMENTS AND ALLOWANCES.......................................61

         64 -VALIDITY OF ACCOUNTS.............................................61

         65 -NOTIFICATION TO ACCOUNT DEBTORS..................................62


Article 7: - CASH MANAGEMENT. PAYMENT OF LIABILITIES:.........................62

         71 -THE BLOCKED ACCOUNT..............................................62

         72 -THE CONCENTRATION AND OPERATING ACCOUNTS.........................63

         73 -PAYMENT OF LIABILITIES...........................................63

         74 -THE OPERATING ACCOUNT............................................64


Article 8: - GRANT OF SECURITY INTEREST:......................................64

         81 -GRANT OF SECURITY INTEREST.......................................64

         82 -EXTENT AND DURATION OF SECURITY INTEREST.........................65

         83 -PERMITTED REAL ESTATE TRANSACTIONS...............................65


Article 9: - AGENT AS BORROWER'S ATTORNEY-IN-FACT:............................65

         91 -APPOINTMENT AS ATTORNEY-IN-FACT..................................65

         92 -NO OBLIGATION TO ACT.............................................66


Article 10: - EVENTS OF DEFAULT:..............................................66

         101 -FAILURE TO PAY REVOLVING CREDIT.................................66

         102 -FAILURE TO MAKE OTHER PAYMENTS..................................67

         103 -FAILURE TO PERFORM COVENANT OR LIABILITY (NO GRACE PERIOD)......67

         104 -FINANCIAL REPORTING REQUIREMENTS................................67

         105 -FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD).........67

         106 -MISREPRESENTATION...............................................68

         107 -ACCELERATION OF OTHER DEBT. BREACH OF LEASE.....................68

         108 -DEFAULT UNDER OTHER AGREEMENTS..................................68

         109 -UNINSURED LOSS..................................................68

         1010 -ATTACHMENT. JUDGMENT. RESTRAINT OF BUSINESS....................68

         1011 -BUSINESS FAILURE...............................................68

         1012 -BANKRUPTCY.....................................................69

         1013 -DEFAULT BY GUARANTOR OR AFFILIATE..............................69

         1014 -INDICTMENT - FORFEITURE........................................69

         1015 -TERMINATION OF GUARANTY........................................69

         1016 -CHALLENGE TO LOAN DOCUMENTS....................................70

         1017 -CHANGE IN CONTROL..............................................70


Article 11: - RIGHTS AND REMEDIES UPON DEFAULT:...............................70

         111 -Acceleration....................................................70

         112 -RIGHTS OF ENFORCEMENT...........................................70

         113 -SALE OF COLLATERAL..............................................71

         114 -OCCUPATION OF BUSINESS LOCATION.................................71

         115 -GRANT OF NONEXCLUSIVE LICENSE...................................72

         116 -ASSEMBLY OF COLLATERAL..........................................72

         117 -RIGHTS AND REMEDIES.............................................72


Article 12: - REVOLVING CREDIT FUNDINGS AND DISTRIBUTIONS:....................72

         121 -REVOLVING CREDIT FUNDING PROCEDURES.............................72

         122 -SWINGLINE LOANS.................................................73

         123 -AGENT'S COVERING OF FUNDINGS:...................................73

         124 -ORDINARY COURSE DISTRIBUTIONS...................................75


Article 13: - ACCELERATION AND LIQUIDATION:...................................76

         131 -ACCELERATION NOTICES............................................76

         132 -ACCELERATION....................................................76

         133 -INITIATION OF LIQUIDATION.......................................77

         134 -ACTIONS AT AND  FOLLOWING INITIATION OF LIQUIDATION.............77

         135 -AGENT'S CONDUCT OF LIQUIDATION..................................77

         136 -DISTRIBUTION OF LIQUIDATION PROCEEDS:...........................78

         137 -RELATIVE PRIORITIES TO PROCEEDS OF LIQUIDATION..................78


Article 14: - THE AGENT:......................................................78

         141 -APPOINTMENT OF THE AGENT........................................78

         142 -RESPONSIBILITIES OF AGENT.......................................79

         143 -CONCERNING DISTRIBUTIONS BY THE AGENT...........................80

         144 -DISPUTE RESOLUTION:.............................................80

         145 -DISTRIBUTIONS OF NOTICES AND OF DOCUMENTS.......................81

         146 -CONFIDENTIAL INFORMATION........................................81

         147 -RELIANCE BY AGENT...............................................81

         148 -NON-RELIANCE ON AGENT AND OTHER REVOLVING CREDIT LENDERS........81

         149 -INDEMNIFICATION.................................................82

         1410 -RESIGNATION OF AGENT...........................................83


Article 15: - ACTION BY AGENTS - CONSENTS - AMENDMENTS - WAIVERS:.............83

         151 -ADMINISTRATION OF CREDIT FACILITIES.............................83

         152 -    ACTIONS REQUIRING OR ON DIRECTION OF MAJORITY LENDERS.......84

         153 -ACTIONS REQUIRING OR ON DIRECTION OF SUPERMAJORITY LENDERS......84

         154 -    ACTION REQUIRING CERTAIN CONSENT............................84

         155 -ACTIONS REQUIRING OR DIRECTED BY UNANIMOUS CONSENT..............85

         156 -ACTIONS REQUIRING SWINGLINE LENDER CONSENT......................86

         157 -ACTIONS REQUIRING AGENT'S CONSENT...............................86

         158 -MISCELLANEOUS ACTIONS...........................................86

         159 -ACTIONS REQUIRING LEAD BORROWER'S CONSENT.......................87

         1510 -NONCONSENTING REVOLVING CREDIT LENDER..........................87

         1511 -REPLACEMENT OF DELINQUENT REVOLVING CREDIT LENDER..............88


Article 16: -   ASSIGNMENTS BY REVOLVING CREDIT LENDERS:......................90

         161 -ASSIGNMENTS AND ASSUMPTIONS:....................................90

         162 -ASSIGNMENT PROCEDURES...........................................90

         163 -EFFECT OF ASSIGNMENT............................................91


Article 17: - NOTICES:........................................................92

         171 -NOTICE ADDRESSES................................................92

         172 -NOTICE GIVEN....................................................92


Article 18: - TERM:...........................................................93

         181 -TERMINATION OF REVOLVING CREDIT.................................93

         182 -ACTIONS ON TERMINATION..........................................93


Article 19: - GENERAL:........................................................94

         191 -PROTECTION OF COLLATERAL........................................94

         192 -PUBLICITY.......................................................94

         193 -SUCCESSORS AND ASSIGNS..........................................94

         194 -SEVERABILITY....................................................94

         195 -AMENDMENTS.  COURSE OF DEALING..................................94

         196 -POWER OF ATTORNEY...............................................95

         197 -APPLICATION OF PROCEEDS.........................................95

         198 -INCREASED COSTS.................................................95

         199 -COSTS AND EXPENSES OF THE AGENT.................................96

         1910 -COPIES AND FACSIMILES..........................................97

         1911 -MASSACHUSETTS LAW..............................................97

         1912 -CONSENT TO JURISDICTION........................................97

         1913 -INDEMNIFICATION................................................97

         1914 -RULES OF CONSTRUCTION..........................................98

         1915 -INTENT.........................................................99

         1916 -PARTICIPATIONS:................................................99

         1917 -RIGHT OF SET-OFF..............................................100

         1918 -PLEDGES TO FEDERAL RESERVE BANKS:.............................100

         1919 -MAXIMUM INTEREST RATE.........................................100

         1920 -WAIVERS.......................................................100


<PAGE>


                                                     EXHIBITS

         1:1-1             :        Availability Schedule
         2:2-9(c)          :        SwingLine Note
         2:2-11            :        Revolving Credit Note
         2:2-13            :        Pricing Grid
         2:2-25            :        Revolving Credit Lenders' Commitments
         3:3-3(a)          :        Specimen Mortgage
         4:4-2             :        Corporate Information
         4:4-3             :        Trade Names
         4:4-5             :        Locations, Leases, and Landlords
         4:4-7             :        Encumbrances
         4:4-7(c)          :        Equipment Usage Agreement
         4:4-8             :        Indebtedness
         4:4-9             :        Insurance Policies
         4:4-11            :        Capital Leases
         4:4-15            :        Taxes
         4:4-19            :        Litigation
         5:5-4             :        Borrowing Base Certificate
         5:5-5             :        Monthly Financial Reporting Requirements
         5:5-11            :        Financial Performance Covenants
         16:16-2           :        Assignment / Assumption


<PAGE>
--------------------------------------------------------------------------------

LOAN AND SECURITY AGREEMENT                            Fleet Retail Finance Inc.
                                                                           AGENT

--------------------------------------------------------------------------------

                                                               February 23, 2001



         THIS AGREEMENT is made between

                   Fleet  Retail  Finance  Inc.  (in such  capacity,  herein the
         "Agent"),  a Delaware  corporation  with  offices  at 40 Broad  Street,
         Boston,  Massachusetts  02109,  as agent for the ratable benefit of the
         "Revolving  Credit  Lenders",  who are,  at  present,  those  financial
         institutions  identified on the signature  pages of this  Agreement and
         who in the future  are those  Persons  (if any) who  become  "Revolving
         Credit  Lenders" in accordance  with the provisions of Section  2:2-25,
         below;

                  and

                  The Revolving Credit Lenders;

                  and

                  HomeBase,  Inc. (in such  capacity,  the "Lead  Borrower"),  a
         Delaware  corporation  with its  principal  executive  offices  at 3345
         Michelson  Drive,  Irvine,  California 92612 as agent for the following
         (individually, a "Borrower" and collectively, the "Borrowers"):


                           HomeBase, Inc.;

                           HomeClub, Inc. of Texas, a Delaware corporation with
                           its principal executive offices at 3345 Michelson
                           Drive,  Irvine, California  92612; and

                           HomeClub,   Inc.,  a  Nevada   corporation  with  its
                           principal  executive offices at 3345 Michelson Drive,
                           Irvine, California 92612,


in  consideration  of the mutual  covenants  contained herein and benefits to be
derived  herefrom  and with the  intention  that this  Agreement  constitute  an
amendment and restatement of the 1999 Loan Agreement (as hereinafter defined),

                                                    WITNESSETH:


<PAGE>


Article 1: - DEFINITIONS:

         As used herein,  the following terms have the following meanings or are
defined in the section of this Agreement so indicated:

         "1997 Subordinated Notes":    The 5.25% Convertible  Subordinated Notes
                  due 2004 issued by the Borrower on or about  November 10, 1997
                  in the aggregate principal amount of up to $100,000,000.

         "1999 Loan  Agreement":     The  December  3,  1999  Loan and  Security
                  Agreement  (as  amended to date)  between  (among  others) the
                  Agent (then known as "BankBoston Retail Finance Inc.") and the
                  Revolving Credit Lenders referred to therein, on the one hand,
                  and the Lead Borrower and the Borrowers on the other, of which
                  this Agreement is an amendment and restatement.

         "Acceleration":   The  making  of  demand  or   declaration   that  any
                  indebtedness,  not  otherwise  due  and  payable,  is due  and
                  payable,   provided  that  such  demand  or   declaration   is
                  authorized  under the Loan Documents.  Derivations of the word
                  "Acceleration"  (such  as  "Accelerate")  are used  with  like
                  meaning in this Agreement.

         "Acceleration Notice":     Written notice as follows:
                           (a)      From the Agent to the Revolving Credit
                                    Lenders, as provided in  13:13-1(a).
                           (b)      From the SuperMajority Lenders to the Agent,
                                    as provided in Section 13:13-1(b).

         "Account Debtor": Has the meaning given that term in the UCC.

         "Accounts"  and  "Accounts  Receivable"  include,  without  limitation,
                  "accounts"  as  defined  in the UCC,  and also all:  accounts,
                  accounts  receivable,   receivables,  and  rights  to  payment
                  (whether or not earned by performance)  for: property that has
                  been  or  is  to  be  sold,  leased,  licensed,  assigned,  or
                  otherwise disposed of; services rendered or to be rendered;  a
                  policy  of  insurance  issued  or to be  issued;  a  secondary
                  obligation  incurred or to be incurred;  energy provided or to
                  be provided;  for the use or hire of a vessel;  arising out of
                  the use of a credit or charge card or information contained on
                  or used with that card; winnings in a lottery or other game of
                  chance;  and also all Inventory  which gave rise thereto,  and
                  all rights associated with such Inventory, including the right
                  of stoppage in transit; all reclaimed,  returned,  rejected or
                  repossessed  Inventory (if any) the sale of which gave rise to
                  any Account.

         "ACH":   Automated clearing house.


         "Affiliate":      (a)      Each Subsidiary.
                           (b) With respect to any two Persons,  a  relationship
                  in which (i) one holds, directly or indirectly,  not less than
                  Twenty Five  Percent  (25%) of the capital  stock,  beneficial
                  interests, partnership interests, or other equity interests of
                  the other; or (ii) one has, directly or indirectly, the right,
                  under  ordinary  circumstances,  to vote for the election of a
                  majority  of the  directors  (or other  body or Person who has
                  those powers  customarily  vested in a board of directors of a
                  corporation); or (iii) not less than Twenty Five Percent (25%)
                  of their  respective  ownership is directly or indirectly held
                  by the same third Person.
                           (c)  Any  corporation,   limited  liability  company,
                  trust, partnership,  joint venture, or other enterprise which:
                  is a parent,  brother-sister,  subsidiary,  or affiliate, of a
                  Borrower;   could  have  such   enterprise's  tax  returns  or
                  financial statements consolidated with that Borrower's;  could
                  be a member  of the  same  controlled  group  of  corporations
                  (within the meaning of Section 1563(a)(1),  (2) and (3) of the
                  Internal  Revenue Code of 1986,  as amended from time to time)
                  of which any Borrower is a member;  controls or is  controlled
                  by any Borrower.

         "Agent": Is referred to in the Preamble.

         " Agent's  Cover":         Defined in Section 12:12-3(c)(i).

         " Agent's Fee": Is defined in Section 2:2-15.

         " Agent's Rights and Remedies":    Is defined in Section 11:11-7.

         "Applicable  Law":  As  to  any   Person:(i)   All   statutes,   rules,
                  regulations, orders, or other requirements having the force of
                  law and (ii) all court  orders and  injunctions,  arbitrator's
                  decisions,  and/or similar rulings,  in each instance ((i) and
                  (ii))  of or by  any  federal,  state,  municipal,  and  other
                  governmental  authority,  or court, tribunal,  panel, or other
                  body which has or claims jurisdiction over such Person, or any
                  property  of such  Person,  or of any other  Person  for whose
                  conduct such Person would be responsible.

         "Appraised Inventory Liquidation Value":    The net recovery, as
                  reflected on an Inventory Appraisal, as recoverable on the
                  Borrowers' Inventory in the event of the conduct of a
                  liquidation of the Borrowers' Inventory pursuant to an in-
                  store liquidation.

         "Appraised Inventory Percentage":  85%.

         "Assigning Revolving Credit Lender":     Defined in Section 16:16-1(a).

         "Assignment and Acceptance":       Defined in Section 16:16-2.

         "Availability":   The lesser of (a) or (b), where
                           (a) is the result of
                                    (i)     The Revolving Credit Ceiling

                                    Minus

                                    (ii) The  aggregate  unpaid  balance  of the
                                    Loan  Account   Minus  (iii)  The  aggregate
                                    undrawn    Stated   Amount   of   all   then
                                    outstanding  L/C's.

                                    Minus

                                    (iv) The aggregate of the Availability
                                    Reserves.

                           (b) is the result of
                                    (i)     The Borrowing Base

                                    Minus

                                    (ii) The  aggregate  unpaid  balance  of the
                                    Loan  Account

                                    Minus

                                    (iii)  The  aggregate undrawn Stated Amount
                                    of all then outstanding L/C's.

                                    Minus

                                    (iv) The aggregate of the Availability
                                    Reserves.

         "Availability  Reserves":  Such reserves as the Agent from time to time
                  determines in the Agent's  discretion as being  appropriate to
                  reflect the impediments to the Agent's ability to realize upon
                  the  Collateral.   Without  limiting  the  generality  of  the
                  foregoing,  Availability  Reserves  may  include  (but are not
                  limited to) reserves based on the following:
                           (i)      Rent  (based  upon past due rent and whether
                                    or not a Landlord's  Waiver,  acceptable  to
                                    the Agent,  has been  received  by the Agent
                                    for Stores in  Pennsylvania,  Virginia,  and
                                    Washington  in which  more than a de minimis
                                    amount  of  the   Borrower's   Inventory  is
                                    located).
                           (ii)     Customer Credit Liabilities.
                           (iii)    Taxes   and  other   governmental   charges,
                                    including,  ad valorem,  personal  property,
                                    and other taxes  which  might have  priority
                                    over the  Collateral  Interests of the Agent
                                    in the Collateral.
                           (iv)     L/C Landing Costs.

         "Availability Schedule:    Is annexed hereto as EXHIBIT 1:1-1.

         "Availability Trigger Cure:    The Borrowers having Excess Availability
                  of at least $75 Million for five (5) consecutive Business Days

         "Availability  Trigger  Event:"  :  The  Borrowers  not  having  Excess
                  Availability  of at least $45 Million for five (5) consecutive
                  Business Days.

         "Bankruptcy Code":      Title 11, U.S.C., as amended from time to time.

         "Base":  The Base Rate  announced  from time to time by Fleet  National
                  Bank (or any successor in interest to Fleet National Bank). In
                  the event  that said  bank (or any such  successor)  ceases to
                  announce such a rate, "Base" shall refer to that rate or index
                  announced or published from time to time as the Agent, in good
                  faith,  designates as the  functional  equivalent to said Base
                  Rate. Any change in "Base" shall be effective, for purposes of
                  the calculation of interest due hereunder, when such change is
                  made  effective  generally  by the bank on whose rate or index
                  "Base" is being set.

         "Base Margin Loan":        Each Revolving Credit Loan while bearing
                  interest at the Base Margin Rate.

         "Base Margin":    The then applicable Base Margin as determined from
                  the applicable Pricing Grid.

         "Base Margin Rate":      The aggregate of Base plus the then applicable
                  Base Margin.

         "Blocked Account Agreement": The Agreement,  styled "Restricted Account
                  Agreement," dated January 10, 2000,  amongst Wells Fargo Bank,
                  N.A., the Lead Borrower,  and BankBoston  Retail Finance Inc.,
                  as Agent and any other agreement,  in form satisfactory to the
                  Agent, with the Lock Box Bank, which agreement  recognizes the
                  Agent's  security  interest in all Receivables  Collateral and
                  provides  that,  on notice  from the Agent,  the Lock Box Bank
                  will forward directly to the Agent proceeds of all Receivables
                  Collateral from time to time received by the Lock Box Bank.

         "Borrower" and "Borrowers":        Is defined in the Preamble.

         "Borrowing Base": The aggregate of the following:
                  (a)      Advances against Eligible Inventory:
                           (i)      Until the conditions of Subsection (ii) are
                                    satisfied:
                                            The  Inventory Advance Rate of the
                                            Cost of Eligible Inventory (Net of
                                            Inventory Reserves)
                           (ii)     The  earlier of (A)  January 31, 2002 or (B)
                                    that date on which  Excess  Availability  is
                                    less than $60 Million, the lesser of:
                                            (A) The Inventory Advance Rate of
                                    the Cost of Eligible Inventory (Net of
                                    of Inventory Reserves)

                                            Or

                                            (B)    The    Appraised    Inventory
                                    Percentage   of  the   Appraised   Inventory
                                    Liquidation Value.
                  Plus

                  (b)      Advances Against Eligible Credit Card Receivables:
                           The Credit  Card  Advance  Rate of the face amount of
                           Eligible Credit Card Receivables.
                  Plus

                  (c)      Advances Against Eligible Real Estate:
                           The least of
                           (i)      $40 Million.
                           (ii)     That amount which, when added to the amounts
                                    determined  pursuant  to (a) and (b) of this
                                    Definition,  does  not  exceed  20%  of  the
                                    resulting sum.
                           (iii)    The  Real  Estate  Advance  Rate of the Real
                                    Estate  Appraised  Value  of  Eligible  Real
                                    Estate.

         "Borrowing Base Certificate":      Is defined in Section 5:5-4.
         "Boston Concentration Account":    Is defined in Section 7:7-2.

         "BusinessDay":  Any day other  than (a) a Saturday  or Sunday;  (b) any
                  day on which banks in Boston, Massachusetts or in Los Angeles,
                  California,  generally are not open to the general  public for
                  the purpose of conducting  commercial banking business; or (c)
                  a day on which the  principal  office of the Agent is not open
                  to the general public to conduct business.

         "Business Plan": The Borrowers' December 1, 2000 business plan provided
                  to the Agent and any revision, amendment, or update of such
                  business plan to which the Agent has provided its written
                  sign-off.

         "Capital Expenditures":   The expenditure of funds or the incurrence of
                  liabilities which may be capitalized in accordance with GAAP.

         "Capital Lease":  Any lease which may be capitalized in accordance with
                  GAAP.

         "Change in Control":       The occurrence of any of the following:
                           (a)      The  failure of the  Parent to own,
                  beneficially and  of  record,  100%  of the  capital stock  of
                  all  other Borrowers.
                           (b)      The acquisition,  by any group of persons
                  (within the meaning of the Securities Exchange Act of 1934, as
                  amended) or by any Person, of beneficial ownership (within the
                  meaning  of  Rule  13d-3  of  the   Securities   and  Exchange
                  Commission)  of 40% or  more  of the  issued  and  outstanding
                  capital stock of the Parent having the right,  under  ordinary
                  circumstances,  to vote for the  election of  directors of the
                  Parent.
                           (c) More than half of the persons who were  directors
                  of the  Parent on the first day of any  period  consisting  of
                  Twelve (12)  consecutive  calendar  months (the first of which
                  Twelve (12) month periods commencing with the first day of the
                  month during which this  Agreement was executed),  cease,  for
                  any reason other than death or disability,  to be directors of
                  the Parent and are not replaced by Directors  approved by vote
                  of not less than two thirds of the  Directors  who are then in
                  office and who either were Directors on the date on which this
                  Agreement was executed or whose election to the Parent's Board
                  was likewise so approved.

         "Chattel Paper":  Has the meaning given that term in the UCC.

         "Collateral":     The totality of (a) the assets and property described
                  in Section 8:8-1; (b)  the Real Estate Collateral; and (c) any
                  other property in which the Agent may in the future be granted
                  a Collateral interest.

         "Collateral Interest":     Any interest in property to secure an
                  obligation, including, without limitation, a security
                  interest, mortgage, and deed of trust.

         "Collateral Interest Restrictions":Any restriction to the creation of a
                  Collateral Interest to the extent that such restriction is not
                  made ineffective by UCC9'99 Sections 9-401,  9-407,  9-408, or
                  9-409.

         "Consent": Actual  consent  given by the  Revolving  Credit Lender from
                  whom such  consent  is  sought;  or the  passage  of Seven (7)
                  Business  Days from  receipt of written  notice to a Revolving
                  Credit Lender from the Agent of a proposed course of action to
                  be  followed  by  the  Agent  without  such  Revolving  Credit
                  Lender's  giving the Agent  written  notice of that  Revolving
                  Credit Lender's  objection to such course of action,  provided
                  that the Agent may rely on such  passage of time as consent by
                  a Revolving  Credit Lender only if such written  notice states
                  that  consent  will be deemed  effective  if no  objection  is
                  received within such time period.

         "Consolidated": When used to modify a financial term, test,  statement,
                  or report,  refers to the  application  or preparation of such
                  term, test, statement or report (as applicable) based upon the
                  consolidation,  in  accordance  with  GAAP,  of the  financial
                  condition or operating results of the Borrowers.

         "Cost":  The lower of (a) or (b), where:
                           (a) is the calculated  cost of purchases,  based upon
                  the Borrowers' accounting practices, known to the Agent, which
                  practices  are in effect on the date on which  this  Agreement
                  was  executed  as such  calculated  cost is  determined  from:
                  invoices  received by the Borrowers;  the Borrowers'  purchase
                  journal; or the Borrowers' stock ledger.
                           (b) is the cost  equivalent of the lowest ticketed or
                  promoted  price at which the subject  Inventory  is offered to
                  the public, after all mark-downs (whether or not such price is
                  then reflected on the  Borrowers'  accounting  system),  which
                  cost  equivalent is  determined in accordance  with the retail
                  method  of  accounting,  reflecting  the  Borrowers'  historic
                  business practices.
                           ("Cost"  does not  include  inventory  capitalization
                  costs or other  non-purchase  price  charges (such as freight)
                  used in the Borrowers' calculation of cost of goods sold).

         "Costs of Collection":    Includes,  without limitation, all attorneys'
                  reasonable fees and reasonable out-of-pocket expenses incurred
                  by the Agent's  attorneys,  and all  reasonable  out-of-pocket
                  costs  incurred  by the  Agent  in the  administration  of the
                  Liabilities  and/or  the Loan  Documents,  including,  without
                  limitation,  reasonable  costs and  expenses  associated  with
                  travel on behalf of the Agent,  where such costs and  expenses
                  are  directly  or  indirectly  related to or in respect of the
                  Agent's:  administration  and  management of the  Liabilities;
                  negotiation,   documentation,   and   amendment  of  any  Loan
                  Document; or efforts to preserve, protect, collect, or enforce
                  the Collateral, the Liabilities, and/or the Agent's Rights and
                  Remedies  and/or any of the rights and  remedies  of the Agent
                  against or in respect of any  guarantor or other person liable
                  in  respect  of  the  Liabilities  (whether  or  not  suit  is
                  instituted  in  connection  with  such  efforts).   "Costs  of
                  Collection"  also includes the reasonable fees and expenses of
                  Lenders'  Special   Counsel.   The  Costs  of  Collection  are
                  Liabilities,  and at the Agent's  option may bear  interest at
                  the then effective Base Margin Rate.

         "Credit Card Advance Rate":       85%

         "Customer Credit Liability":      Gift certificates, customer deposits,
                  merchandise credits, layaway obligations, frequent shopping
                  programs, and similar liabilities of any Borrower to its
                  retail customers and prospective customers.

         "DDA":   Any checking or other demand daily depository account
                  maintained by any Borrower.

         "Delinquent Revolving Credit Lender":    Defined in Section 12:12-3(c).

         "Deposit Account":         Has the meaning given that term in the UCC.

         "Documents":      Has the meaning given that term in the UCC.

         "Documents of Title":      Has the meaning given that term in the UCC.

         "Eligible Assignee":  A bank,  insurance company, or company engaged in
                  the  business  of making  commercial  loans  having a combined
                  capital and surplus in excess of $300 Million or any Affiliate
                  of any  Revolving  Credit  Lender,  or any  Person  to  whom a
                  Revolving  Credit  Lender  assigns its rights and  obligations
                  under this  Agreement as part of a programmed  assignment  and
                  transfer of such Revolving  Credit Lender's rights in and to a
                  material portion of such Revolving  Credit Lender's  portfolio
                  of asset based credit facilities.

         "Eligible Credit Card  Receivables": Under 7 business day accounts due
                  on a non-recourse basis from major credit card processors
                  (which, if due on account of a private label credit card
                  program, are deemed in the discretion of the Agent to be
                  eligible).

         "Eligible Inventory":      The following:
                            (a)  Such  of  a   Borrower's   Inventory   (without
                  duplication of Eligible L/C Inventory ), as to which the Agent
                  has a perfected  security interest which is prior and superior
                  to all security interests,  claims, and all Encumbrances other
                  than Permitted Encumbrances,  but exclusive of those Permitted
                  Encumbrances  listed  in  subparagraphs  (l)  and  (n)  of the
                  definition  of Permitted  Encumbrances.  "Eligible  Inventory"
                  does  not  include:  any  non-merchandise  inventory  (such as
                  labels, bags, and packaging materials);  damaged goods; return
                  to vendor merchandise;  packaways;  consigned  inventory;  and
                  other similar categories of Goods.
                           (b)      Eligible L/C Inventory.

         "EligibleL/C  Inventory":  Inventory  (without  duplication of Eligible
                  Inventory),   the   purchase  of  which  is   supported  by  a
                  documentary L/C then having an initial expiry of Sixty (60) or
                  less  days (as  determined  either  empirically  or  through a
                  commercially reasonable estimation process), provided that the
                  Agent  has  received  a  customs  brokers  agreement  in  form
                  reasonably satisfactory to the Agent.

         "EligibleReal  Estate":  Such  of  the  Lead  Borrower's  real  estate,
                  designated  from time to time by the Lead Borrower as Eligible
                  Real  Estate,  as to which  the  Real  Estate  Parameters  are
                  satisfied.

         "Employee Benefit Plan":   As defined in ERISA.

         "Encumbrance":    Each of the following:
                           (a) A  Collateral  Interest or agreement to create or
                  grant a Collateral Interest;  the interest of a lessor under a
                  Capital  Lease;  conditional  sale or  other  title  retention
                  agreement;  sale of accounts  receivable or chattel paper;  or
                  other arrangement  pursuant to which any Person is entitled to
                  any  preference  or priority  with  respect to the property or
                  assets of  another  Person or the  income or  profits  of such
                  other  Person;  each of the  foregoing  whether  consensual or
                  non-consensual  and  whether  arising  by  way  of  agreement,
                  operation of law, legal process or otherwise.
                           (b) The filing of any financing  statement  under the
                  UCC or comparable  law of any  jurisdiction,  which filing has
                  been authorized by a Borrower.

         "End     Date":  The date upon which both (a) all Liabilities have been
                  paid in full and (b) all  obligations of any Revolving  Credit
                  Lender  to  make  loans  and  advances  and to  provide  other
                  financial accommodations to the Borrowers hereunder shall have
                  been irrevocably terminated.

         "Environmental Laws":      All of the following:
                           (a) Applicable Law which  regulates or relates to, or
                  imposes any  standard of conduct or liability on account of or
                  in respect to  environmental  protection  matters,  including,
                  without  limitation,   Hazardous  Materials,  as  are  now  or
                  hereafter in effect.
                           (b) The common law  relating  to damage to Persons or
                  property from Hazardous Materials.

         "Equipment": Includes,  without  limitation,  "equipment" as defined in
                  the  UCC,  and  also  all  furniture,  store  fixtures,  motor
                  vehicles,  rolling stock, machinery,  office equipment,  plant
                  equipment,  tools, dies, molds, and other goods, property, and
                  assets  which are used  and/or were  purchased  for use in the
                  operation or furtherance of a Borrower's business, and any and
                  all  accessions  or  additions   thereto,   and  substitutions
                  therefor.

         "ERISA": The Employee Retirement Income Security Act of 1974, as
                  amended.

         "ERISA   Affiliate":  Any Person which is under  common  control with a
                  Borrower  within the  meaning  of Section  4001 of ERISA or is
                  part of a group which includes any Borrower and which would be
                  treated as a single employer under Section 414 of the Internal
                  Revenue Code of 1986, as amended.

         "Eurodollar Business Day": Any day which is both a Business Day and a
                  day on which the principal market in Eurodollars in which
                  Fleet National Bank participates is open for dealings in
                  United States Dollar deposits.

         "Eurodollar Loan":         Any Revolving Credit Loan which bears
                  interest at a Eurodollar Rate.

         "Eurodollar Margin":       The then applicable Eurodollar Margin as
                  determined from the Pricing Grid.

         "Eurodollar Offer Rate":  That rate of interest  (rounded  upwards,  if
                  necessary, to the next 1/100 of 1%) determined by the Agent to
                  be the highest  prevailing rate per annum at which deposits on
                  U.S.   Dollars  are  offered  to  Fleet   National   Bank,  by
                  first-class  banks in the  Eurodollar  market  in which  Fleet
                  National Bank  participates  at or about 10:00AM (Boston Time)
                  Two (2)  Eurodollar  Business Days before the first day of the
                  Interest Period for the subject Eurodollar Loan, for a deposit
                  approximately  in the amount of the subject  loan for a period
                  of time approximately equal to such Interest Period.

         "Eurodollar Rate":  That per annum rate (calculated  based on a 360 day
                  year and actual days  elapsed)  which is the  aggregate of the
                  Eurodollar Offer Rate plus the Eurodollar  Margin except that,
                  in the  event  that it is  determined  by the  Agent  that any
                  Revolving   Credit  Lender  may  be  subject  to  the  Reserve
                  Percentage,  the  "Eurodollar  Rate"  shall  mean,  as to such
                  Revolving Credit Lender,  with respect to any Eurodollar Loans
                  then  outstanding   (from  the  date  on  which  that  Reserve
                  Percentage  first became  applicable to such loans),  and with
                  respect to all Eurodollar  Loans  thereafter made, an interest
                  rate per annum equal the sum of (a) plus (b), where:
                           (a) is the decimal equivalent of the following
                               fraction:
                                               Eurodollar Offer Rate
                                           ----------------------------
                                            1 minus Reserve Percentage

                           (b) is the applicable Eurodollar Margin.

         "Events of Default":       Is defined in Article 10:.

         "Excess Availability":     The result of Availability minus: all then
                  held checks (if any); accounts payable which are beyond credit
                  terms then accorded the Borrowers; overdrafts; any then unpaid
                  charges to the Loan Account.

         "Exempt  DDA": A depository  account  maintained by any  Borrower,  the
                  only  contents of which may be  transfers  from the  Operating
                  Account and actually used solely (i) for petty cash  purposes;
                  or (ii) for payroll.

         "Farm Products":  Has the meaning given that term in the UCC.

         "Fee Letter":     That letter dated on or about December 1, 2000 and
                  styled "Fee Letter" between the Lead Borrower and the Agent,
                  as such letter may from time to time be amended.

         "Fiscal":When  followed by "month" or  "quarter",  the relevant  fiscal
                  period  based on the  Borrowers'  fiscal  year and  accounting
                  conventions.  When  followed by reference to a specific  year,
                  the  fiscal  year  which  ends in a month of the year to which
                  reference is being made (e.g.  if the  Borrowers'  fiscal year
                  ends in January  2001  reference  to that year would be to the
                  Borrowers' "Fiscal 2001").

         "Fixtures":       Has the meaning given that term in the UCC.

         "GAAP":  Principles which are consistent with those promulgated or
                  adopted by the Financial Accounting Standards Board and its
                  predecessors (or successors) in effect and applicable to that
                  accounting period in respect of which reference to GAAP is
                  being made, provided, however, in the event of a Material
                  Accounting Change, then unless otherwise specifically agreed
                  to by the Agent, (a) the Borrowers' compliance with the
                  financial performance covenants imposed pursuant to Section
                  5:5-11 shall be determined as if such Material Accounting
                  Change had not taken place and (b) the Lead Borrower shall
                  include, with its monthly,  quarterly, and annual financial
                  statements a schedule, certified by the Lead Borrower's chief
                  financial officer, on which the effect of such Material
                  Accounting Change on that statement shall be described.

         "General Intangibles":    Includes,   without   limitation,    "general
                  intangibles"  as defined in the UCC;  and also all:  rights to
                  payment  for credit  extended;  deposits;  amounts  due to any
                  Borrower; credit memoranda in favor of any Borrower;  warranty
                  claims;  tax refunds  and  abatements;  insurance  refunds and
                  premium  rebates;  all means and  vehicles  of  investment  or
                  hedging, including, without limitation, options, warrants, and
                  futures contracts; records; customer lists; telephone numbers;
                  goodwill;  causes of  action;  judgments;  payments  under any
                  settlement  or other  agreement;  literary  rights;  rights to
                  performance;  royalties; license and/or franchise fees; rights
                  of  admission;   licenses;   franchises;  license  agreements,
                  including all rights of any Borrower to enforce same; permits,
                  certificates of convenience and necessity,  and similar rights
                  granted  by  any  governmental   authority;   patents,  patent
                  applications,   patents   pending,   and  other   intellectual
                  property;  internet addresses and domain names;  developmental
                  ideas  and  concepts;   proprietary   processes;   blueprints,
                  drawings,  designs,  diagrams,  plans,  reports,  and  charts;
                  catalogs;  manuals; technical data; computer software programs
                  (including  the source and object  codes  therefor),  computer
                  records,  computer  software,  rights of  access  to  computer
                  record service bureaus, service bureau computer contracts, and
                  computer  data;  tapes,  disks,   semi-conductors   chips  and
                  printouts; trade secrets rights, copyrights,  mask work rights
                  and  interests,  and  derivative  works and  interests;  user,
                  technical  reference,  and other manuals and materials;  trade
                  names,  trademarks,  service marks, and all goodwill  relating
                  thereto;  applications for registration of the foregoing;  and
                  all other general  intangible  property of any Borrower in the
                  nature of intellectual  property;  proposals;  cost estimates,
                  and  reproductions  on  paper,  or  otherwise,  of any and all
                  concepts or ideas,  and any matter  related  to, or  connected
                  with, the design, development,  manufacture,  sale, marketing,
                  leasing,  or use of any or all  property  produced,  sold,  or
                  leased,  by  any  Borrower  or  credit  extended  or  services
                  performed, by any Borrower, whether intended for an individual
                  customer or the general  business of any Borrower,  or used or
                  useful in connection with research by any Borrower.

         "Goods": Has the meaning  given that term in the UCC, and also includes
                  all things movable when a security  interest  therein attaches
                  and also  all  computer  programs  embedded  in goods  and any
                  supporting   information   provided  in   connection   with  a
                  transaction  relating  to the  program  if (i) the  program is
                  associated  with the goods in such manner that it  customarily
                  is considered  part of the goods or (ii) by becoming the owner
                  of the goods, a Person  acquires a right to use the program in
                  connection with the goods.

         "Hazardous Materials":     Any (a) substance which is defined or
                  regulated as a hazardous material in or under any
                  Environmental Law and (b) oil in any physical state.

         "House2Home  Conversion":  The conversion of the  Borrowers'  principal
                  line of business from that it which it had been engaged at the
                  execution of the 1999 Loan Agreement to the  "House2Home - The
                  Incredible  Decorating  Store"  concept  as  outlined  in  the
                  Business Plan.

         "Indebtedness":   All indebtedness and obligations of or assumed by any
                  Person on account of or in respect to any of the following:
                           (a) In  respect  of  money  borrowed  (including  any
                  indebtedness  which  is  non-recourse  to the  credit  of such
                  Person but which is secured by an  Encumbrance on any asset of
                  such Person)  whether or not  evidenced by a promissory  note,
                  bond, debenture or other written obligation to pay money.
                           (b) In  connection  with  any  letter  of  credit  or
                  acceptance  transaction  (including,  without limitation,  the
                  face  amount of all letters of credit and  acceptances  issued
                  for the account of such Person or  reimbursement on account of
                  which such Person would be obligated).
                           (c) In  connection  with  the  sale  or  discount  of
                  accounts receivable or chattel paper of such Person.
                           (d) On account of deposits or advances  which  create
                  an obligation,  on the part of a Borrower,  to repay or credit
                  such deposit or advance.
                           (e) As lessee under Capital Leases.
                           (f)  In  connection   with  any  sale  and  leaseback
                  transaction  which  results  in a  Capital  Lease on which any
                  Borrower is obligated.
                                    "Indebtedness" also includes:
                                            (x)  Indebtedness  of others secured
                                    by an  Encumbrance  on  any  asset  of  such
                                    Person,  whether or not such Indebtedness is
                                    assumed by such Person.
                                            (y)   Any   guaranty,   endorsement,
                                    suretyship or other undertaking  pursuant to
                                    which  that  Person may be liable on account
                                    of any obligation of any third party.
                                            (z)    The    Indebtedness    of   a
                                    partnership  or joint venture for which such
                                    Person is liable  as a  general  partner  or
                                    joint venturer.

         "InDefault":  Any  occurrence,  circumstance,  or state  of facts  with
                  respect to a Borrower which (a) is an Event of Default; or (b)
                  would become an Event of Default if any requisite  notice were
                  given and/or any requisite period of time were to run and such
                  occurrence,   circumstance,   or  state  of  facts   were  not
                  absolutely cured within any applicable grace period.

         "Indemnified Person":      Is defined in Section 19:19-13.

         "Instruments":    Has the meaning given that term in the UCC.

         "Interest Payment Date":   With reference to:
                           Each  Eurodollar  Loan:  The last day of the Interest
                  Period  relating  thereto (and the last day of month three for
                  any such  loan  which has a six month  Interest  Period);  the
                  Termination Date; and the End Date.
                           Each Base Margin Loan: The first day of each month;
                  the Termination Date; and the End Date.

         "Interest Period":         The following:
                           (a) With respect to each Eurodollar Loan:  Subject to
                  Subsection  (c), below,  the period  commencing on the date of
                  the making or  continuation  of, or conversion to, the subject
                  Eurodollar  Loan and ending  one,  two,  three,  or six months
                  thereafter, as the Lead Borrower may elect by notice (pursuant
                  to Section 2:2-7) to the Agent
                           (b) With respect to each Base Margin Loan: Subject to
                  Subsection  (c), below,  the period  commencing on the date of
                  the  making  or  continuation  of or  conversion  to such Base
                  Margin  Loan and  ending  on that  date  (i) as of  which  the
                  subject Base Margin Loan is converted to a Eurodollar Loan, as
                  the Lead  Borrower  may elect by notice  (pursuant  to Section
                  2:2-7) to the Agent,  or (ii) on which the subject Base Margin
                  Loan is paid by the Borrowers.
                           (c)      The  setting of  Interest  Periods is in all
                                    instances subject to the following:
                                    (i)       Any Interest Period for a Base
                           Margin Loan which would otherwise end on a day which
                           is not a Business Day shall be extended to the next
                           succeeding Business Day.
                                    (ii) Any  Interest  Period for a  Eurodollar
                           Loan which would otherwise end on a day that is not a
                           Eurodollar Business Day shall be extended to the next
                           succeeding   Eurodollar  Business  Day,  unless  that
                           succeeding  Eurodollar  Business  Day is in the  next
                           calendar  month,  in which event such Interest Period
                           shall end on the last Eurodollar  Business Day of the
                           month during which the Interest Period ends.
                                    (iii) Subject to Subsection (iv), below, any
                           Interest  Period  applicable  to a  Eurodollar  Loan,
                           which Interest Period begins on a day for which there
                           is no numerically  corresponding  day in the calendar
                           month during which such Interest  Period ends,  shall
                           end on the last Eurodollar  Business Day of the month
                           during which that Interest Period ends.
                                    (iv)  Any   Interest   Period   which  would
                           otherwise end after the Termination Date shall end on
                           the Termination Date.
                                    (v) The number of Interest Periods in effect
                           at any  one  time is  subject  to  Section  2:2-13(d)
                           hereof.

         "Inventory": Includes,  without  limitation,  "inventory" as defined in
                  the UCC and also all:  (a) Goods  which are leased by a Person
                  as  lessor;  are held by a  Person  for sale or lease or to be
                  furnished  under a contract of  service;  are  furnished  by a
                  Person  under  a  contract  of  service;  or  consist  of  raw
                  materials, work in process, or materials used or consumed in a
                  business;  (b) Goods of said description in transit; (c) Goods
                  of  said  description  which  are  returned,  repossessed  and
                  rejected; (d) packaging,  advertising,  and shipping materials
                  related to any of the  foregoing;  (e) all names,  marks,  and
                  General  Intangibles  affixed or to be  affixed or  associated
                  thereto;  and (f)  Documents  and  Documents  of  Title  which
                  represent any of the foregoing.

         "Inventory Advance Rate":  70%.

         "Inventory  Appraisal":   An  appraisal  of  the  Borrowers'  Inventory
                  undertaken  at the  request  of  the  Agent,  by a  Nationally
                  Recognized  Inventory Appraiser acceptable to the Agent, using
                  a methodology  comparable to that employed by Gordon  Brothers
                  in  the   preparation  of  its  appraisal  of  the  Borrowers'
                  Inventory dated on or about October 25, 2000.

         "Inventory Reserves":     Such Reserves as may be established from
                  time to time  by the  Agent  in the  Agent's  discretion  with
                  respect to the determination of the saleability, at retail, of
                  the Eligible  Inventory or which reflect such other factors as
                  affect the market value of the Eligible Inventory.

         "Investment Property":     Has the meaning given that term in the UCC.

         "Issuer":         The issuer of any L/C.

         "L/C":   Any letter of credit, the issuance of which is procured by the
                  Agent for the account of any Borrower and any acceptance made
                  on account of such letter of credit.

         "L/C     Landing  Costs":  To the  extent  not  included  in the Stated
                  Amount  of  an  L/C,  customs,   duty,   freight,   and  other
                  out-of-pocket  costs and  expenses  which will be  expended to
                  "land" the  Inventory,  the  purchase of which is supported by
                  such L/C.

         "Lead Borrower":  Is referred to in the Preamble.

         "Lease": Any lease or other agreement, no matter how styled or
                  structured, pursuant to which a Borrower is entitled to the
                  use or occupancy of any space.

         "Lenders'Special Counsel":  A single counsel,  selected by the Majority
                  Lenders  following the  occurrence of an Event of Default,  to
                  represent  the interests of the  Revolving  Credit  Lenders in
                  connection with the  enforcement,  attempted  enforcement,  or
                  preservation  of any rights and  remedies  under this,  or any
                  other  Loan  Document,  as  well  as in  connection  with  any
                  "workout",   forbearance,   or  restructuring  of  the  credit
                  facility contemplated hereby.

         "Letter-of-Credit Right":  Has the meaning given that term in UCC 9'99
                  and also refers to any right to payment or performance under
                  an L/C, whether or not the beneficiary has demanded or is at
                  the time entitled to demand payment or performance.

         "Liabilities":    Includes, without limitation, the following:
                  (a) All and each of the  following,  whether  now  existing or
         hereafter  arising under this  Agreement or under any of the other Loan
         Documents:
                           (i) Any  and all  direct  and  indirect  liabilities,
                  debts,  and  obligations  of each Borrower to the Agent or any
                  Revolving  Credit  Lender,  each of every  kind,  nature,  and
                  description.
                           (ii) Each  obligation  to repay  any  loan,  advance,
                  indebtedness,  note, obligation,  overdraft,  or amount now or
                  hereafter  owing by any Borrower to the Agent or any Revolving
                  Credit Lender  (including all future  advances  whether or not
                  made  pursuant to a commitment  by the Agent or any  Revolving
                  Credit  Lender),  whether  or not any of such are  liquidated,
                  unliquidated,  primary, secondary, secured, unsecured, direct,
                  indirect, absolute,  contingent, or of any other type, nature,
                  or description,  or by reason of any cause of action which the
                  Agent or any  Revolving  Credit  Lender may hold  against  any
                  Borrower.
                           (iii)  All  notes  and  other   obligations  of  each
                  Borrower now or hereafter  assigned to or held by the Agent or
                  any Revolving Credit Lender,  each of every kind,  nature, and
                  description.
                           (iv)  All  interest,  fees,  and  charges  and  other
                  amounts  which may be  charged  by the Agent or any  Revolving
                  Credit Lender to any Borrower and/or which may be due from any
                  Borrower to the Agent or any Revolving Credit Lender from time
                  to time, including,  without limitation, any interest accruing
                  after the filing of a  petition  by or  against  any  Borrower
                  under the Bankruptcy Code, regardless of whether such interest
                  is an allowed claim under the Bankruptcy Code).
                           (v) All costs and  expenses  incurred  or paid by the
                  Agent or any  Revolving  Credit  Lender  in  respect  of any
                  agreement between any Borrower and the Agent or any  Revolving
                  Credit Lender or instrument furnished by any Borrower to the
                  Agent or any Revolving Credit Lender  (including,  without
                  limitation, Costs of Collection, attorneys' reasonable fees,
                  and all court and litigation costs and expenses).
                           (vi) Any and all  covenants  of each  Borrower  to or
                  with the Agent or any Revolving  Credit Lender and any and all
                  obligations  of each Borrower to act or to refrain from acting
                  in accordance with any agreement between that Borrower and the
                  Agent or any Revolving  Credit Lender or instrument  furnished
                  by that Borrower to the Agent or any Revolving Credit Lender.
                           (vii) Each of the  foregoing as if each  reference to
                  the " the Agent or any Revolving  Credit  Lender" were to each
                  Affiliate  of the Agent.
                  (b) Any and all  direct or  indirect liabilities, debts, and
         obligations of each Borrower to the Agent or any Affiliate of the
         Agent, each of every kind, nature, and  description  owing on  account
         of any service or  accommodation provided to, or for the account of any
         Borrower pursuant to this or any other  Loan  Document, including  cash
         management  services  and  the issuances of L/C's.

         "Liquidation": The exercise,  by the Agent, of those rights accorded to
                  the  Agent  under  the Loan  Documents  as a  creditor  of the
                  Borrowers  following  and on account of the  occurrence  of an
                  Event  of  Default  looking  towards  the  realization  on the
                  Collateral.  Derivations  of the word  "Liquidation"  (such as
                  "Liquidate") are used with like meaning in this Agreement.

         "Loan Account":   Is defined in Section 2:2-10.

         "Loan Commitment":        With respect to each Revolving Credit Lender,
                  that respective Revolving Credit Lender's Revolving Credit
                  Dollar Commitment.

         "Loan    Documents":  This  Agreement,  each  instrument  and  document
                  executed and/or delivered  pursuant to the 1999 Loan Agreement
                  or as  contemplated  by  Article  3:,  below,  and each  other
                  instrument  or  document  from  time to time  executed  and/or
                  delivered in  connection  with the  arrangements  contemplated
                  hereby.

         "Lock    Box  Bank":  That  bank to  which  the  Borrowers  concentrate
                  proceeds of the Borrowers'  sales,  which, at the execution of
                  this Agreement, is Wells Fargo Bank, N.A.

         "Majority Lenders":     Revolving Credit Lenders (other than Delinquent
                  Revolving Credit Lenders) holding 51% or more of the Loan
                  Commitments (other than any Loan Commitments held by
                  Delinquent Revolving Credit Lenders).

         "Material Accounting  Change":   Any  change  in  GAAP   applicable  to
                  accounting  periods  subsequent to the Borrowers'  fiscal year
                  most  recently  completed  prior  to  the  execution  of  this
                  Agreement,   which  change  has  a  material   effect  on  the
                  Borrowers'   Consolidated  financial  condition  or  operating
                  results,  as  reflected on  financial  statements  and reports
                  prepared  by or for the  Borrowers,  when  compared  with such
                  condition  or results as if such change had not taken place or
                  where preparation of the Borrowers'  statements and reports in
                  compliance  with  such  change  results  in  the  breach  of a
                  financial  performance  covenant  imposed  pursuant to Section
                  5:5-11  where such a breach  would not have  occurred  if such
                  change had not taken place or visa versa.

         "Material Adverse Change":  Subject to the  proviso at the foot of this
                  Definition,  any  event,  fact,  circumstance,  change  in, or
                  effect on, the business of, any Borrower  which,  individually
                  or in the  aggregate or on a  cumulative  basis with any other
                  circumstances, changes in, or effects on, the Borrowers or the
                  Collateral taken as a whole:
                           (a)  Is,  or  would  reasonably  be  expected  to be,
                  materially  adverse  to the  business,  operations,  assets or
                  liabilities   (including,   without   limitation,   contingent
                  liabilities), results of operations or the financial condition
                  of the Borrowers, when taken as a whole; or
                           (b)  Would   reasonably  be  expected  to  materially
                  adversely affect the ability of the Borrowers taken as a whole
                  to operate or conduct business in all material respects in the
                  manner in which they are  currently  operated or  conducted by
                  the  Borrowers  taken as a whole (after  giving  effect to the
                  House2Home Conversion as reflected in the Business Plan) or to
                  perform their obligations under the Loan Documents; or
                           (c) Would  reasonably  be expected to have a material
                  adverse  effect or result in a material  adverse change in the
                  value,  enforceability,  collectibility  or the  nature of the
                  Collateral.  Provided,  however,  no  adverse  effect  of  the
                  House2Home  Conversion which is reflected in the Business Plan
                  (but not otherwise)  shall be considered in the  determination
                  of whether a "Material Adverse Change" has taken place.

         "Material Adverse Effect":     A result, consequence, or outcome with
                  respect to the Borrowers which constitutes a Material Adverse
                  Change.

                  "Maturity Date":   November 30, 2004.

         "Minimum Projected   Excess   Availability":    Twenty   Five   Million
                  Dollars($25  Million)  less than Excess  Availability  for the
                  relevant period,  as reflected on the Agent's December 1, 2000
                  Availability Schedule.

         "Nationally Recognized  Inventory  Appraiser:"  An inventory  appraiser
                  which  engages  in a national  practice  of the  appraisal  of
                  retail inventory.

         "New     Store":  A Store which,  on February 1, 2001, was not operated
                  by any Borrower  under  either the HomeBase or the  House2Home
                  concept  and was not then dark on  account  of its  undergoing
                  conversion from the HomeBase to the House2Home concept.

         "Nominee":      A business entity (such as a corporation or limited
                  partnership) formed by the Agent to own or manage any Post
                  Foreclosure Asset.

         "Operating Account":       Is defined in Section 7:7-2.

         "OverLoan": A loan,  advance,  or providing of credit  support (such as
                  the issuance of any L/C) to the extent that, immediately after
                  its having been made, Availability is less than zero.

         "Parent":         HomeBase, Inc.

         "Participant":    Is defined in Section 19:19-16, hereof.

         "Payment Intangible":     Has the meaning given that term in UCC 9'99
                  and also refers to any general intangible under which the
                  Account Debtor's primary obligation is a monetary obligation.

         "Permitted Affiliate Transactions":Each of the following:
                           (a)      The sale of goods and services for a price
                  and on terms which are
                                    (i)     competitive and fully deductible as
                  an "ordinary and necessary
                  business  expense" and/or fully depreciable under the Internal
                  Revenue  Code of 1986 and the  Treasury  Regulations,  each as
                  amended; and
                                    (ii)  no  less  favorable  to  that  selling
                  Borrower  than those which would have been charged and imposed
                  in an arms length transaction.
                           (b) A transaction  in which there is no  Consolidated
                  gain or loss to any party to such transaction.

         "Permitted Encumbrances":  The following:
                  (a)      Encumbrances in favor of the Agent.
                  (b)  Those  Encumbrances  (if any)  listed  on  Exhibit  4:4-6
         annexed to the 1999 Loan Agreement and which, for ease of reference, is
         annexed hereto as EXHIBIT 4:4-7.
                  (c)  Liens  securing  the  payment  of taxes,  either  not yet
         overdue or the  validity of which are being  contested  as permitted by
         Section 4:4-15(b) of this Agreement.
                  (d) Non-consensual  statutory liens (other than liens securing
         the payment of taxes)  arising in the  ordinary  course of a Borrowers'
         business to the extent:  such liens  secure  obligations  which are not
         overdue  or  such  liens  secure  obligations  relating  to  claims  or
         liabilities which are fully insured and being defended at the sole cost
         and expense and at the sole risk of the insurer or are being  contested
         in  good  faith  by  appropriate  proceedings  diligently  pursued  and
         available to a Borrower,  in each instance prior to the commencement of
         foreclosure  or other  similar  proceedings  and with  respect to which
         adequate reserves have been set aside on the Borrowers' books.
                  (e) Encumbrances on properties consisting of easements, rights
         of way, zoning  restrictions,  restrictions on the use of real property
         and defects and  irregularities  in the title  thereto,  landlord's  or
         lessor's  liens under leases to which a Borrower is a party,  and other
         minor liens or encumbrances  none of which  interferes  materially with
         the  use of  the  property  affected  in the  ordinary  conduct  of the
         business of that Borrower.
                  (f)  Deposits  under  workmen's   compensation,   unemployment
         insurance and social  security  laws, or to secure the  performance  of
         bids,  tenders,  contracts  (other than for the  repayment  of borrowed
         money) or  leases,  or to  secure  statutory  obligations  or surety or
         appeal  bonds,  or to secure  indemnity,  performance  or other similar
         bonds arising in the ordinary course of business.
                  (g)  Landlord's  liens by operation of law where  waivers have
                  not been obtained.
                  (h) Purchase money security  interests (as defined in the UCC)
         in Equipment permitted by Section 4:4-7(c).
                  (i)      Interests of lessors under Capital Leases.
                  (j) Liens arising on account of the transfer of an interest in
         Accounts or notes receivable,  which transfer qualifies as a sale under
         GAAP.
                  (k) Liens consisting of security  deposits made by a Borrower.
                  (l) Liens granted by one Borrower to another Borrower.
                  (m) Encumbrances on Inventory which,  when aggregated with the
         Cost of Inventory consigned to any Borrower, do not exceed four percent
         (4%) of the Cost of all of the Borrowers' Inventory at any time.
                  (n) Liens not otherwise  described in this  Definition,  which
         secure up to $5 Million in the aggregate at any one time outstanding.
                  (o) Liens arising out of Permitted Real Estate Transactions.
         The  inclusion of any of the  foregoing  as a  "Permitted  Encumbrance"
         shall  not  affect  its  relative  priority  vis a vis  any  Collateral
         Interest created by a Borrower in favor of the Agent.

         "Permitted Indebtedness":  The following:
                           (a)      Indebtedness under this Agreement.
                           (b)      Indebtedness described on EXHIBIT 4:4-8,
                  annexed hereto.
                           (c)      Indebtedness on account of a Permitted Real
                  Estate Transaction.
                           (d)      Indebtedness secured solely by a Permitted
                  Encumbrance.
                           (e)      Indebtedness on account of the termination
                  of the Borrower's private label
                  credit card  program to take effect on or about July 15, 2001,
                  provided that the discount in connection with such termination
                  does not exceed five  percent  (5%) of the  aggregate  balance
                  then owed by cardholders in that program.
                           (f) Contingent obligations on account of endorsements
                  of  instruments  for  deposit or  collection  in the  ordinary
                  course.
                           (g)  Contingent  obligations  consisting of unsecured
                  guaranties,  and other  arrangements which have the functional
                  effect of a guaranty, of another Borrower or of any Subsidiary
                  of any Borrower.
                           (h)      Permitted SubDebt.
                           (i)      Indebtedness to any Affiliate.
                           (j)      Capitalized Lease obligations, not to exceed
                  $30 Million outstanding at any            one time.

         "Permitted  Investments":  Each of the  following,  provided that it is
                  held by the Parent; is subject to the prior perfected security
                  interest of the Agent;  and is  denominated  in United  States
                  Dollars:
                           (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 Revolving Credit 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. which 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 SEC rule
                  2a-7 (17 CFR  270.2a-7)  under the  Investment  Company Act of
                  1940.
                           (l) Insurance company guaranteed investment contracts
                  or funding  agreements  with  insurers  rated A-2 or better by
                  Standard and Poor's Corporation.
                           (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.

         "Permitted Merger":  A merger or  consolidation  of one  Borrower  into
                  another,  not less than thirty (30) days prior written  notice
                  of which (with  reasonable  particularity  as to the facts and
                  circumstances thereof) has been provided to the Agent.

         "Permitted Real  Estate  Transaction":  The  sale,  mortgaging  (or its
                  functional  equivalent),  or sale  and  leaseback  of any real
                  estate  owned  by a  Borrower,  where  both  of the  following
                  conditions  are  satisfied:  (a)  on the  date  on  which  the
                  relevant   Borrower   becomes   contractually   obligated   to
                  consummate the subject transaction,  no Borrower is in Default
                  and no  Borrower  will  become  InDefault  as a result of such
                  transaction   and  (b)  on  the  date  on  which  the  subject
                  transaction is  consummated,  (i) such real estate is not then
                  designated  by the Lead  Borrower as Eligible  Real Estate and
                  (ii) no OverLoan will result on account of the consummation of
                  such transaction.

         "Permitted Repurchase"     Either of the following ((a) or (b)) which
                  occurs after May 31, 2002:
                           (a)      A purchase or repurchase, by the Parent of
                  its capital stock as follows:
                                    (i) With proceeds received from the issuance
                           of new shares of the Parent's capital stock.
                                    (ii)  Pursuant  to a program  adopted by the
                           Parent's Directors to repurchase stock options issued
                           by the Parent.
                           (b) A purchase or repurchase,  by the Parent, of any
                  of its capital stock and a purchase,  repurchase,  retirement,
                  or repayment of principal, of any of the  1997  Subordinated
                  Notes,  provided  that  the Excess  Availability,  immediately
                  after such  purchase or repurchase, is not less than Threshold
                  Excess Availability.

         "Permitted Subsidiary":  A wholly owned subsidiary of the Parent (other
                  than a "Borrower"  at the execution of this  Agreement)  where
                  either (a) or (b) of this Definition is satisfied:
                           (a) The assets of such  subsidiary,  when  aggregated
                  with all other  subsidiaries  other than those governed by (b)
                  of this Definition, are less than $1,000,000.00.
                           (b) Such  subsidiary  has  become a  "Borrower"  or a
                  guarantor of the Liabilities and has granted to the Agent, for
                  the ratable benefit of the Revolving Credit Lenders  perfected
                  first-priority  Collateral  Interests  in all  of  its  assets
                  (subject   only   to  any   applicable   Collateral   Interest
                  Restrictions   and  Permitted   Encumbrances)  to  secure  its
                  obligations so  undertaken,  all by its execution and delivery
                  to  the  Agent  of  such   documentation   as  is   reasonably
                  satisfactory to the Agent.

         "Permitted Sub Debt":       The following Indebtedness:
                           (a)      Indebtedness evidenced by the 1997
                  Subordinated Notes.
                           (b)      Indebtedness subordinated to the Liabilities
                  pursuant to written agreement satisfactory to the Agent.

         "Person":    Any natural person, and any corporation, limited liability
                  company, trust, partnership, joint venture, or other
                  enterprise or entity.

         "Post Foreclosure Asset":  All or any part of the Collateral, ownership
                  of which is acquired by the Agent or a Nominee on account of
                  the "bidding in" at a disposition as part of a Liquidation or
                  by reason of a "deed in lieu" type of transaction.

         "Pricing Grid":   Set out in EXHIBIT 2:2-13.

         "Proceeds":       Includes, without limitation, "Proceeds" as defined
                  in the UCC and each type of property described in Section
                  8:8-1 hereof.

         "Protective OverAdvances":  Revolving Credit Loans which are OverLoans,
                  but as to which each of the following conditions is satisfied:
                  (a) the Revolving Credit Ceiling is not exceeded; and (b) when
                  aggregated  with  all  other  Protective  OverAdvances,   such
                  Revolving  Credit Loans do not aggregate  more than 10% of the
                  aggregate of the Borrowing Base; and (c) such Revolving Credit
                  Loans are made or  undertaken  in the  Agent's  discretion  to
                  protect and preserve the  interests  of the  Revolving  Credit
                  Lenders.

         "Real Estate Advance Rate":        50%.

         "Real Estate  Appraised  Value":     The forced  liquidation  appraised
                  value of Eligible Real Estate,  as determined by a real estate
                  appraiser  reasonably  satisfactory  to the  Agent and using a
                  methodology which is reasonably satisfactory to the Agent, the
                  then  aggregate  of which  value shall be reduced on the first
                  day of each  month,  beginning  with the twenty  fourth  month
                  after the  Restatement  Date, by one-sixtieth of the aggregate
                  as of the first day of such twenty fourth  month,  except that
                  the value of any Eligible Real Estate which is acquired  after
                  the first day of the twenty fourth month after the Restatement
                  Date,   shall  be  reduced  by  one-sixtieth  of  such  forced
                  liquidation appraised value commencing on the first day of the
                  second month after the month during which such  Eligible  Real
                  Estate had been acquired.

         "Real Estate Collateral":  All real  estate and  interests  in real
                  estate (other than solely as lessee, sublessor,  sublessee, or
                  holder of any option to purchase under any lease) in which any
                  Borrower has an interest.
         "Real Estate Parameters":  (a)     The subject real estate is owned by
                  (but not leased to) the Lead Borrower (or a Subsidiary of the
                  Lead Borrower) in fee simple title.
                           (b) Such parcel of Real Estate has been  appraised by
                  a third  party  appraiser  acceptable  to the  Agent and title
                  insurance,   environmental  studies,  and  other  real  estate
                  requirements, as reasonably determined by the Agent, have been
                  satisfied,  including,  but not limited to,  those items which
                  would be required if the Agent were subject to compliance with
                  the Financial  Institutions Reform,  Recovery, and Enforcement
                  Act of 1989 (commonly referred to as "FIRREA").
                           (c) A mortgage (or its functional equivalent) in form
                  reasonably  satisfactory  to the  Agent  has been  filed  with
                  respect  to such real  estate  and the  Agent's  mortgage  and
                  security  interests  in such  parcel of real  estate have been
                  perfected such that Agent has a perfected  first-priority lien
                  in such real estate,  subject only to Permitted  Encumbrances,
                  but  exclusive  of  those  Permitted  Encumbrances  listed  in
                  subparagraphs (l), (n), and (o) of the definition of Permitted
                  Encumbrances.
                           (d) The Lead Borrower (or the  Subsidiary  which owns
                  the  subject   real   estate)  is  in   compliance   with  the
                  representations,  warranties  and  covenants  set forth in the
                  mortgage or its functional  equivalent relating to such parcel
                  of real estate.

         "Receipts":       All cash, cash equivalents, money, checks, credit
                  card slips, receipts and other Proceeds from any sale of the
                  Collateral.

         "Receivables Collateral":  That portion of the Collateral which
                  consists of Accounts, Accounts Receivable, General
                  Intangibles, Chattel Paper, Instruments, Documents of Title,
                  Documents, Investment Property, Payment Intangibles, Letter-
                  of -Credit Rights, bankers' acceptances, and all other rights
                  to payment.

         "Register":       Is defined in Section 16:16-2(c).

         "Requirements of Law":     As to any Person:
                           (a)      Applicable Law.
                           (b)      That Person's organizational documents.
                           (c) That Person's  by-laws  and/or other  instruments
                  which  deal  with   corporate   or  similar   governance,   as
                  applicable.

         "Reserve Percentage": The decimal equivalent of that rate applicable to
                  a Revolving Credit Lender under  regulations  issued from time
                  to time by the  Board  of  Governors  of the  Federal  Reserve
                  System for determining the maximum reserve requirement of that
                  Revolving   Credit   Lender  with  respect  to   "Eurocurrency
                  liabilities"  as  defined  in such  regulations.  The  Reserve
                  Percentage applicable to a particular Eurodollar Loan shall be
                  based upon that in effect during the subject  Interest Period,
                  with  changes in the  Reserve  Percentage  which  take  effect
                  during   such   Interest   Period  to  take   effect  (and  to
                  consequently   change  any  interest  rate   determined   with
                  reference to the Reserve  Percentage)  if and when such change
                  is applicable to such loans.

         "Reserves": The following: Availability Reserves and Inventory Reserves

         "Restatement Date":        The date of this Agreement.

         "Revolving Credit":        Is defined in Section 2:2-1.

         "Revolving Credit Ceiling":        $250,000,000.00 .

         "Revolving Credit Commitment Fee": Is defined in Section 2:2-14.

         "Revolving Credit Dollar Commitment":       As set forth on EXHIBIT
                  2:2-25, annexed hereto (as such amounts may change in
                  accordance with the provisions of this Agreement).

         "Revolving Credit Early Termination Fee": Is defined in Section 2:2-17.

         "Revolving Credit Lenders":       Each Revolving Credit Lender to which
                  reference is made in the Preamble of this Agreement and any
                  other Person who becomes a "Revolving Credit Lender" in
                  accordance with the provisions of this Agreement.

         "Revolving Credit Loans": Loans made under the Revolving Credit, except
                  that  where  the term  "Revolving  Credit  Loan" is used  with
                  reference to available  interest rates applicable to the loans
                  under the Revolving Credit, it refers to so much of the unpaid
                  principal  balance of the Loan  Account as bears the same rate
                  of  interest  for  the  same  Interest  Period.  (See  Section
                  2:2-13(c)).

         "Revolving Credit Note":   Is defined in Section 2:2-11.

         "Revolving Credit Obligations":    The aggregate of the Borrowers'
                  liabilities, obligations, and indebtedness of any character on
                  account of or in respect to the Revolving Credit.

         "Revolving Credit Percentage Commitment":   As set forth on EXHIBIT
                  2:2-25, annexed hereto (as such amounts may change in
                  accordance with the provisions of this Agreement).

         "SEC":   The Securities and Exchange Commission.

         "Senior  Officer":  President, Chief Executive Officer, Chief Operating
                  Officer,  Chief Financial  Officer,  Treasurer,  and any other
                  Person or  officer  reasonably  so  designated  by the  Agent,
                  written  notice of which  designation is provided by the Agent
                  to the Lead Borrower.

         "Stated Amount":  The maximum amount for which an L/C may be honored.

         "Store": A place at which a Borrower offers its Inventory for sale to
                  the public.

         "Subsidiary":  Any  Person  (a) 50% of whose  stock or other  divisible
                  ownership interests having ordinary voting power, are owned or
                  controlled, directly or indirectly by another Person or (b) of
                  which  another  Person  is the  general  partner  or  managing
                  partner or the like.

         "SuperMajority   Lenders":   Revolving   Credit   Lenders  (other  than
                  Delinquent  Revolving  Credit Lenders) holding 66-2/3% or more
                  of the Loan Commitments (other than Loan Commitments held by a
                  Delinquent Revolving Credit Lender).

         "Supporting  Obligation":  Has the meaning  given that term in UCC 9'99
                  and also  refers  to a  Letter-of-Credit  Right  or  secondary
                  obligation  which  supports the payment or  performance  of an
                  Account,  Chattel Paper, a Document, a General Intangible,  an
                  Instrument, or Investment Property.

         "SwingLine":  The facility pursuant to which the SwingLine Lender may
                  advance Revolving Credit Loans aggregating up to the SwingLine
                  Loan Ceiling.

         "SwingLine Lender":        Fleet Retail Finance Inc.

         "SwingLine Loan Ceiling":  $25,000,000.00 (subject to increase as
                  provided in Section 15:15-4).

         "SwingLine Loans":         Defined in Section 2:2-9.

         "Termination Date":  The earliest of (a) the Maturity  Date; or (b) the
                  occurrence of any event described in Section 10:10-12,  below;
                  or (c) the  Agent's  notice to the Lead  Borrower  setting the
                  Termination  Date on account of the occurrence of any Event of
                  Default other than as described in Section 10:10-12, below; or
                  (d) that date, sixty (60) days  irrevocable  written notice of
                  which is provided by the Lead Borrower to the Agent.

         "Threshold Excess Availability": Forty Million Dollars ($40,000,000.00)

         "Transfer":  Wire  transfer   pursuant  to  the  wire  transfer  system
                  maintained  by the Board of Governors  of the Federal  Reserve
                  Board,  or as otherwise  may be agreed to from time to time by
                  the Agent  making  such  Transfer  and the  subject  Revolving
                  Credit Lender.  Wire  instructions  may be changed in the same
                  manner that Notice Addresses may be changed (Section 17:17-1),
                  except that no change of the wire  instructions  for Transfers
                  to any Revolving Credit Lender shall be effective  without the
                  consent of the Agent.


         "UCC":   The Uniform Commercial Code as in effect from time to time in
                  Massachusetts.

         "UCC9'99": The Uniform  Commercial Code, Article 9, 1999 Official Text,
                  except that following the effectiveness,  in Massachusetts, of
                  the  revision  of  Article 9 of the  Uniform  Commercial  Code
                  contemplated  by UCC9'99 (with such  nonuniform  variations as
                  may be adopted  as part of the  enactment  of that  revision),
                  each reference to "UCC9'99" shall be to the UCC.

         "Unanimous Consent":    Consent of Revolving Credit Lenders (other than
                  Delinquent Revolving Credit Lenders) holding 100% of the Loan
                  Commitments (other than Loan Commitments held by a Delinquent
                  Revolving Credit Lender).

         "Unused Line Fee":         Is defined in Section 2:2-16.

         "Usage": The aggregate,  on the day on which Usage is being determined,
                  of (a) the then  principal  balance of the Loan  Account  plus
                  (ii) the then Stated Amount of all L/C's.

         "Usage   Percentage ": The decimal equivalent of a fraction, determined
                  with respect to a fiscal month,  in which (a) the numerator is
                  the aggregate of (i) the average unpaid  principal  balance of
                  the Loan  Account plus (ii) the average  Stated  Amount of all
                  L/C's   and   Acceptances,   and   (b)  the   denominator   is
                  $250,000,000.00.


<PAGE>


Article 2: - THE REVOLVING CREDIT:

         21 -ESTABLISHMENT OF  REVOLVING CREDIT
                  (a) The Revolving  Credit  Lenders  hereby  establish a
revolving line of credit (the  "Revolving  Credit")  in the  Borrowers'  favor
pursuant to which  each Revolving  Credit Lender,  subject to, and in accordance
with,  this Agreement, acting  through the Agent,  shall make loans and advances
and otherwise  provide financial  accommodations  to and for the account of the
Borrowers  as provided herein.
                  (b) Loans,  advances,  and financial  accommodations under the
Revolving Credit shall be made with  reference to the Borrowing  Base and shall
be subject to Availability.  The Borrowing Base and Availability shall be
determined by the Agent by reference to Borrowing  Base  Certificates  furnished
as provided in Section  5:5-4, below, and shall  be  subject  to the  following:
                           (ii)  Such determination  shall take into account
                  those Reserves as the Agent may determine as being applicable
                  thereto.
                           (iii) The Cost of  Eligible Inventory  shall be based
                  on the Borrowers' stock ledger inventory.
                  (a) The commitment of each Revolving Credit Lender to provide
such loans, advances, and financial accommodations is subject to Section 2:2-25.
                  (b) The proceeds of borrowings  under the Revolving  Credit
shall be used solely for  the  following   purposes:
                           (iv)  To  provide   on-going  working  capital
                  requirements and general corporate requirements of the
                  Borrowers, it being  recognized  that such  working  capital
                  and  general  corporate requirements  do not  include  the use
                  of such  proceeds  to fund  any purchase or repurchase, by the
                  Parent, of any of its capital stock and a purchase,
                  repurchase,  retirement, or repayment of principal, of any of
                  the 1997 Subordinated Notes,
                           (v)  For Permitted Repurchases.


          22 -DESIGNATION OF ELIGIBLE REAL ESTATE
                  (a) The Lead  Borrower  may  designate one or more  parcels of
the Real  Estate Collateral  as Eligible Real Estate upon written  notice to the
Agent, provided that the Real Estate Parameters have been satisfied with respect
to such parcel on the date on which such  designation is made.
                  (b) The Lead Borrower may remove one or more  parcels of Real
Estate  Collateral,  from time to time as Eligible Real Estate by written notice
to the Agent, provided that:
                           (ii) An OverLoan does not result from such removal.
                           (iii) No Borrower is InDefault  immediately prior
                  to such removal nor after such removal.

          23 -INITIAL RESERVES. CHANGES TO RESERVES.
                  (a) At the execution of the amendment and  restatement of this
Agreement,  the only  Reserves  are those in effect,  immediately  prior to such
amendment  and restatement.
                  (b) The Agent shall provide not less than seven (7) days prior
notice to the Lead  Borrower of the  establishment  of any  Reserve  (other than
those  established at the execution of this Agreement) except that the following
may be undertaken  without such prior  notice:
                           (ii) a change to the amount of a then existing
                  Reserve (as distinguished from a change by which such Reserve
                  is measured  or  determined), which  change  reflects  changed
                  circumstances  (e.g.  the amount of the  Reserve for  Customer
                  Credit Liability  will  change  based  on the  aggregate  of
                  Customer  Credit Liability at any one time); and
                           (iii)  the  creation  of, or a change  to an existing
                  Reserve on account of circumstances which the Agent determines
                  as having a Material Adverse Change on the maintenance of loan
                  to collateral values.

          24 -ADVANCES IN EXCESS OF BORROWING BASE (OVERLOANS).
                  (a) No Revolving Credit Lender has any  obligation to make any
loan or advance, or otherwise to provide any credit to or for the benefit of the
Borrowers  where the result of such loan,  advance,  or credit is an OverLoan.
                  (b) The Revolving Credit Lenders' obligations, among
themselves, are subject to Section 12:12-3(a) (which relates to each Revolving
Credit Lender's making amounts available to the Agent) and to Section 15:15-3(a)
(which relates to Protective OverAdvances).
                  (c) The Revolving Credit Lenders'  providing of an OverLoan on
any one occasion does not affect the obligations of each Borrower hereunder
(including each Borrower's obligation  to  immediately  repay any amount  which
otherwise constitutes an OverLoan) nor obligate  the  Revolving  Credit  Lenders
to do so on any other occasion.

          25 -RISKS OF VALUE OF COLLATERAL.  The  Agent's  reference  to a given
asset in connection with the making of loans,  credits, and advances and the
providing of financial  accommodations  under the Revolving  Credit and/or the
monitoring of compliance with the provisions hereof shall not be deemed a
determination by the Agent or any Revolving Credit Lender relative to the actual
value of the asset in question.  All risks  concerning  the value of the
Collateral are and remain upon the Borrowers. All Collateral secures the prompt,
punctual,  and faithful performance  of the  Liabilities  whether or not  relied
upon by the  Agent in connection with the making of loans, credits, and advances
and the providing of financial accommodations under the Revolving Credit.

          26 -COMMITMENT TO MAKE REVOLVING CREDIT LOANS AND SUPPORT  LETTERS OF
              CREDIT. Subject to the provisions of this Agreement, the Revolving
Credit Lenders shall make a loan or advance under the Revolving  Credit and the
Agent shall endeavor to have an L/C issued for the account of the Lead Borrower,
in each instance if duly and timely requested by the Lead Borrower as provided
herein provided that:
                  (a) No  OverLoan is then  outstanding  and none will  result
therefrom.
                  (b) No Borrower is then InDefault and none will thereby become
InDefault.

          27 -REVOLVING CREDIT LOAN REQUESTS.
                  (a)  Requests  for loans and  advances  under  the  Revolving
Credit or for the continuance or conversion of an interest rate  applicable to a
Revolving  Credit Loan may be  requested  by the Lead Borrower in such manner as
may from time to time  be  acceptable  to the  Agent.
                  (b)  Subject  to the  provisions  of  this Agreement, the Lead
Borrower may request a Revolving  Credit Loan and elect an interest rate and
Interest Period to be applicable to that Revolving Credit Loan by  giving notice
to the Agent by no later  than the  following:
                           (ii) If such Revolving  Credit Loan is to be or is to
          be converted to a Base Margin Loan:  By 1:30PM on the Business Day on
          which the subject  Revolving  Credit Loan is to be made or is to be so
          converted.  Base Margin  Loans  requested  by the Lead Borrower, other
          than  those  resulting  from  the conversion  of  a Eurodollar Loan,
          shall not be less than $500,000.00.
                           (iii) If such  Revolving  Credit  Loan is to be,  or
          is to be continued  as, or converted to, a Eurodollar  Loan: By 1:00PM
          Three (3)  Eurodollar  Business Days before  the commencement  of any
          new Interest Period or the end of the then applicable Interest Period.
          Eurodollar Loans and conversions to Eurodollar Loans shall each be not
          less than $1,000,000.00  and in increments of  $500,000.00 in excess
          of such  minimum.
                           (iv) Any  Eurodollar  Loan  which  matures  while any
          Borrower is InDefault shall be converted, at the option of the Agent,
          to a Base Margin Loan  notwithstanding any notice from the Lead
          Borrower that such Loan is to be  continued as a Eurodollar  Loan.
                  (a) Any request for a Revolving  Credit Loan or for the
continuance  or conversion of an interest rate  applicable to a Revolving Credit
Loan which is made after the applicable  deadline therefor,  as set forth above,
shall be deemed to have been made at the opening of business on the then next
Business Day or Eurodollar  Business Day, as  applicable.
                  (b) The Lead  Borrower  may request  that the Agent cause the
issuance by the Issuer of L/C's for the account of the  Borrowers as provided in
Section  2:2-20.
                  (c) The Agent  may rely on any request for a loan or  advance,
or other financial accommodation under the Revolving  Credit  which  the  Agent,
in good  faith, believes to have been made by a Person duly  authorized  to act
on behalf of the Lead  Borrower and may decline to make any such  requested loan
or advance, or issuance, or to provide any such financial accommodation  pending
the Agent's being furnished with such  documentation  concerning that Person's
authority to act as may be satisfactory to the Agent.
                  (d) A request by the Lead Borrower for loan or advance,  or
other financial  accommodation  under the Revolving  Credit shall be irrevocable
and shall constitute certification by each Borrower that as of the date of such
request,  each of the  following is true and  correct:
                           (v) There has been no material adverse change in the
          Borrowers' financial condition from the most recent financial
          information  furnished Agent or any Revolving  Credit Lender pursuant
          to this Agreement.
                           (vi) Each representation which is made herein or in
          any of the Loan  Documents is then true and complete as of and as if
          made on the date of such request (other than any  representation which
          is made only as of a specific date), it being  understood  that any
          representation  which is made by reference to an EXHIBIT hereto shall
          be deemed a  representation  as of the date of  this  Agreement).
                           (vii)  No  Borrower  is  InDefault  or if a  Borrower
          is InDefault,  the facts and  circumstances  thereof  and the steps
          (if any)  being taken to remedy such  condition.
                  (a) If, at any time or from time to time,  any Borrower  is
InDefault:
                           (viii)  The Agent may  suspend  the Revolving  Credit
          immediately.
                           (ix) Neither the Agent nor any  Revolving  Credit
          Lender shall be obligated,  during such suspension,  to make any loans
          or advance, or to provide any  financial  accommodation  hereunder or
          to seek the issuance of any L/C.
                           (x) The Agent may suspend the right of the Lead
          Borrower to request any  Eurodollar Loan or to convert any Base Margin
          Loan to a Eurodollar Loan.

          28 -MAKING OF REVOLVING CREDIT LOANS.
                  (a) A loan or advance under the Revolving Credit shall be made
by the transfer of the proceeds of such loan or advance to the Operating Account
or as otherwise instructed by the Lead  Borrower.
                  (b) A loan or advance shall be deemed to have been made under
the Revolving Credit (and the Borrowers shall be indebted to the Agent and the
Revolving  Credit Lenders for the amount thereof immediately) at the  following:
                           (ii) The Agent's  initiation of the transfer of the
          proceeds of such loan or advance in accordance with the Lead
          Borrower's  instructions  (if such  loan or  advance  is of funds
          requested by the Lead  Borrower).
                           (iii) The charging of the amount of such loan to the
          Loan  Account  (in all other  circumstances).
                  (a) There shall not be any recourse to or liability of the
Agent or any Revolving Credit Lender, on account of any delay in the receipt,
and/or any loss, of funds which constitute a loan or advance under the Revolving
Credit,  the wire transfer of which was properly initiated  by the Agent in
accordance  with wire  instructions  provided to the Agent by the Lead Borrower.

          29 -SWINGLINE LOANS.
                  (a) For ease of administration,  Base Margin Loans may be made
by the SwingLine Lender  (in the  aggregate,  the  "SwingLine  Loans")  in
accordance  with  the procedures  set forth in this  Agreement  for the  making
of loans and  advances under the Revolving Credit.  The unpaid principal balance
of the SwingLine Loans shall not at any one time be in excess of the SwingLine
Loan  Ceiling.
                  (b) The aggregate unpaid principal balance of SwingLine Loans
shall bear interest at the rate  applicable to Base Margin Loans and shall be
repayable as a loan under the Revolving Credit.
                  (c) The Borrowers'  obligation to repay SwingLine Loans shall
be evidenced by a Note in the form of EXHIBIT 2:2-9(c), annexed hereto, executed
by the Borrowers,  and payable to the SwingLine Lender. Neither the original nor
a copy of that  Note  shall be  required,  however,  to  establish  or prove any
Liability. The Borrowers shall execute a replacement of any SwingLine Note which
has been lost,  mutilated,  or destroyed thereof and deliver such replacement to
the SwingLine Lender.
                  (d) For all purposes of this Loan Agreement, the SwingLine
Loans  and  the  Borrowers'  obligations  to  the  SwingLine  Lender  constitute
Revolving Credit Loans and are secured as "Liabilities".
                  (e) SwingLine Loans may be subject to periodic settlement with
the Revolving Credit Lenders as provided in this Agreement, but in any event, no
less frequently than weekly.

          210 -THE LOAN ACCOUNT.
                  (a) An  account ("Loan  Account") shall be opened on the books
of the Agent in which a record shall be kept of all loans and advances made
under the Revolving Credit.
                  (b) The Agent shall also keep a record  (either in the Loan
Account or elsewhere,  as the  Agent may from time to time  elect) of all
interest,  fees, service charges, costs, expenses,  and other debits owed to the
Agent and each Revolving Credit Lender on account of the Liabilities and of all
credits against such  amounts  so  owed.
                  (c) All credits against the Liabilities  shall  be conditional
upon final  payment to the Agent for the account of each Revolving Credit Lender
of the items giving rise to such  credits.  The amount of any item credited
against the Liabilities which is charged back against the Agent or any Revolving
Credit  Lender for any reason or is not so paid shall be a  Liability and shall
be added to the Loan Account,  whether or not the item so charged back or not so
paid is returned.
                  (d) Except as otherwise  provided herein, all fees, service
charges,  costs,  and  expenses for which any  Borrower  is  obligated hereunder
are payable on demand. In the determination of Availability, the Agent may deem
fees, service charges,  accrued interest, and other payments which will be due
and payable between the date of such  determination  and the first day of the
then next  succeeding  month as having  been  advanced  under the  Revolving
Credit  whether or not such  amounts  are then due and  payable.
                  (e) The Agent, without the request of the Lead Borrower, may
advance under the Revolving Credit any interest,  fee,  service charge, or other
payment to which the Agent or any Revolving  Credit Lender is entitled from any
Borrower  pursuant  hereto and may charge the same to the Loan Account
notwithstanding that such amount so advanced may  result in an  OverLoan.  Such
action  on the part of the  Agent  shall not constitute a waiver of the Agent's
rights and each Borrower's  obligations under Section  2:2-12(b).  Any amount
which is added to the  principal balance of the Loan Account as provided in this
Section  2:2-10(e)  shall bear  interest at the interest  rate then and
thereafter  applicable  to Base Margin  Loans.
                  (f) Any statement  rendered  by the  Agent or any  Revolving
Credit Lender to the Lead Borrower concerning the Liabilities shall be
considered correct and accepted by each Borrower and shall be  conclusively
binding upon each Borrower  unless the Lead Borrower  provides the Agent with
written  objection  thereto  within sixty (60) days from the mailing of such
statement,  which  written  objection  shall indicate,  with particularity,  the
reason for such objection.  The Loan Account and the Agent's books and records
concerning the loan arrangement  contemplated herein and the Liabilities  shall
be prima facie evidence and proof of the items described therein.


          211 -THE REVOLVING  CREDIT NOTES.  The Borrowers'  obligation to repay
loans and advances under the Revolving Credit, with interest as provided herein,
shall be evidenced by Notes (each,  a  "Revolving  Credit  Note") in the form of
EXHIBIT 2:2-11, annexed hereto, executed by each Borrower, one payable to each
Revolving Credit Lender. Neither the original nor a copy of any Revolving Credit
Note shall be required,  however,  to establish or prove any Liability.  In the
event that any  Revolving  Credit Note is ever lost,  mutilated,  or  destroyed,
each Borrower shall execute a replacement thereof and deliver such replacement
to the Agent for delivery to such Revolving Credit Lender.

          212 -PAYMENT OF THE LOAN ACCOUNT.
                  (a) The Borrowers  may repay all or any portion of the
principal  balance of the Loan Account from time to time until the  Termination
Date.
                  (b) The Borrowers, without notice or demand from the Agent or
any Revolving Credit Lender, shall pay the Agent for the benefit of the
Revolving Credit Lenders, that amount, from time to time, which is necessary so
that there is no OverLoan  outstanding.
                  (c) The Borrowers shall repay the then entire unpaid balance
of the Loan Account and all other  Liabilities on the Termination  Date.
                  (d) The Agent shall endeavor to cause the application of
payments (if any),  pursuant to Sections  2:2-12(a) and 2:2-12(b) against
Eurodollar Loans then outstanding in such manner as results in the least cost to
the Borrowers,  but shall not have any affirmative  obligation to do so nor
liability on account of the Agent's  failure to have done so. In no event shall
action or inaction  taken by the Agent excuse any Borrower  from any
indemnification  obligation  under Section  2:2-12(e).
                  (e) The Borrowers shall indemnify the Agent and each Revolving
Credit Lender and hold the Agent and each Revolving  Credit  Lender  harmless
from and against any loss,  cost or expense (including  amounts  payable  by the
Agent or such Revolving  Credit Lender on account of "breakage fees" (so-called)
which the Agent or such Revolving Credit Lender  may  sustain  or incur
(including,  without  limitation,  by  virtue of acceleration  after the
occurrence of any Event of Default) as a consequence of the following:
                           (ii) Default by any Borrower in payment of the
          principal amount of or any interest on any Eurodollar Loan as and when
          due and payable,  including  any such loss or expense  arising  from
          interest or fees payable by such Revolving  Credit Lender in order to
          maintain its Eurodollar Loans.
                           (iii) Default by any Borrower in making a borrowing
          or conversion after the Lead Borrower has given (or is deemed to have
          given) a request for a Revolving Credit Loan or a  request  to convert
          a Revolving Credit Loan from one  applicable interest rate to another.
                           (iv) The making of any payment on a Eurodollar Loan
          or the making of any  conversion  of any such Loan to a Base  Margin
          Loan on a day that is not the last day of the applicable Interest
          Period with respect thereto.

          213 -INTEREST ON REVOLVING CREDIT LOANS.
                  (a) Each  Revolving  Credit  Loan shall bear  interest  at the
Base Margin Rate unless  timely  notice is given (as provided in Section  2:2-7)
that the subject Revolving  Credit Loan (or a portion  thereof) is, or is to be
converted to, a Eurodollar  Loan.
                  (b) Each Revolving  Credit Loan which consists of a Eurodollar
Loan shall bear interest at the applicable  Eurodollar Rate.
                  (c) Subject to, and in accordance  with,  the  provisions of
this  Agreement,  the Lead Borrower may cause all or a part of the unpaid
principal  balance of the Loan Account to bear interest at the Base Margin Rate
or the  Eurodollar  Rate as specified from time to time by notice to the Agent.
For ease of reference and  administration,  each part of the Loan Account  which
bears interest at the same interest and for the same Interest Period is referred
to herein as if it were a separate  "Revolving Credit Loan".
                  (d) The Lead  Borrower  shall not select,  renew,  or convert
any interest rate for a Revolving Credit Loan such that, in addition to interest
at the Base Margin Rate, there are more than six (6) Eurodollar Rates applicable
to the Revolving  Credit Loans at any one time.
                  (e) The Borrowers shall pay accrued and unpaid interest on
each Revolving Credit Loan in arrears as follows:
                           (ii) On the applicable Interest Payment Date for that
          Revolving  Credit Loan.
                           (iii) On the  Termination  Date and on the End  Date.
                           (iv) If an Event  of  Default  has occurred and is
          continuing:  with such  frequency as may be  determined  by the Agent.
                  (a) The Base  Margin  and the  Eurodollar  Margin  shall  be
determined according to the Pricing Grid annexed hereto as EXHIBIT 2:2-13.
                  (b) If an Event of Default has occurred and is  continuing and
following the earlier of (i) the giving of a notice by the Agent exercising  its
rights under this  section,  or (ii)  Acceleration, all Revolving  Credit Loans
shall bear interest at a rate which is the aggregate  of the rate applicable to
Base Margin  Loans plus Two Percent (2%) per annum.

          214 -REVOLVING CREDIT COMMITMENT FEE. In consideration of the
commitment to make loans and advances to the Borrowers under the Revolving
Credit,  and to maintain sufficient  funds  available  for such  purpose,  there
has been  earned and the Borrowers  shall pay the  "Revolving  Credit Commitment
Fee" (so  referred  to herein) in the amount and payable as provided in the Fee
Letter.

          215 -AGENT'S  FEE.  In  addition  to any other fee or expense to be
paid by the Borrowers on account of the Revolving Credit,  the Borrowers shall
pay the Agent the " Agent's Fee" at the times and in the amounts as set forth
the Fee Letter.

          216 -UNUSED LINE FEE.
                  (a) In addition to any other fee to be paid by the  Borrowers
on account of the Revolving  Credit,  the Borrowers  shall pay the Agent the
"Unused Line Fee" (so referred  to  herein)  of the  following  per annum
percentage of the average difference, during the quarter just ended (or relevant
period with respect to the payment being made on the  Termination  Date) between
the Revolving  Credit Ceiling and the aggregate of the unpaid  principal balance
of the Loan Account and the undrawn Stated Amount of L/C's  outstanding  during
the relevant period:
                           (ii) Until the unpaid  principal  balance of the Loan
          Account  remains at or in excess of $50 Million for seven consecutive
          days:                 0.75%
                           (iii) All times after the unpaid principal balance of
          the Loan Account has been at or in excess of $50 Million for seven
          consecutive days:     0.50%
                  (a) The Unused Line Fee shall be paid in arrears, on the first
day of each  quarter  after the Restatement Date and on the Termination Date.

          217 -EARLY TERMINATION FEE.
                  (a) Except as provided in Section  2:2-17(b),  in the event
that the Termination Date occurs, for any reason, prior to the Maturity Date,
the Borrowers shall pay to the Agent , for the benefit of the Revolving  Credit
Lenders,  the "Revolving Credit Early  Termination  Fee" (so referred to herein)
equal to the  following percentage of Revolving Credit Ceiling.
                           (ii) Prior to the first  anniversary of the
Restatement  Date:  1.0%
                           (iii) On or after the first such  anniversary  and
before the  second  such  anniversary:  0.5%.
                           (iv) On or after the second  such anniversary:  Nil.
                  (a) No Early  Termination Fee shall be due and payable in the
event of the  early  termination  of the  Revolving  Credit  in  concert  with a
refinancing of the Revolving  Credit agented or provided by Fleet Retail Finance
Inc. or any of its  affiliates,  it being  understood that neither any Revolving
Credit  Lender nor any  affiliate of any  Revolving  Credit Lender has agreed to
provide or to entertain a request to provide any such refinancing.

          218 -CONCERNING FEES. The Borrowers shall not be entitled to any
credit,  rebate or  repayment  of any fee  earned by the Agent or any  Revolving
Credit  Lender pursuant to this Agreement or any Loan Document  notwithstanding
any termination of this  Agreement or suspension or termination of the Agent's
and any Revolving Credit Lender's respective obligation to make loans and
advances hereunder.

          219 -AGENT'S AND REVOLVING CREDIT LENDERS' DISCRETION.
                  (a) Each  reference in the Loan  Documents to the exercise of
discretion or the like by the  Agent or any  Revolving  Credit  Lender  shall be
to such  Person's exercise of its judgment, in good faith, based upon such
Person's consideration of any such factors as the Agent or that Revolving Credit
Lender,  taking into account  information of which that Person then has actual
knowledge,  believes:
                           (ii) Will or reasonably could be expected to affect
          the value of the Collateral, the enforceability of the Agent's
          Collateral  Interests  therein,  or the amount which the Agent  would
          likely  realize  therefrom  (taking into account delays which may
          possibly be  encountered  in the Agent's realizing upon the Collateral
          and likely Costs of Collection).
                           (iii) That any report or  financial  information
          delivered  to the Agent or any Revolving  Credit  Lender  by  or on
          behalf  of  any  Borrower  is  incomplete, inaccurate,  or  misleading
          in any material  manner  or was  not  prepared  in accordance with the
          requirements  of this Agreement.
                           (iv) That any Borrower is InDefault.
                  (a) In the exercise of such judgement,  the Agent and each
Revolving Credit Lender also may take into account any of the following factors:
                           (v) Those included in, or tested by, the  definitions
          of "Eligible  Inventory" and "Cost".
                           (vi)  Material  changes  in or to the  mix of the
          Borrowers'  Inventory.
                           (vii) Seasonality  with  respect to the  Borrowers'
          Inventory  and patterns of retail sales.
                           (viii) Such other factors as the Agent and each
          Revolving  Credit Lender determines  as having a material  bearing on
          credit  risks  associated  with the providing of loans and financial
          accommodations to the Borrowers.

          220 -PROCEDURES FOR ISSUANCE OF L/C'S.
                  (a) The Lead  Borrower may  request  that the Agent  cause the
issuance by the Issuer of L/C's for the account of any  Borrower.  Each such
request shall be in such manner as may from time to time be acceptable  to the
Agent.
                  (b) The Agent will cause the issuance of any L/C so requested
by the Lead  Borrower,  provided that , at the time that the request is made,
the Revolving Credit has not been suspended as provided in Section  2:2-7(g) and
if so issued:
                           (ii) The aggregate Stated  Amount of all  L/C's  then
          outstanding,  does not  exceed  Seventy-five Million Dollars and No
          Cents ($75,000,000.00).
                           (iii) The  expiry of the L/C is not later than the
          earlier of Thirty  (30) days prior to the  Maturity  Date (unless  the
          Borrowers  provide  cash  collateral reasonably satisfactory to the
          Agent in an amount equal to not less than 105% of the  Stated  Amount
          of any L/C  which has an  expiry  after  that  date) or the following:
                                        (B) Standby's: One (1) year from initial
                  issuance.
                                        (C) Documentary's:  One Hundred Eighty
                  (180) days from issuance.
                           (i) An OverLoan will not result from the issuance of
          the subject L/C.
                  (a) Each Borrower shall execute such  documentation to apply
for and support the issuance of an L/C as may be required by the Issuer.
                  (b) There shall not be any recourse  to, nor  liability  of,
the Agent or any  Revolving  Credit  Lender on account of the  following  to the
extent that any of the  following  occurs for reasons not within the  reasonable
control of the Issuer:
                           (ii) Any delay by an Issuer to issue an L/C;
                           (iii) Any action or inaction of an Issuer on account
          of or in respect to, any L/C.
                  (a) The Borrowers shall reimburse the Issuer for the amount of
any  honoring of a drawing  under an L/C on the same day on which such honoring
takes  place.  The Agent,  without  the request of any  Borrower,  may advance
under the  Revolving  Credit (and charge to the Loan Account) the amount of any
honoring of any L/C and other amount for which any Borrower,  the Issuer, or the
Revolving  Credit Lenders become  obligated on account of, or in respect to, any
L/C. Such advance shall be made whether or not any Borrower is InDefault or such
advance would result in an OverLoan.  Such action shall not constitute a waiver
of the Agent's rights under Section 2:2-12(b) hereof.

          221 -FEES FOR L/C'S.
                  (a) The  Borrowers shall pay to the Agent the following  fees,
on  account of L/C's,  the  issuance  of which had been  procured  by the Agent,
quarterly  in arrears, and on the Termination Date and on the End Date, equal to
the following percentage per annum of the weighted  average Stated Amount of the
subject L/C's outstanding  during the period in respect of which such fee is
being paid except that, if an Event of Default has occurred and is  continuing,
such fee shall be increased by two percent  (2%) per annum:
                           (ii) Standby  L/C's:  The  Eurodollar Margin(s) in
effect during the subject  quarter.
                           (iii)  Documentary  L/C's: The Eurodollar Margin(s)
          in effect during the subject quarter minus Fifty (50) basis points.
                  (a) In  addition  to the  fee to be  paid  as  provided  in
Subsection 2:2-21(a),  above, the Borrowers shall pay to the Agent (or to the
Issuer, if so requested by Agent), on demand, the Issuers's then standard fees
associated with the issuance,  processing,  negotiation,  amendment,  and
administration of the L/C's.
                  (b) If any change in Applicable Law shall either: (iv) impose,
modify or deem  applicable any reserve,  special deposit or similar requirements
against letters of credit  heretofore or hereafter issued by any Issuer or with
respect to which any Revolving Credit Lender or any Issuer has an obligation to
lend to fund drawings under any L/C; or
                           (v) impose on any Issuer any other  condition  or
          requirements  relating to any such  letters of credit; and the  result
          of any  event  referred  to in Section 2:2-21(c)(i) or  2:2-21(c)(ii),
          above, shall be to increase the cost to any Revolving Credit Lender or
          to any  Issuer of issuing or  maintaining  any L/C (which  increase in
          cost  shall  be the  result  of such  Issuer's  reasonable allocation
          among that Revolving  Credit  Lender's or Issuer's  letter of credit
          customers of the aggregate of such cost  increases resulting from such
          events), then, upon demand by the Agent and delivery by the Agent to
          the Lead Borrower of a  certificate  of an  officer of the  subject
          Revolving Credit Lender or the subject Issuer  describing  such change
          in law,  executive  order,  regulation, directive, or interpretation
          thereof, its effect on such Revolving Credit Lender or such Issuer,
          and the basis for  determining  such increased  costs and their
          allocation,  the Agent, on not less than  fifteen  (15) days notice to
          the Lead Borrower,  may debit the Loan Account by such amounts as
          shall be  sufficient to compensate  the subject  Revolving  Credit
          Lender or the subject Issuer for such increased cost. Any Revolving
          Credit Lender's or any Issuer's  determination of costs incurred under
          Section  2:2-21(c)(i)  or  2:2-21(c)(ii),  above,  and the allocation,
          if any, of such costs among the Borrowers and other letter of credit
          customers of such Revolving Credit Lender or such Issuer,  if done in
          good faith and  made  on  an  equitable   basis  and  in  accordance
          with  such  officer's certificate, shall be conclusive and binding on
          the Borrowers.

          222 -CONCERNING L/C'S.
                  (a) None of the  Issuer,  the  Issuer's  correspondents,  any
Revolving Credit Lender, the Agent, or any advising, negotiating, or paying bank
with respect to any L/C  shall be  responsible  in any way  for:
                           (ii)  The  performance  by any beneficiary  under any
          L/C of that  beneficiary's  obligations  to any Borrower.
                           (iii) The form, sufficiency,  correctness,
          genuineness, authority of any person signing;  falsification;  or the
          legal effect of; any documents called for under any L/C if (with
          respect to the  foregoing)  such documents on their face appear to be
          in order.
                  (a) The Issuer may honor, as complying with the terms of any
L/C and of any drawing thereunder, any drafts or other documents otherwise in
order, but  signed or issued by an  administrator,  executor,  conservator,
trustee in bankruptcy,  debtor  in  possession,  assignee  for the  benefit  of
creditors, liquidator,  receiver,  or other legal  representative  of the party
authorized under  such L/C to draw or issue  such  drafts or other  documents.
                  (b)  Unless otherwise agreed to, in the particular instance,
each Borrower hereby authorizes any Issuer to:
                           (iv) Select an advising  bank,  if any. (v) Select a
          paying bank, if any.
                           (vi) Select a negotiating bank. (a) All directions,
          correspondence, and funds transfers relating to any L/C are at the
          risk of the Borrowers. The Issuer shall have discharged  the  Issuer's
          obligations under any L/C which,  or the drawing under which, includes
          payment instructions, by the initiation of the method of payment
          called for in, and in accordance  with, such  instructions (or by any
          other commercially  reasonable and comparable method). None of the
          Agent, any Revolving Credit Lender, or the Issuer shall have any
          responsibility for any inaccuracy,  interruption,  error, or delay in
          transmission or delivery by post, telegraph or cable, or for any
          inaccuracy of translation.
                  (b) The Agent's, each Revolving  Credit  Lender's,  and the
Issuer's  rights,  powers,  privileges and immunities  specified in or arising
under this Agreement are in addition to any heretofore or at any time  hereafter
otherwise  created or arising,  whether by statute or rule of law or contract.
                  (c) Except to the extent otherwise expressly provided
hereunder or agreed to in writing by the Issuer and the Lead Borrower,
documentary  L/C's will be  governed by the Uniform  Customs  and  Practice  for
Documentary Credits, International Chamber of Commerce, Publication No. 500, and
standby L/C's will be governed by International Standby Practices ISP98 (adopted
by the  International  Chamber of Commerce on April 6, 1998) and any  respective
subsequent  revisions  thereof.
                  (d) The obligations of the Borrowers under this Agreement with
respect to L/C's are absolute, unconditional, and irrevocable and shall be
performed  strictly  in  accordance  with the terms  hereof  under all
circumstances,  whatsoever including,  without limitation,  the following:
                           (vii) Any lack of validity or enforceability or
          restriction, restraint, or stay in the enforcement of this Agreement,
          any L/C,  or any other  agreement  or  instrument  relating thereto.
                           (viii) Any  Borrower's  consent to any amendment or
          waiver of, or consent to the departure from, any L/C.
                           (ix) The existence of any claim,  set-off,  defense,
          or other right which any Borrower may have at any time against the
          beneficiary  of any L/C.
                           (x) Any good faith  honoring of a drawing under any
          L/C,  which drawing possibly  could have been  dishonored  based upon
          a strict  construction  of the terms of the L/C.

          223 -CHANGED CIRCUMSTANCES.
                  (a) The  Agent may  advise  the Lead  Borrower  that the Agent
has made the good faith determination  (which  determination shall be final and
conclusive) of any of the following:
                           (ii) Adequate and fair means do not exist for
          ascertaining the rate for  Eurodollar  Loans.
                           (iii) The  continuation  of or  conversion  of any
          Revolving  Credit  Loan to a  Eurodollar  Loan has been  made
          impracticable  or unlawful by the  occurrence  of a  contingency  that
          materially  and  adversely affects the  applicable  market or the
          compliance by the Agent or any Revolving Credit Lender in good faith
          with any Applicable  Law.
                           (iv) The indices on which the interest rates for
          Eurodollar Loans are based shall no longer represent the effective
          cost to the Agent or any  Revolving  Credit  Lender  for U.S.  dollar
          deposits  in  the   interbank   market  for   deposits  in  which  it
          regularly participates.
                  (a) In the event that the Agent  advises the Lead  Borrower of
an occurrence  described in Section  2:2-23(a),  then, until the Agent notifies
the Lead Borrower that the circumstances giving rise to such notice no longer
apply:
                           (v) The obligation of the Agent or each Revolving
          Credit Lender to make loans of the type affected by such changed
          circumstances or to permit  the Lead  Borrower  to select the affected
          interest rate as otherwise  applicable to any Revolving Credit  Loans
          shall be suspended.
                           (vi) Any notice which the Lead  Borrower had given
          the Agent with respect to any Eurodollar  Loan,  the time for action
          with  respect to which has not  occurred prior to the Agent's having
          given notice pursuant to Section 2:2-23(a), shall be deemed at the
          option of the Agent to not having been given.

          224 -DESIGNATION OF LEAD BORROWER AS BORROWERS'AGENT.
                  (a) Each Borrower hereby  irrevocably  designates and appoints
the Lead Borrower as that  Borrower's  agent to obtain  loans  and  advances
under the  Revolving Credit, the proceeds of which shall be available to each
Borrower for those uses as set forth in Section 2:2-1(d),  2:2-1(d)(i),
2:2-1(d)(ii).  As the disclosed principal for its agent,  each Borrower shall be
obligated to the Agent and each Revolving  Credit  Lender on  account  of loans
and  advances  so made under the Revolving  Credit as if made  directly by the
Revolving  Credit  Lenders to that Borrower,  notwithstanding  the  manner by
which  such  loans and  advances  are recorded on the books and records of the
Lead Borrower and of any Borrower.
                  (b) Each Borrower recognizes that credit available to it under
the Revolving Credit is in excess of and on better  terms than it  otherwise
could obtain on and for its own  account  and that one of the  reasons  therefor
is its  joining in the credit facility contemplated herein with all other
Borrowers. Consequently, each Borrower  hereby  assumes and agrees to discharge
all  Liabilities of all other Borrowers as if the Borrower so assuming were each
other Borrower.
                  (c) The Lead Borrower  shall act as a  conduit  for each
Borrower (including  itself,  as a "Borrower")on whose behalf the Lead Borrower
has requested a Revolving  Credit Loan.
                  (d) The proceeds of each loan and advance  provided  under the
Revolving Credit  which is  requested by the Lead  Borrower  shall be  deposited
into the Operating  Account or as  otherwise  indicated  by the Lead  Borrower.
The Lead Borrower  shall  cause the  transfer  of the  proceeds  thereof  to the
(those) Borrower(s)  on whose  behalf such loan and advance  was  obtained.
Neither the Agent nor any Revolving Credit  Lender shall have any  obligation to
see to the application of such proceeds.

          225 -LENDERS' COMMITMENTS
                  (a) Subject to Section 16:16-1 (which provides for assignments
and assumptions of commitments),  each Revolving Credit Lender's  "Revolving
Credit  Percentage Commitment",  and "Revolving Credit Dollar Commitment"
(respectively so referred to herein) is set forth on EXHIBIT 2:2-25,  annexed
hereto.
                  (b) The obligations of each Revolving  Credit Lender are
several and not joint. No Revolving  Credit Lender shall have any obligation to
make any loan or advance under the Revolving Credit in excess of either of the
following:
                           (ii) That Revolving Credit Lender's Revolving Credit
          Percentage Commitment of the subject loan or advance or of
          Availability.
                           (iii) That Revolving Credit Lender's Revolving Credit
          Dollar Commitment.
                  (a) No  Revolving  Credit  Lender shall have any  liability to
the  Borrowers on account of the failure of any other Revolving Credit Lender to
provide any loan or  advance  under  the  Revolving  Credit nor  any  obligation
to make up any shortfall which may be created by such failure.
                  (b) The Revolving Credit Dollar Commitments,  Revolving Credit
Commitment  Percentages,  and identities of the Revolving  Credit Lenders may be
changed,  from time to time by the reallocation or  assignment  of Revolving
Credit Dollar Commitments  and  Revolving  Credit Commitment Percentages amongst
the  Revolving  Credit  Lenders  or with other Persons who determine to become
"Revolving Credit Lenders",  provided,  however unless an Event of Default has
occurred and is  continuing  (in which event,  no consent of any  Borrower  is
required) any assignment to a Person not then a Revolving  Credit  Lender  shall
be  subject  to the prior  consent  of the Lead Borrower (not to be unreasonably
withheld), which consent will be deemed given unless the Lead Borrower  provides
the Agent with written  objection,  not more than Five (5) Business  Days after
the Agent shall have given the Lead  Borrower written  notice of a proposed
assignment).
                  (c) Upon written notice given the Lead  Borrower from time to
time by the Agent,  of any  assignment or allocation referenced in Section
2:2-25(d):
                           (iv) Each Borrower  shall execute one or more
          replacement Revolving Credit Notes to reflect such changed Revolving
          Credit Dollar Commitments,  Revolving  Credit  Commitment Percentages,
          and  identities  and  shall  deliver  such   replacement  Revolving
          Credit Notes to the Agent (which promptly thereafter  shall deliver to
          the Lead  Borrower the  Revolving  Credit Notes so replaced) provided
          however, in the event that a Revolving  Credit Note is to be exchanged
          following  its  acceleration  or the  entry of an order  for relief
          under the  Bankruptcy  Code with respect to any  Borrower,  the Agent,
          in lieu of causing  the Borrowers to execute one or more new Revolving
          Credit Notes, may issue the Agent's  Certificate  confirming the
          resulting  Revolving Credit Dollar Commitments and Revolving Credit
          Percentage Commitments.
                           (v) Such change shall be effective from the effective
          date  specified in such written notice and any Person added as a
          Revolving  Credit Lender shall have all rights and privileges of a
          Revolving  Credit Lender  hereunder  thereafter as if such Person had
          been a signatory to this  Agreement  and any other Loan Document to
          which a Revolving  Credit Lender is a signatory and any Person removed
          as a Revolving Credit Lender shall be relieved of any obligations or
          responsibilities of a Revolving Credit Lender hereunder thereafter.


<PAGE>


Article 3: - CONDITIONS PRECEDENT:

         As a condition to the effectiveness of the amendment and restatement of
this  Agreement  (which  effectiveness  shall be marked by written  confirmation
thereof from the Agent to the Lead Borrower) each of the documents  respectively
described  in Sections  3:3-1  through and  including  3:3-4,  (each in form and
substance satisfactory to the Agent) shall have been delivered to the Agent, and
the  conditions  respectively  described in Sections 3:3-5 through and including
3:3-8, shall have been satisfied:

          31 -CORPORATE DUE DILIGENCE.
                  (a)  Certificates  of corporate  good standing for each
Borrower,  respectively issued  by the  Secretary  of State  for the  state in
which  that  Borrower  is incorporated.
                  (b) Certificates of due qualification, in good standing,
issued by the Secretaries of State of each State in which the nature a
Borrower's business conducted or assets owned could require such qualification.
                  (c) Certificates of each  Borrower's  Secretary of the due
adoption,  continued  effectiveness,  and setting forth the texts of, each
corporate resolution adopted in connection with the establishment of the loan
arrangement contemplated by the Loan Documents and attesting to the true
signatures of each Person authorized as a signatory to any of the Loan
Documents.

          32 -OPINION.  An  opinion of counsel  to the  Borrowers  in form and
substance satisfactory to the Agent to be addressed to the Agent and the Lenders

          33 -ADDITIONAL DOCUMENTS. Such additional instruments and documents as
the Agent or its counsel reasonably may require or request including,  without
limitation, the following:
                  (a)  Confirmation  that the form of mortgage or deed of trust,
a copy of which is annexed  hereto as EXHIBIT  3:3-3(a)  (with  such  variance
to reflect  differences  in local  state law as may be mutually  acceptable  to
the Agent and the Lead Borrower),  is acceptable to the Agent and the Lead
Borrower. Until such time that all Real Estate Parameters are satisfied,  the
subject real estate shall not be included as Eligible Real Estate. The Borrowers
or Permitted Subsidiaries   granting  a  guaranty  of  the  Liabilities  in form
reasonably satisfactory  to the Agent shall cause clause (c) of the Real Estate
Parameters to be satisfied for all Real Estate  Collateral within thirty (30)
days from the date of this Agreement. In addition, the opinion described in
Section 3-2, above shall be updated to the reasonable  satisfaction of the Agent
in connection with the  delivery of such  mortgages  and deeds of trust.
                  (b) A Security  Agreement pursuant to which security interests
are created in all trademarks owned by any Borrower  or any  Subsidiary,  which
trademarks  were not  included in any such Security Agreement executed
contemporaneous with the execution of the 1999 Loan Agreement.
                  (c) Confirmation (in form reasonably acceptable to the Agent)
by each Person which is obligated on any of the Liabilities  that such person
remains so liable  following the execution of this  restatement of the 1999 Loan
Agreement.
                  (d) The  Notifications  (if any) to Credit Card Processors
described in Section 7:7-1(b)(i).
                  (e) The Notifications (if any) to the Borrowers'  depositories
described  in  Section   7:7-1(b)(ii).
                  (f) Agreements with any  Borrowers' warehousemen and inventory
consolidators (if any) from whom such agreements were not received in connection
with the execution of the 1999 Loan Agreement  (each of which  agreements  is in
form  reasonably  satisfactory  to the Agent).  Such requirements  shall be
satisfied  within  thirty (30) days from the date of this Agreement.

          34 -OFFICERS' CERTIFICATES. Certificates executed by the Chief
Financial Officer and  Executive  Vice  President  of the  Lead  Borrower  and
stating  that  the representations  and  warranties  made by the  Borrowers  to
the  Agent and the Revolving  Credit  Lenders in the Loan Documents are true and
complete as of the date of such  Certificate,  and that no event  has  occurred
which is or which, solely with the giving of notice or passage of time (or both)
would be an Event of Default.

          35 -REPRESENTATIONS  AND WARRANTIES. Each of the representations made
by or on behalf of each Borrower in this  Agreement or in any of the other Loan
Documents or in any other report,  statement,  document, or paper provided by or
on behalf of each  Borrower  shall be true and  complete  as of the date as of
which  such representation or warranty was made.

          36 -ALL FEES AND EXPENSES PAID.  All fees due at or immediately  after
the first funding under the Revolving Credit and all costs and expenses incurred
by the Agent in connection with the  establishment of the credit facility
contemplated hereby (including the fees and expenses of counsel to the Agent)
shall have been paid in full.

          37 -NO BORROWER INDEFAULT. No Borrower is InDefault.

          38 -NO ADVERSE  CHANGE.  No event shall have occurred or failed to
occur,  which occurrence  or failure is or could have a  materially  adverse
effect upon the Borrowers' financial  condition,  taken as a whole, as reflected
on the Business Plan.

          39 -BENEFIT OF CONDITIONS PRECEDENT. The conditions set forth in this
Article 3: are for the sole benefit of the Agent and each  Revolving  Credit
Lender and may be waived by the Agent in whole or in part without prejudice to
the Agent or any Revolving Credit Lender.

No  document  shall be deemed  delivered  to the Agent or any  Revolving  Credit
Lender  until  received  and  accepted  by the Agent at its  offices  in Boston,
Massachusetts.  Under no  circumstances  shall this  Agreement take effect until
executed and accepted by the Agent at said offices.


<PAGE>


Article 4: - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:

         To induce each Revolving Credit Lender to establish the credit facility
contemplated  herein and to induce the Revolving Credit Lenders to provide loans
and advances under the Revolving  Credit (each of which loans shall be deemed to
have been made in reliance  thereupon) the  Borrowers,  in addition to all other
representations,  warranties,  and  covenants  made by any Borrower in any other
Loan Document, make those representations, warranties, and covenants included in
this Agreement.

          41 -PAYMENT AND PERFORMANCE OF LIABILITIES. The Borrowers shall pay
each payment Liability when due (or when demanded,  if payable on demand) and
shall promptly, punctually, and faithfully perform each other Liability.

          42 -DUE ORGANIZATION. AUTHORIZATION. NO CONFLICTS.
                    (a) Each Borrower  presently is and hereafter shall remain
in good standing as a corporation  under the laws of the State in which it is
organized,  as set forth in the  Preamble  to this  Agreement  and is and  shall
hereafter  remain  duly qualified and in good  standing in every other State in
which,  by reason of the nature or location of each  Borrower's  assets or
operation  of each  Borrower's business,  such  qualification may be necessary,
except where the failure to so qualify would not have a Material Adverse Effect.
                    (b) Each Borrower's respective organizational identification
number assigned to it by  the  State  of  its incorporation  and its  respective
federal  employer identification  number is stated  on  EXHIBIT  4:4-2,  annexed
hereto.
                    (c)  Except in  consequence  of a Permitted  Merger,  no
Borrower  shall:  change its State of  organization;  any organizational
identification number assigned to that Borrower by that State; or that
Borrower's federal taxpayer  identification number.
                    (d) Each Affiliate,  as of the Restatement  Date, is listed
on EXHIBIT 4:4-2. Each Affiliate listed on EXHIBIT 4:4-2 (except for the Parent)
is a Subsidiary of the Parent. No Borrower (except for the Parent) will create
any  Subsidiary  nor will the Parent  permit any Subsidiary to create any
Subsidiary other than a Permitted  Subsidiary.  The Lead Borrower  shall provide
the Agent with prior written notice of any entity's becoming or ceasing to be an
Affiliate.
                    (e) Each  Borrower  has all  requisite corporate power and
authority to execute and deliver all Loan Documents to which that  Borrower  is
a party  and has and  will hereafter  retain  all  requisite corporate  power to
perform all  Liabilities.
                    (f) The execution and delivery by each  Borrower  of each
Loan  Document to which it is a party;  each  Borrower's consummation of the
transactions contemplated by such Loan Documents (including, without limitation,
the creation of Collateral Interests by that Borrower to secure the
Liabilities); each Borrower's  performance  under those of the Loan Documents to
which it is a party; the borrowings  hereunder;  and the use of the proceeds
thereof:
                              (ii) Have been duly  authorized by all  necessary
          corporate action.
                              (iii) Do not,  and will not,  contravene  in any
          material respect any provision of any Requirement of Law or obligation
          of that  Borrower.
                              (iv) Will not result in the creation or imposition
          of, or the  obligation to create or impose,  any  Encumbrance upon any
          assets  of that  Borrower  pursuant  to any Requirement of Law or
          obligation, except pursuant to the Loan Documents.
                    (a) The Loan Documents (exclusive of any documents described
in Section 3-3(a) or (f) to be delivered  subsequent to the date of this
Agreement) have been duly executed and delivered by each Borrower and are the
legal, valid and binding  obligations of each  Borrower,  enforceable  against
each Borrower in accordance  with their respective  terms,  except as such
enforceability  is  limited  by  bankruptcy, insolvency,  or other laws relating
to or affecting generally the enforcement of creditors' rights and except to the
extent that the availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
therefor may be brought.

          43 -TRADE NAMES.
                    (a) EXHIBIT 4:4-3, annexed hereto, is a listing of:
                              (ii) All names under which any Borrower  conducted
          its business since January 1, 1995.
                              (iii) All Persons with whom any Borrower ever
          consolidated  or merged,  or from whom any  Borrower  acquired in a
          single  transaction  or in a series of related transactions
          substantially  all of such Person's  assets since January 1, 1995.
                    (a) The Lead Borrower will provide the Agent with not less
than  twenty-one (21) days prior written notice (with reasonable  particularity)
of any change to any Borrower's  name from that under which that Borrower is
conducting  its business at the  execution of this Agreement and will not effect
such change unless each Borrower is then in compliance with all provisions of
this Agreement.

          44 -INFRASTRUCTURE.
                    (a) Each Borrower has and will maintain a sufficient
infrastructure  to conduct its  business  as  presently  conducted  and  as
contemplated  to be  conducted following its execution of this Agreement.
                    (b) Each Borrower owns and possesses, or has the right to
use (and will hereafter own, possess,  or have such right to use) all patents,
industrial  designs,  trademarks,  trade names, trade styles, brand  names,
service  marks,  logos,  copyrights,   trade  secrets,  know-how, confidential
information,  and other intellectual or proprietary property of any third Person
necessary for that Borrower's conduct of that Borrower's  business.
                    (c) The conduct by each Borrower of that Borrower's business
does not presently infringe  (nor will any  Borrower  conduct  its  business in
the future so as to infringe)  the patents,  industrial  designs,  trademarks,
trade  names, trade styles, brand names, service marks, logos, copyrights, trade
secrets, know-how, confidential  information,  or other intellectual or
proprietary property of any third  Person,  except where such conflict would not
reasonably be expected to have a Material Adverse Effect.

          45 -LOCATIONS.
                    (a) The Collateral,  and the books, records, and papers of
Borrowers' pertaining thereto,  are kept and maintained  solely at the following
locations:
                              (ii) The Lead Borrower's chief executive  offices
which, on the Restatement Date, are at 3345 Michelson Drive,  Irvine, California
92612 or as otherwise  permitted by Section 4:4-5(b)(vii).
                              (iii) Those locations which are listed on
          EXHIBIT 4:4-5, annexed hereto, which EXHIBIT includes, with respect to
          each such location, the name and address  of  the  landlord  on the
          Lease  which covers  such  location  (or an indication that a Borrower
          owns the subject location) and of all service bureaus with which any
          such records are  maintained  and the names and addresses of each of
          then   Borrowers'   landlords,   or  as   otherwise   permitted  by
          Section 4:4-5(b)(vii).
                    (a) No Borrower  shall  remove any of the  Collateral  from
said chief executive office or those locations listed on EXHIBIT 4:4-5 except
for the following purposes:
                              (iv) To accomplish sales of Inventory in the
          ordinary course of business
                              (v) The consummation of the House2Home  Conversion
          as reflected on the Business  Plan.
                              (vi) To move  Inventory  to such  location or from
          one such location to another such location.
                              (vii) To utilize such of the Collateral as is
          removed from such  locations in the ordinary  course of business (such
          as motor vehicles).
                              (viii) To Stores opened after the execution of
          this  Agreement,  but only where there is compliance  with the Section
          4:4-6 .
                              (ix) In connection with any  disposition  of
          Collateral  permitted by Section  4:4-14(d).
                              (x) To other locations, not less than  Thirty (30)
          days  prior  written  notice of which is provided to the Agent,  and
          provided that there is compliance  with all relevant provisions of the
          Loan Documents (including, but not limited to, Section 4:4-25) in
          connection  therewith.
                    (a) Except as  otherwise  disclosed  pursuant to, or
permitted by, this Section 4:4-5, no tangible  personal property of any Borrower
is in the care or  custody  of any third  party or stored  or  entrusted  with a
bailee or other third party and none shall  hereafter be placed under such care,
custody, storage, or entrustment.

          46 -STORES.
                    (a) No Borrower will execute any Lease:
                              (ii) other than in the ordinary course of
          business; or
                              (iii) which would result in a breach of this
          Agreement.
                    (a) No Borrower will open any New Store:
                              (iv) On less than thirty (30) days prior  written
          notice to the Agent (with reasonable particularity of the relevant
          facts and circumstances); and
                              (v) which would result in a breach of Section
          4:4-6(c)(i); or
                              (vi) not in compliance  with all other  provisions
          of this Agreement  including, without  limitation,  Section 4:4-25.
                    (a) The Borrowers,  as a whole,  will not
                              (vii) Open more than the  following  number of new
          Stores during the Fiscal year indicated:
                                        (B) FYE January 2002  :       10
                                        (C) FYE January 2003  :       10
                                        (D) FYE January 2004  :       15
                                        (E) FYE January 2005  :       15
                              (i) Close more than twelve Stores operated in the
          House2Home format during any twelve (12) month period.
                              (ii) Permanently  close (as  distinguished  from
          converting to the  House2Home concept) more than twenty seven (27)
          Stores operated in the HomeBase format.

          47 -TITLE TO ASSETS.
                    (a) The Borrowers are, and (except for Collateral sold,
conveyed, or disposed of as  permitted  by this  Agreement)  shall  hereafter
remain,  the owners of the Collateral free and clear of all  Encumbrances  with
the exceptions of Permitted Encumbrances.
                    (b) No  Borrower  has,  and none  shall have possession  of,
any property on consignment to that Borrower, the Cost of which, when aggregated
with the Cost of  Inventory  on which  there  is an  Encumbrance,  exceeds  four
percent (4%) of the Cost of all of the Borrowers' Inventory at that time.
                    (c) No Borrower shall acquire or obtain the right to use any
Equipment, the acquisition or right to use of which Equipment is otherwise
permitted by this Agreement,  in which  Equipment  any third party has an
interest,  except for:
                              (ii)  Equipment which is merely  incidental to the
          conduct  of that  Borrower's  business  or Equipment that is not
          necessary in connection with the conduct of any Liquidation.
                              (iii) Equipment,  the acquisition or right to use
          of which has been consented to by the Agent,  which consent may be
          conditioned  solely upon the Agent's receipt of an  agreement with the
          third party  which has an interest in such  Equipment substantially in
          the form of EXHIBIT 4:4-7(c), annexed hereto.

          48 -INDEBTEDNESS.  The  Borrowers  do not and  shall  not  hereafter
have  any Indebtedness other than Permitted Indebtedness.

          49 -INSURANCE.
                    (a) EXHIBIT 4:4-9, annexed hereto, is a schedule of all
property, liability, and business  interruption  insurance policies owned by the
Borrowers or under which any Borrower is the named  insured.  Each of such
policies is in full force and effect.  Neither the issuer of any such policy nor
any Borrower is in default or violation of any such policy.
                    (b) The Borrowers  shall have and maintain at all times
insurance  covering  the  Collateral  for such  risks,  in such  amounts,
containing  such  terms,  in such form,  for such  periods,  and written by such
companies as is consistent  with sound and prudent  industry  practice.
                    (c) All insurance  carried by the  Borrowers  shall provide
for a minimum of thirty (30) days' written notice of  cancellation  to the Agent
and all such insurance which covers the Collateral shall include an endorsement
in favor of the Agent,  which endorsement  shall  provide  that the  insurance,
to the extent of the  Agent's interest therein, shall not be impaired or
invalidated,  in whole or in part, by reason of any act or neglect of any
Borrower or by the failure of any  Borrower to comply  with any  warranty  or
condition  of the  policy.
                    (d) The  coverage reflected on EXHIBIT 4:4-9 presently
satisfies the foregoing  requirements,  it being recognized by each Borrower,
however,  that such  requirements may change hereafter to reflect changing
circumstances.
                    (e) The Lead Borrower shall furnish the Agent from time to
time with certificates or other evidence  satisfactory to the Agent regarding
compliance by the Borrowers with the foregoing requirements.
                    (f) In the event of the  failure  by the  Borrowers  to
maintain  insurance  as required herein, the Agent, at its option and at
Borrowers' expense,  may obtain such insurance, provided, however, the Agent's
obtaining of such insurance shall not constitute a cure or  waiver  of any Event
of  Default  occasioned  by the Borrowers' failure to have maintained such
insurance.

          410 -LICENSES. Except for matters which, individually and in the
aggregate could not reasonably be expected to have a Material Adverse Effect:
                    (a) Each license, distributorship,  franchise,  and similar
agreement  issued to, or to which any Borrower  is a party  is in full  force
and  effect.
                    (b) No party to any such license or  agreement is in default
or  violation  thereof.
                    (c) No Borrower has received any notice or threat of
cancellation of any such license or agreement.

          411 -LEASES.
                    (a) EXHIBIT  4:4-11,  annexed hereto,  is a schedule of all
presently  effective Capital Leases as of the Restatement Date. (Exhibit 4:4-5
includes a list of all other presently effective Leases).
                    (b) As of the Restatement Date: (ii) Each of such Leases and
Capital Leases is in full force and effect as of the Restatement Date
                              (iii) No party to any such Lease or Capital  Lease
          is in default or violation of any such Lease or Capital  Lease.
                              (iv) No Borrower  has  received any notice or
          threat of  cancellation  of any such Lease or Capital  Lease  except
          for matters which individually and in the aggregate would not
          reasonably be expected to have a Material Adverse Effect.
                    (a) Each Borrower hereby authorizes the Agent at any time
and from time to time while any Borrower is InDefault to contact any of the
Borrowers'  respective  landlords in order to confirm the  Borrowers'  continued
compliance  with the terms and  conditions  of the Lease(s)  between the subject
Borrower and that  landlord and to discuss such issues,  concerning  the subject
Borrower's occupancy under such Lease(s), as the Agent may determine.

          412 -REQUIREMENTS  OF LAW.  Each  Borrower  is in  compliance  with,
and shall hereafter comply with and use its assets in compliance with, all
Requirements of Law except where the failure of such  compliance will not
reasonably be expected to have a Material  Adverse  Effect.  No Borrower has
received any notice of any violation of any Requirement of Law (other than of a
violation which has no more than a de minimis  adverse effect on the Borrowers'
business or assets),  which violation reasonably could be expected to have a
Material Adverse Effect.

          413 -LABOR RELATIONS.
                    (a)  As of the  Restatement  Date,  no  Borrower  is  party
to  any  collective bargaining or other labor contract.
                    (b) There is not presently  pending and, to any Borrower's
knowledge,  there is not  threatened any of the following  which reasonably
could be expected to have a Material Adverse Effect:
                              (ii) Any strike, slowdown,  picketing,  work
          stoppage,  or employee grievance process.
                              (iii) Any proceeding  against or affecting any
          Borrower  relating to the alleged violation of any  Applicable Law
          pertaining to labor  relations or before  National Labor Relations
          Board, the Equal Employment Opportunity Commission,  or any comparable
          governmental body, organizational activity, or other labor or
          employment dispute against or  affecting  any  Borrower,  which,  if
          determined  adversely to that Borrower could have a Material Adverse
          Effect.
                              (iv) Any lockout of any employees by any Borrower
          (and no such action is  contemplated  by any Borrower).
                              (v) Any application for the certification of a
          collective bargaining agent.
                    (a) No event has occurred or  circumstance  exists which
could provide the basis for any work stoppage or other labor  dispute  which
reasonably  could be expected to have a Material  Adverse Effect.
                    (b) Each Borrower:  (vi) Has complied in all material
respects with all Applicable Law relating to employment, equal employment
opportunity, nondiscrimination, immigration,  wages, hours, benefits, collective
bargaining,  the  payment of social  security  and  similar taxes, occupational
safety and health, and plant closing.
                              (vii) Is not  liable  for the  payment  of a
          material  amount of  compensation, damages, taxes, fines, penalties,
          or other amounts, however designated, for that Borrower's  failure to
          comply with any  Applicable  Law  referenced  in Section 4:4-13(d)(i).

          414 -PROPERTIES. The Borrowers shall:
                    (a) Keep the Collateral in good order and repair  (ordinary
reasonable wear and tear and  insured  casualty  excepted).
                    (b) Not  suffer  or cause  the waste or destruction  of any
material  part  of the  Collateral.
                    (c) Not use any of the Collateral in violation of any policy
of insurance thereon.
                    (d) Not sell, lease, or otherwise  dispose of any of the
Collateral,  other than the following:
                              (ii) The  sale of  Inventory,  which  sale  is
          otherwise  in  conformity  with  this Agreement.
                              (iii) The sale of Collateral by one Borrower to
          another,  which sale or other  disposition is otherwise in conformity
          with this  Agreement.
                              (iv) The disposal of Equipment  which is obsolete,
          worn out, or damaged  beyond  repair, which  Equipment is replaced to
          the extent  necessary to preserve or improve the operating  efficiency
          of any Borrower.
                              (v) The disposal of equipment in concert with
          Store  closures  permitted by Section  4:4-6.  (vi)  Permitted  Real
          Estate Transactions.
                              (vii) The sale,  to  independent  third  parties,
          of  trademarks associated  with the HomeBase  concept.
                              (viii) The turning over to the Agent of all
          Receipts as provided  herein.  (ix) The  disposition of any  non-
          merchandise inventory (such as labels, bags, and packaging materials);
          damaged goods; return to  vendor  merchandise;  packaways;  consigned
          inventory;  and  other  similar categories of Goods otherwise in
          compliance with this Agreement.

          415 -TAXES.
                    (a) With respect to the Borrowers' federal, state, and local
tax liability and obligations:
                              (ii) The Lead Borrower, in compliance in all
          material respects with Applicable Law, has properly filed all returns
          due to be filed up to the date of this  Agreement,  other than any
          return,  the failure of which to so file would not  reasonably  be
          expected  to  have  more  than  a de  minimis  adverse  effect  on the
          Borrowers.
                              (iii) Except as described on EXHIBIT 4:4-15, as of
          the Restatement Date:
                                        (B) No audit or examination of the books
                    and records of any  Borrower is being conducted by any
                    taxing authority.
                                        (C) No agreement is extant  which waives
                    or extends any statute of  limitations applicable  to the
                    right of any taxing authority to assert a deficiency or make
                    any other claim for or in respect to federal income taxes.
                                        (D) No issue has been raised in any tax
                    examination of any Borrower which, by application of similar
                    principles,  reasonably  could be  expected  to  result  in
                    the  assertion  of a material deficiency for any fiscal year
                    open for  examination,  assessment,  or claim  by any taxing
                    authority.
                                        (E) No  Borrower is aware  of any  facts
                    or circumstances  such that any claim could be made  against
                    such  Borrower by any taxing  authority where the result of
                    such claim could reasonably be expected to have a Material
                    Adverse Effect.
                    (a) The Borrowers  have, and hereafter  shall: pay, as they
become due and payable,  all taxes and  unemployment  contributions and other
charges of any kind or nature levied,  assessed or claimed against any Borrower
or the  Collateral  by any person or entity whose claim could result in an
Encumbrance upon any asset of any Borrower or by any governmental  authority;
properly exercise any trust responsibilities imposed upon any Borrower by reason
of withholding  from  employees'  pay or by reason of any Borrower's  receipt of
sales tax or other  funds for the  account of any third  party;  timely make all
contributions  and other  payments as may be required  pursuant to any  Employee
Benefit Plan now or hereafter  established by any Borrower;  and timely file all
tax and other returns and other reports with each governmental authority to whom
any Borrower is  obligated to so file,  provided,  however,  the Lead  Borrower,
after  establishing  proper  reserves,  may in  good  faith  and by  appropriate
proceedings contest any tax, assessment,  or other governmental charge,  subject
however,  to Section  4:4-15(c).
                    (b) No Borrower shall suffer or permit any tax lien to be
filed  against it,  which tax lien  includes  any  Collateral  which consists of
Inventory, Account, or a right to payment of that Borrower,  where such tax lien
could have priority over the Liabilities.

          416 -NO MARGIN STOCK. No Borrower is engaged in the business of
extending credit for the purpose of  purchasing  or carrying any margin stock
(within the meaning of  Regulations  U, T, and X of the Board of  Governors  of
the Federal Reserve System of the United States). No part of the proceeds of any
borrowing hereunder will be used at any time to purchase or carry any such
margin stock or to extend credit to others for the  purpose of  purchasing  or
carrying  any such  margin stock.

          417 -ERISA.  Except for matters which individually or in the aggregate
are not reasonably expected to have a Material Adverse Effect, no Borrower nor
any ERISA Affiliate ever has or hereafter  shall:
                    (a) Fail to be in compliance with that Borrower's  Employee
Benefit  Plan.
                    (b) Fail  timely to file all reports  and filings  required
by  ERISA  to be filed by any  Borrower.
                    (c)  Engage in any "prohibited  transactions" or "reportable
events"  (respectively as described in ERISA).
                    (d) Engage in, or commit, any act such that a tax or penalty
could be imposed upon any Borrower on account thereof  pursuant to ERISA.
                    (e) Accumulate any material funding  deficiency  within the
meaning of ERISA.
                    (f) Terminate any Employee  Benefit Plan such that a lien
could be asserted  against any assets of any  Borrower  on  account  thereof
pursuant  to  ERISA.
                    (g) Be a  member  of, contribute to, or have any obligation
under any Employee Benefit Plan which is a multiemployer plan within the meaning
of Section 4001(a) of ERISA.

          418 -HAZARDOUS MATERIALS.
                    (a) Except for matters which individually or in the
aggregate are not reasonably expected  to have a Material  Adverse  Effect,  no
Borrower  has ever:
                              (i) been legally  responsible  for any  release or
          threat of  release  of any  Hazardous Material  or
                              (ii)  received notification  of the  incurrence of
          any expense in connection  with the assessment,  containment,  or
          removal  of any  Hazardous Material for which that Borrower would be
          responsible.
                    (b) Each Borrower shall:
                              (i) dispose  of any  Hazardous  Material  only in
          compliance in all material respects with all  Environmental  Laws and
                              (ii) have possession of any Hazardous Material
          only  in the  ordinary  course  of  that  Borrower's  business  and in
          compliance  all material  respects  with all  Environmental  Laws.
                    (c) The Lead Borrower  shall  provide  the Agent  with
written  notice  upon any  Borrower's obtaining knowledge of any incurrence of
any expense or loss by any governmental authority or other Person in connection
with the  assessment,  containment,  or removal of any Hazardous Material, for
which expense or loss any Borrower may be liable,  where  such  expense or loss
reasonably  could be  expected  to have a Material Adverse Effect.

          419 -LITIGATION. Except as described in EXHIBIT 4:4-19, annexed
hereto, there is not presently pending or threatened by or against any Borrower
any suit, action, proceeding,  or  investigation  which, if determined adversely
to any Borrower, could reasonably be expected to have a Material Adverse Effect.

          420 -DIVIDENDS. INVESTMENTS. CORPORATE ACTION.
                    (a) No Borrower shall:
                              (ii) Pay any cash dividend or make any other
          distribution in respect of any class of that Borrower's capital stock,
          except  that the Parent may declare and issue dividends of its own
          capital stock.
                              (iii) Except for a Permitted  Repurchase,  own,
          redeem,  retire,  purchase,  or acquire any of any  Borrower's capital
          stock.
                              (iv) Invest in or purchase  any stock or
          securities or rights to purchase any such stock or  securities, of any
          Person other than the  following:
                                        (B) A Permitted  Repurchase.
                                        (C) A Permitted Investment.
                              (i) Merge or consolidate or be merged or
          consolidated  with or into any other corporation or other entity
          other than a Permitted Merger.
                              (ii)  Consolidate  any of that  Borrower's
          operations  with  those of any other Person other than of another
          Borrower.
                              (iii)  Organize or create any Affiliate other than
          a Permitted  Subsidiary.
                              (iv)  Subordinate  any debts or obligations  owed
          to that  Borrower  by any third party to any other debts owed by
          such third party to any other  Person.
                              (v) Acquire any assets other than in the  ordinary
          course and conduct of that Borrower's  business as conducted at the
          execution of this Agreement.
                    (a) The Parent shall not permit any Subsidiary to undertake
any of the  foregoing  actions  unless,  if that  Affiliate  were a  Borrower,
that Affiliate could have done so.

          421 -LOANS.  No Borrower  shall make any loans or advances  to, nor
acquire the Indebtedness of, any Person, provided,  however, the foregoing does
not prohibit any of the following:
                    (a) Advance payments made to that Borrower's suppliers in
the ordinary course.
                    (b) Advances to that Borrower's  officers,  employees,  and
salespersons  with  respect  to  reasonable  expenses  to be  incurred  by  such
officers,  employees,  and salespersons for the benefit of that Borrower,  which
expenses  are  properly  substantiated  by the person  seeking  such advance and
properly  reimbursable  by that Borrower.
                    (c) Loans by one Borrower to another, not to exceed $1
Million at any one time  outstanding,  but only at a time when the unpaid
principal balance of the Loan Account is less than $25,000.00.

          422 -PROTECTION OF ASSETS. The Agent, in the Agent's  discretion,  and
from time to time,  if an Event of Default has occurred and is  continuing,  may
discharge any tax or Encumbrance on any of the Collateral,  or take any other
action which the Agent reasonably  may deem  necessary  or  desirable to repair,
insure, maintain,  preserve,  collect, or realize upon any of the Collateral.
The Agent shall not have any  obligation  to undertake any of the foregoing and
shall have no  liability  on account of any action so  undertaken  except  where
there is a specific  finding  in a  judicial  proceeding  (in  which  the  Agent
has had an opportunity  to be heard),  from which  finding no further  appeal is
available, that the Agent had acted in actual bad faith or in a grossly
negligent  manner. The  Borrowers  shall  pay  to the  Agent,  on  demand,  or
the  Agent,  in its discretion,  may add to the Loan  Account,  all amounts paid
or incurred by the Agent pursuant to this section 4:4-22.

          423 -LINE OF BUSINESS.  No Borrower shall engage in any business other
than the business in which it is currently  engaged,  the business which will
result from the execution of the House2Home  Conversion  (the conduct of each of
which is as reflected in the Business Plan), or a business reasonably related
thereto.

          424 -AFFILIATE  TRANSACTIONS.  No Borrower shall make any payment, nor
give any value to any Affiliate except for Permitted Affiliate Transactions.

          425 -FURTHER ASSURANCES.
                    (a) No Borrower  is the owner of, nor has it any  interest
in, any  property or asset which,  immediately upon the  satisfaction of the
conditions  precedent to the  effectiveness  of the amendment and restatement of
this Agreement  (Article 3:) will not be subject to a perfected Collateral
Interest in favor of the Agent (subject only to Permitted Encumbrances and
Collateral Interest Restrictions) to secure the Liabilities.
                    (b) No Borrower will hereafter acquire any asset or any
interest in property which is not, immediately upon such acquisition, subject to
such a  perfected  Collateral  Interest  in favor of the  Agent  to  secure  the
Liabilities  (subject only to Permitted  Encumbrances  and  Collateral  Interest
Restrictions),  provided,  however,  the Lead Borrower's engaging in a Permitted
Real Estate  Transaction (as to which, see Section 8:8-3) shall not constitute a
breach of this Section 4:4-25(b).
                    (c) Each Borrower shall execute and deliver to the Agent
such instruments,  documents, and papers, and shall do all such things from time
to time  hereafter as the Agent may  request to carry into effect the provisions
and intent of this  Agreement;  to protect  and  perfect the Agent's Collateral
Interests  in the  Collateral;  and to  comply  with all  applicable statutes
and laws, and facilitate the collection of the Receivables  Collateral.
Each Borrower shall execute all such instruments as may be required by the Agent
with respect to the recordation  and/or  perfection of the Collateral  Interests
created or contemplated herein.
                    (d) Each Borrower hereby designates the Agent as and  for
that  Borrower's  true  and  lawful  attorney,   with  full  power  of
substitution,  to sign and file any financing  statements in order to perfect or
protect the Agent's Collateral  Interests in the Collateral.
                    (e) This Agreement constitutes an  authenticated  record
which  authorizes the Collateral  Agent to file such financing statements as the
Collateral Agent determines as appropriate to perfect or protect the Agent's
Collateral  Interests  created hereby.
                    (f) A carbon,  photographic,  or  other  reproduction  of
this  Agreement  or of  any financing statement or other instrument executed
pursuant to this Section 4:4-25 shall be sufficient for filing to perfect the
security interests granted herein.

          426 -ADEQUACY OF DISCLOSURE.
                    (a) All financial statements furnished to the Agent and to
each Revolving Credit Lender by each Borrower have been prepared in accordance
with GAAP  consistently applied and present fairly the condition of the
Borrowers at the date(s) thereof and the results of operations and cash flows
for the period(s) covered (provided however,  that  unaudited  financial
statements  are subject to normal year end adjustments  and to the absence of
footnotes).  There has been no change in the Consolidated  financial condition,
results of operations,  or cash flows of the Borrowers since the date(s) of such
financial statements,  other than changes in the ordinary course of business,
which changes have not been materially adverse, either singularly or in the
aggregate or are reflected in the Business Plan.
                    (b) As of the  Restatement  Date,  no Borrower  has any
contingent  obligations  or obligation  under any  Lease or  Capital  Lease
which is not  reflected  in the Borrowers'  Consolidated financial statements
(or in the footnotes included with such  statements)  furnished to the Agent and
to each  Revolving  Credit  Lender prior to the  execution  of this  Agreement.
                    (c) To the best  knowledge  of the Borrowers, no document,
instrument,  agreement, or paper now or hereafter given the Agent and to each
Revolving  Credit Lender by or on behalf of each Borrower or any guarantor of
the  Liabilities  in  connection  with the execution of this Agreement  by the
Agent and to each  Revolving  Credit  Lender  contains or will contain  any
untrue  statement  of a material  fact or omits or, when taken as a whole,  will
omit to  state a  material  fact  necessary  in  order to make the statements
therein not misleading. There is no fact known to any Borrower (other than risks
disclosed by the Parent to the Agent or in its filings with the SEC) which has,
or which, in the foreseeable  future could  reasonably be expected to have, a
Material Adverse Effect.

          427 -NO RESTRICTIONS ON LIABILITIES.  No Borrower shall enter into or
permit any Affiliate  or  Subsidiary  to  directly  or  indirectly  become
subject  to any agreement  which  prohibits or restricts,  in any manner,  any
Borrower's or any such  Affiliate's or  Subsidiary's:
                    (a) Creation of, and granting of Collateral Interests  in
favor of the Agent other than the  following:
                              (ii) In  connection with a Permitted Real Estate
Transaction (as to which, see Section 8:8-3).
                              (iii) By documentation  which evidences  solely a
purchase money security  interest in Equipment  otherwise  permitted  by  this
Agreement.
                    (a)  The  incurrence  of Liabilities.

          428 -OTHER  COVENANTS.  No Borrower shall  indirectly do or cause to
be done any act  which,  if done  directly  by that  Borrower,  would  breach
any  covenant contained in this Agreement.


<PAGE>


Article 5:        FINANCIAL REPORTING AND PERFORMANCE COVENANTS:

          51 -MAINTAIN RECORDS.   The Borrowers shall:
                    (a) At all times,  keep  proper  books of  account, in which
full, true, and accurate entries shall be made of all of the Borrowers'financial
transactions, all in accordance  with GAAP applied  consistently  with prior
periods to fairly reflect the Consolidated  financial condition of the Borrowers
at the close of, and its results of operations  for, the periods in question.
                    (b) Timely provide the Agent with those financial  reports,
statements,  and schedules required by this Article 5: or otherwise,  each of
which  reports,  statements and schedules shall be prepared,  to the extent
applicable, in accordance  with GAAP applied consistently  with prior periods to
fairly  reflect the  Consolidated  financial condition of the Borrowers at the
close of, and the results of  operations  for, the period(s)  covered therein.
                    (c) At all times, keep accurate current records of the
Collateral including,  without limitation,  accurate current stock, cost, and
sales records of its Inventory,  accurately and  sufficiently  itemizing and
describing  the kinds,  types,  and  quantities  of  Inventory  and the cost and
selling prices thereof.
                    (d) At all times,  retain independent  certified public
accountants  who are  reasonably  satisfactory  to the Agent and  instruct  such
accountants to fully  cooperate  with, and be available to, the Agent to discuss
the Borrowers' financial  performance,  financial condition,  operating results,
controls,  and such other  matters,  within the scope of the  retention  of such
accountants, as may be raised by the Agent.
                    (e) Not change any Borrower's fiscal year.

          52 -ACCESS TO RECORDS.
                    (a) Each  Borrower  shall  accord  the Agent  with  access
from time to time at reasonable  times,  on  reasonable  notice,  as the  Agent
may  require  to all properties owned by or over which any Borrower has control.
The Agent shall have the right,  and each  Borrower  will permit the Agent from
time to time as Agent may request, to examine, inspect,  copy, and make extracts
from any and all of the Borrowers' books,  records,  electronically stored data,
papers, and files. Each Borrower shall make all of that Borrower's copying
facilities  available to the Agent.
                    (b) Each Borrower hereby authorizes the Agent to:
                              (ii) Inspect, copy, duplicate, review, cause to be
          reduced to hard copy, run off, draw off, and otherwise use any and all
          computer or electronically stored  information or data  which  relates
          to any  Borrower,  or any service bureau,  contractor,  accountant, or
          other person, and directs any such service bureau, contractor,
          accountant, or other person fully to cooperate with the Agent with
          respect thereto.
                              (iii)  Verify,  in a  manner  consistent  with
          customary  commercial  financing practices,  at any  time  the
          Collateral  or  any  portion  thereof,  including verification with
          Account Debtors,  and/or with each Borrower's computer billing
          companies,  collection  agencies,  and  accountants and to sign the
          name of each Borrower on any notice to each Borrower's Account Debtors
          or verification of the Collateral.
                    (a)  The  Agent  from  time  to  time  may  designate one or
more representatives to exercise the Agent's rights under this Section 5:5-2 as
fully as if the Agent were doing so.

          53 -NOTICE TO AGENT.
                    (a) The Lead Borrower shall provide the Agent with written
notice  promptly upon the  occurrence of any of the following  events,  which
written  notice shall be with reasonable  particularity  as to the facts and
circumstances in respect of which  such  notice is being  given:
                              (ii) Any change in any Borrower's Senior Officers.
                              (iii) Any ceasing of any Borrower's making of
          payment, in the ordinary course,  to any of its creditors  where the
          result thereof could reasonably be expected to have a Material Adverse
          Effect.
                              (iv) Any failure by any Borrower to pay rent at
          any of that Borrower's  locations,  which failure continues for more
          than three (3) days  following the last day on which such rent was
          payable where the result of such failure could reasonably be expected
          to be a Material Adverse Effect.
                              (v) Any Material Adverse Change.
                              (vi) Any Borrower's becoming InDefault.
                              (vii) Any intention on the part of any Borrower to
          discharge  that  Borrower's present  independent  accountants  or any
          withdrawal  or  resignation  by  such independent  accountants  from
          their acting in such capacity (as to which, see Subsection  5:5-1(d)).
                              (viii) Any litigation which, if determined
          adversely to any Borrower,  could reasonably be expected to have a
          Material Adverse Effect on the financial  condition of that  Borrower.
                    (a) The Lead Borrower  shall:
                              (ix) Provide  the  Agent,  promptly  after  being
          distributed,  with  copies  of any materials distributed to the
          shareholders of the Parent  (qua such shareholders).
                              (x) Provide the Agent, promptly after being filed
          with the SEC, all registration statements,  annual,  quarterly,  and
          other reports filed by the Parent.
                              (xi) At the  request of the Agent,  from time to
          time,  provide the Agent with copies of all advertising  (including
          copies of all print advertising and duplicate tapes of all video and
          radio advertising).
                              (xii) Provide the Agent, promptly following
          receipt  by the  Parent,  with  a  copy  of any  management  letter or
          similar communications from any accountant of the Parent.

          54 -BORROWING BASE CERTIFICATE. The Lead Borrower shall provide the
Agent with a Borrowing Base Certificate (in the form of EXHIBIT 5:5-4 annexed
hereto, as such form may be revised from time to time by the Agent) as follows:
                    (a) By 1:00PM on each  Wednesday,  as of the  close of
business  on the then  immediately  prior Saturday.
                    (b) With each Revolving Credit loan request made pursuant to
Section 2:2-7.

          55 -MONTHLY REPORTS.   Monthly, the Lead Borrower shall provide the
Agent with
                    (a) Timely as  provided  in EXHIBIT  5:5-5, annexed  hereto,
those  financial statements and reports described in EXHIBIT 5:5-5.
                    (b) The officer's  compliance certificate described in
Section 5:5-8.

          56 -QUARTERLY REPORTS.  Quarterly, within Forty Five (45) days
following the end of each of the Borrowers' first three Fiscal  quarters,  the
Lead Borrower shall provide  the Agent  with the  following:
                    (a) A  management  prepared  financial statement of the
Borrowers  for the period from the beginning of the  Borrowers' then  current
fiscal  year  through  the  end  of  the  subject  quarter,  with comparative
information for the same period of the previous fiscal year,  which statement
shall include,  at a minimum, a balance sheet, income statement (which income
statement shall be on a store specific and on a "consolidated" basis), statement
of changes in shareholders' equity, and cash flows and comparisons of same Store
sales for the corresponding  quarter of the then immediately previous year, as
well as to the Business  Plan.
                    (b) Copy of the  Borrowers' 10-Q filed with the SEC, for the
first second, and third fiscal quarters only.
                    (c) The officer's compliance certificate described in
Section 5:5-8.

          57 -ANNUAL REPORTS.  Annually,  within ninety (90) days following the
end of the Borrowers'  Fiscal year,  the Lead Borrower shall furnish the Agent
                    (a) The 10-K report for the  Borrowers or that year,  filed,
or to be filed with the SEC, which  shall have been  prepared  by, and bear the
unqualified opinion of, the Borrowers'  independent certified public accountants
(i.e. said statement shall be  "certified"  by such  accountants)  and shall
include,  at a minimum  (with comparative  information for the then prior fiscal
year) a balance sheet, income statement, statement of changes in shareholders'
equity, and cash flows.
                    (b) The officer's compliance certificate described in
Section 5:5-8.

          58 -OFFICERS' CERTIFICATES.  The Lead Borrower  shall cause a Senior
Officer to provide such Person's  Certificate  with those  monthly,  quarterly,
and annual statements to be furnished pursuant to this Agreement,  which
Certificate shall:
                    (a) Indicate that the subject  statement was prepared in
accordance with GAAP or the  requirements  of this  Agreement,  consistently
applied in the preparation thereof and with prior such  statements of like kind
furnished  pursuant to this Agreement,  and  presents  fairly the  Consolidated
financial  condition of the Borrowers at the close of, and the results of the
Borrowers' operations and cash flows for, the period(s) covered,  subject,
however to the following:
                              (ii) Usual year end  adjustments  (this  exception
          shall not be included in the Certificate which accompanies such annual
          statement).
                              (iii)  Material  Accounting  Changes (in which
          event, such Certificate shall include a schedule(in reasonable detail)
          of the effect of each such Material Accounting  Change) not previously
          specifically taken into account  in the determination of the financial
          performance covenant imposed pursuant to Section 5:5-11.
                              (iv) The absence of footnotes to monthly and
          quarterly statements.
                    (a) Indicate either that
                              (i) no Borrower is InDefault,  or
                              (ii) if such an event has  occurred,  its nature
          (in  reasonable  detail) and the steps (if any) being taken or
          contemplated  by the  Borrowers  to be taken on account  thereof.
                    (b) Include calculations concerning the Borrowers'
compliance (or failure to comply) at the date of the  subject  statement  with
each of the  financial  performance covenants included in Section 5:5-11 hereof.

          59 -INVENTORIES, APPRAISALS, AND AUDITS.
                    (a) The  Agent,  at the  expense of the  Borrowers,  may
participate  in and/or observe each count and/or  physical  inventory of so much
of the  Collateral as consists of Inventory which is undertaken on behalf of the
Borrowers.
                    (b) The Borrowers,  shall cause physical  inventories to be
undertaken as follows:
                              (ii) Subject to Section  5:5-9(b)(ii),  the
          Borrowers, at their own expense, shall cause at least one (1) physical
          inventory  to be  undertaken  in each fiscal year during which this
          Agreement is in effect (the  scheduling of which  inventory  shall be
          subject to the Agent's  discretion  after the  occurrence  and
          continuance of any Event of Default) conducted by such inventory
          takers as are  satisfactory  to the Agent and the Parent  and which
          employs a methodology  consistent  with that which had been  employed
          in physical inventories taken prior to November 1, 1999.
                              (iii) The Agent may cause or require additional
          inventories to be undertaken (in each  instance, at the expense of the
          Borrowers)  if an Event of Default or an Availability  Trigger Event
          has occurred and is continuing.
                              (iv) On the Agent's reasonable  request from time
          to time, the Lead Borrower shall provide the Agent with a copy of the
          preliminary results ("flash report") of a physical inventory conducted
          pursuant to this Section  5:5-9(b) (as well as of any other  physical
          inventory  undertaken  by any  Borrower)  within  ten (10)  days
          following  the completion of such  inventory.
                              (v) The Lead  Borrower,  within thirty (30) days
          following  the end of each of the  Borrowers'  Fiscal  years,  shall
          provide the Agent  with  a  reconciliation  of  the  results  of  the
          Borrowers' physical inventories taken during the Fiscal year then just
          ended and, to the extent not previously  so posted,  shall post such
          results to the  Borrowers'  stock ledger and, as applicable to the
          Borrowers'  other  financial  books and records .
                    (a) Upon the Agent's  reasonable  request from time to time,
the  Borrowers shall permit the Agent to obtain an appraisal, from time to time,
of the  Borrowers' Inventory.
                              (vi) Subject to Section 5:5-9(c)(ii) , the
          Borrowers shall reimburse the Agent for the Agent's out-of-pocket cost
          of up to four (4)  such appraisals in any Twelve (12) month period
          during which this Agreement is in effect.
                              (vii)  If such  expense  obligation  arose  while
          an  Event  of  Default  or an Availability  Trigger Event has occurred
          and is continuing,  the Borrowers shall reimburse the Agent for all
          such  appraisals.
                    (a) The Borrowers shall reimburse the Agent for the Agent's
out-of-pocket cost of commercial finance audits of the Borrowers' books and
records as follows: (viii) Subject to Section 5:5-9(d)(ii), the Borrowers shall
reimburse the Agent for the Agent's out-of-pocket  cost of up to four (4) such
audits in any Twelve (12) month period during which this Agreement is in effect.
                              (ix)  If  such  expense  obligation  arose  while
          an  Event  of  Default  or an Availability  Trigger Event has occurred
          and is continuing,  the Borrowers shall reimburse  the Agent for all
          such audits.  Revolving  Credit  Lenders,  at their respective own
          expense,  may accompany and observe any commercial  finance audit of
          the Borrower's books which the Agent causes to be undertaken.

          510 -ADDITIONAL FINANCIAL INFORMATION.
                    (a) In addition  to all other  information  required to be
provided pursuant to this Article 5:, the Lead Borrower promptly  shall  provide
the Agent (and any guarantor  of the  Liabilities),  with  such  other and
additional  information concerning  the  Borrowers,  the  Collateral,  the
operation of the  Borrowers' business,   and  the  Borrowers'   financial
condition, including  original counterparts of financial reports and statements,
as the Agent may from time to time  request  from the Lead  Borrower.
                    (b) The Lead  Borrower  may provide the Agent,  from time to
time  hereafter,  with updated  forecasts of the Borrowers' anticipated
performance  and  operating  results.
                    (c) In all events, the Lead Borrower, no earlier than Ninety
(90) days prior to the end of its fiscal year nor later than the last day of the
first fiscal quarter of the Borrower's fiscal year, shall furnish the Agent with
an updated and extended  forecast which shall go out at least through the end of
the subject fiscal year and shall include an income  statement,  balance  sheet,
and statement of cash flow, by month,  each prepared in conformity with GAAP and
consistent with the Borrowers' then current practices.
                    (d) The Agent and each of the Revolving  Credit Lenders
agrees that, except with the prior  consent of the Lead  Borrower,  it will not
disclose any confidential  information  with respect to the Borrowers  which is
now or in the future  furnished  pursuant  to this  Agreement or any other  Loan
Document, provided, however, that the Agent and each Revolving Credit Lender may
disclose any such  information as follows:
                              (ii) To the following (but only if the Person to
          whom so disclosed is instructed to treat the such information as
          confidential):
                                        (B) To its employees, Affiliates,
                    advisors or counsel.
                                        (C) To any prospective or actual
                    transferee or participant in connection with any
                    contemplated transfer or participation of this Agreement,
                    the Liabilities, or any interest therein by the Agent or any
                    Revolving  Credit  Lender, which transfer  or  participation
                    is permitted by the terms of this Agreement.
                                        (D) To the Agent and other Revolving
                    Credit Lenders.
                              (i) As has become generally available to the
          public.
                              (ii) As may be required or  appropriate  in any
          report,  statement  or testimony submitted to any municipal, state, or
          federal regulatory body having or claiming to have jurisdiction over
          the Agent or any Revolving Credit Lender.
                              (iii) As may be  required  or  appropriate  in
          respect  to any  summons  or  subpoena  or in connection  with any
          litigation
                              (iv) In order to comply  with any law,  order,
          regulation or ruling applicable to the Agent or any Revolving Credit
          Lender.

          511 -FINANCIAL  PERFORMANCE  COVENANTS.  The Borrowers  shall observe
and comply with those financial performance covenants set forth on EXHIBIT
5:5-11,  annexed hereto. Compliance with such financial performance covenants
shall be made as if no Material Accounting Changes had been made (other than any
Material Accounting Changes  specifically taken into account in the setting of
such covenants).  The Agent may determine the Borrowers'  compliance  with such
covenants  based upon financial  reports and  statements  provided  by the Lead
Borrower to the Agent (whether  or not such  financial  reports  and  statements
are  required  to be furnished  pursuant  to  this  Agreement)  as well as by
reference to interim financial information provided to, or commercially
reasonably developed by, the Agent.


<PAGE>


Article 6:        - USE OF COLLATERAL:

          61 -USE OF INVENTORY COLLATERAL.
                    (a) No Borrower shall engage in any sale or other
disposition of Inventory which consists of:
                              (ii) Any sale or other disposition which is not
          for fair consideration in the conduct of the Borrowers' business  in
          the  ordinary  course  unless  conducted  as  part  of the House2Home
          Conversion  and/or unless  conducted in connection with any Store
          closure (including any Store sale) permitted by this Agreement.
                              (iii) Sales or other dispositions to creditors.
                              (iv) Sales or other  dispositions  in bulk except
          in  connection  with any Store closure  permitted by this  Agreement.
                              (v) Sales of any Collateral in breach of any
          provision of this Agreement.  (a) No sale of Inventory by any Borrower
          shall be on consignment,  approval,  or under any other  circumstances
          such that, with the exception of the Borrowers' customary return
          policy applicable to the return of  inventory  purchased  by the
          Borrowers'  retail  customers  in the ordinary course,  such Inventory
          may be returned to a Borrower without the consent of the Agent.

          62 -INVENTORY  QUALITY.  All  Inventory  now owned or hereafter
acquired by any Borrowers is and will be of good and merchantable  quality and
free from defects (other than (x) quality problems and defects within  customary
trade tolerances and (y) subject to insured casualties).

          63 -ADJUSTMENTS AND ALLOWANCES. Each Borrower may grant such
allowances or other adjustments to that Borrower's Account Debtors (exclusive of
extending the time for payment of any Account or Account Receivable in excess of
$100,000.00, which shall not be done without first  obtaining the Agent's prior
written  consent in each  instance)  as that  Borrower  may  reasonably  deem to
accord  with  sound business practice.

          64 -VALIDITY OF ACCOUNTS.
                    (a) The amount of each Account shown on the books,  records,
and invoices of the Borrowers represented as owing by each Account Debtor is and
will be the correct amount actually owing by such Account Debtor and shall have
been fully earned by performance  by  the  Borrowers.
                    (b)  No  Borrower  has  any  knowledge  of any impairment of
the validity or collectibility of any of the Accounts  which are included in the
calculation of the Borrowing Base (except as stated therein and except as
subject to  adjustments  to Credit Card  Receivables  in the  ordinary course of
business).  The Lead  Borrower  shall notify the Agent of any material such
impairment   promptly  after  any  Borrower  becomes  aware  of  any  such
impairment.

          65 -NOTIFICATION  TO ACCOUNT DEBTORS.  The Agent shall have the right
(after any Event of Default has occurred and is continuing) to notify any of the
Borrowers' Account Debtors to make payment directly to the Agent and to collect
all amounts due on account of the Collateral.


<PAGE>


Article 7: - CASH MANAGEMENT. PAYMENT OF LIABILITIES:

          71 -THE BLOCKED ACCOUNT.
                    (a) On the Restatement  Date, the Blocked Account Agreement
is in full force and effect.
                    (b) As a condition to the effectiveness of the amendment and
restatement of this  Agreement, the Lead Borrower shall deliver the following to
the Agent:
                              (ii)  Notices to each  processor  of any of credit
          card  receipts of any of the Borrowers, each in form satisfactory  to
          the Agent,  which  notices  were not so  delivered  in connection with
          the execution of the 1999 Loan Agreement.
                              (iii) A notice,  addressed  generally to the
          depositories at which any Borrower maintains a DDA into which proceeds
          of the Borrower's sales are deposited,  each in form  satisfactory  to
          the Agent,  which  notices  were not so  delivered  in connection with
          the  execution  of the  1999  Loan  Agreement.
                    (a) Upon  the occurrence of any Event of Default or an
Availability  Trigger Event,  then, in addition to any other rights to which the
Agent is then entitled, the Agent may (and on instructions of the  SuperMajority
Lenders  shall  )  undertake  the following (subject in all events to Section
7:7-1(d)).
                              (iv) Give notice to the Lock Box Bank to forward
          to the Boston Concentration Account, by ACH or wire transfer,  the
          proceeds of all Receivables Collateral from time to time received by
          the Lock Box Bank.
                              (v) Give notice to each of the Borrowers'  credit
          card processors to forward to the Boston  Concentration  Account, by
          ACH or wire transfer,  the  proceeds of all  Receivables  Collateral
          which such credit card processors  otherwise would forward to or for
          the account of the Borrower.
                              (vi) Send a copy of the notice furnished  pursuant
          to  Section  7:7-1(b)(ii)  (or pursuant to the cognate  provision
          included in the 1999 Loan Agreement) to each depository  at which any
          Borrower  maintains  a DDA into which  proceeds of the Borrower's
          sales are deposited as described and to take such other steps as the
          Agent  reasonably  determines as appropriate  to cause the Agent's
          dominion and control of Receipts,  proceed,  and  collections.
                              (vii) Give notice to the Lead Borrower of the
          Agent's  having  exercised  its rights  pursuant to this Section
          7:7-1(c).  Following  the  occurrence of any event  described  in this
          Section 7:7-1(c), all Receipts,  proceeds, and collections shall be
          held in trust by the Borrowers for the Agent and shall not be
          commingled  with any of the  Borrowers' other funds or deposited in
          any account of any Borrower other than as instructed by the  Agent.
                    (a) If,  following  the  Agent's  exercise  of any of its
rights described  in Section  7:7-1(c):  (viii) If such  exercise was on account
of the occurrence of an Event of Default which is no longer continuing; or
                              (ix) If such  exercise  was on  account  of the
          occurrence  of an  Availability Trigger Event and an Availability
          Trigger Cure occurs thereafter, then the Agent,  subject to its
          continuing  rights  thereafter  under  Section 7:7-1(c),  shall  take
          steps to  reverse  those  actions  which it had so taken pursuant  to
          that   Section.
                    (a) The Borrower  will  not  change  its  cash concentration
procedures from those in place at the execution of this Agreement unless  such
change is  coordinated  with the  Agent  with a view  towards  the preservation
and protection of the Agent's rights included in this Article 7:.

          72 -THE CONCENTRATION AND OPERATING ACCOUNTS.
                    (a) The following checking accounts have been or will be
established (and are so referred to herein):
                              (ii) The "Boston Concentration Account" (so
          referred to herein): Established by the Agent with Fleet National
          Bank.
                              (iii) The "Operating  Account"  (so  referred  to
          herein): One more accounts established by the Lead Borrower with Fleet
          National Bank (the Operating Account is referred to as the
          "Disbursement  Account" in the 1999 Loan Agreement).
                    (a) The  Borrowers  shall pay all fees and charges of, and
maintain such  impressed balances as may be required by the  depository in which
any account is opened as required hereby (even if such account is opened by and/
or is the property of the Agent.

          73 -PAYMENT OF LIABILITIES.
                    (a) On each  Business Day, the Agent shall apply the then
collected  balance of the Boston  Concentration  Account (net of fees charged,
and of such  impressed balances  as may be  required  by the bank at  which  the
Boston  Concentration Account is maintained): First, towards the SwingLine Loans
and Second,  towards the unpaid  balance of the Loan  Account  and all other
Liabilities,  provided, however,  for purposes of the  calculation  of interest
on the unpaid  principal balance of the Loan Account,  such payment shall be
deemed to have been made One (1) Business Day after such  transfer.
                    (b) The following rules shall apply to deposits and payments
under and pursuant to this Agreement:
                              (ii) Funds shall be deemed  to have  been
          deposited  to the  Boston  Concentration  Account  on the Business Day
          on which  deposited, provided that notice of such deposit is available
          to the Agent by 2:00PM on that Business Day.
                              (iii) Funds paid to the Agent, other than by
          deposit to the Boston Concentration Account, shall be deemed to have
          been received on the Business Day when they are good and collected
          funds,  provided that notice of such payment is available to the Agent
          by 2:00PM on that  Business  Day.
                              (iv) If notice of a deposit  to the Boston
          Concentration Account (Section 7:7-3(b)(i))  or  payment  (Section
          7:7-3(b)(ii)) is not  available  to the Agent until after  2:00PM on a
          Business Day,  such deposit or payment shall be deemed to have been
          made at 9:00AM on the then next Business Day.
                              (v) All deposits to the Boston Concentration
          Account and other  payments to the Agent are subject to clearance  and
          collection.
                    (a) The Agent  shall  transfer  to the  Operating  Account
any  surplus  in the  Boston Concentration  Account  remaining after the
application  towards the Liabilities referred to in Section 7:7-3(a), above
(less those amount which are to be netted out, as provided therein) provided,
however, in the event that
                              (vi) any Borrower is InDefault;  and (vii) one or
          more L/C's are then outstanding, then the Agent may establish a funded
          reserve of up to 105% of the aggregate  Stated Amounts of such L/C's.
          Such funded reserve shall either be (i) returned to the Borrowers in
          the event that no Borrower is InDefault or (ii) applied  towards the
          Liabilities following the occurrence of any Event of Default described
          in Section  10:10-12 or Acceleration.

          74 -THE  OPERATING  ACCOUNT.  Except as otherwise  specifically
provided in, or permitted by, this  Agreement,  all checks shall be drawn by the
Borrower  upon, and other disbursements shall be made by the Borrower solely
from, the Operating Account or from its payroll account.


<PAGE>


Article 8: - GRANT OF SECURITY INTEREST:

          81 -GRANT OF SECURITY INTEREST.       To secure the Borrowers' prompt,
punctual, and faithful performance of all and each of the Liabilities, each
Borrower hereby grants to the Agent, for the ratable benefit of the Revolving
Credit Lenders, a continuing security interest in and to, and assigns to the
Agent, for the ratable benefit of the Revolving Credit Lenders, the following,
and each item thereof, whether now owned or now due, or in which that Borrower
has an interest, or hereafter acquired, arising, or to become due, or in which
that Borrower obtains an interest, and all products, Proceeds, substitutions,
and accessions of or to any of the following:
                    (a)      All Accounts and accounts receivable.
                    (b)      All Inventory.
                    (c)      All General Intangibles.
                    (d)      All Equipment.
                    (e)      All Goods.
                    (f)      All Farm Products.
                    (g)      All Fixtures.
                    (h)      All Chattel Paper.
                    (i)      All Letter-of-Credit Rights.
                    (j)      All Payment Intangibles.
                    (k)      All Supporting Obligations.
                    (l)      All Real Estate Collateral.
                    (m)      All books, records, and information relating to the
Collateral and/or to the operation of each Borrower's business, and all rights
of access to such books, records, and information, and all property in which
such books, records, and information are stored, recorded, and maintained.
                    (n)      All Investment Property, Instruments, Documents,
Deposit Accounts, money, policies and certificates of insurance, deposits,
impressed accounts, compensating balances, cash, or other property.
                    (o)      All insurance proceeds, refunds, and premium
rebates, including, without limitation, proceeds of fire and credit insurance,
whether any of such proceeds, refunds, and premium rebates arise out of any of
the foregoing. (8:8-1(a) through 8:8-1(n)) or otherwise.
                    (p)      All liens, guaranties, rights, remedies, and
privileges pertaining to any of the foregoing (8:8-1(a) through 8:8-1(o)),
including the right of stoppage in transit.

          82 -EXTENT AND DURATION OF SECURITY INTEREST.
                    (a) The security interest created herein is subject to any
applicable Collateral Interest Restrictions.
                    (b) The security interest created and granted herein is in
addition to, and supplemental of, any security interest previously granted by
any Borrower to the Agent and shall continue in full force and effect applicable
to all  Liabilities  until  both  (a) all  Liabilities  have  been  paid  and/or
satisfied in full and (b) the security  interest  created herein is specifically
terminated in writing by a duly authorized officer of the Agent.

          83 -PERMITTED  REAL  ESTATE  TRANSACTIONS.  The Agent  shall  execute
all such documents as the Lead Borrower  from time to time may request to
facilitate  the consummation of a Permitted Real Estate  Transaction,  including
the release and discharge  of any  Collateral  Interest  which the Agent  then
holds on the Real Estate Collateral which is subject of such Permitted Real
Estate Transaction.


<PAGE>


Article 9: - AGENT AS BORROWER'S ATTORNEY-IN-FACT:

          91 -APPOINTMENT   AS   ATTORNEY-IN-FACT.   Each  Borrower  hereby
irrevocably constitutes  and appoints the Agent (acting through any of its
officers) as that Borrower's true and lawful attorney, with full power of
substitution,  following the occurrence and during the continuance of an Event
of Default, to convert the Collateral into cash at the sole risk,  cost, and
expense of that Borrower,  but for the sole benefit of the Agent and the
Revolving  Credit Lenders.  The rights and powers granted the Agent by this
appointment  include but are not limited to the right and power to:
                    (a) Prosecute, defend, compromise, or release any action
relating  to the  Collateral.
                    (b) Sign  change of  address  forms to change the address to
which each Borrower's mail is to be sent to such address as the Agent shall
designate;  receive and open each Borrower's mail;  remove any Receivables
Collateral  and Proceeds of  Collateral  therefrom  and turn over the balance of
such  mail  either to the Lead  Borrower  or to any  trustee  in  bankruptcy  or
receiver of the Lead Borrower,  or other legal representative of a Borrower whom
the Agent  determines to be the appropriate  person to whom to so turn over such
mail.
                    (c) Endorse the name of the relevant  Borrower in favor of
the Agent upon any and all checks, drafts, notes,  acceptances,  or other items
or instruments; sign and endorse the name of the  relevant  Borrower  on, and
receive as secured party, any of the Collateral, any invoices, schedules of
Collateral,  freight or express receipts, or bills of lading,  storage receipts,
warehouse receipts, or other documents of title respectively  relating to the
Collateral.
                    (d) Sign the name of the relevant  Borrower on any notice to
that Borrower's  Account Debtors or verification of the Receivables Collateral;
sign the relevant Borrower's name on any Proof of Claim in Bankruptcy  against
Account Debtors,  and on notices of lien, claims of mechanic's liens, or
assignments or releases of mechanic's liens securing  the  Accounts.
                    (e) Take all such action as may be necessary to obtain the
payment of any letter of credit  and/or  banker's  acceptance  of which any
Borrower is a beneficiary.
                    (f) Repair, manufacture, assemble, complete, package,
deliver, alter or supply goods, if any, necessary to fulfill in whole or in part
the  purchase  order of any  customer  of each  Borrower.  (g) Use,  license  or
transfer any or all General Intangibles of each Borrower.

          92 -NO OBLIGATION TO ACT. The Agent shall not be obligated to do any
of the acts or to exercise any of the powers authorized by Section 9:9-1 herein,
but if the Agent elects to do any such act or to exercise any of such powers,
it shall not be accountable  for more than it actually  receives as a result of
such exercise of power,  and shall not be  responsible to any Borrower for any
act or omission to act  except  for any act or  omission  to act as to  which
there  is a final determination  made in a judicial  proceeding (in which
proceeding the Agent has had an opportunity to be heard) which determination
includes a specific finding that the subject act or omission to act had been
grossly  negligent or in actual bad faith.


<PAGE>


Article 10: - EVENTS OF DEFAULT:
         The occurrence of any event described in this Article 10: respectively
shall constitute an "Event of Default" herein.

          101 -FAILURE TO PAY REVOLVING CREDIT.  The failure by any Borrower to
pay any principal or interest when due under the Revolving Credit.

          102 -FAILURE TO MAKE OTHER  PAYMENTS.  The failure by any Borrower to
pay within five (5) days of when due, any, fee, or other payment  Liability
(other than as set forth in Section 10:10-1, above) under any of the Loan
Documents.

          103 -FAILURE TO PERFORM COVENANT OR LIABILITY (NO GRACE PERIOD).  The
failure by any Borrower to promptly, punctually,  faithfully and timely perform,
discharge, or comply with any  covenant or  Liability  not  otherwise  described
in Section 10:10-1  or  Section  10:10-2  hereof,  and  included  in any  of the
following provisions hereof:
                         Section             Relates to:
                         -------             -----------
                         4:4-5               Location of Collateral
                         4:4-7               Title to Assets
                         4:4-8               Indebtedness
                         4:4-9               Insurance Policies
                         4:4-15(c)           Tax Liens
                         4:4-20              Dividends. Investments. Other
                                             Corporate Actions
                         4:4-24              Affiliate Transactions
                         5:5-11              Financial Performance Covenants
                         6:6-1               Use of Inventory Collateral
                         Article 7:          Cash Management

          104 -FINANCIAL REPORTING REQUIREMENTS.  The failure by the Lead
Borrower or any Borrower to promptly, punctually, faithfully and timely perform,
discharge, or comply with the financial reporting requirements included in
Article 5:,  subject,  however,  to the following  limited number of grace
periods applicable to certain of those requirements:

<TABLE>
<CAPTION>
===================================== ================== ========================== ================================
REPORT / STATEMENT                    REQUIRED BY        GRACE PERIOD               NUMBER OF GRACE PERIODS
                                      SECTION
===================================== ================== ========================== ================================

<S>                                   <C>                <C>                        <C>
Weekly Borrowing Base                 5:5-4              One Business Day           Six  in any 12 months

------------------------------------- ------------------ -------------------------- --------------------------------

Monthly Reports                       5:5-5              Six Business Days          Three in any 12 months

------------------------------------- ------------------ -------------------------- --------------------------------

Notice of Change in Senior Officers   5:5-3(a)(i)        Twenty Days                One in any 12 months

------------------------------------- ------------------ -------------------------- --------------------------------

Notice of Material Adverse Change     5:5-3(a)(iv)       Ten Business Days          One in any 12 months

------------------------------------- ------------------ -------------------------- --------------------------------

Retain Accountants                    5:5-3(a)(vi)       Twenty Days                Once

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

          105 -FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD). The
failure by any Borrower,  twenty  (20)  days  following  the  earlier,  with
respect  to  that Borrower's failure to promptly, punctually and faithfully
perform, discharge, or comply with any covenant or Liability not described in
any of Sections  10:10-1, 10:10-2,  10:10-3,  or 10:10-4  hereof,  to have cured
such  failure:
                    (a) That Borrower's  knowledge  of such  failure to perform,
discharge,  or comply.
                    (b) Written  notice from the Agent to the Lead  Borrower of
such failure to perform, discharge or comply.

          106 -MISREPRESENTATION.  Any representation or warranty at any time
made by any Borrower to the Agent or any Revolving Credit Lender was not true or
complete in all material respects when given.

          107 -ACCELERATION  OF OTHER DEBT.  BREACH OF LEASE. The occurrence of
any event such that any  Indebtedness of any  Borrower  in excess  of $5 Million
to any creditor other than  the Agent  or  any  Revolving Credit Lender could be
accelerated  or,  without the consent of any  Borrower,  any Leases with monthly
base rent  aggregating not less than  $200,000.00  could be terminated  prior to
their stated  termination  date  (whether or not the subject  creditor or lessor
takes any action on account of such occurrence).

          108 -DEFAULT  UNDER  OTHER  AGREEMENTS.  The occurrence of any  breach
of any covenant or failure  timely to  discharge  any  Liability  imposed by, or
of any default under, any agreement  (including any Loan Document) between the
Agent or any Revolving Credit Lender and any Borrower or instrument given by any
Borrower to the Agent or any Revolving Credit Lender and the expiry, without
cure, of any applicable  grace period  (notwithstanding  that the subject  Agent
or Revolving Credit Lender may not have exercised all or any of its rights on
account of such breach or default).

          109 -UNINSURED LOSS.  The occurrence, in consequence of any single
event or series of connected events, of the uninsured loss, theft, damage, or
destruction of or to the Collateral in excess of the following:
                    (a) If an Availability Trigger Event has occurred and is
then continuing (i.e. no Availability Cure has thereafter occurred): In excess
of $5 Million.
                    (b) Under all circumstances other than as described in
Section 10:10-9(a): $10 Million.

          1010 -ATTACHMENT. JUDGMENT. RESTRAINT OF BUSINESS.
                    (a) The service of process upon the Agent or any Revolving
Credit Lender or any Participant seeking to attach, by trustee, mesne, or other
process, any of funds of any Borrower on deposit with, or assets of any Borrower
in the possession of, the Agent or that Revolving Credit Lender or such
Participant.
                    (b) The entry of any judgment  against any Borrower,  which
judgment is not satisfied (if a money judgment) or appealed from (with execution
or similar  process  stayed)  within thirty (30) days of its entry and which
judgment,  when added to all other money judgments, aggregates in excess of
$100,000.00.
                    (c) The occurrence of any Material Adverse Effect.

          1011 -BUSINESS FAILURE. Any act by, against, or relating to any
Borrower, or its property or assets, which act constitutes the determination, by
any Borrower, to initiate a program of partial or total self-liquidation (not
otherwise permitted by  this  Agreement);   application  for,  consent  to,  or
sufferance  of the appointment of a receiver, trustee, or other person, pursuant
to court action or otherwise, over all, or any part of any Borrower's property;
the granting of any trust mortgage or execution of an assignment for the benefit
of the creditors of any  Borrower, or the  occurrence  of  any  other  voluntary
or involuntary liquidation or extension of debt agreement for any Borrower;  the
offering by or entering  into by any  Borrower  of any  composition,  extension,
or any  other arrangement  seeking  relief from or extension of the debts of any
Borrower;  or the  initiation  of any judicial or  non-judicial  proceeding  or
agreement  by, against,  or  including  any  Borrower  which seeks or intends to
accomplish  a reorganization  or arrangement  with  creditors;  and/or the
initiation by or on behalf of any  Borrower of the liquidation  or winding up of
all or any part of any Borrower's business or operations,  and if such action is
initiated against any Borrower,  it is not timely  contested,  or if so timely
contested,  is not dismissed within sixty (60) days of when initiated.

          1012 -BANKRUPTCY. The failure by any Borrower to generally pay the
debts of that Borrower as they mature;  adjudication of bankruptcy or insolvency
relative to any Borrower; the entry of an order for relief or similar order with
respect to any  Borrower in any  proceeding  pursuant to the Bankruptcy  Code or
any other federal bankruptcy law; the filing of any complaint, application, or
petition by any  Borrower  initiating  any matter in which any Borrower is or
may be granted any relief from the debts of that Borrower  pursuant to the
Bankruptcy  Code or any  other  insolvency  statute  or  procedure;  the  filing
of any  complaint, application,  or petition  against any Borrower  initiating
any matter in which that Borrower is or may be granted any relief from the debts
of that Borrower pursuant to the Bankruptcy Code or any other insolvency statute
or procedure, which complaint,  application, or petition is not timely contested
in good faith by that Borrower by appropriate  proceedings or, if so  contested,
is not dismissed within sixty (60) days of when filed.

          1013 -DEFAULT BY GUARANTOR OR AFFILIATE.  The occurrence of any of the
foregoing Events of Default  with  respect to any guarantor  of the Liabilities,
or the occurrence of any of the foregoing  Events of Default with respect to any
such guarantor as if such guarantor were a "Borrower" described therein.

          1014 -INDICTMENT - FORFEITURE.  The  indictment of, or institution of
any legal process  or  proceeding  against,  any  Borrower,  under any  federal,
state, municipal, and other civil or criminal  statute, rule, regulation, order,
or other  requirement  having  the  force of law where the  relief,  penalties,
or remedies sought or  available include the  forfeiture of any property of that
Borrower and/or the imposition of any stay or other order,  the effect of which,
could reasonably be expected to have a Material Adverse Effect.

          1015 -TERMINATION OF GUARANTY.  The termination or attempted
termination of any guaranty by any guarantor of the Liabilities.

          1016 -CHALLENGE TO LOAN DOCUMENTS.
                    (a) Any challenge  by or on  behalf of any  Borrower  or any
guarantor  of the Liabilities  to the  validity  of any  Loan  Document  or the
applicability or enforceability of any Loan Document strictly in accordance with
the subject Loan Document's terms or which seeks to void,  avoid,  limit, or
otherwise  adversely affect any security  interest  created by or in any Loan
Document or any payment made pursuant thereto.
                    (b) Any determination by any court or any other judicial
or government  authority that any Loan Document is not  enforceable  strictly in
accordance  with the  subject  Loan  Document's  terms or which  voids,  avoids,
limits, or otherwise adversely affects any security interest created by any Loan
Document or any payment made pursuant thereto.

          1017 -CHANGE IN CONTROL.  Any Change in Control.


<PAGE>


Article 11: - RIGHTS AND REMEDIES UPON DEFAULT:

          111  -ACCELERATION.  Upon the occurrence of any Event of Default as
described in Section 10:10-12, all Indebtedness of the Borrower to the Revolving
Credit Lenders shall be immediately  due and payable. Upon the occurrence of any
Event of Default  other than as described in Section  10:10-12,  the Agent may
(and on the issuance of Acceleration Notice(s) requisite to the causing of
Acceleration, the Agent  shall)  declare all  Indebtedness  of the  Borrower to
the Revolving Credit Lenders to be immediately due and payable and may  exercise
all of the Agent's Rights and Remedies as the Agent from time to time thereafter
determines as  appropriate,  including  those rights and remedies set forth in
this Article 11:.

          112 -RIGHTS OF ENFORCEMENT.  The Agent shall have all of the rights
and remedies of a secured  party upon  default  under the UCC, in addition to
which the Agent shall have all and each of the following rights and remedies:
                    (a) To give notice to any bank at which  any DDA or  Blocked
Account  is  maintained  and in which Proceeds of Collateral are deposited, to
turn over such Proceeds directly to the Agent.
                    (b) To give  notice to any  customs  broker of any of the
Borrowers  to follow the  instructions  of the Agent as provided in any written
agreement  or undertaking of such broker in favor of the Agent.
                    (c) To collect the Receivables Collateral with or without
the taking of possession  of any of the  Collateral.
                    (d) To take  possession  of all or any portion of the
Collateral.
                    (e) To sell, lease,  or  otherwise  dispose  of any or all
of the  Collateral,  in its  then condition  or  following  such  preparation or
processing  as the Agent  deems advisable and with or without the taking of
possession of any of the Collateral.
                    (f) To conduct one or more going out of business sales which
include the sale or other disposition of the Collateral.
                    (g) To apply the Receivables Collateral or the  Proceeds  of
the  Collateral  towards  (but  not  necessarily  in  complete satisfaction  of)
the  Liabilities.
                    (h) To  exercise all or any of the rights, remedies, powers,
privileges,  and  discretions  under  all or any of the Loan Documents.

          113 -SALE OF  COLLATERAL.
                    (a) Any sale or other  disposition of the Collateral  may be
at public or private  sale upon such terms and in such manner as the Agent deems
advisable,  having due regard to compliance with any statute or regulation which
might affect,  limit, or apply to the Agent's disposition of the  Collateral.
                    (b) The  Agent, in the  exercise of the  Agent's  rights and
remedies upon default,  may conduct one or more going out of business  sales, in
the Agent's own right or by one or more agents and contractors. Such sale(s) may
be conducted upon any premises owned,  leased, or occupied by any Borrower.  The
Agent and any such agent or contractor,  in conjunction  with any such sale, may
augment the  Inventory  with other goods (all of which other goods shall  remain
the sole  property  of the  Agent  or such  agent or  contractor).  Any  amounts
realized  from the sale of such  goods  which  constitute  augmentations  to the
Inventory (net of an allocable share of the costs and expenses incurred in their
disposition) shall be the sole property of the Agent or such agent or contractor
and  neither  any  Borrower  nor any  Person  claiming  under or in right of any
Borrower  shall  have  any  interest  therein.
                    (c)  Unless  the  Collateral  is perishable  or  threatens
to  decline  speedily  in  value,  or  is  of a  type customarily sold on a
recognized market (in which event the Agent shall provide the Lead Borrower such
notice as may be  practicable  under the  circumstances), the Agent  shall give
the Lead  Borrower  at least ten (10) days  prior  written notice of the date,
time, and place of any proposed public sale, and of the date after which any
private sale or other disposition of the Collateral may be made. Each Borrower
agrees that such written notice shall satisfy all requirements for notice to
that Borrower which are imposed under the UCC or other  applicable law with
respect to the exercise of the Agent's  rights and remedies  upon  default.
                    (d) The Agent and any Revolving  Credit Lender may purchase
the Collateral, or any  portion  of it at any  sale  held  under  this  Article.
                    (e) If any of the Collateral is sold, leased, or otherwise
disposed of by the Agent on credit, the Liabilities  shall not be deemed to have
been reduced as a result thereof unless and until payment is finally  received
thereon by the Agent.
                    (f) The Agent shall apply the  proceeds of the  Agent's
exercise of its rights and  remedies  upon default  pursuant to this Article 11:
in accordance  with  Sections  13:13-6 and 13:13-7.

          114 -OCCUPATION OF BUSINESS LOCATION. In connection with the Agent's
exercise of the Agent's rights under this Article 11:, the Agent may enter upon,
occupy, and use any  premises  owned or occupied  by each  Borrower,  and may
exclude  each Borrower from such premises or portion thereof as may have been so
entered upon, occupied, or used by the Agent. The Agent shall not be required to
remove any of the  Collateral from any such  premises  upon the  Agent's  taking
possession thereof,  and may render any Collateral  unusable to the Borrowers.
In no event shall the Agent be liable to any  Borrower  for use or occupancy by
the Agent of any premises pursuant to this Article 11:, nor for any charge (such
as wages for any Borrower's employees and utilities) incurred in connection with
the Agent's exercise of the Agent's Rights and Remedies.

          115 -GRANT OF NONEXCLUSIVE  LICENSE.  Each Borrower hereby grants to
the Agent a royalty  free  nonexclusive  irrevocable  license to use,  apply,
and affix any trademark,  trade name, logo, or the like in which any Borrower
now or hereafter has rights,  such  license  being with  respect to the  Agent's
exercise of the rights hereunder including, without limitation,   in  connection
with  any completion  of the  manufacture  of  Inventory or sale or other
disposition  of Inventory.

          116 -ASSEMBLY OF COLLATERAL.  The Agent may require any Borrower to
assemble the Collateral  and make it available to the Agent at the  Borrowers'
sole risk and expense at a place or places which are  reasonably  convenient to
both the Agent and the Lead Borrower.

          117 -RIGHTS  AND  REMEDIES.  The rights, remedies, powers, privileges,
and discretions of the Agent hereunder (herein, the Agent's Rights and
Remedies") shall be cumulative and not exclusive of any rights or remedies which
it would otherwise have. No delay or omission by the Agent in exercising or
enforcing any of the Agent's  Rights and Remedies  shall operate as, or
constitute,  a waiver thereof.  o waiver by the Agent of any Event of Default or
of any default under any other agreement shall operate as a waiver of any other
default  hereunder or under any other  agreement.  No single or partial exercise
of any of the Agent's Rights or  Remedies,  and no express  or implied agreement
or  transaction  of whatever  nature  entered  into  between the Agent and any
person, at any time, shall preclude the other or further exercise of the Agent's
Rights and Remedies. No waiver by the Agent of any of the  Agent's  Rights  and
Remedies  on any one occasion  shall be deemed a waiver on any subsequent
occasion,  nor shall it be deemed a continuing  waiver. The Agent's Rights and
Remedies may be exercised at such time or times and in such order of preference
as the Agent may  determine. The Agent's Rights and Remedies may be exercised
without resort or regard to any other source of satisfaction of the Liabilities.


<PAGE>


Article 12: - REVOLVING CREDIT FUNDINGS AND DISTRIBUTIONS:

          121 -REVOLVING CREDIT FUNDING PROCEDURES.  Subject to Section 12:12-2:
                    (a) The Agent shall advise each Revolving Credit Lender, no
later than 2:00PM on a date on which any Revolving Credit Loan (other than a
SwingLine Loan) is to be made on that  date.  Such  advice,  in each  instance,
may be by  telephone  or facsimile  transmission,  provided that if such advice
is by telephone, it shall be confirmed in writing.  Advice of a Revolving Credit
Loan shall  include the amount of and interest rate applicable to the subject
Revolving Credit Loan.
                    (b) Subject to that Revolving Credit Lender's  Revolving
Credit Dollar Commitment, each Revolving Credit Lender, by no later than the end
of business on the day on which the subject Revolving Credit Loan is to be made,
shall  Transfer  that Revolving Credit Lender's Revolving Credit Percentage
Commitment of the subject Revolving Credit Loan to the Agent.

          122 -SWINGLINE LOANS.
                    (a) In the event that, when a Revolving Credit Loan is
requested,  the aggregate unpaid  balance of the SwingLine Loan is less than the
SwingLine  Loan Ceiling, then the SwingLine Lender may advise the Agent that the
SwingLine  Lender has determined to include up to the amount of the requested
Revolving Credit Loan as part of the SwingLine Loan. In such event,  the
SwingLine  Lender shall Transfer the amount  of the  requested  Revolving Credit
Loan  to the  Agent.
                    (b) The SwingLine  Loan  shall be converted  to a  Revolving
Credit  Loan in which all Revolving Credit Lenders participate as follows:
                              (ii) At any time and from time to time, the
          SwingLine Lender may advise the Agent that all, or any part of the
          SwingLine  Loan is to be converted  to a Revolving  Credit Loan in
          which all Revolving Credit Lenders participate.
                              (iii) At the  initiation  of a  Liquidation,  the
          then entire  unpaid  principal balance of the SwingLine  Loan shall be
          converted to a Revolving  Credit Loan in which all Revolving Credit
          Lenders participate. In either such event, the Agent shall advise each
          Revolving Credit Lender of such conversion as if, and with the same
          effect as if such conversion were the making of a Revolving  Credit
          Loan as provided in Section 12:12-1.
                    (a) The SwingLine Lender, in separate  capacities, may also
be the Agent and a Revolving Credit Lender.
                    (b) The SwingLine Lender, in its capacity as SwingLine
Lender, is not a "Revolving Credit Lender" for any of the following purposes:
                              (iv) Except as otherwise specifically provided in
          the relevant Section, any distribution pursuant to Section 13:13-6.
                              (v) Determination  of whether the requisite Loan
          Commitments have Consented to action requiring such Consent.

          123 -AGENT'S COVERING OF FUNDINGS:
                    (a) Each Revolving Credit Lender shall make available to the
Agent, as provided herein, that Revolving Credit Lender's Revolving Credit
Percentage Commitment of the following:
                              (ii) Each Revolving Credit Loan, up to the maximum
          amount of that Revolving Credit Lender's Revolving Credit Dollar
          Commitment of the Revolving Credit Loans.
                              (iii) Up to the  maximum  amount of that Revolving
          Credit  Lender's  Revolving Credit  Dollar  Commitment  of each L/C
          Drawing  (to the  extent  that such L/C Drawing is not "covered" by a
          Revolving Credit Loan as provided herein).
                    (a) In all circumstances, the Agent may:
                              (iv) Assume that each Revolving Credit Lender,
          subject to Section 12:12-3(a), timely shall make available to the
          Agent that Revolving Credit Lender's  Revolving  Credit  Percentage
          Commitment of each Revolving  Credit Loan, notice of which is provided
          pursuant to Section 12:12-1.
                              (v) In reliance upon such assumption, make
          available the corresponding amount to the Borrowers.
                              (vi) Assume that each Revolving  Credit Lender
          timely shall pay, and shall make  available,  to the Agent all other
          amounts which that  Revolving Credit  Lender is obligated to so pay
          and/or make  available  hereunder or under any of the Loan  Documents.
                    (a) In the event that, in reliance upon any of such
assumptions,  the Agent makes available,  a Revolving Credit Lender's  Revolving
Credit Percentage Commitment of one or more Revolving Credit Loans, or any other
amount to be made available hereunder or under any of the Loan Documents,  which
amount a Revolving Credit Lender (a "Delinquent  Revolving Credit Lender") fails
to provide to the Agent within One (1)  Business  Day of written  notice of such
failure, then: (vii) The amount which had been made available by the Agent is an
" Agent's Cover" (and is so referred to herein).
                              (viii) All interest  paid by the  Borrowers on
          account of the  Revolving  Credit Loan or coverage of the subject L/C
          Drawing  which  consist of the Agent's Cover shall be retained by the
          Agent until the Agent's Cover, with interest,  has been paid.
                              (ix) The Delinquent Revolving  Credit Lender shall
          pay to the Agent,  on demand,  interest at a rate equal to the
          prevailing  federal  funds rate on any Agent's  Cover in respect of
          that  Delinquent  Revolving  Credit  Lender
                              (x) The Agent shall have succeeded  to all  rights
          to payment to which the  Delinquent Revolving Credit Lender otherwise
          would have been entitled  hereunder in respect of those  amounts  paid
          by or in  respect  of the  Borrowers  on  account of the Agent's Cover
          together with interest until it is repaid.  Such payments shall be
          deemed made first  towards the amounts in respect of which the Agent's
          Cover was provided and only then towards amounts in which the
          Delinquent  Revolving Credit Lender is then participating.  For
          purposes of distributions to be made pursuant to Section  12:12-4(a)
          (which relates to ordinary course  distributions)  or Section  13:13-6
          (which relates to  distributions  of proceeds of a Liquidation) below,
          amounts shall be deemed distributable to a Delinquent Revolving Credit
          Lender (and consequently,  to the Agent to the extent to which the
          Agent is then entitled) at the highest  level of  distribution  (if
          applicable)  at which the Delinquent  Revolving  Credit  Lender would
          otherwise  have been  entitled to a distribution.
                              (xi) Subject  to  Subsection  12:12-3(c)(iv),  the
          Delinquent Revolving  Credit  Lender shall be entitled to receive  any
          payments from the Borrowers to which the  Delinquent  Revolving Credit
          Lender is then  entitled, provided  however  there shall be deducted
          from such amount and retained by the Agent any  interest  to which the
          Agent is then  entitled  on account of Section 12:12-3(c)(ii),  above.
                    (a) A Delinquent  Revolving  Credit Lender shall not be
relieved of any obligation of such Delinquent  Revolving Credit Lender hereunder
(all and each of which shall  constitute  continuing  obligations on the part of
any Delinquent  Revolving  Credit  Lender).
                    (b) A Delinquent Revolving Credit Lender may cure its status
as a Delinquent Revolving Credit Lender by paying the Agent the aggregate of the
following:
                              (xii) The Agent's Cover (to the extent not
previously repaid by the Borrowers and retained by the Agent in accordance with
Subsection 12:12-3(c)(iv),  above) with respect to that Delinquent Revolving
Credit Lender.
                           Plus

                              (xiii) The aggregate of the amount payable under
          Subsection  12:12-3(c)(iii), above  (which  relates  to  interest  to
          be paid by that Delinquent Revolving Credit Lender).

                           Plus

                              (xiv) All such  costs and  expenses  as may be
          incurred by the Agent in the enforcement of the Agent's rights against
          such  Delinquent  Revolving Credit Lender.

          124 -ORDINARY  COURSE  DISTRIBUTIONS.  (This Section  12:12-4 applies
unless the provisions of Section 13:13-6 (which relates to  distributions in the
event of a Liquidation) becomes operative).
                    (a) Weekly, on such day as may be set from time to time by
the Agent (or more  frequently  at the Agent's  option) the Agent and each
Revolving  Credit  Lender  shall settle up on amounts  advanced  under the
Revolving Credit and collected funds received in the Concentration  Account.
                    (b) The Agent shall  distribute to the SwingLine Lender and
to each Revolving Credit Lender,  such Person's  respective  Pro-Rata  share of
interest  payments on the Revolving  Credit  Loans  when actually  received  and
collected  by the Agent(excluding the one Business Day for settlement provided
for in Section 7:7-3(a), which shall be for the account of the Agent only).
For purposes of  calculating interest due to a Revolving Credit Lender, that
Revolving Credit Lender shall be entitled to receive interest on the actual
amount  contributed by that Revolving Credit  Lender  towards the  principal
balance of the Revolving  Credit  Loans outstanding during the applicable period
covered by the interest payment made by the  Borrowers.  Any net  principal
reductions  to the  Revolving  Credit Loans received by the Agent in accordance
with the Loan Documents  during such period shall not reduce such actual amount
so contributed,  for purposes of calculation of interest due to that Revolving
Credit Lender, until the Agent has distributed to that Revolving Credit Lender
its pro-rata share thereof.
                    (c) The Agent shall distribute  fees paid on account  of the
Revolving  Credit,  as  follows:
                              (ii) Revolving Credit  Commitment Fee: As provided
          by separate  agreement between the Agent and each respective Revolving
          Credit Lender.
                              (iii) Agent's Fee: Retained by and for the account
          of the Agent.
                              (iv) Fees described in Section 2:2-21(b) (which
          relates to fees associated with, among other  things, the  issuance of
          L/C's):  Retained by the Issuer.
                              (v) All other fees: To the Revolving Credit
          Lenders, based on their respective Revolving Credit Percentage
          Commitments, except that no Revolving Credit Lender shall have any
          interest in, or right to receive any part of any  interest  which
          reflects "float" as described in the proviso included in Section
          7:7-3(a). Any such float shall be for the account of the Agent only.
                    (a) No Revolving Credit Lender shall have any  interest  in,
or right to receive any part of, the  Agent's Fee to be paid by the Borrowers to
the Agent  pursuant to this  Agreement.
                    (b) Any amount received by the  Agent as  reimbursement  for
any cost or expense (including without limitation, attorneys'  reasonable  fees)
shall be  distributed by the Agent to that Person which is entitled to such
reimbursement as provided in this Agreement (and if such Person(s) is (are) the
Revolving Credit Lenders, pro-rata based upon their respective Revolving Credit
Commitment Percentages at the date on which the expense,  in respect of which
such reimbursement is being made, was incurred).
                    (c) Each distribution pursuant to this Section 12:12-4 is
subject to Section 12:12-3(c), above.


<PAGE>


Article 13: - ACCELERATION AND LIQUIDATION:

          131 -ACCELERATION NOTICES
                    (a) The Agent may give the Revolving  Credit Lenders an
Acceleration Notice at any time following the occurrence of an Event of Default.
                    (b) The SuperMajority Lenders  may give the Agent an
Acceleration  Notice at any time  following  the occurrence of an Event of
Default. Such notice may be by multiple counterparts, provided that counterparts
executed by the requisite  Revolving Credit Lenders are received by the Agent
within a period of five (5) consecutive Business Days.

          132 -ACCELERATION  Unless  stayed by judicial or statutory  process,
the Agent shall Accelerate  the  Revolving  Credit   Obligations  within  a
commercially reasonable time following:
                    (a) The Agent's giving of an Acceleration  Notice to the
Revolving Credit Lenders as provided in Section 13:13-1(a).
                    (b) The Agent's receipt of an Acceleration Notice from the
SuperMajority  Lenders, in compliance with Section 13:13-1(b) .

          133 -INITIATION OF LIQUIDATION Unless stayed by judicial or statutory
process, a Liquidation  shall be initiated by the Agent  within a  commercially
reasonable time following Acceleration of the Revolving Credit Obligations.

          134 -ACTIONS AT AND FOLLOWING INITIATION OF LIQUIDATION (a) At the
initiation of a Liquidation:
                              (ii) The unpaid principal balance of the SwingLine
          Loan (if any) shall be converted,  pursuant to Section 12:12-2(b)(ii),
          to a Revolving Credit Loan in which all Revolving Credit Lenders
          participate.
                              (iii) The Agent and the Revolving  Credit Lenders
          shall "net out" each Revolving Credit Lender's respective
          contributions towards the Revolving Credit Loans, so that each
          Revolving Credit Lender holds that Revolving Credit Lender's Revolving
          Credit  Percentage  Commitment of the Revolving  Credit Loans and
          advances.
                    (a) Following the  initiation of a Liquidation,  each
Revolving Credit Lender shall contribute, towards any L/C thereafter honored and
not immediately reimbursed by the Borrowers,  that  Revolving  Credit  Lender's
Revolving  Credit  Percentage Commitment of such honoring.

          135 -AGENT'S CONDUCT OF LIQUIDATION
                    (a) Any  Liquidation  shall be  conducted  by the  Agent,
with the  advice  and assistance of the Revolving  Credit Lenders.
                    (b) The Agent may establish one or more Nominees to "bid in"
or otherwise acquire ownership to any Post Foreclosure Asset.
                    (c) The Agent shall manage the Nominee and manage and
dispose of any Post Foreclosure  Assets with a view towards the realization of
the economic benefits of the ownership of the Post  Foreclosure  Assets and in
such regard, the Agent and/or the Nominee may operate, repair, manage, maintain,
develop, and dispose of any  Post  Foreclosure  Asset  in such  manner  as the
Agent  determines  as appropriate under the  circumstances.
                    (d) The Agent may decline to undertake or to continue taking
a course of action or to  execute an action  plan (whether proposed by the Agent
or any Revolving Credit Lender) unless  indemnified to the Agent's  satisfaction
by the  Revolving  Credit  Lenders  against  any  and all liability  and expense
which may be incurred by the Agent by reason of taking or continuing  to take
that course of action or action plan,  except for any action taken or omitted to
be taken as to which a final judicial determination has been or is made (in a
proceeding  in which the Agent  has had an  opportunity  to be heard)  that the
Agent had acted in a grossly  negligent  manner,  in actual bad faith, or in
willful misconduct.
                    (e) Each Revolving Credit Lender shall execute all such
instruments and documents not inconsistent with the provisions of this Agreement
as the Agent and/or the Nominee reasonably may request with respect to the
creation and governance of any Nominee, the conduct of the Liquidation, and the
management and disposition of any Post Foreclosure Asset.

          136 -DISTRIBUTION OF LIQUIDATION PROCEEDS:
                    (a) The Agent may establish one or more reasonably  funded
reserve accounts into which proceeds of the  conduct of any Liquidation  may  be
deposited  in anticipation  of future  expenses  which  may be  incurred  by the
Agent in the exercise of rights as a secured creditor of the Borrowers and prior
claims which the Agent  anticipates  may need to be paid.
                    (b) The Agent shall distribute the net proceeds of
Liquidation in accordance with the relative priorities set forth in Section
13:13-7.
                    (c) Each Revolving Credit Lender, on the written request of
the Agent and/or any Nominee,  not more frequently  than once each month,  shall
reimburse  the Agent  and/or  any  Nominee,  Pro-Rata,  for any cost or  expense
reasonably  incurred  by the  Agent  and/or  the  Nominee  in the  conduct  of a
Liquidation,  which  amount  is not  covered  out  of  current  proceeds  of the
Liquidation,  which  reimbursement  shall be paid over to and distributed by the
Agent.

          137 -RELATIVE  PRIORITIES TO PROCEEDS OF LIQUIDATION The relative
priorities to the proceeds of a Liquidation are as follows:
                    (a) To the Agent as reimbursement for all reasonable  third
party costs and expenses  incurred by the Agent and to Lenders' Special  Counsel
and to any funded  reserve established  pursuant to Section 13:13-6(a); and then
                    (b) To the  SwingLine  Lender,  on account of any SwingLine
loans not  converted  to Revolving  Credit Loans  pursuant to Section
13:13-4(a)(i);  and then
                    (c) To the  Revolving  Credit  Lenders  (other than any
Delinquent Revolving Credit Lender),  pro-rata,  to the unpaid principal balance
of the Revolving  Credit;  and then
                    (d) To the Revolving  Credit  Lenders (other than any
Delinquent Revolving Credit Lender),  pro-rata,  to accrued interest on the
Revolving  Credit;  and then
                    (e) To the Revolving Credit Lenders (other than any
Delinquent Revolving Credit Lender),  pro-rata,  to those fees distributable
hereunder  to the  Revolving  Credit  Lenders;  and then
                    (f) To any  Delinquent Revolving  Credit  Lenders,  pro-rata
to amounts to which such Revolving  Credit Lenders  otherwise  would have been
entitled  pursuant to Sections  13:13-7(c), 13:13-7(d), 13:13-7(e) ; and then
                    (g) To the Revolving Credit Lenders, pro-rata, to the extent
of the Revolving Credit Early Termination Fee; and then
                    (h) To any other Liabilities.


<PAGE>


Article 14: - THE AGENT:

          141 -APPOINTMENT OF THE AGENT
                    (a) Each Lender appoints and designates Fleet Retail Finance
Inc. as the "Agent" hereunder and under the Loan Documents.
                    (b) Each Revolving Credit Lender authorizes the Agent:
                              (ii) To  execute those of the Loan  Documents  and
          all other  instruments relating thereto to which the Agent is a party.
                              (iii) To take  such  action on behalf of the
          Revolving  Credit  Lenders  and to exercise all such powers as are
          expressly  delegated to the Agent  hereunder and in the Loan Documents
          and all related documents, together with such other powers as are
          reasonably incident thereto.
                    (a) The CIT Group/ Business Credit, Inc. has been granted
the title of "Documentation Agent", in which capacity, it shall not have any
rights nor any  responsibilities.  It may resign such position,  at any time, on
written notice to the Agent; and shall cease to be Documentation  Agent
contemporaneous  with its ceasing to be a Revolving Credit Lender.
                    (b) Foothill Capital Corporation has been granted the title
of "Syndication  Agent", in which capacity, it shall not have any rights nor any
responsibilities.  It may resign such position,  at any time, on written notice
to the Agent;  and shall cease to be Syndication Agent  contemporaneous with its
ceasing to be a Revolving Credit Lender.

          142 -RESPONSIBILITIES OF AGENT
                    (a) The Agent shall not have any duties or responsibilities
to, or any fiduciary relationship  with, any Revolving  Credit Lender except for
those  expressly set forth in this Agreement.
                    (b) Neither the Agent nor any of its Affiliates  shall be
responsible to any Revolving Credit Lender for any of the following:
                              (ii) Any recitals, statements,  representations or
          warranties made by any Borrower or any other Person.
                              (iii) Any  appraisals or other assessments  of the
          assets of any Borrower or of  any other Person responsible for  or  on
          account  of  the Liabilities.
                              (iv) The   value,   validity,    effectiveness,
          genuineness, enforceability, or sufficiency of the Loan Agreement, the
          Loan Documents or any other  document  referred to or  provided  for
          therein.
                              (v) Any failure by any Borrower or any other
          Person (other than the Agent) to perform its obligations under the
          Loan Documents.
                    (a) The Agent may employ attorneys, accountants, and other
professionals  and  agents  and   attorneys-in-fact   and  shall  not  be
responsible for the negligence or misconduct of any such attorneys, accountants,
and other  professionals  or agents or  attorneys-in-fact  selected by the Agent
with reasonable care. No such attorney,  accountant, other professional,  agent,
or  attorney-in-fact  shall be responsible for any action taken or omitted to be
taken by any other such Person.
                    (b) Neither the Agent, nor any of its directors, officers,
or employees shall be responsible for any action taken or omitted to be taken or
omitted to be taken by any other of them in  connection  herewith in reliance
upon  advice of its counsel  nor,  in any other  event  except for any action
taken or omitted to be taken as to which a final  judicial  determination has
been or is made (in a proceeding in which such Person has had an opportunity to
be heard) that such Person had acted in a grossly negligent manner, in actual
bad  faith,  or in  willful  misconduct.
                    (c) The  Agent  shall  not  have  any responsibility  in any
event for more funds than the Agent actually receives and collects.
                    (d) The Agent, in its separate capacity as a Revolving
Credit Lender, shall have the same rights and powers  hereunder as any other
Revolving  Credit Lender.

          143 -CONCERNING DISTRIBUTIONS BY THE AGENT
                    (a) The  Agent in the  Agent's reasonable  discretion  based
upon the  Agent's determination  of the  likelihood  that  additional  payments
will be received, expenses  incurred,  and/or  claims made by third parties to
all or a portion of such proceeds,  may delay the distribution of any payment
received on account of the Liabilities.
                    (b) The Agent may disburse funds prior to determining that
the sums which the Agent  expects to receive have been  finally and
unconditionally paid to the Agent.  If and to the extent that the Agent does
disburse  funds and it later  becomes  apparent  that the Agent did not then
receive a payment in an amount equal to the sum paid out, then any  Revolving
Credit Lender to whom the Agent made the funds  available,  on demand from the
Agent,  shall refund to the Agent the sum paid to that  person.
                    (c) If, in the  reasonable  opinion  of the Agent,  the
distribution  of any amount received by the Agent might involve the Agent in
liability, or might be prohibited hereby, or might be questioned by any Person,
then the Agent may refrain from making  distribution  until the Agent's right to
make distribution  has been adjudicated  by a court  of  competent jurisdiction.
                    (d) The proceeds of any Revolving Credit Lender's exercise
of any right of, or in the nature of,  set-off  shall be deemed,  First,  to the
extent that a Revolving  Credit Lender is entitled to any  distribution
hereunder,  to constitute  such  distribution  and  Second,  shall be  shared
with  the  other Revolving  Credit Lenders as if distributed  pursuant to (and
shall be deemed as distributions   under)  Section  13:13-7.
                    (e)  Each  Revolving  Credit  Lender recognizes  that the
crediting  of the  Borrowers  with the  "proceeds"  of any transaction in  which
a Post  Foreclosure Asset  is  acquired  is a  non-cash transaction and that, in
consequence, no distribution of such "proceeds" will be made by the Agent to any
Revolving  Credit  Lender.
                    (f) In the event that (x) a court of competent  jurisdiction
shall  adjudge  that any amount  received and distributed  by the Agent is to be
repaid or disgorged or (y) the  SuperMajority Lenders determine to effect such
repayment or disgorgement,  then each Revolving Credit Lender to which any such
distribution  shall have been made shall repay, to the Agent which had made such
distribution,  that Revolving  Credit Lender's Pro-Rata  share  of the  amount
so  adjudged  or  determined  to be  repaid  or disgorged.

          144 -DISPUTE  RESOLUTION:  Any dispute among the Revolving Credit
Lenders and/or the Agent concerning the interpretation,  administration,  or
enforcement of the financing  arrangements  contemplated  by this or any other
Loan Document or the interpretation or administration of this or any other Loan
Document which cannot be resolved  amicably shall be resolved in the United
States  District Court for the District of  Massachusetts,  sitting in Boston or
in the  Superior Court of Suffolk  County,  Massachusetts, to  the  jurisdiction
of  which  courts  each Revolving Credit Lender hereto hereby submits.

          145 -DISTRIBUTIONS  OF NOTICES AND OF DOCUMENTS The Agent will forward
to each Revolving Credit Lender,  promptly after the Agent's receipt thereof,  a
copy of each notice or other document furnished to the Agent pursuant to this
Agreement, including monthly,  quarterly, and annual financial statements
received from the Lead Borrower  pursuant to Article 5: of this  Agreement,
other than any of the following:
                    (a) Routine  communications  associated  with requests for
Revolving Credit  Loans  and/or  the  issuance  of  L/C's.
                    (b)  Routine  or  nonmaterial communications.
                    (c) Any notice or document required by any of the Loan
Documents to be furnished to the Revolving Credit Lenders by the Lead  Borrower.
                    (d) Any notice or document of which the Agent has knowledge
that such notice or document had been forwarded to the Revolving Credit Lenders
other than by the Agent.

          146 -CONFIDENTIAL INFORMATION
                    (a) Each Revolving Credit Lender will maintain, as
confidential, all of the following:
                              (ii) Proprietary approaches, techniques, and
          methods of analysis which are applied by the Agent in the
          administration of the credit facility  contemplated by this Agreement.
                              (iii) Proprietary  forms and formats utilized by
          the Agent in providing reports to the Revolving Credit Lenders
          pursuant hereto,  which forms or formats are not of general  currency.
                    (a) Nothing included herein shall prohibit the disclosure
of any such information as may be required to be provided by judicial process or
by regulatory authorities having jurisdiction over any party to this Agreement.

          147 -RELIANCE BY AGENT The Agent shall be entitled to rely upon any
certificate, notice or other document  (including any cable,  telegram,  telex,
or facsimile) reasonably believed by the Agent to be genuine and correct  and to
have been signed or sent by or on behalf of the proper person or persons,  and
upon advice and  statements of  attorneys,  accountants  and other  experts
selected by the Agent. As to any matters not expressly provided for in this
Agreement, any Loan Document, or in any other document referred to therein,  the
Agent shall in all events be fully protected in acting, or in refraining from
acting, in accordance with the applicable Consent required by this Agreement.
Instructions given with the requisite Consent shall be binding on all Revolving
Credit Lenders.

          148 -NON-RELIANCE ON AGENT AND OTHER REVOLVING CREDIT LENDERS
                    (a) Each Revolving Credit Lender represents to all other
Revolving Credit Lenders and to the Agent that such Revolving Credit Lender:
                              (ii) Independently and without reliance on any
          representation or act by Agent or by any other Revolving Credit
          Lender, and based on such documents and information  as that Revolving
          Credit Lender has deemed appropriate, has made such Revolving  Credit
          Lender's own appraisal of the financial condition and affairs of  the
          Borrowers and decision to enter into this Agreement.
                              (iii)  Has  relied  upon  that  Revolving  Credit
          Lender's  review  of the Loan Documents  by that  Revolving  Credit
          Lender and by  counsel to that  Revolving Credit  Lender as that
          Revolving Credit Lender  deemed  appropriate  under the circumstances.
                    (a) Each  Revolving  Credit  Lender  agrees that such
Revolving Credit  Lender,  independently  and  without  reliance  upon  Agent or
any other Revolving Credit Lender, and based upon such documents and information
as such Revolving  Credit Lender shall deem  appropriate  at the time,  will
continue to make such Revolving Credit  Lender's own appraisals of the financial
condition and affairs of the Borrowers when determining whether to take or not
to take any discretionary  action under this  Agreement.
                    (b) The Agent, in the discharge of that Agent's duties
hereunder,  shall not be required to make inquiry of, or to inspect the
properties or books of, any Person.
                    (c) Except for notices, reports, and other  documents and
information  expressly  required to be furnished to the Revolving Credit Lenders
by the Agent  hereunder  (as to which,  see  Section 14:14-5),  the Agent shall
not have any affirmative duty or  responsibility  to provide any Lender with any
credit or other  information  concerning any Person, which  information may come
into the possession of Agent or any Affiliate of the Agent.
                    (d) Each Revolving Credit Lender, at such  Revolving  Credit
Lender's request, shall have reasonable  access to all  nonprivileged  documents
in the possession of the Agent,  which documents  relate to the Agent's
performance of its duties hereunder.

          149 -INDEMNIFICATION Without limiting the liabilities of the Borrowers
under any this or any of the other Loan  Documents,  each  Revolving  Credit
Lender shall indemnify the Agent, Pro-Rata, for any and all liabilities,
obligations, losses, damages, penalties,  actions, judgments, suits, costs,
expenses or disbursements of any kind or  nature  whatsoever  (including
attorneys'  reasonable  fees and expenses and other out-of-pocket  expenditures)
which may at any time be imposed on, incurred by, or asserted  against the Agent
and in any way  relating to or arising out of this  Agreement or any other  Loan
Document  or any  documents contemplated by or referred to therein or the
transactions  contemplated thereby or the  enforcement  of any of terms  hereof
or  thereof  or of any such  other documents, provided, however, no Revolving
Credit Lender shall be liable for any of the foregoing to the extent that any of
the foregoing  arises from any action taken  or  omitted  to be  taken  by the
Agent  as to  which a  final  judicial determination has been or is made (in a
proceeding in which the Agent has had an opportunity to be heard) that the Agent
had acted in a grossly negligent manner, in actual bad faith, or in willful
misconduct.

          1410 -RESIGNATION OF AGENT
                    (a) The Agent may resign at any time by giving 60 days prior
written  notice thereof to the  Revolving  Credit  Lenders. Upon  receipt of any
such notice of resignation,  the  SuperMajority  Lenders  shall  have the  right
to  appoint a successor  to such Agent (and if no Event of Default has  occurred
and is then continuing,  with the  consent  of the  Lead  Borrower,  not to be
unreasonably withheld  and,  in any event,  deemed  given by the Lead  Borrower
if no written objection is provided by the Lead Borrower to the (resigning)
Agent within seven (7) Business Days notice of such  proposed  appointment).
If a successor  Agent shall not have been so appointed  and accepted such
appointment  within 30 days after the giving of notice by the resigning Agent,
then the resigning Agent may appoint a  successor  Agent,  which shall be a
financial  institution  having a combined  capital and  surplus in excess of $1
Billion.  The consent of the Lead Borrower otherwise required by this Section
14:14-10(a) shall not be required if an Event of Default has occurred and is
then continuing.
                    (b) Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor shall thereupon  succeed  to,
and  become  vested  with,  all  the  rights,  powers, privileges, and duties of
the (resigning) Agent so replaced, and the (resigning) Agent shall be discharged
from the  (resigning)  Agent's duties and obligations hereunder,  other than on
account of any  responsibility for any action taken or omitted  to be taken  by
the  (resigning)  Agent  as to  which a final  judicial determination  has been
or is made (in a  proceeding  in which  the  (resigning) Person  has had an
opportunity  to be heard)  that such  Person  had acted in a grossly  negligent
manner  or in bad  faith.
                    (c) After any retiring Agent's resignation,  the  provisions
of this  Agreement and of all other Loan Documents shall  continue in effect for
the  retiring Person's  benefit in respect of any actions taken or omitted to be
taken by it while it was acting as Agent.


<PAGE>


Article 15: - ACTION BY AGENTS - CONSENTS - AMENDMENTS - WAIVERS:

          151 -ADMINISTRATION OF CREDIT FACILITIES
                    (a) Except as otherwise  specifically provided in this
Agreement,  the Agent may take any action with  respect to the credit  facility
contemplated  by the Loan Documents as the Agent  determines to be  appropriate,
provided, however, the Agent is not under any affirmative obligation to take any
action which it is not required by this  Agreement or the Loan Documents
specifically  to so take.
                    (b) Except as  specifically  provided in the following
Sections of this  Agreement, whenever a Loan Document or this Agreement provides
that action may be taken or omitted to be taken in Agent's  discretion,  the
Agent shall have the sole right to take, or refrain from taking, such action
without, and  notwithstanding,  any vote of the Revolving Credit Lenders:

          Actions Described in Section       Type of Consent Required
          ----------------------------       ------------------------
                    15:15-2                  Majority Lenders
                    15:15-3                  SuperMajority Lenders
                    15:15-4                  Certain Consent
                    15:15-5                  Unanimous Consent
                    15:15-6                  Consent of SwingLine Lender
                    15:15-7                  Consent of the Agent

                    (c) The  rights  granted  to the  Revolving  Credit  Lenders
in those  sections referenced in Section 15:15-1(b) shall not otherwise limit or
impair the Agent's exercise of its discretion under the Loan Documents.

          152 - ACTIONS  REQUIRING OR ON DIRECTION OF MAJORITY LENDERS Except as
otherwise provided in this Agreement,  the Consent or direction of the Majority
Lenders is required for any amendment, waiver, or modification of any Loan
Document.

          153 -ACTIONS  REQUIRING OR ON DIRECTION OF SUPERMAJORITY  LENDERS The
Consent or direction of the SuperMajority Lenders is required as follows:
                    (a) The Revolving Credit  Lenders agree that any loan or
advance under the Revolving  Credit which results in a Protective  OverAdvance
may be made by the Agent in its discretion without  the Consent of the Revolving
Credit Lenders and that each Revolving Credit  Lender  shall  be bound  thereby,
provided,  however,  the  Consent  or direction  of the  SuperMajority  Lenders
is  required to permit a  Protective OverAdvance to be outstanding for more than
45 consecutive Business Days or more than twice in any twelve month  period.
                    (b) If any Borrower is then  InDefault, the  SuperMajority
Lenders may direct the Agent to suspend the Revolving Credit (including the
making of any Protective  OverAdvances),  whereupon, as long as a Borrower is
InDefault,  the only  Revolving  Credit Loans which may be made are either
                              (ii) Revolving Credit Loans made or undertaken in
          the Agent's  discretion to protect and preserve the interests of the
          Revolving Credit Lenders; or
                              (iii) Revolving Credit Loans made with Consent of
          the SuperMajority Lenders.
                    (a) If an  Event  of  Default  has  occurred  and  not  been
duly  waived,  the SuperMajority  Lenders  may:
                              (iv)  Give the  Agent an  Acceleration  Notice  in
          accordance with Section 13:13-1(b).
                              (v) Direct the Agent to increase the rate of
          interest  to the default  rate of  interest  as  provided  in, and to
          the extent permitted by, this Agreement.

          154 - ACTION  REQUIRING  CERTAIN CONSENT The consent of the SwingLine
Lender and Revolving  Credit  Lenders  (other than  Delinquent  Revolving Credit
Lenders) holding 66-2/3%% or more of the Loan Commitments of the Revolving
Credit Lenders (other than any Loan  Commitments  held by Delinquent  Revolving
Credit Lenders) shall be required to increase the SwingLine Loan Ceiling.

          155 -ACTIONS  REQUIRING OR DIRECTED BY UNANIMOUS  CONSENT None of the
following may take place except with Unanimous Consent:
                    (a) Any increase in any Revolving Credit  Lender's Revolving
Credit  Dollar   Commitment  or  Revolving  Credit Percentage  Commitment (other
than by reason  of the  application  of  Section 15:15-10 (which deals with
NonConsenting  Revolving  Credit Lenders) or Section 16:16-1 (which deals with
assignments and participations)).
                    (b) Any decrease in any interest rate or fee payable to the
Revolving  Credit  Lenders on account of the Revolving  Credit Loans.
                    (c) Any  extension of the Maturity  Date.
                    (d) Any forgiveness  of all or  any  portion of any  payment
Liability  consisting  of principal  or  interest  under  the  Revolving  Credit
or  any  fee  which  is distributable to the Revolving Credit Lenders.
                    (e) Any decrease in any interest rate or fee payable under
any of the Loan Documents  (other than any Agent's Fee (for which the  consent
of the Agent  shall  also be required))  and of any fee provided  for by the Fee
Letter  (which  may be amended  by  written  agreement between the Lead Borrower
on the one hand, and the Agent on the other).
                    (f) Any release of a material  portion  of the  Collateral
not  otherwise required or provided for in the Loan  Documents or to  facilitate
a  Liquidation.
                    (g) Any amendment or waiver of the financial  performance
covenants set forth on EXHIBIT 5:5-11(a).
                    (h) Any amendment of the definition of the terms "Borrowing
Base" or "Availability"  or of any  Definition of any component  thereof,  such
that more credit would be available to the Borrowers,  based on the same assets,
as would have been  available to the Borrowers  immediately  prior to such
amendment , it being  understood,  however,  that:
                              (ii) The foregoing  shall not limit the adjustment
          by the Agent of any Reserve in the Agent's administration of the
          Revolving Credit as otherwise permitted by this Agreement.
                              (iii) The foregoing  shall not prevent the Agent,
          in its  administration  of the Revolving Credit,  from restoring any
          component of Borrowing Base which had been lowered  by the  Agent back
          to the value of such  component,  as stated in this Agreement or to an
          intermediate  value.
                    (a) Any release of any Person obligated on  account of the
Liabilities.
                    (b) The making of any  Revolving  Credit  Loan which,  when
made,  would be an OverLoan  and is not a  Protective  OverAdvance, provided,
however,
                              (iv) no Consent  shall be required in  connection
          with the making of any Revolving Credit Loan to "cover" any  honoring
          of a drawing under any L/C; and
                              (v) each Lender  recognizes that subsequent to the
          making of a Revolving  Credit Loan which does not constitute a
          Protective  OverAdvance,  the unpaid  principal balance  of the Loan
          Account may exceed Borrowing  Base on account of changed circumstances
          beyond the control of the Agent  (such as a drop in collateral value).
                    (a) The waiver of the  obligation of the Borrowers to reduce
the unpaid principal  balance of loans under the  Revolving  Credit to an amount
so that no OverLoan is outstanding (other than a Protective OverAdvance) or,
subject to the time limits included in Section  15:15-3(a) (which relates to
time and frequency limits on Protective OverAdvances),  to eliminate an
Protective OverAdvance.
                    (b) Any  amendment  of this  Article  15:.
                    (c) Amendment of any of the following Definitions:
                                    "Appraised Inventory Liquidation Value"
                                    "Appraised Inventory Percentage"
                                    "Majority Lender"
                                    "Protective OverAdvance"
                                    "SuperMajority Lenders
                                    "Unanimous Consent"

          156 -ACTIONS REQUIRING SWINGLINE LENDER CONSENT No action,  amendment,
or waiver of compliance  with,  any provision of the Loan  Documents or of this
Agreement which affects the SwingLine Lender may be undertaken  without the
Consent of the SwingLine Lender.

          157 -ACTIONS REQUIRING AGENT'S CONSENT
                    (a) No action, amendment, or waiver of compliance  with, any
provision of the Loan Documents or of this  Agreement which affects the Agent in
its capacity as Agent may be undertaken without the written consent of the Agent
                    (b) No action referenced herein which affects the rights,
duties,  obligations, or liabilities of the Agent shall be effective without the
written consent of the Agent.

          158 -MISCELLANEOUS ACTIONS
                    (a) Notwithstanding  any other provision of this Agreement,
no single Revolving Credit  Lender  independently  may exercise  any right of
action or  enforcement against or with respect to any Borrower.
                    (b) The Agent shall be fully justified in failing or
refusing to take action under this  Agreement or any Loan Document on behalf of
any  Revolving  Credit  Lender  unless the Agent  shall  first
                              (ii) receive  such  clear,  unambiguous,  written
          instructions  as the  Agent  deems appropriate;  and
                              (iii) be indemnified to the  Agent's  satisfaction
          by the Revolving  Credit Lenders against any and all liability and
          expense which may be incurred by the Agent by reason of taking or
          continuing to take any such action, unless such action had been
          grossly negligent, in willful misconduct,  or in bad faith.
                    (a) The Agent may establish  reasonable  procedures for the
providing of direction  and  instructions  from the  Revolving  Credit  Lenders
to the Agent, including its reliance on multiple counterparts,  facsimile
transmissions,  and time limits  within which such  direction and  instructions
must be received in order  to  be  included  in  a  determination  of  whether
the  requisite  Loan Commitments has provided its direction, Consent, or
instructions,  provided that in no event shall the Agent shorten the time period
for Consent.

          159 -ACTIONS REQUIRING LEAD BORROWER'S CONSENT
                    (a) Subject to Section  15:15-9(b) the  provisions of this
Agreement which are included in the following  Articles  may be amended  without
the consent of any Borrower,  but only if the subject amendment relates to the
relationships of the Revolving  Credit  Lenders  and the  Agent  inter  se and
neither  creates  any additional  nor augments any existing  obligation on any
Borrower under any Loan Document  nor  relieves  the  Agent  or any  Revolving
Credit  Lender  from any commitment or undertaking to any Borrower.
        Article     Title of Article
        -------     ----------------
          12:       Revolving Credit Fundings and Distributions
          13:       Acceleration and Liquidation
          14:       The Agent
          15:       Action By Agents - Consents - Amendments - Waivers (other
                    than as provided in Section 15:15-9(b))
          16:       Assignments and Participations

                    (b) Subject to Section  15:15-9(c), the following provisions
of this Agreement may not be amended without the consent of the Lead Borrower:
        Section     Relates To
        -------     ----------
        15:15-3     SuperMajority Lenders
        15:15-5     Unanimous Consent
        15:15-9     Actions Requiring Borrower's Consent

                    (c) The Lead Borrower's consent to the amendment of those
provisions  referenced in Section  15:15-9(b)  shall be deemed given unless
written  objection is made, within  Seven (7)  Business  Days  following  the
Agent's  giving  notice to the Borrower of the proposed amendment thereof,
provided that the Agent may rely on such passage of time as consent by the Lead
Borrower only if such written notice states that consent will be deemed
effective if no objection is received within such time period.

          1510 -NONCONSENTING REVOLVING CREDIT LENDER
                    (a) In the event that a Revolving  Credit  Lender (in this
Section 15:15-10, a "NonConsenting  Revolving Credit  Lender") does not  provide
its Consent to a proposal by the Agent to take action which  requires  consent
under this Article 15:, then one or more  Revolving Credit  Lenders who provided
Consent to such action may require the assignment,  without  recourse and in
accordance with the procedures  outlined in Section 16:16-1,  below, of the
NonConsenting  Revolving Credit Lender's commitment  hereunder on fifteen (15)
days written notice to the Agent and to the NonConsenting  Revolving Credit
Lender.
                    (b) At the end of such fifteen (15) days, and provided that
the NonConsenting  Revolving Credit Lender delivers the Revolving  Credit Note
held by the  NonConsenting  Revolving Credit Lender to the Agent,  the Revolving
Credit Lenders who have given such written notice shall  Transfer  the following
to the  NonConsenting  Revolving  Credit Lender:
                              (ii) Such NonConsenting  Revolving Credit Lender's
          Pro-Rata share of the principal and interest of the  Revolving Credit
          Loans to the date of such assignment.
                              (iii) All fees  distributable  hereunder to the
          NonConsenting  Revolving Credit Lender to the date of such assignment.
                              (iv) Any out-of-pocket costs and expenses for
          which the NonConsenting Revolving Credit Lender is entitled to
          reimbursement from the Borrowers.
                    (a) In the event that the  NonConsenting  Revolving  Credit
Lender  fails to  deliver  to the Agent the  Revolving  Credit  Note held by the
NonConsenting Revolving Credit Lender as provided in Section 15:15-10(b),  then:
                              (v) The amount otherwise to be Transferred to the
          NonConsenting Revolving Credit Lender shall be Transferred to the
          Agent and held by the Agent, without interest, to be turned over to
          the  NonConsenting  Revolving  Credit  Lender  upon  delivery of the
          Revolving  Credit  Note  held by that  NonConsenting  Revolving Credit
          Lender.
                              (vi) The Revolving Credit Note held by the
          NonConsenting Revolving Credit Lender shall  have no force or effect
          whatsoever.
                              (vii) The  NonConsenting  Revolving Credit  Lender
          shall cease to be a  "Revolving  Credit  Lender".
                              (viii) The Revolving  Credit  Lender(s) which have
          Transferred the amount to the Agent as described  above shall have
          succeeded to all rights and become subject to all of the  obligations
          of the  NonConsenting  Revolving  Credit  Lender as "Revolving Credit
          Lender".
                    (a) In the event that more than One (1) Revolving Credit
Lender wishes to require such assignment,  the NonConsenting  Revolving Credit
Lender's commitment  hereunder  shall be divided  among such  Revolving  Credit
Lenders, pro-rata based upon their respective  Revolving Credit  Percentage
Commitments, with the Agent coordinating such transaction.
                    (b) The Agent shall coordinate the retirement  of the
Revolving  Credit Note held by the  NonConsenting  Revolving Credit  Lender and
the  issuance of Revolving  Credit  Notes to those  Revolving Credit Lenders
which  "take-out"  such  NonConsenting  Revolving  Credit Lender, provided,
however, no processing fee otherwise to be paid as provided in Section
16:16-2(b) shall be due under such circumstances.

          1511 -REPLACEMENT OF DELINQUENT REVOLVING CREDIT LENDER
                    (a) In the event that a Delinquent  Revolving  Credit Lender
fails to cure its status  as a  Delinquent  Revolving  Credit  Lender  (as to
which,  see  Section 12:12-3(e))  within  Thirty (30) days  following its having
become a Delinquent Revolving Credit Lender, then, subject to, and in accordance
with the procedures outlined and  referred to in this Section  15:15-11,  the
Delinquent  Revolving Credit Lender's commitment hereunder may be assigned
without recourse or consent of the Delinquent  Revolving Credit Lender.
                    (b) Any one or more Revolving Credit Lenders  which are not
Delinquent  Revolving  Credit  Lenders may require  such assignment by written
notice given to the Agent and the Lead  Borrower, at any time during the fifteen
(15) day period which  commences after the expiry of the thirty (30) days
referenced  in Section  15:15-11(a).
                    (c) In the event that no Revolving  Credit Lenders  provide
its written notice prior to the expiry of the fifteen (15) days referenced in
Section 15:15-11(b),  then the Agent may require such assignment to one or more
Eligible Assignees (subject to any consent of the Lead Borrower required by
Section  2:2-25(d)) by giving notice of its nomination of one or more
replacements  for the Delinquent  Revolving Credit Lender at any time during the
then next  following  fifteen  (15) days.
                    (d) In the event that neither any Revolving  Credit Lender
provides its written notice as provided in Section  15:15-11(b)  nor the Agent
nominates a replacement  for the Delinquent Revolving  Credit  Lender to which
the Lead  Borrower  consents,  as provided in Section 15:15-11(c), then the Lead
Borrower, at any time thereafter may nominate a replacement  for the Delinquent
Revolving  Credit Lender by written notice to the Agent,  provided that:
(ii) Such nominee is an Eligible Assignee.
                              (iii) The Agent shall have given its written
          consent to such  nomination,  which  consent shall not be unreasonably
withheld or delayed.
                    (a) Within fifteen (15) days following the designation  (and
the consent,  if applicable,  of the Agent or of the Lead  Borrower) or one or
more  replacements  for the  Delinquent  Revolving Credit Lender,  those
replacements shall Transfer to the Agent, the aggregate of the Delinquent
Revolving  Credit  Lender's  Pro-Rata share of the principal and interest of the
Revolving  Credit  Loans to the date of such  assignment.
                    (b) Following the Agent's receipt of the aggregate described
in Section 15:15-11(e), the Agent shall  Transfer  such  aggregate to the
Delinquent  Revolving  Credit Lender,  net of the amounts set forth below (which
shall be distributed to, and retained by, the Agent), but only if the Delinquent
Revolving  Credit  Lender delivers  the  Revolving  Credit Note held by the
Delinquent  Revolving  Credit Lender:
                              (iv) The  Agent's  Cover (to the  extent not
          previously  repaid by the Borrower and retained by the Agent in
          accordance with Subsection 12:12-3(c)(iv), above) with respect to that
          Delinquent Revolving Credit Lender.

                              Plus

                              (v) The aggregate of the amount payable under
          Subsection  12:12-3(c)(iii), above  (which relates to  interest  to be
          paid  by  that  Delinquent Revolving Credit Lender).

                              Plus

                              (vi) All such  costs and  expenses  as may be
          incurred by the Agent in the enforcement of the Agent's rights against
          such  Delinquent  Revolving  Credit Lender.

The  Delinquent  Revolving  Credit Lender shall remain liable for any deficiency
remaining  after the above  application.
                    (a) In the event  that the  Delinquent Revolving  Credit
Lender fails to deliver to the Agent the Revolving Credit Note held by the
Delinquent Revolving Credit Lender,
                              (vii) The amount otherwise to be Transferred to
          the Delinquent Revolving Credit Lender shall be Transferred to the
          Agent and held by the Agent, without interest, to be turned over to
          the Delinquent Revolving  Credit Lender upon delivery of the Revolving
          Credit Note held by that Delinquent Revolving Credit Lender.
                              (viii) The Revolving Credit Note held by the
          Delinquent  Revolving Credit Lender shall have no force or effect
          whatsoever.
                              (ix) The Delinquent  Revolving Credit Lender shall
          cease to be a "Revolving  Credit Lender".  (a) Immediately upon its
          (or their) transfer of the aggregate referred to in Section
          15:15-11(e),  the Persons who have made such  Transfer(s)  shall have
          succeeded to all rights and become  subject to all of the  obligations
          of the  Delinquent  Revolving  Credit Lender  as  "Revolving  Credit
          Lender".
                    (b) The  Agent  shall  coordinate  the retirement of the
Revolving Credit Note held by the Delinquent  Revolving Credit Lender and the
issuance of Revolving  Credit Notes to those  Persons who have become  Revolving
Credit Lenders  pursuant to this Section  15:15-11,  provided, however,  no
processing  fee  otherwise  to be  paid  as  provided  in  Section 16:16-2(b)
shall be due under such circumstances.


<PAGE>


Article 16: -ASSIGNMENTS BY REVOLVING CREDIT LENDERS:

          161 -ASSIGNMENTS AND ASSUMPTIONS:
                    (a) Except as provided  herein, each Revolving Credit Lender
(in this Section 16:16-1(a), an "Assigning Revolving  Credit Lender") may assign
to one or more Eligible  Assignees  (in this Section  16:16-1(a),  each an
"Assignee  Revolving Credit Lender") all or a portion of that Revolving  Credit
Lender's  interests, rights and  obligations  under this Agreement and the Loan
Documents (including all or a portion of its Commitment) and the same portion of
the Revolving Credit Loans at the time  owing to it,  and of the  Revolving
Credit  Note held by the Assigning  Revolving  Credit Lender,  provided  that:
                              (ii) The Agent shall have given its prior written
          consent to such assignment, which consent shall not be unreasonably
          withheld, but need not be given if the proposed assignment would
          result in any resulting Revolving Credit Lender's having a Dollar
          Commitment of less than the "minimum hold" amount specified in Section
          16:16-1(a)(iii)  or if there  would be more than  Eight (8)  Revolving
          Credit Lenders. (For provisions which deal with any required consent
          of the Borrowers to such assignment, see Section 2:2-25(d)).
                              (iii) Each such assignment shall be of a constant,
          and not a varying, percentage of all the Assigning Revolving Credit
          Lender's rights and obligations under this Agreement.
                              (iv) Following the  effectiveness of such
          assignment,  the Assigning Revolving Credit Lender's Dollar Commitment
          (if not an assignment of all of the Assigning  Revolving  Credit
          Lender's Commitment) shall not be less than $10,000,000.00.

          162 -ASSIGNMENT PROCEDURES. (This Section 16:16-2 describes the
procedures to be followed in connection with an assignment  effected pursuant to
this Article 16: and permitted by Section  16:16-1).
                    (a) The parties to such an assignment shall execute and
deliver to the Agent,  for recording in the Register,  an Assignment and
Acceptance substantially in the form of EXHIBIT 16:16-1, annexed hereto.
                    (b) The Assigning  Revolving  Credit  Lender shall  deliver
to the Agent, with such Assignment and  Acceptance, the  Revolving  Credit  Note
held by the subject Assigning Revolving Credit Lender and the Agent's processing
fee of $3,500.00, provided,  however,  no such  processing  fee shall be due
where the  Assigning Revolving  Credit Lender is one of the Revolving  Credit
Lenders at the initial execution  of  this  Agreement.
                    (c) The  Agent  shall  maintain  a copy of each Assignment
and  Acceptance  delivered to it and a register or similar list (the "Register")
for the recordation of the names and  addresses of the  Revolving Credit Lenders
and of the Revolving Credit  Percentage  Commitment and Revolving Credit
Percentage Commitment of each Revolving Credit Lender. The Register shall be
available  for  inspection by the  Revolving  Credit  Lenders and by the Lead
Borrower  at any  reasonable  time and from time to time upon  reasonable  prior
notice.  In the absence of manifest error,  the entries in the Register shall be
conclusive  and  binding  on all  Revolving  Credit  Lenders.  The Agent and the
Revolving  Credit  Lenders may treat each  Person  whose name is recorded in the
Register as a  "Revolving  Credit  Lender"  hereunder  for all  purposes of this
Agreement.
                    (d) The Assigning  Revolving  Credit  Lender and Assignee
Revolving Credit  Lender,   directly  between  themselves,   shall  make  all
appropriate adjustments in payments for periods prior to the effective date of
an Assignment and Assumption.

          163 -EFFECT OF ASSIGNMENT.
                    (a) From and after the effective  date specified in an
Assignment and Acceptance which has been executed, delivered, and recorded
(which effective date the Agent may delay by up to Five (5) Business Days after
the delivery of such  Assignment and Acceptance):
                              (ii) The Assignee Revolving Credit Lender:
                                        (B) Shall be a party to this Agreement
                    and the Loan Documents (and to any amendments thereof) as
                    fully as if the Assignee Revolving Credit Lender had
                    executed each.
                                        (C) Shall have the rights of a Revolving
                    Credit Lender hereunder to the extent of the Revolving
                    Credit Percentage Commitment and Revolving Credit Percentage
                    Commitment assigned by such Assignment and Acceptance.
                              (i) The Assigning Revolving Credit Lender shall be
          released from the Assigning Revolving Credit Lender's obligations
          under this  Agreement and the Loan Documents to the extent of the
          Commitment assigned by such Assignment and Acceptance.
                              (ii) The Agent shall  undertake to obtain and
          distribute  replacement  Revolving Credit  Notes to the subject
          Assigning  Revolving  Credit  Lender and  Assignee Revolving  Credit
          Lender.
                    (a) By executing and  delivering  an Assignment  and
Acceptance,  the parties  thereto  confirm to and agree with each other and with
all parties to this  Agreement  as to those  matters  which are set forth in the
subject Assignment and Acceptance.


<PAGE>


Article 17: - NOTICES:

          171 -NOTICE ADDRESSES.  All notices, demands, and other communications
made in respect  of any Loan  Document  (other  than a request  for a loan or
advance or other financial  accommodation  under the Revolving Credit) shall be
made to the following  addresses,  each of which may be changed  upon seven (7)
days written notice to all others given by certified mail, return receipt
requested:

If to the Agent:
                                    Fleet Retail Finance Inc.
                                    40 Broad Street
                                    Boston, Massachusetts 02109
                                    Attention        :

                                    Fax              :

         With a copy to:
                                    Riemer & Braunstein LLP
                                    Three Center Plaza
                                    Boston, Massachusetts  02108
                                    Attention        : Richard B. Jacobs,
                                                       Esquire
                                    Fax              : 617 880 3456

If to the Lead Borrower
And All Borrowers:
                                    HomeBase, Inc.
                                    3345 Michelson Drive
                                    Irvine, California 92612
                                    Attention        : Steven Bowen
                                    Fax              : 949 442 5779

         With a copy  to:
                                    HomeBase, Inc.
                                    3345 Michelson Drive
                                    Irvine, California 92612
                                    Attention        : John Price
                                                       Vice President and
                                                       General Counsel
                                    Fax              : 949 442 5333

          172 -NOTICE GIVEN.
                    (a) Except as otherwise  specifically  provided herein,
notices shall be deemed made and correspondence received, as follows (all times
being local to the place of delivery or receipt):
                              (ii) By mail: the sooner of when actually
          received or Three (3) days following deposit in the United States mail
          as certified mail, return receipt requested, postage prepaid.
                              (iii) By recognized  overnight express delivery:
          the Business Day following the day when sent.
                              (iv) By Hand: If delivered on a Business Day after
          9:00 AM and no later than Three (3) hours prior to the close of
          customary business hours of the recipient,  when delivered. Otherwise,
          at the opening of the then next Business Day.
                              (v) By Facsimile transmission  (which must include
          a header on which the party sending such  transmission is indicated):
          If sent on a Business Day after 9:00 AM and no later  than  Three  (3)
          hours  prior to the  close of  customary business hours of the
          recipient,  one (1) hour after being sent.  Otherwise,  at the opening
          of the then next  Business  Day. (a)  Rejection or refusal to accept
          delivery  and  inability  to deliver  because of a changed  address or
          Facsimile Number  for which no due notice  was given  shall each be
          deemed  receipt of the notice sent.


<PAGE>


Article 18: - TERM:

          181 -TERMINATION  OF REVOLVING  CREDIT.  The  Revolving  Credit shall
remain in effect (subject to suspension as provided in Section  2:2-7(g) hereof)
until the Termination Date.

          182 -ACTIONS ON TERMINATION.
                    (a) On the  Termination  Date, the Borrowers shall pay the
Agent (whether or not then due), in  immediately  available  funds,  all then
Liabilities  including, without limitation:  the following:
                              (ii) The entire balance of the Loan Account
          (including the unpaid principal balance of the Revolving Credit Loans,
          and the SwingLine Loan ).
                              (iii) Any then remaining  installments of the
          Revolving  Credit  Commitment Fee.
                              (iv) Any then remaining installments of the
          Agent's Fee.
                              (v) Any payments due on account of the
          indemnification obligations included in Section 2:2-12(e).
                              (vi) Any accrued and unpaid Unused Line Fee.
                              (vii) All  unreimbursed  costs and expenses of the
          Agent and of Lenders' Special Counsel for which each Borrower is
          responsible.
                    (a) On the Termination Date, the Borrowers  shall also shall
make such arrangements  concerning  any L/C's then outstanding as are reasonably
satisfactory to the Agent.
                    (b) Until such payment (Section 18:18-2(a)) and arrangements
concerning L/C's (Section 18:18-2(b)), all provisions  of this  Agreement, other
than those  included  in Article 2: which place any  obligation  on the Agent or
any  Revolving  Credit Lender to make any loans or advances or to provide any
financial accommodations  to any  Borrower shall remain in full force and effect
until all Liabilities shall have been paid in full.
                    (c) The release by the Agent of the Collateral  Interests
granted the Agent by the Borrowers hereunder may be upon such  conditions  and
indemnifications as the Agent may require.


<PAGE>


Article 19: - GENERAL:

          191 -PROTECTION  OF  COLLATERAL.  The Agent has no duty as to the
collection or protection of the  Collateral  beyond the safe custody of such of
the Collateral as may come into the possession of the Agent.

          192 -PUBLICITY. The Agent may issue a "tombstone" notice of the
establishment of the credit  facility  contemplated  by this  Agreement and may
make reference to each Borrower (and may utilize any logo or other  distinctive
symbol associated with each Borrower) in connection with any advertising,
promotion, or marketing undertaken by the Agent.

          193 -SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon the
Borrowers and their respective representatives, successors, and assigns and
shall enure to the benefit of the Agent and each Revolving  Credit Lender and
their  respective successors  and  assigns,  provided,  however,  no  trustee or
other  fiduciary appointed with respect to any Borrower shall have any rights
hereunder. In the event that the Agent or any  Revolving  Credit  Lender assigns
or transfers its rights under this Agreement,  the assignee shall thereupon
succeed to and become vested with all rights,  powers,  privileges,  and  duties
of such  assignor hereunder and such assignor shall  thereupon be discharged and
relieved from its duties and obligations hereunder.

          194 -SEVERABILITY. Any determination that any provision of this
Agreement or any application thereof is invalid,  illegal, or unenforceable in
any respect in any instance  shall not affect the validity,  legality,  or
enforceability  of such provision in any other instance, or the validity,
legality, or enforceability of any other provision of this Agreement.

          195 -AMENDMENTS.  COURSE OF DEALING.
                    (a) This Agreement and the other Loan Documents  incorporate
all discussions and negotiations  between  each  Borrower and the Agent and each
Revolving  Credit Lender, either express or implied, concerning the matters
included herein and in such other instruments, any custom, usage, or course of
dealings to the contrary notwithstanding. No such discussions,  negotiations,
custom, usage, or course of dealings shall limit,  modify,  or otherwise affect
the provisions thereof.  No failure by the Agent or any  Revolving Credit Lender
to give notice to the Lead Borrower of any Borrower's having failed to observe
and comply with any warranty or covenant  included in any Loan  Document  shall
constitute a waiver of such warranty or covenant or the amendment of the subject
Loan  Document.  No change made by the Agent to the  manner by which  Borrowing
Base is determined  shall obligate the Agent to continue to determine  Borrowing
Base in that manner.
                    (b) Each Borrower may undertake any action otherwise
prohibited hereby, and may omit to take any action otherwise  required  hereby,
upon and with the express prior written consent of the Agent. Subject to Article
15:, no consent,  modification, amendment,  or waiver of any provision of any
Loan  Document  shall be effective unless executed in writing by or on behalf of
the party to be charged with such modification,  amendment,  or waiver  (and if
such  party is the Agent then by a duly  authorized  officer  thereof).  Any
modification,  amendment,  or  waiver provided  by the  Agent  shall  be in
reliance  upon  all  representations  and warranties  theretofore  made to the
Agent by or on behalf of the Borrowers (and any guarantor,  endorser,  or surety
of the Liabilities) and consequently may be rescinded in the event that any of
such  representations  or warranties  was not true and complete in all material
respects when given.

          196 -POWER OF ATTORNEY.  In connection  with all powers of attorney
included in this  Agreement,  each Borrower hereby grants unto the Agent (acting
through any of its officers) full power to do any and all things necessary or
appropriate in connection  with the  exercise of such powers as fully and
effectually  as that Borrower might or could do, hereby  ratifying all that said
attorney shall do or cause to be done by virtue of this Agreement.  No power of
attorney set forth in this Agreement shall be affected by any disability or
incapacity suffered by any Borrower and each shall survive the same. All powers
conferred upon the Agent by this Agreement,  being coupled with an interest,
shall be irrevocable until this Agreement is terminated by a written  instrument
executed by a duly  authorized officer of the Agent.

          197 -APPLICATION  OF  PROCEEDS.  The  proceeds  of  any  collection,
sale,  or disposition  of the  Collateral  by or on  behalf  of the  Agent or of
any other payments  received  hereunder by or on behalf of the Agent,  shall be
applied by the Agent towards the Liabilities  in such order  and  manner  as the
Agent determines in its sole discretion,  consistent,  however,  with Sections
13:13-6 and 13:13-7 and any other applicable provisions of this Agreement. The
Borrowers shall remain liable for any deficiency remaining following such
application.

          198 -INCREASED  COSTS.  If, as a result of the  adoption of any change
to any Requirement of Law, or of the interpretation or application thereof by
any court or  by  any   governmental  or  other  authority  or  entity  charged
with  the administration  thereof,  whether  or not having  the force of law,
which:
                    (a) subjects any  Revolving  Credit  Lender  to any taxes or
changes  the basis of taxation, or increases any existing taxes, on payments of
principal, interest or other  amounts  payable by any  Borrower  to the Agent or
any  Revolving  Credit Lender  under this  Agreement  (except  for taxes on the
Agent or any  Revolving Credit  Lender  based on net income or capital  imposed
by the  jurisdiction in which the  principal or lending  offices of the Agent or
that  Revolving  Credit Lender are located);
                    (b) imposes, modifies or deems applicable any reserve, cash
margin,  special  deposit or similar  requirements  against assets held by, or
deposits in or for the account of or loans by or any other  acquisition of funds
by the  relevant  funding  office of any  Revolving Credit  Lender  (other than
reserves and assessments taken into account in the determination of the interest
rate  applicable to  Eurodollar  Loans);
                    (c) imposes on any Revolving  Credit Lender any other
condition with respect to any Loan Document;  or
                    (d) imposes on any Revolving  Credit Lender a  requirement
to maintain or allocate  capital in relation to the  Liabilities; and the result
of any of the  foregoing,  in such Revolving Credit Lender's reasonable opinion,
is to increase the cost to that Revolving Credit Lender of making or maintaining
any loan,  advance or financial accommodation or to reduce the income receivable
by that Revolving Credit Lender in respect of any loan,  advance or financial
accommodation  by an amount which that Revolving Credit Lender deems to be
material, then upon written notice from the Agent,  from time to time, to the
Lead  Borrower  (such notice to set out in reasonable  detail the facts  giving
rise to and a summary  calculation  of such increased cost or reduced income),
the Borrowers shall pay to the Agent for the benefit of the subject  Revolving
Credit  Lender  within  fifteen (15) days of receipt of such notice, that amount
which shall compensate the subject Revolving Credit  Lender for such  additional
cost or  reduction  in income ,  provided, however,  no Borrower shall be liable
for any such increased expense incurred or reduction in amount  received by a
Revolving  Credit Lender where such notice is not given to the Lead Borrower
within 120 days following that date on which the subject Revolving Credit Lender
knew or  reasonably  should have known of such effect.

          199 -COSTS AND EXPENSES OF THE AGENT .
                    (a) The Borrowers  shall pay from time to time on demand all
Costs of Collection and all reasonable  costs,  expenses,  and disbursements
(including  attorneys' reasonable fees and expenses) which are incurred by the
Agent in connection with the preparation,  negotiation,  execution, and delivery
of this Agreement and of any  other  Loan  Documents, and all  other  reasonable
costs,  expenses,  and disbursements  which  may be  incurred  by the  Agent in
connection  with or in respect  to the  credit  facility contemplated  hereby or
which otherwise are incurred  with  respect to the  Liabilities.  The  Borrowers
shall not have any responsibility  to reimburse any  Person on account of costs,
expenses,  and disbursements (including  attorneys' fees and  expenses) incurred
or paid on account of a dispute  solely  amongst and  between  the Agent and the
Revolving Credit  Lenders.
                    (b) The Borrowers  shall pay from time to time on demand all
reasonable  costs  and  expenses  (including   attorneys'  reasonable  fees  and
expenses)  incurred,  following the  occurrence of any Event of Default,  by the
Revolving  Credit  Lenders  to  Lenders'  Special  Counsel.
                    (c) Each  Borrower authorizes  the  Agent,  on  fifteen (15)
days  prior  notice  with  reasonable particularity to the Lead Borrower, to pay
all such fees and expenses and in the Agent's discretion,  to add such fees and
expenses to the Loan Account.
                    (d) The undertaking  on the part of each Borrower in this
Section  19:19-9 shall survive payment  of the  Liabilities  and/or  any
termination,  release,  or  discharge executed  by the  Agent in  favor of any
Borrower,  other than a  termination, release, or discharge which makes specific
reference to this Section 19:19-9.

          1910 -COPIES AND  FACSIMILES.  Each Loan  Document and all  documents
and papers which relates thereto which have been or may be hereinafter furnished
the Agent or any Revolving Credit Lender may be reproduced by that Revolving
Credit Lender or by the Agent by any photographic, microfilm, xerographic,
digital imaging, or other process, and such Person making such reproduction may
destroy any document so  reproduced. Any such reproduction  shall be  admissible
in evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction  was made in the regular  course of business).  Any facsimile which
bears proof of  transmission shall be binding on the party  which or on whose
behalf such  transmission  was initiated and likewise  shall be so admissible in
evidence as if the original of such  facsimile  had been  delivered to the party
which or on whose behalf such transmission was received.

          1911 -MASSACHUSETTS  LAW.  This  Agreement  and  all  rights  and
obligations hereunder,  including matters of construction,  validity, and
performance, shall be governed by the law of The Commonwealth of Massachusetts.

          1912 -CONSENT TO JURISDICTION.
                    (a) Each Borrower agrees that any legal action, proceeding,
case, or controversy against any  Borrower  with  respect to any Loan  Document
may be brought in the Superior Court of Suffolk County  Massachusetts or in the
United States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, as the Agent may elect in the Agent's  sole  discretion.  By
execution  and delivery of this Agreement,  each Borrower,  for itself and in
respect of its property,  accepts, submits, and consents generally and
unconditionally,  to the jurisdiction of the aforesaid  courts.
                    (b) Each Borrower  WAIVES any  objection  based on forum non
conveniens  and any  objection to venue of any action or  proceeding  instituted
under any of the Loan  Documents  and  consents to the granting of such legal or
equitable remedy as is deemed appropriate by the Court.
                    (c) Nothing herein shall affect the right of the Agent to
bring legal actions or proceedings in any other competent  jurisdiction.
                    (d) Each Borrower agrees that any action  commenced by any
Borrower  asserting  any claim  arising  under or in  connection  with this
Agreement  or any other Loan  Document  shall be brought  solely in the Superior
Court of Suffolk County  Massachusetts  or in the United States  District Court,
District  of  Massachusetts,  sitting  in Boston,  Massachusetts,  and that such
Courts shall have exclusive jurisdiction with respect to any such action.

          1913 -INDEMNIFICATION. Each Borrower shall indemnify, defend, and hold
the Agent and each  Revolving  Credit  Lender  and their  respective  employees,
officers,  or agents (each,  an "Indemnified  Person")  harmless of and from any
claim brought or  threatened  against any  Indemnified  Person by any Person (as
well  as  from  attorneys'  reasonable  fees,  expenses,  and  disbursements  in
connection  therewith) on account of the  relationship of any Borrower or of any
other  guarantor  or endorser of the  Liabilities  (each of claims  which may be
defended,  compromised,  settled,  or pursued  by the  Indemnified  Person  with
counsel of the Lender's  selection,  but at the expense of the Borrowers)  other
than  any  claim  as to  which a  final  determination  is  made  in a  judicial
proceeding  (in which the Agent  and any  other  Indemnified  Person  has had an
opportunity to be heard),  which determination  includes a specific finding that
the Indemnified Person seeking  indemnification had acted in a grossly negligent
manner or in actual bad faith. This indemnification shall survive payment of the
Liabilities and/or any termination,  release, or discharge executed by the Agent
in favor of the Borrowers, other than a termination,  release, or discharge duly
executed on behalf of the Agent which makes  specific  reference to this Section
19:19-13.

          1914  -RULES OF  CONSTRUCTION.  The  following  rules of  construction
shall be applied in the interpretation,  construction,  and enforcement of this
Agreement and of the other Loan Documents:
                    (a) Unless otherwise specifically provided for herein,
interest and any fee or charge which is stated as a per annum percentage shall
be calculated based on a 365/366 day year and actual days elapsed.
                    (b) Any term used herein to describe Collateral or a Person,
which term is defined in either (or both) the UCC as in effect  on the date when
this  Agreement  was executed by the Borrowers or in UCC9'99, shall be given the
meaning which is the more encompassing of the two definitions.
                    (c) Words in the singular include the plural and words in
the plural  include  the  singular.
                    (d) Each  warranty  and representation  made by any Borrower
which  includes  reference to an EXHIBIT is made as of the  Restatement  Date.
                    (e) Cross  references  to  Sections  in this Agreement begin
with the Article in which that Section  appears,  followed by a colon,  and then
the  Section  to which  reference  is  made.  (For  example,  a reference to
"Section  5:5-6" is to Section 5-6,  which  appears in Article 5 of this
Agreement).
                    (f) Titles, headings (indicated by being underlined or shown
in SMALL  CAPITALS)  and any  Table of  Contents  are  solely  for  convenience
of reference;  do not constitute a part of the instrument in which included; and
do not affect such instrument's  meaning,  construction,  or effect.
                    (g) The words "includes" and  "including"  are not limiting.
                    (h) Text which follows the words "including,  without
limitation" (or similar words) is  illustrative  and not limitational.
                    (i) Text  which is shown in  italics  (except  for
parenthesized italicized  text), shown  in  bold,  shown IN ALL CAPITAL LETTERS,
or in any combination of the foregoing,  shall be deemed to be conspicuous.
                    (j) The words "may not" are prohibitive and not  permissive.
                    (k) Any reference to a Person's "knowledge"  (or words of
similar import) is to the knowledge of the Borrowers' respective Senior Officers
                    (l) Terms which are defined in one section of any Loan
Document are used with such  definition  throughout the instrument in  which so
defined.
                    (m) The  symbol "$" refers to United  States  Dollars.
                    (n) Unless limited by reference  to a particular  Section or
provision,  any reference to "herein",  "hereof",  or "within"  is to the entire
Loan  Document in which such reference  is made.
                    (o)  References  to "this  Agreement"  or to any other Loan
Document  is to  the  subject  instrument  as  amended  to  the  date on  which
application   of  such   reference  is  being  made.
                    (p)  Except  as  otherwise specifically  provided,  all
references to time are to Boston time.
                    (q) In the determination  of any  notice,  grace,  or other
period of time  prescribed  or allowed hereunder:
                              (ii) Unless otherwise provided (I) the day of the
          act, event, or default from which the designated period of time begins
          to run shall not be included and the last day of the period so
          computed  shall be  included  unless such last day is not a Business
          Day, in which event the last day of the relevant  period  shall be the
          then next  Business  Day and (II) the period so computed  shall end at
          5:00 PM on the relevant Business Day.
                              (iii) The word "from" means "from and including".
                              (iv) The words "to" and "until" each mean "to, but
          excluding".
                              (v) The word "through" means "to and including".
                    (a) The Loan Documents shall be construed and interpreted in
a harmonious manner and in  keeping  with the  intentions  set  forth in Section
19:19-15  hereof, provided,  however, in the event of any inconsistency  between
the provisions of this  Agreement and any other Loan  Document,  the  provisions
of this Agreement shall govern and control.

          1915 -INTENT. It is intended that:
                    (a) This Agreement take effect as a sealed instrument.
                    (b) The scope of all Collateral  Interests created by any
Borrower to secure the Liabilities be broadly construed in favor of the Agent
and that,  subject to any applicable  Collateral  Interest  Restrictions,  they
cover all  assets of each Borrower.
                    (c) All Collateral Interests created in favor of the Agent
at any time and  from  time  to  time  secure  all  Liabilities,  whether  now
existing  or contemplated  or hereafter  arising.  (d) All reasonable  costs,
expenses, and disbursements incurred  by the Agent and,  to the  extent  provide
in Section 19:19-9  each  Revolving  Credit  Lender,   in  connection  with such
Person's relationship(s) with any Borrower shall be borne by the Borrowers.

          1916 -PARTICIPATIONS:  Each Revolving Credit Lender may sell
participations to one or more financial institutions  (each, a "Participant")
all or a portion of such Revolving  Credit  Lender's  rights and  obligations
under this Agreement, provided that no such  participation  shall include any
provision  which accords the Person purchasing such participation with the
right, vis a vis the Agent, to consent to any action, amendment, or waiver which
is subject to any requirement herein for approval by all or a requisite  number
or proportion of the Revolving Credit Lenders. No such sale of a participation
shall relieve a Revolving Credit Lender from that Revolving  Credit Lender's
obligations  hereunder nor obligate the Agent to any Person other than a
Revolving Credit Lender.

          1917 -RIGHT OF SET-OFF. Any and all deposits or other sums at any time
credited by or due to any Borrower from the Agent or any Revolving Credit Lender
or any Participant or from any Affiliate of any of the foregoing,  and any cash,
securities,  instruments  or other property of any Borrower in the possession of
any of the foregoing,  whether for  safekeeping or otherwise  (regardless of the
reason such Person had received the same) shall at all times constitute security
for all  Liabilities  and for any and all  obligations  of each  Borrower to the
Agent and such Revolving  Credit Lender or any Participant or such Affiliate and
may be applied or set off against the Liabilities  and against such  obligations
at any  time,  whether  or not  such  are  then  due and  whether  or not  other
collateral is then available to the Agent or that Revolving Credit Lender.

          1918 -PLEDGES TO FEDERAL RESERVE BANKS: Nothing included in this
Agreement shall prevent or limit any Revolving Credit Lender, to the extent that
such  Revolving  Credit Lender is subject to any of the twelve  Federal  Reserve
Banks organized  under ss.4 of the Federal  Reserve Act (12 U.S.C.  ss.341) from
pledging  all or any portion of that  Lender's  interest  and rights  under this
Agreement,  provided,  however,  neither such pledge nor the enforcement thereof
shall release the pledging  Revolving  Credit Lender from any of its obligations
hereunder or under any of the Loan Documents.

          1919 -MAXIMUM  INTEREST RATE.  Regardless of any provision of any Loan
Document, neither the Agent nor any Revolving Credit Lender shall be entitled to
contract for, charge,  receive,  collect, or apply as interest on any Liability,
any amount in excess of the maximum rate imposed by Applicable  Law. Any payment
which is made which,  if treated as interest on a Liability would result in such
interest's  exceeding  such  maximum  rate shall be held,  to the extent of such
excess,  as additional  collateral  for the  Liabilities  as if such excess were
"Collateral."

          1920 -WAIVERS.
                    (a) Each  Borrower  (and  all  guarantors,  endorsers,  and
sureties  of  the Liabilities) makes each of the waivers included in Section
19:19-20(b),  below, knowingly,  voluntarily, and intentionally, and understands
that Agent and each Revolving Credit Lender, in establishing the facilities
contemplated hereby and in providing loans and other financial  accommodations
to or for the account of the Borrowers as provided  herein,  whether now or in
the future,  is relying on such waivers.
                    (b) EACH BORROWER,  AND EACH SUCH GUARANTOR,  ENDORSER, AND
SURETY RESPECTIVELY  WAIVES  THE  FOLLOWING:
                              (ii) Except  as  otherwise  specifically required
          hereby, notice of non-payment, demand, presentment, protest  and  all
          forms of demand  and notice,  both  with  respect  to  the Liabilities
          and the Collateral.
                              (iii) Except as otherwise specifically required
hereby,  the right to notice and/or  hearing prior to the Agent's  exercising of
the Agent's  rights upon  default.
                              (iv) THE RIGHT TO A JURY IN ANY TRIAL OF ANY
CASE OR  CONTROVERSY  IN WHICH THE AGENT OR ANY  REVOLVING  CREDIT  LENDER IS OR
BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE
AGENT OR ANY  REVOLVING  CREDIT  LENDER OR IN WHICH  THE AGENT OR ANY  REVOLVING
CREDIT LENDER IS JOINED AS A PARTY LITIGANT),  WHICH CASE OR CONTROVERSY  ARISES
OUT OF OR IS IN RESPECT OF, ANY RELATIONSHIP  AMONGST OR BETWEEN ANY BORROWER OR
ANY OTHER PERSON AND THE AGENT AND EACH REVOLVING  CREDIT LENDER LIKEWISE WAIVES
THE  RIGHT  TO A JURY IN ANY  TRIAL OF ANY SUCH  CASE OR  CONTROVERSY).
                              (v) The benefits  or  availability  of  any  stay,
          limitation,   hindrance, delay,  or restriction (including,  without
          limitation, any automatic stay which otherwise might be imposed
          pursuant to Section 362 of the Bankruptcy Code) with respect to any
          action which the Agent may or may become  entitled to take  hereunder.
                              (vi) Any  defense,  counterclaim,  set-off,
          recoupment,  or other basis on which the amount of any Liability,  as
          stated on the books and records of the Agent, could be reduced or
          claimed to be paid otherwise than in accordance  with the tenor of
          and written terms of such Liability.
                              (vii) Any claim to consequential, special, or
          punitive damages.


<PAGE>


                      The "Lead Borrower and the Borrowers"

                                                                  HOMEBASE, INC.
                                          (The "LEAD BORROWER" and a "BORROWER")

                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


                                                       HOMECLUB INC., OF TEXAS


                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


                                                                  HOMECLUB, INC.

                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


<PAGE>


                                                                    The "Agent":
                                                      FLEET  RETAIL FINANCE INC.

                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________



                                                  The "Revolving Credit Lenders"
                                                       FLEET RETAIL FINANCE INC.

                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


                                           THE CIT GROUP / BUSINESS CREDIT, INC.

                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


                                                    FOOTHILL CAPITAL CORPORATION

                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


                                                        GMAC BUSINESS CREDIT LLC

                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


                                                      GMAC COMMERCIAL CREDIT LLC

                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


                                                   LASALLE BUSINESS CREDIT, INC.

                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


                                          NATIONAL CITY COMMERCIAL FINANCE, INC.

                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


                                                                  PROVIDENT BANK

                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


                                                   TEXTRON FINANCIAL CORPORATION

                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________


                                            GENERAL ELECTRIC CAPITAL CORPORATION

                                             By_________________________________

                                     Print Name:________________________________

                                          Title:________________________________