U.S. $175,000,000

                     AMENDED AND RESTATED CREDIT AGREEMENT


                        Dated as of September 11, 1997,


                                     Among



                     GENERAL ELECTRIC CAPITAL CORPORATION,

                  individually and in its capacity as Agent,



                           CERTAIN OTHER LENDERS AND

                    FINANCIAL INSTITUTIONS PARTIES HERETO,


                        FINLAY FINE JEWELRY CORPORATION


                                      and


                           FINLAY ENTERPRISES, INC.





<PAGE>


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

                                                                          Page
                                                                          ----

SECTION 1.      DEFINITIONS AND ACCOUNTING TERMS...........................  1

     ss. 1.1.   CERTAIN DEFINED TERMS......................................  1
     ss. 1.2.   TERMS DEFINED IN THE UNIFORM COMMERCIAL CODE............... 33
     ss. 1.3.   COMPUTATION OF TIME PERIODS................................ 33
     ss. 1.4.   ACCOUNTING TERMS........................................... 33
     ss. 1.5.   OTHER PROVISIONS REGARDING DEFINITIONS..................... 33

SECTION 2.      AMOUNT AND TERMS........................................... 33

     ss. 2.1.   REVOLVING ADVANCES; SWING LINE FACILITY.................... 33
     ss. 2.2.   REVOLVING CREDIT FACILITY COMMITMENT AND
                BORROWING LIMIT............................................ 35
     ss. 2.3.   REVOLVING NOTES............................................ 36
     ss. 2.4.   NOTICE OF BORROWING; BORROWER'S CERTIFICATE................ 37
     ss. 2.5.   TERMINATION OR REDUCTION OF REVOLVING CREDIT
                FACILITY COMMITMENTS; REDUCTION OF PARENT
                REVOLVING CREDIT SUBLIMIT COMMITMENTS...................... 38
     ss. 2.6.   INTEREST................................................... 39
     ss. 2.7.   CONVERSION OF BORROWINGS; RENEWALS......................... 41
     ss. 2.8.   COMPUTATION OF INTEREST.................................... 42
     ss. 2.9.   INCREASED COSTS............................................ 42
     ss. 2.10.  CHANGE IN LAW RENDERING EURODOLLAR ADVANCES
                UNLAWFUL................................................... 44
     ss. 2.11.  EURODOLLAR AVAILABILITY.................................... 44
     ss. 2.12.  INDEMNITIES................................................ 45
     ss. 2.13.  DISBURSEMENT............................................... 48
     ss. 2.14.  AGENT'S AVAILABILITY ASSUMPTION............................ 49
     ss. 2.15.  PRO RATA TREATMENT AND PAYMENTS............................ 50
     ss. 2.16.  EURODOLLAR OFFICES......................................... 50
     ss. 2.17.  TELEPHONIC NOTICE.......................................... 51
     ss. 2.18.  MAXIMUM INTEREST........................................... 51
     ss. 2.19.  RECEIPT OF PAYMENTS........................................ 51
     ss. 2.20.  APPLICATION OF PROCEEDS.................................... 52
     ss. 2.21.  ACCOUNTING................................................. 54
     ss. 2.22.  TAXES...................................................... 54



                                       i

<PAGE>

                             
                                                                          Page
                                                                          ----

SECTION 2A.     AMOUNT AND TERMS OF LETTERS OF CREDIT
                AND PARTICIPATIONS THEREIN................................. 56

     ss. 2A.1.  LETTERS OF CREDIT.......................................... 56
     ss. 2A.2.  ISSUING THE LETTERS OF CREDIT.............................. 57
     ss. 2A.3.  REIMBURSEMENT OBLIGATIONS.................................. 57
     ss. 2A.4.  REVOLVING ADVANCES......................................... 58
     ss. 2A.5.  SETTLEMENT BY LENDERS WITH ISSUING BANK.................... 58
     ss. 2A.6.  LETTER OF CREDIT FEES...................................... 60
     ss. 2A.7.  INDEMNIFICATION:  NATURE OF THE ISSUING BANK'S
                DUTIES..................................................... 60
     ss. 2A.8.  INCREASED COSTS............................................ 61
     ss. 2A.9.  UNIFORM CUSTOMS AND PRACTICE............................... 62
     ss. 2A.10. FOREIGN CURRENCY........................................... 62
     ss. 2A.11. REIMBURSEMENT OF CERTAIN COSTS............................. 63

SECTION 3.      PAYMENTS AND PREPAYMENTS................................... 63

     ss. 3.1.   MANDATORY PAYMENTS......................................... 63
     ss. 3.2.   CERTAIN PAYMENTS........................................... 64
     ss. 3.3.   OPTIONAL PREPAYMENTS....................................... 65
     ss. 3.4.   PROCEDURES FOR PAYMENT..................................... 66
     ss. 3.5.   UNUSED FACILITY FEE........................................ 66
     ss. 3.6.   FEES....................................................... 67

SECTION 4.      SECURITY AND GUARANTIES.................................... 67

     ss. 4.1.   PLEDGE OF CAPITAL STOCK AND NOTES.......................... 67
     ss. 4.2.   SECURITY AGREEMENT - TRADEMARK, PATENT AND
                COPYRIGHT.................................................. 68
     ss. 4.3.   SECURITY AGREEMENTS........................................ 68
       ss. 4.4.   REAL PROPERTY; MORTGAGES; LEASEHOLD
                MORTGAGES; TITLE INSURANCE................................. 69
     ss. 4.5.   ADDITIONAL COLLATERAL...................................... 70
     ss. 4.6.   FILING AND RECORDING....................................... 71
     ss. 4.7.   INTERPRETATION OF SECURITY DOCUMENTS....................... 71
     ss. 4.8.   GUARANTIES................................................. 71
     ss. 4.9.   ASSIGNMENTS OF INSURANCE................................... 71
     ss. 4.10.  CASH COLLATERAL AGREEMENT.................................. 72



                                       ii

<PAGE>



                              
                                                                          Page
                                                                          ----
SECTION 5.      CONDITIONS PRECEDENT TO INITIAL BORROWINGS
                AND ISSUANCE OF LETTERS OF CREDIT.......................... 72

     ss. 5.1.   OPINIONS OF COUNSEL........................................ 72
     ss. 5.2.   FINANCIAL STATUS AND STATEMENTS............................ 73
     ss. 5.3.   QUALIFICATION.............................................. 73
     ss. 5.4.   SECURITY DOCUMENTS AND INSTRUMENTS......................... 73
     ss. 5.5.   EVIDENCE OF INSURANCE...................................... 74
     ss. 5.6.   EXAMINATION OF BOOKS....................................... 74
     ss. 5.7.   BORROWING BASE............................................. 74
     ss. 5.8.   NOTES...................................................... 74
     ss. 5.9.   [Intentionally Omitted.]................................... 74
     ss. 5.10.  [Intentionally Omitted.]................................... 74
     ss. 5.11.  FEES AND EXPENSES.......................................... 74
     ss. 5.12.  MANAGEMENT................................................. 74
     ss. 5.13.  DISBURSEMENT AUTHORIZATION................................. 75
     ss. 5.14.  LOCKBOX.................................................... 75
     ss. 5.15.  LITIGATION................................................. 75
     ss. 5.16.  TAX MATTERS................................................ 75
     ss. 5.17.  COMPLIANCE WITH LAW........................................ 76
     ss. 5.18.  PROCEEDINGS; RECEIPT OF DOCUMENTS.......................... 76
     ss. 5.19.  ENVIRONMENTAL MATTERS AND APPRAISALS....................... 77
     ss. 5.20.  [Intentionally Omitted.]................................... 77
     ss. 5.21.  SPECIAL COUNSEL FEES....................................... 77
     ss. 5.22.  CONSIGNMENT AGREEMENTS..................................... 77
     ss. 5.23.  [Intentionally Omitted.]................................... 77
     ss. 5.24.  INSURANCE POLICIES......................................... 77
     ss. 5.25.  [Intentionally Omitted.]................................... 77
     ss. 5.26.  PERFECTION OF SECURITY INTERESTS IN THE
                UNITED KINGDOM............................................. 77

SECTION 5A.     CONDITIONS PRECEDENT TO AMENDMENT
                AND RESTATEMENT............................................ 77

     ss. 5A.1.  OPINIONS OF COUNSEL........................................ 78
     ss. 5A.2.  QUALIFICATION.............................................. 78
     ss. 5A.3.  AMENDMENTS TO SECURITY DOCUMENTS AND
                INSTRUMENTS................................................ 78
     ss. 5A.4.  NOTES...................................................... 78
     ss. 5A.5.  FEES AND EXPENSES.......................................... 78
     ss. 5A.6.  LITIGATION................................................. 78
    

                                      iii

<PAGE>


                               
                                                                          Page
                                                                          ---- 

     ss. 5A.7.  COMPLIANCE WITH LAW........................................ 79
     ss. 5A.8.  PROCEEDINGS; RECEIPT OF DOCUMENTS.......................... 79
     ss. 5A.9.  PURCHASE OF SHARE.......................................... 80

SECTION 5B.     CONDITIONS PRECEDENT TO INITIAL BORROWINGS
                TO THE PARENT.............................................. 80

SECTION 6.      CONDITIONS PRECEDENT TO EACH BORROWING
                AND ISSUANCE OF LETTERS OF CREDIT.......................... 80

     ss. 6.1.   CONDITIONS................................................. 80
     ss. 6.2.   WRITTEN NOTICE............................................. 81

SECTION 7.      USE OF PROCEEDS............................................ 81

SECTION 8.      AFFIRMATIVE COVENANTS...................................... 82

     ss. 8.1.   FINANCIAL STATEMENTS AND OTHER INFORMATION................. 82
     ss. 8.2.   TAXES AND CLAIMS........................................... 87
     ss. 8.3.   INSURANCE.................................................. 88
     ss. 8.4.   BOOKS AND RESERVES......................................... 90
     ss. 8.5.   PROPERTIES IN GOOD CONDITION............................... 90
     ss. 8.6.   MAINTENANCE OF EXISTENCE, ETC.............................. 90
     ss. 8.7.   INSPECTION BY THE AGENT AND THE LENDERS.................... 90
     ss. 8.8.   PAY INDEBTEDNESS TO LENDERS AND PERFORM
                OTHER COVENANTS............................................ 91
     ss. 8.9.   NOTICE OF DEFAULT.......................................... 91
     ss. 8.10.  REPORTING OF MISREPRESENTATIONS............................ 91
     ss. 8.11.  COMPLIANCE WITH LAW........................................ 91
     ss. 8.12.  ERISA...................................................... 92
     ss. 8.13.  FURTHER ASSURANCES......................................... 93
     ss. 8.14.  CONSIGNMENT AGREEMENTS..................................... 93
     ss. 8.15.  AUDITS..................................................... 93
     ss. 8.16.  ENVIRONMENTAL MATTERS, ETC................................. 93
     ss. 8.17.  FINANCIAL COVENANTS........................................ 97
     ss. 8.18.  LEASES; NEW REAL ESTATE....................................101
     ss. 8.19.  LICENSE AGREEMENTS.........................................102
     ss. 8.20.  SUPPLEMENTAL DISCLOSURE....................................103
     ss. 8.21.  AGREEMENTS.................................................103
     ss. 8.22.  COLLECTION AND PAYMENT; LOCK BOX;
                BANK ACCOUNTS..............................................103
   

                                       iv
<PAGE>


                               
                                                                          Page
                                                                          ----
 
     ss. 8.23.  EMPLOYMENT AGREEMENTS......................................105
     ss. 8.24.  SONAB LOCK BOX AND BLOCKED ACCOUNTS........................105
     ss. 8.25.  SONAB SECURITY.............................................105

SECTION 9.      NEGATIVE COVENANTS.........................................105

     ss. 9.1.   CAPITAL EXPENDITURES.......................................106
     ss. 9.2.   LIENS......................................................106
     ss. 9.3.   INDEBTEDNESS...............................................108
     ss. 9.4.   LOANS, INVESTMENTS AND GUARANTEES..........................109
     ss. 9.5.   MERGER, SALE OF ASSETS, DISSOLUTION, ETC...................113
     ss. 9.6.   DIVIDENDS, REDEMPTIONS AND OTHER PAYMENTS..................114
     ss. 9.7.   TRANSACTIONS WITH AFFILIATES...............................116
     ss. 9.8.   BLOCKED ACCOUNTS...........................................117
     ss. 9.9.   MANAGEMENT COMPENSATION AND OTHER PAYMENTS.................117
     ss. 9.10.  COMPROMISE OF RECEIVABLES..................................118
     ss. 9.11.  NONCOMPLIANCE WITH ERISA...................................118
       ss. 9.12.  AMENDMENT AND MODIFICATION OF CERTAIN
                DOCUMENTS..................................................118
     ss. 9.13.  FISCAL YEAR................................................119
     ss. 9.14.  CHANGE OF BUSINESS.........................................119
     ss. 9.15.  NO NEGATIVE PLEDGES........................................119
     ss. 9.16.  RENTAL OBLIGATIONS.........................................120
     ss. 9.17.  LEASE-BACKS................................................120
     ss. 9.18.  CAPITAL STOCK..............................................120
     ss. 9.19.  DEBT INCURRENCE AND PAYMENTS TO THE PARENT.................120
     ss. 9.20.  THE PARENT.................................................121
     ss. 9.21.  INDENTURE GUARANTEES.......................................121
     ss. 9.22.  PRIVATE SALE OF STOCK......................................121
     ss. 9.23.  DEBENHAMS LICENSE AGREEMENTS...............................121
     ss. 9.24.  FACTORY OUTLET STORES......................................121
     ss. 9.25.  MONOPRIX LICENSE AGREEMENTS................................122

SECTION 10.     DEFAULTS AND REMEDIES......................................122

     ss. 10.1.  EVENTS OF DEFAULT..........................................122
     ss. 10.2.  SUITS FOR ENFORCEMENT......................................127
     ss. 10.3.  RIGHTS AND REMEDIES CUMULATIVE.............................127
     ss. 10.4.  RIGHTS AND REMEDIES NOT WAIVED.............................128
     ss. 10.5.  APPLICATION OF PROCEEDS....................................128


                                       v
<PAGE>

                               

                                                                          Page
                                                                          ---- 

SECTION 11.     REPRESENTATIONS AND WARRANTIES.............................129

     ss. 11.1.  CORPORATE STATUS...........................................129
     ss. 11.2.  POWER AND AUTHORITY........................................130
     ss. 11.3.  NO VIOLATION OF AGREEMENTS.................................130
     ss. 11.4.  NO LITIGATION..............................................131
     ss. 11.5.  GOOD TITLE TO PROPERTIES...................................131
     ss. 11.6.  FINANCIAL STATEMENTS AND CONDITION.........................133
     ss. 11.7.  TRADEMARKS, PATENTS, ETC...................................134
     ss. 11.8.  TAX LIABILITY..............................................134
     ss. 11.9.  GOVERNMENTAL ACTION........................................134
     ss. 11.10. DISCLOSURE.................................................135
     ss. 11.11. REGULATION U...............................................135
     ss. 11.12. INVESTMENT COMPANY.........................................135
     ss. 11.13. EMPLOYEE BENEFIT PLANS.....................................135
     ss. 11.14. DEBENTURE COLLATERAL.......................................137
     ss. 11.15. PERMITS, ETC...............................................137
     ss. 11.16. ENVIRONMENTAL STATUS.......................................138
     ss. 11.17. SOLVENCY...................................................139
     ss. 11.18. PROJECTIONS................................................139
     ss. 11.19. BANK ACCOUNTS..............................................139
     ss. 11.20. EMPLOYMENT AGREEMENTS......................................139
     ss. 11.21. LABOR MATTERS..............................................139
     ss. 11.22. OTHER VENTURES.............................................140
     ss. 11.23. BROKERS AND CONSULTANTS....................................140
     ss. 11.24. MATERIAL CONTRACTS.........................................140
     ss. 11.25. LICENSE AGREEMENTS.........................................140
     ss. 11.26. UNWRITTEN AGREEMENTS.......................................140

SECTION 12.     MISCELLANEOUS..............................................140

     ss. 12.1.  COLLECTION COSTS...........................................140
     ss. 12.2.  AMENDMENT, MODIFICATION AND WAIVER.........................141
     ss. 12.3.  NEW YORK LAW...............................................142
     ss. 12.4.  NOTICES....................................................142
     ss. 12.5.  FEES AND EXPENSES..........................................142
     ss. 12.6.  STAMP OR OTHER TAX.........................................143
     ss. 12.7.  WAIVER OF JURY TRIAL AND SET-OFF...........................143
     ss. 12.8.  TERMINATION OF AGREEMENT...................................144
     ss. 12.9.  CAPTIONS...................................................145
     ss. 12.10. LIEN; SET-OFF BY LENDERS...................................145


                                       vi
<PAGE>



                                                                          Page
                                                                          ---- 

     ss. 12.11. PAYMENT DUE ON NON-BUSINESS DAY............................145
     ss. 12.12. SERVICE OF PROCESS.........................................145
     ss. 12.13. GENERAL ELECTRIC CAPITAL CORPORATION, AS AGENT.............146
     ss. 12.14. CONCERNING JOINT AND SEVERAL LIABILITY OF
                THE BORROWERS..............................................151
     ss. 12.15. BENEFIT OF AGREEMENT.......................................152
     ss. 12.16. COUNTERPARTS; FACSIMILE SIGNATURE..........................154
     ss. 12.17. INVALIDITY.................................................154
     ss. 12.18. DISCLOSURE OF FINANCIAL INFORMATION........................154



                                     vii



<PAGE>





SCHEDULES AND EXHIBITS

Schedule 4.3(b)(B)      -     Jurisdictions
Schedule 4.4(a)(ii)     -     Excluded Leases
Schedule 8.3            -     Insurance
Schedule 9.2            -     Existing Liens
Schedule 9.3            -     Indebtedness
Schedule 9.4            -     Outstanding Investments
Schedule 9.9            -     Compensation Policies
Schedule 11.1           -     Subsidiaries
Schedule 11.5           -     Real Property
Schedule 11.8           -     Taxes
Schedule 11.13          -     ERISA
Schedule 11.16          -     Environmental Matters
Schedule 11.19          -     Collection, Concentration and Special
                                Accounts
Schedule 11.20          -     Employment Agreements
Schedule 11.21          -     Labor Matters
Schedule 11.23          -     Brokers and Consultants
Schedule 11.24          -     Material Contracts
Schedule 11.25          -     License Agreements

Exhibit A               -     Lenders, Commitments and Initial
                                Eurodollar Offices
Exhibit B               -     Form of Indemnification Agreement
Exhibit 2.1(c)(ii)      -     Form of Swing Line Note
Exhibit 2.3(a)          -     Form of Revolving Note
Exhibit 2.4             -     Form of Borrower's Certificate
Exhibit 4.1(a)          -     Form of Pledge Agreement
Exhibit 4.2             -     Form of Trademark, Patent and
                                Copyright Security Agreement
Exhibit 4.3(a)          -     Form of Security Agreement
Exhibit 4.8             -     Form of Guaranty
Exhibit 4.9(a)          -     Assignment of Life Insurance
Exhibit 4.9             -     Assignment of Business Interruption Insurance
Exhibit 5.1             -     Form of Opinion of Counsel for the Credit Parties
Exhibit 5.13            -     Form of Disbursement Authorization Letter
Exhibit 5.22            -     Form of Consignor Letter
Exhibit 8.1(p)          -     Form of Borrowing Base Certificate
Exhibit 9.7             -     Share Exchange Agreement
Exhibit 11.19           -     Lock-Box and Receivable Collection Arrangements


                                     viii





<PAGE>


     AMENDED AND RESTATED  CREDIT  AGREEMENT,  dated as of  September  11, 1997,
among FINLAY FINE JEWELRY  CORPORATION,  a Delaware corporation (the "Company"),
FINLAY  ENTERPRISES,  INC., a Delaware  corporation  (the "Parent",  each of the
Parent and the  Company,  a  "Borrower"  and,  collectively,  the  "Borrowers"),
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation having an office at
260 Long Ridge Road,  Stamford,  Connecticut 06927 ("GE Capital"),  individually
and as agent for each of the Lenders  hereunder (GE Capital,  in such  capacity,
together  with any  successor  agent  under  Section  12.13  hereof,  being  the
"Agent"),  and the other banks and other financial institutions named herein and
whose  signatures  appear on the  signature  pages hereto (GE Capital,  and such
other banks and other financial institutions and their respective successors and
assigns, individually, a "Lender" and collectively, the "Lenders").

     WHEREAS, the Company borrowed certain sums pursuant to the Credit Agreement
dated as of May 26,  1993 among the  Company,  the  Parent,  the  Lenders and GE
Capital,  individually  as a  Lender  thereunder  and as agent  for the  Lenders
thereunder  (such  Credit  Agreement,  as amended,  is referred to herein as the
"Original Credit Agreement");

     WHEREAS,  the Borrowers  have  requested  that the Lenders make  additional
secured  revolving  credit advances to the Borrowers from time to time which the
Borrowers  may  use  for the  ongoing  working  capital  and  general  corporate
requirements of the Borrowers consistent with the terms of this Agreement;

     WHEREAS,  the  Lenders  are  willing,  subject  to and upon the  terms  and
conditions  herein set forth,  to extend such  financial  accommodations  to the
Borrowers; and

     WHEREAS, the parties hereto desire to amend and restate the Original Credit
Agreement in its entirety in order to effect and/or permit the foregoing.

     NOW,  THEREFORE,  IT IS AGREED THAT THE ORIGINAL CREDIT AGREEMENT IS HEREBY
AMENDED AND RESTATED IN ITS ENTIRETY TO READ AS FOLLOWS:

     SECTION 1.  DEFINITIONS AND ACCOUNTING TERMS.

     ss. 1.1. CERTAIN DEFINED TERMS. For all purposes of this Agreement,  unless
the context otherwise requires,  the following terms shall have the meanings set
forth  below  (the  following  meanings  to be  equally  applicable  to both the
singular and plural forms of the terms defined):

     "Account  Debtor" shall mean any Person who is or who may become  obligated
to the Company or its Subsidiaries  under, with respect to, or on account of, an
Account.






<PAGE>


     "Accounts" shall mean all accounts, accounts receivable, other receivables,
contract rights,  chattel paper,  instruments,  documents and notes, whether now
owned or  hereafter  acquired by the Company or any  Subsidiary  of the Company,
other than a Foreign Subsidiary and shall include amounts payable to the Company
under License  Agreements as provided in the second  paragraph of the definition
of Eligible Receivables.

     "Additional  Indebtedness"  shall mean all Lender Debt other than principal
of Revolving Advances and interest thereon.

     "Adjusted Eurodollar Rate" shall mean, with respect to each Interest Period
for a Eurodollar Advance,  the rate obtained by dividing (i) the Eurodollar Rate
for such  Interest  Period  by (ii) a  percentage  equal to 1 minus  the  stated
maximum  rate (stated as a decimal) of all  reserves  required to be  maintained
against "Eurocurrency  liabilities" as specified in Regulation D (or against any
other category of liabilities  which includes deposits by reference to which the
interest rate on Eurodollar Advances is determined or any category of extensions
of credit or other assets which includes loans by a non-United  States office of
any Lender to United  States  residents),  and  adding  thereto  the  Applicable
Eurodollar Margin.

     "Adverse Environmental Condition" shall mean any of the matters referred to
in clause (i), (ii) or (iii) of the  definition of  Environmental  Claim,  which
could give rise to an Environmental Claim.

     "Affiliate" of any specified Person shall mean any other Person directly or
indirectly  controlling  or  controlled  by or under  direct or indirect  common
control with such  specified  Person or which is a director,  officer or partner
(limited  or  general)  of  such  specified  Person.  For the  purposes  of this
definition, "control," when used with respect to any specified Person, means the
possession,  direct or indirect,  of the power to vote five percent (5%) or more
of the securities  having ordinary voting power for the election of directors or
the power to direct or cause the  direction  of the  management  and policies of
such Person,  directly or  indirectly,  whether  through the ownership of voting
securities,   by  contract  or  otherwise;   and  the  terms  "controlling"  and
"controlled" have meanings correlative to the foregoing.

     "Agent" shall have the meaning set forth in the preamble to this Agreement.

     "Aggregate  Revolving  Commitments"  shall  mean at any time the sum of the
Revolving Commitments of the Lenders at such time.

     "Aggregate  Revolving Sublimit  Commitments" shall mean at any time the sum
of the Revolving Sublimit Commitments of the Lenders at such time.

     "Agreement"  shall mean this  Amended and  Restated  Credit  Agreement,  as
amended, restated, modified or supplemented from time to time.



                                       2
<PAGE>

     "Applicable  Eurodollar  Margin"  shall  mean the per annum  interest  rate
margin from time to time in effect and  payable in  addition  to the  Eurodollar
Rate  applicable  to the  Revolving  Loan, as determined by reference to Section
2.6(f) of this Agreement.

     "Applicable  Index  Margin"  shall mean the per annum  interest rate margin
from time to time in effect and payable in addition to the Index Rate applicable
to the Revolving  Loan,  as  determined  by reference to Section  2.6(f) of this
Agreement.

     "Applicable Margins" means collectively the Applicable Index Margin and the
Applicable Eurodollar Margin.

     "Approved  Delegate"  shall have the meaning set forth in Section  12.13(n)
hereof.

     "Assignment of Life Insurance"  shall have the meaning set forth in Section
4.9 hereof.

     "Authorized  Representative" shall mean each Person designated from time to
time, as  appropriate,  in a Written  Notice of the Company to the Agent for the
purposes of giving  notices of  borrowing,  requests for issuances of Letters of
Credit or guaranties  thereof,  or conversion or renewal of, Revolving Advances,
which  designation  shall  continue in force and effect  until  terminated  in a
Written Notice to the Agent.

     "Base Rate" shall mean a fluctuating interest rate per annum as shall be in
effect from time to time,  which rate per annum shall be equal to the Index Rate
plus the Applicable Index Margin.

     "Base Rate Advance"  shall mean the portion of any Revolving  Advance which
is not a Eurodollar Advance.

     "Blocked   Accounts"  shall  mean  the  deposit  accounts  of  the  Company
designated as "Blocked Accounts" on Schedule 11.19 hereto and such other deposit
accounts  as the Agent may from time to time  approve  in  writing  as  "Blocked
Accounts" for purposes of this Agreement.

     "Board" shall mean the Board of Governors of the Federal  Reserve System or
any successor agency or entity performing substantially the same functions.

     "Borrower" and "Borrowers" shall have the respective  meanings set forth in
the preamble to this Agreement.

     "Borrower's  Certificate"  shall have the  meaning set forth in Section 2.4
hereof.



                                       3

<PAGE>


     "Borrowing Base" shall mean, at any time, the sum of (i) an amount equal to
sixty  percent  (60%) of the  aggregate  value  (lower  of cost  (on a  specific
identification  or  first-  in-first-out  basis  consistent  with the  Company's
practices) and current market value) of Eligible  Inventory and Foreign Eligible
Inventory,  respectively, plus (ii) an amount equal to eighty-five percent (85%)
of the Net Amount of  Eligible  Receivables  and Net Amount of Foreign  Eligible
Receivables,  respectively;  in each case as indicated on the most recent weekly
Borrowing  Base  Certificate  delivered  to the Agent by the  Company as of such
time,  unless a more recent Borrowing Base Certificate has been requested by the
Agent and  delivered by the Company to the Agent,  in which case as indicated on
such more recent  Borrowing  Base  Certificate.  In no event shall the Borrowing
Base   attributable  to  Foreign  Inventory  and  Foreign   Receivables   exceed
$20,000,000.

     The Agent reserves the right to adjust the Borrowing Base in its reasonable
judgment by revising  standards of eligibility,  establishing  reserves,  and/or
subject to the following sentence increasing or decreasing from time to time the
percentages set forth above, in which case "Borrowing  Base" shall be defined to
include such revisions,  reserves or altered  percentages.  Notwithstanding  the
foregoing,  any increase in the  percentages  set forth above shall  require the
consent of the Majority Lenders.

     "Borrowing  Base  Certificate"  shall have the meaning set forth in Section
8.1(p) hereof.

     "Borrowing  Limit"  shall  have the  meaning  set forth in  Section  2.2(a)
hereof.

     "Business Day" shall mean:

     (a) for all portions of the Revolving  Advances on which  interest  accrues
based upon the Base Rate, any day other than a Saturday,  Sunday or other day on
which banks in New York, New York are authorized or required to close, and

     (b) for portions of the Revolving  Advances on which interest accrues based
upon  the  Adjusted   Eurodollar  Rate,  the  Business  Days  described  in  the
immediately  preceding  subclause  (a) for the  definition  of Business Day, but
excluding  therefrom any day on which commercial banks are not open for dealings
in Dollar deposits in the London (England) interbank market.

     "Capital  Expenditures"  shall mean, for any Person,  any  expenditures  or
costs  (excluding  any  Initial  License  Expense)  made by such  Person for the
acquisition,  maintenance  or  repair  of fixed or  capital  assets  (which  are
required to be capitalized  into the fixed asset caption on the balance sheet of
such  Person in  accordance  with  GAAP),  including,  without  limitation,  the
incurrence or assumption of any Indebtedness in respect of such fixed or capital
asset,  and,  without  double  counting,  any  payment  made in  respect of such
incurrence or assumption.



                                       4
<PAGE>


 
    "Capital Lease" of any Person shall mean any lease of any property (whether
real,  personal or mixed) by that Person as lessee  which,  in  conformity  with
GAAP, is, or is required to be,  accounted for as a capital lease on the balance
sheet of such Person.

     "Capitalized  Lease  Obligations"  of any Person shall at any time mean all
obligations under Capital Leases of such Person in each case taken at the amount
thereof accounted for as liabilities in accordance with GAAP at such time.

     "Cash  Collateral  Agreement"  shall have the  meaning set forth in Section
4.10 hereof.

     "Cash Interest Expense" shall mean, for any period, the aggregate amount of
cash  required  to be applied by the Parent  and its  Subsidiaries  to  Interest
Expense of the Company and its Subsidiaries during such period.

     "Change  of  Control"  shall  mean a "Change  of  Control"  as such term is
defined in the Senior Note Indenture (as in effect on the Closing Date).

     "Charge" shall mean all Federal,  state,  county, city,  municipal,  local,
foreign  or  other  governmental  taxes at the  time  due and  payable,  levies,
assessments,  charges, liens, claims or encumbrances upon or relating to (i) any
Collateral,  (ii) any  Lender  Debt,  (iii)  any of the  Parent's  or any of its
Subsidiaries' employees, payroll, income or gross receipts, (iv) the Parent's or
any of its Subsidiaries' ownership or use of any of its assets, or (v) any other
aspect of the Parent's or any of its Subsidiaries' business.

     "Claims" shall have the meaning set forth in Section 2.12(c) hereof.

     "Clean Down Period" shall mean each period which begins on December 26 of a
calendar  year and ends on February 26 of the  immediately  succeeding  calendar
year.

     "Closing Date" shall mean September 11, 1997.

     "COBRA" shall have the meaning set forth in Section 11.13 hereof.

     "Code" shall mean, at any date,  the Internal  Revenue Code of 1986, as the
same shall be in effect at such date.

     "Collateral"  shall  mean  all  property  and  interests  therein  (real or
personal, tangible or intangible) in which a Lien is now or hereafter granted to
the  Agent  or any  one or  more  of the  Lenders  by any  Credit  Party  or any
Subsidiary  thereof as security for all or any portion of the Lender Debt or any
guarantee thereof.

     "Collecting  Bank  Agreement"  shall mean,  with respect to any  Collecting
Bank,  an  agreement,  in such  form or with  such  provisions  as the Agent may
require, executed by such Collecting Bank, the Agent, where applicable,  and the
Company,  in each case as amended,  supplemented or otherwise modified from time
to time with the prior written consent of the Agent.


                                       5
<PAGE>



     "Collecting  Banks"  shall mean the banks  listed on Schedule  11.19 hereto
under the heading "Blocked  Accounts" and such other banks as the Agent may from
time to time  approve in  writing as  "Collecting  Banks" for  purposes  of this
Agreement.

     "Commitment  Letter" shall mean the commitment  letter,  dated July 8, 1997
between GE Capital and the Company, as amended from time to time.

     "Company"  shall  have  the  meaning  set  forth  in the  preamble  to this
Agreement.

     "Company's First Supplemental  Indenture" shall mean the First Supplemental
Indenture to the Senior Note  Indenture,  dated as of October 28, 1994,  between
the Company and Marine Midland Bank, as trustee.

     "Company's   Second   Supplemental   Indenture"   shall   mean  the  Second
Supplemental Indenture to the Senior Note Indenture,  dated as of July 14, 1995,
between the Company and Marine Midland Bank, as trustee.

     "Company's  Revolving  Loan"  shall  mean,  at any  time,  the  outstanding
principal balance of all Revolving Advances made by the Lenders to the Company.

     "Consignment  Agreement" shall mean (i) each written consignment  agreement
existing as of the Closing Date or entered into after the Closing Date and as to
which the Company has complied  with Section  8.14 hereof,  in each case,  as in
effect from time to time, and (ii) each  consignment  arrangement,  which is not
evidenced by or  memorialized  in a writing  signed by the  consignor  and as to
which the Company has complied  with Section  8.14 hereof,  in each case,  under
which the Company or any Subsidiary thereof is the consignee thereunder.

     "Consignment  Inventory"  shall mean, at any time, each item of merchandise
which (i) at such time is in possession of the Company or any Subsidiary thereof
as consignee  pursuant to a  Consignment  Agreement  which,  if not in a writing
signed by the consignor, has been approved in writing by the Agent, (ii) at such
time is identified by item number in the computer  records of the Company or any
Subsidiary thereof (to which the Agent has on-line access to the extent required
by Section 8.7(b) hereof) as being "memo" or "consigned" inventory,  (iii) as of
such  time  has  not  been  sold or  deemed  sold  to or by the  Company  or any
Subsidiary  thereof,  (iv) to which  ownership,  at such time,  is retained by a
consignor  under such  Consignment  Agreement or other  consignment  arrangement
until such item of  merchandise  is sold or deemed sold by the  consignor to the
consignee, and (v) accordingly,  at such time, is not an asset of the Company or
any Subsidiary  thereof.  Ownership of an item of  merchandise  described in the
foregoing  sentence  is  deemed  to be  retained  by such  consignor  until,  in
accordance  with the  applicable  Consignment  Agreement  or  other  consignment



                                       6


<PAGE>


arrangement,  ownership is transferred (or deemed to be transferred) to a buyer,
the Company or any Subsidiary thereof, regardless of whether any procedures have
been  performed to protect the third party's title to such item of  merchandise.
Additionally,  "Consignment  Inventory"  (a) includes,  at any time, any item of
merchandise  (including the gold content  thereof) which (i) contains gold which
is leased by or consigned or lent to the Company or any Subsidiary thereof,  and
(ii) complies at such time with clauses (ii) and (iii) of the first  sentence of
this definition,  and (b) excludes all cash and non-cash proceeds of any item of
merchandise  (and  any  gold  content  thereof)  which  constituted  Consignment
Inventory.

     "Consignor  Letter" shall mean a letter agreement executed and delivered by
a consignor of "memo" or "consigned"  inventory to the Company  substantially in
the form of Exhibit 5.22 attached hereto.

     "Contingent  Obligations"  of any Person  shall mean any direct or indirect
liability, contingent or otherwise, of such Person:

          (iwith respect to any indebtedness,  lease, dividend, letter of credit
     or other obligation of another if the primary purpose or intent in creating
     such liability is to provide assurance to the obligee of such obligation of
     another that such obligation of another will be paid or discharged, or that
     any agreements  relating thereto will be complied with, or that the holders
     of such  obligation will be protected (in whole or in part) against loss in
     respect thereof;

          (ii) under any letter of credit  issued for the account of such Person
     or for which such Person is otherwise liable for reimbursement thereof;

          (iii) under any Hedge Agreement; or

          (iv) to  advance  or  supply  funds or  otherwise  to  assure  or hold
     harmless  the owner of such  primary  obligation  against  loss in  respect
     thereof.

Contingent Obligations shall include, without limitation:

          (a) the direct or indirect guarantee,  endorsement (otherwise than for
     collection  or  deposit in the  ordinary  course of  business),  co-making,
     discounting  with  recourse  or sale with  recourse  by such  Person of the
     obligation of another, and

          (b) any  liability  of such  Person  for the  obligations  of  another
     through any agreement (contingent or otherwise):

          (i) to purchase,  repurchase or otherwise  acquire such  obligation or
     any security therefor,  or to provide funds for the payment or discharge of


                                       7

<PAGE>


     such obligation (whether in the form of loans,  advances,  stock purchases,
     capital contributions or otherwise);

          (ii) to maintain  the  solvency or any  balance  sheet item,  level of
     income or financial condition of another; or

          (iii) to make take-or-pay or similar  payments if required  regardless
     of non-performance by any other party or parties to an agreement,

if in the case of any agreement  described  under  subclause (i) or (ii) of this
sentence  the  primary  purpose  or  intent  thereof  is  as  described  in  the
immediately preceding sentence. The amount of any Contingent Obligation shall be
equal to the amount of the obligation so guaranteed or otherwise supported.

     "Credit  Parties"  shall mean and include the Parent,  the Company and each
Guarantor.

     "Current Liabilities" of any Person, determined at any time, shall mean all
liabilities of such Person which would,  in accordance  with GAAP, be classified
as current  liabilities  excluding  Revolving Advances and excluding the current
portion of long-term Indebtedness for Borrowed Money.

     "Debenture  Indenture"  shall mean the  indenture  dated as of May 26, 1993
between the Parent and Marine  Midland Bank,  N.A., as trustee,  under which the
Debentures  were issued,  as such indenture is in effect on the Closing Date, as
supplemented  by the Parent's First  Supplemental  Indenture and Parent's Second
Supplemental Indenture..

     "Debentures"  shall mean the Parent's 12% Senior  Discount  Debentures  due
2005.

     "Default"  shall mean an event,  act or condition  which with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.

     "Designated Officer" shall mean the chief financial officer, president, any
vice  president  having  responsibility  for  financial  affairs,  treasurer  or
controller of the Parent or the Company, as the case may be.

     "Disbursement  Account"  shall mean,  with  respect to each  Borrower,  the
deposit  account of such Borrower into which shall be deposited only proceeds of
Revolving  Advances,  which shall  constitute  a "Blocked  Account" and which is
designated as a "Disbursement Account" on Schedule 11.19 hereto.

     "Disqualified  Stock" shall mean any capital stock which,  by its terms (or
by the terms of any  security  into which it is  convertible  or for which it is



                                       8
<PAGE>


exchangeable),  or upon the  happening of any event,  matures or is  mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder  thereof,  in whole or in part,  on or prior to date on
which the Debentures mature.

     "Domestic Inventory" shall mean Inventory (i) owned by the Company and (ii)
located in the United States of America.

     "Domestic Subsidiary" shall mean any Subsidiary of the Company which is not
a Foreign Subsidiary.

     "EBITDA" shall mean, for the Parent and its Subsidiaries, on a consolidated
basis for any period, the sum of:

          (i) the net income (or net loss) from operations of the Parent and its
     Subsidiaries on a consolidated  basis  (determined in accordance with GAAP)
     for  such  period  without  giving  effect  to any  extraordinary  gains or
     non-cash  extraordinary  losses,  but giving  effect to cash  extraordinary
     losses); plus

          (ii) to the extent that any of the items referred to in any of clauses
     (A) through (C) below were deducted in calculating such net income:

          (A)  Interest  Expense  of  the  Parent  and  its  Subsidiaries,  on a
     consolidated basis for such period;

          (B) income  tax  expense  of the  Parent  and its  Subsidiaries,  on a
     consolidated basis with respect to operations for such period; and

          (C) the amount of all  depreciation and amortization of the Parent and
     its Subsidiaries, on a consolidated basis for such period; plus (or minus)

          (iii) without  double  counting items taken into account in clause (C)
     above, all other non-cash  charges or credits  including any "LIFO" charges
     or credits of the Parent and its consolidated  Subsidiaries for such period
     provided  that such  non-cash  charges (or credits)  cannot  become cash in
     accordance with GAAP.

     Any  calculation  of  EBITDA  for  the  Parent  and its  Subsidiaries  on a
consolidated  basis for any period  shall  exclude  any  negative  "EBITDA"  (as
calculated solely for the Parent and not its Subsidiaries) of up to $1,000,000.

     "Eligible  Inventory" shall mean such of the Domestic  Inventory (valued at
the lower of cost (on a specific identification basis) and current market value)
of the Company  which is subject to no Lien (other than in favor of the Agent or


                                       9
<PAGE>

otherwise  permitted  by the Loan  Documents)  and which the Agent,  in its sole
discretion,  shall deem eligible,  less such reserves as the Agent,  in its sole
discretion,  shall from time to time deem appropriate and shall exclude,  in any
event,  the  categories  of  Inventory  deemed  ineligible  as set  forth on the
Borrowing  Base  Certificate  delivered by the Company on the Closing Date.  The
Agent does not intend to treat an item of  Inventory as eligible if any warranty
or representations  contained in any of the Loan Documents  applicable either to
Eligible  Inventory  in  general  or to any  such  specific  Inventory  has been
breached with respect to such Inventory.

     "Eligible  Receivables"  shall mean (A)  amounts  payable  to the  Company,
whether or not due, under the License Agreements, including, without limitation,
at any time during any  calendar  month (or other  relevant  calculation  period
under a License  Agreement),  amounts which,  based on gross sales in accordance
with the terms of the License Agreements, the Company has calculated will become
due and payable to the Company  under the  License  Agreements  as of the end of
such  calendar  month  (or other  relevant  calculation  period  under a License
Agreement),  in each case,  less (B) (a) all amounts  payable by the Company (by
set-off  or  otherwise),  whether  or not due,  under  the  License  Agreements,
including,  without limitation,  at any time during any calendar month (or other
relevant calculation period under a License Agreement), all amounts which, based
on the terms of such License Agreement or otherwise,  the Company has calculated
will become due and payable (by set-off or otherwise) by the Company (including,
without limitation,  by means of offset or deduction from amounts payable to the
Company under the License  Agreements)  as of the end of such calendar month (or
other  relevant  calculation  period  under a License  Agreement),  such amounts
payable by the Company to include, without limitation,  the percentage of sales,
net sales or other amount which is withheld  from the Company by the other party
thereto as a license fee,  rental fee or otherwise,  all amounts  denominated as
"Other  Costs" or any  similar  term  under any  License  Agreement,  including,
without limitation, discounts payable in respect of credit card sales, interest,
carrying  or  service  charges  collected  by the  other  party  to any  License
Agreements,  and  charges  payable by or  charged  to the  Company in respect of
advertising or promotion,  (b) the amount of all sales in respect of which goods
have been returned and (c) all other amounts or adjustments  which, based on the
License Agreements or otherwise,  was or as of the end of any calendar month (or
other relevant  calculation period) will be deducted from amounts payable to the
Company or will be payable by the  Company  under the  License  Agreements  (the
excess of (A) over (B), the "Net Amount of Eligible Receivables"), in each case,
as such amounts and deductions described in clauses (A) and (B) are set forth on
the most recent  Borrowing  Base  Certificate  delivered  by the  Company  under
Section  8.1(p)  hereof or pursuant  to the request of the Agent,  in each case,
except to the extent that the Agent has  determined  that any amount  payable to
the  Company  under  any  one or  more  License  Agreements  is not an  Eligible
Receivable or has  determined  that any amount  payable by the Company should be
increased, and less such reserves as the Agent shall deem appropriate.

     For the purposes of this Agreement,  the term "Account" shall also include,
with respect to any License  Agreement,  amounts described in clause (A) of this
definition  payable to the Company under such License Agreement  (whether or not


                                       10
<PAGE>

due), less the amounts  described in clauses  (B)(a),  (B)(b) and (B)(c) of this
definition  which have been or will be deducted  therefrom or will be payable by
the Company.  

     Without in any way limiting the discretion of the Agent to deem or not deem
any Account arising from any License Agreement as an Eligible Receivable,  Agent
does not currently intend to treat an Account as eligible if:

     (a) any warranty or  representation  contained in any of the Loan Documents
applicable  either to  Accounts  in general or to any such  specific  Account or
related  License  Agreement  has been  breached  with respect to such Account or
License Agreement;

     (b) 50% or more of the  outstanding  Accounts from the Account Debtor which
constituted  Eligible  Receivables  at the time they arose have become,  or been
determined by the Agent to be, ineligible;

     (c) such  Account  is owed by an  Account  Debtor  which  has  commenced  a
voluntary case under the bankruptcy or insolvency laws of any  jurisdiction,  or
made an assignment  for the benefit of  creditors,  or against which a decree or
order for relief has been  entered by a court in an  involuntary  case under the
bankruptcy or insolvency  laws of any  jurisdiction,  or against which any other
petition or other application for relief under the bankruptcy or insolvency laws
of any jurisdiction has been filed, or which has suspended business or consented
to or suffered a receiver,  trustee, liquidator or custodian to be appointed for
it or for all or a  significant  portion of its assets or affairs  (except  that
such an Account  shall not be deemed  ineligible  under  this  clause (c) if the
Agent, in its discretion,  deems such Account as not ineligible or to the extent
that  and  only so long as the  Account  Debtor  on such  Account  shall  have a
debtor-in-possession  credit facility or other credit support,  in each instance
satisfactory  to the Agent,  to assure  timely  payment of such Account and such
Account  (to the extent not  covered by credit  insurance)  shall  constitute  a
post-petition claim against such Account Debtor);

     (d) any amount payable in respect of such Account is more than 60 days past
due;

     (e) the  License  Agreement  under  which  such  Account  arises  has  been
terminated (or notice of termination given) or is otherwise not in full force or
effect (or, if not in effect because such License Agreement has been approved as
an  acceptable  arrangement  by the  Agent,  if the  Agent's  approval  has been
rescinded),  the Company or the licensor thereunder is in material default under
such License Agreement, the licensor under such License Agreement is entitled to
withhold  amounts  which  may be  withheld  only  upon  default  by the  Company
thereunder,  or the Account Debtor under such License  Agreement has no place of
business in the United States;

     (f) the Account  Debtor is an affiliate or employee of the Parent or any of
its Subsidiaries;


                                       11
<PAGE>


     (g) such Account is  denominated  in other than United States dollars or is
payable outside the United States;

     (h) such Account is subject to any claim or dispute by the Account  Debtor,
in which  event such  Account  will be deemed  ineligible  to the extent of such
claim or dispute;

     (i) such Account may become  subject to any setoff (not already  taken into
account in clauses (B)(a),  (B)(b) or (B)(c) of this  definition) by the Account
Debtor,  in which event such Account will be deemed  ineligible to the extent of
such setoff;

     (j) such Account is not subject to an enforceable  and duly perfected first
priority  Lien in favor of the Agent as security  for the Lender  Debt,  or such
Account  is not  owned by the  Company  free and  clear  of all  Liens,  claims,
defenses or rights of others except the Liens  granted to the Agent  pursuant to
the Loan Documents or otherwise permitted hereunder;

     (k) any sale taken into account in  determining  the amount  payable to the
Company in respect of such Account by the Account  Debtor was made other than in
accordance with the terms of the applicable License Agreement;

     (l) such  Account is not a genuine,  bona fide  obligation  of the  Account
Debtor or is not valid,  binding and  enforceable  against the Account Debtor in
accordance with its terms; or

     (m) such Account is evidenced by any note, draft, trade acceptance or other
instrument  for the payment of money which has not been  delivered  in pledge to
the Agent (endorsed in a manner acceptable to the Agent).

     "Employee Plan" shall mean an "employee benefit plan" as defined in Section
3(3) of ERISA,  which is maintained for, or contributions are made on behalf of,
employees  of  any  Credit  Party,  and  any  ERISA  Affiliate,   other  than  a
Multiemployer Plan.

     "Employment  Agreements"  shall mean and  include  the  written  employment
agreement dated as of May 26, 1993,  between the Company and David B. Cornstein,
the written employment agreement dated as of January 3, 1995 between the Company
and Arthur E.  Reiner,  and the letter  agreement  dated  April 18,  1997 by the
Parent in favor of Joseph M. Melvin, and each other written employment agreement
between the Company and any other full time employee of the Company in effect at
any time, as each may be amended,  modified,  supplemented,  restated,  renewed,
replaced  or  extended  from time to time in  accordance  with its terms and the
limitations set forth in Section 9.12 hereof.

     "Environmental  Claim" shall mean any written  notice of violation,  claim,
demand, abatement or other order by any governmental authority or any person for
personal injury (including sickness,  disease or death),  tangible or intangible


                                       12
<PAGE>

property damage, damage to the environment,  nuisance, pollution,  contamination
or other adverse effects on the environment,  or for fines, penalties or deed or
use  restrictions,  resulting  from or  based  upon  (i) the  existence,  or the
continuation  of the existence,  of a Release  (including,  without  limitation,
sudden or non-sudden, accidental or nonaccidental Releases), of, or exposure to,
any  Hazardous  Material  or  any  substance,   chemical,  material,  pollutant,
contaminant,  odor or audible noise in, into or onto the environment (including,
without  limitation,  the air, ground,  water or any surface) at, in, by or from
any of the Facilities,  (ii) the  environmental  aspects of the  transportation,
storage,  treatment or disposal of materials in connection with the operation of
any of the Facilities or (iii) the violation, or alleged violation by the Parent
or  any  of  its  Subsidiaries,  of any  statutes,  ordinances,  orders,  rules,
regulations,  Permits or licenses of or from any governmental authority,  agency
or court relating to environmental matters connected with any of the Facilities,
under any applicable Environmental Law.

     "Environmental Laws" shall mean the Comprehensive  Environmental  Response,
Compensation,  and  Liability  Act (42 U.S.C.  ss. 9601 et seq.),  the Hazardous
Material  Transportation  Act  (49  U.S.C.  ss.  1801  et  seq.),  the  Resource
Conservation  and Recovery Act (42 U.S.C.  ss. 6901 et seq.),  the Federal Water
Pollution  Control Act (33 U.S.C.  ss. 1251 et seq.),  the Oil  Pollution Act of
1990 (P.L.  101-380),  the Safe Drinking  Water Act (42 U.S.C.  ss.  300(f),  et
seq.),  the Clean Air Act (42 U.S.C.  ss.  7401 et seq.),  the Toxic  Substances
Control Act, as amended (15 U.S.C. ss. 2601 et seq.),  the Federal  Insecticide,
Fungicide,  and Rodenticide Act (7 U.S.C. ss. 136 et seq.), and the Occupational
Safety and Health  Act (29 U.S.C.  ss. 651 et seq.),  as such laws have been and
hereafter may be amended or supplemented,  and any analogous future federal,  or
any analogous present or future,  and applicable,  state or local,  statutes and
regulations  promulgated pursuant thereto, or any other federal,  state or local
statute,  ordinance or  regulation  which  regulates or creates  liability  with
respect to a Hazardous Material.

     "Equipment"  shall mean all of the equipment (as defined in the UCC) of the
Credit  Parties,  including,  without  limitation,  machinery,  data  processing
hardware and software, furniture,  fixtures, office equipment and other tangible
personal  property of the Credit Parties,  and all accessions,  accretions,  and
additions to Equipment,  and all other  component and auxiliary parts used or to
be used in  connection  with or attached to any of the same,  wherever  located,
whether now owned or hereafter acquired.

     "Equity  Interests"  shall mean capital stock and all warrants,  options or
other  rights to  acquire  capital  stock or that are  measured  by the value of
capital stock (but  excluding any debt  security  that is  convertible  into, or
exchangeable for, capital stock).

     "Equity Plan" shall mean the Company's Equity Participation Plan.

     "ERISA" shall mean, at any date, the Employee  Retirement  Income  Security
Act of 1974 and the regulations  promulgated and rulings issued thereunder,  all
as the same shall be in effect at such date.


                                       13
<PAGE>


     "ERISA  Affiliate"  shall  mean  any  trade  or  business  (whether  or not
incorporated),  any individual,  trust, firm,  partnership or joint venture that
for  purposes  of Title I and Title IV of ERISA and Section 412 of the Code is a
member of any Credit  Party's  controlled  group or is under common control with
any Credit  Party within the meaning of Section  414(b),  (c), (m) or (o) of the
Code, and the regulations promulgated and rulings issued thereunder.

     "ERISA  Event"  shall mean,  with  respect to any Credit Party or any ERISA
Affiliate  and with  respect to any Pension  Benefit Plan subject to Title IV of
ERISA  or  Section  412  of the  Code,  (a) a  Reportable  Event  (other  than a
Reportable  Event not  subject to the  provision  for 30-day  notice to the PBGC
under  subsection  .13, .14,  .15,  .18, or .19 of PBGC Reg. ss. 2615),  (b) the
withdrawal  of any Credit Party or any ERISA  Affiliate  from a Pension  Benefit
Plan during a plan year in which it was a  "substantial  employer" as defined in
Section  4001(a)(2)  of  ERISA,  (c) the  provision  of a notice  of  intent  to
terminate  a  Pension  Benefit  Plan  under  Section  4041  of  ERISA,  (d)  the
institution of proceedings to terminate a Pension Benefit Plan by the PBGC under
Section  4042 of ERISA,  (e) the failure to make  required  contributions  which
would  result  in the  imposition  of a Lien  under  Section  412 of the Code or
Section 302 of ERISA, or (f) any other event or condition which might reasonably
be  expected  to  constitute  grounds  under  Section  4042  of  ERISA  for  the
termination  of, or the  appointment  of a trustee to  administer,  any  Pension
Benefit Plan or to cause the  imposition of any liability on any Credit Party or
any ERISA Affiliate under Title IV of ERISA.

     "Eurodollar  Advance"  shall  mean the  portion  of any  Revolving  Advance
designated to bear interest based upon the Adjusted  Eurodollar Rate as provided
in Section 2 of this Agreement.

     "Eurodollar  Rate" shall mean,  with respect to any Eurodollar  Advance for
any Interest Period,  the average (mean) of the four rates (rounded  upward,  if
necessary,  to the nearest 1/16 of 1%),  reported  from time to time by Telerate
News  Service  (or such other  number of rates as such  service may from time to
time report),  at which foreign  branches of major U.S. banks offer U.S.  dollar
deposits to other banks for amounts  and in funds  comparable  to the  principal
amount  of the  Eurodollar  Advance  requested  by the  Company  for  which  the
Eurodollar Rate is being  determined with maturities  comparable to the Interest
Period  for which  such  Eurodollar  Rate  will  apply in the  London  (England)
interbank market at  approximately  11:00 a.m. London setting time, on the third
full  Eurodollar  Business Day next  preceding  such Interest  Period,  subject,
however,  to the provisions of Section 2.11 hereof. If such interest rates cease
to be  available  from  Telerate  News  Service,  the  Eurodollar  Rate  will be
determined from such financial  reporting  service or other information as would
be  mutually  acceptable  to the  Company  and the Agent.  The term  "Eurodollar
Business  Day"  means a business  day on which  banks  generally  in the city of
London (England) are open for interbank or foreign exchange transactions.

     "Events of  Default"  shall  have the  meaning  set forth in  Section  10.1
hereof.



                                       14
<PAGE>


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

     "Excluded  Claims"  shall have the  meaning  set forth in  Section  2.12(c)
hereof.

     "Excluded Taxes" shall mean franchise taxes and taxes upon or determined by
reference to any Lender's net income, in each case, imposed by the United States
of America or any political  subdivision or taxing authority  thereof or therein
or by any jurisdiction in which the Initial Eurodollar Office or other branch of
any Lender is located,  is resident or in which any Lender is  organized  or has
its principal or registered office (including,  without limitation, branch taxes
imposed  by the  United  States or  similar  taxes  imposed  by any  subdivision
thereof).

     "Facilities"  shall mean real  property  owned,  operated  or leased by any
Credit Party.

     "Federal  Bankruptcy  Code"  shall mean Title 11 of the United  States Code
entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto.

     "Federal  Funds Rate" shall mean, for any day, a floating rate equal to the
weighted  average of the rates on overnight  Federal  funds  transactions  among
members of the Federal Reserve System, as determined by the Agent.

     "Fee Letter" shall mean that certain  letter  agreement  dated July 8, 1997
between GE Capital and the Company.

     "Financial  Statements"  shall have the meaning set forth in Section 5.2(b)
hereof.

     "FIRREA"  shall  mean the  Financial  Institutions  Reform,  Recovery,  and
Enforcement Act of 1989, as amended from time to time.

     "First  Amendment"  means  Amendment  No. 1,  dated June 15,  1995,  to the
Original Credit Agreement as amended and restated on March 28, 1995.

     "First Sonab Intercompany Note" shall mean the demand promissory note dated
October 28, 1994 by Sonab to the order of the Company in the principal amount of
$12,000,000  together  with any  replacement  or  substitution  thereof  and any
amendment  or  modification  thereof,  in each  case as  permitted  by the terms
hereof.

     "First  Supplemental  Indentures"  shall mean,  collectively,  the Parent's
First Supplemental Indenture and the Company's First Supplemental Indenture.

     "Fiscal Year" shall mean,  with respect to the Parent and its  consolidated
Subsidiaries,  each annual accounting period which begins on the day immediately
following  the end of the preceding  period and ends on the Saturday  closest to
January 31 of each year.


                                       15
<PAGE>


     "Fixed Charge Coverage Ratio" shall mean, for any period,  the ratio of (a)
the excess,  if any, of (i) EBITDA of the Parent and its  Subsidiaries  for such
period  over the sum of (x) the  amount  of cash  applied  by the  Parent to the
payment of income  taxes of the Parent and its  Subsidiaries  in respect of such
period,  whether  directly or pursuant to the Tax Allocation  Agreement plus (y)
the amount of  Capital  Expenditures  made by the  Parent  and its  Subsidiaries
during such period to (b) the sum of (i) Cash Interest  Expense for such period,
plus (ii) the amount of payments  of  principal  on  Indebtedness  for  Borrowed
Money, including, without limitation,  Capitalized Lease Obligations,  scheduled
to be made during such period  excluding  payments of principal on the Revolving
Loan or in  respect  of  reimbursement  of  Letters  of  Credit  (or  guaranties
thereof), plus (iii) dividends paid in cash by the Parent during such period.

     "Foreign  Accounts"  shall mean all accounts,  accounts  receivable,  other
receivables,  contract rights, chattel paper, instruments,  documents and notes,
whether now owned or hereafter  acquired by the Foreign  Subsidiaries  and shall
include amounts payable to the Foreign  Subsidiaries under License Agreements as
provided  in  the  second  paragraph  of  the  definition  of  Foreign  Eligible
Receivables.

     "Foreign  Eligible  Inventory"  shall  mean such of the  Foreign  Inventory
(valued at the lower of cost (on a specific  identification  basis) and  current
market  value) of the  Foreign  Subsidiaries  which is subject to no Lien (other
than in favor of the Agent or  otherwise  permitted by the Loan  Documents)  and
which the Agent, in its sole discretion, shall deem eligible, less such reserves
as the Agent, in its sole  discretion,  shall from time to time deem appropriate
and shall  exclude,  in any event,  the categories of Foreign  Inventory  deemed
ineligible  as set forth on the  Borrowing  Base  Certificate  delivered  by the
Company  on the  Closing  Date.  The Agent  does not  intend to treat an item of
Foreign  Inventory as eligible if any warranty or  representations  contained in
any of the Loan Documents  applicable  either to Foreign  Eligible  Inventory in
general or to any such specific Foreign Inventory has been breached with respect
to such Foreign Inventory.

     "Foreign  Eligible  Receivables"  shall  mean (A)  amounts  payable  to the
Foreign  Subsidiaries,  whether  or  not  due,  under  the  License  Agreements,
including,  without limitation,  at any time during any calendar month (or other
relevant calculation period under a License Agreement),  amounts which, based on
gross sales in accordance with the terms of the License Agreements,  the Foreign
Subsidiaries  have  calculated  will  become  due  and  payable  to the  Foreign
Subsidiaries  under the License  Agreements as of the end of such calendar month
(or other relevant calculation period under a License Agreement),  in each case,
less (B) (a) all  amounts  payable by the  Foreign  Subsidiaries  (by set-off or
otherwise), whether or not due, under the License Agreements, including, without
limitation, at any time during any calendar month (or other relevant calculation
period under a License Agreement), all amounts which, based on the terms of such
License  Agreement or otherwise,  the Foreign  Subsidiaries have calculated will
become due and  payable (by set-off or  otherwise)  by the Foreign  Subsidiaries



                                       16

<PAGE>

(including,  without  limitation,  by means of offset or deduction  from amounts
payable to the Foreign  Subsidiaries under the License Agreements) as of the end
of such calendar  month (or other  relevant  calculation  period under a License
Agreement), such amounts payable by the Foreign Subsidiaries to include, without
limitation, the percentage of sales, net sales or other amount which is withheld
from the  Foreign  Subsidiaries  by the other  party  thereto as a license  fee,
rental fee or otherwise, all amounts denominated as "Other Costs" or any similar
term under any  License  Agreement,  including,  without  limitation,  discounts
payable in respect of credit card sales,  interest,  carrying or service charges
collected by the other party to any License  Agreements,  and charges payable by
or charged to the Foreign  Subsidiaries  in respect of advertising or promotion,
(b) the amount of all sales in respect of which goods have been returned and (c)
all other  amounts or  adjustments  which,  based on the License  Agreements  or
otherwise,  was  or as of the  end of any  calendar  month  (or  other  relevant
calculation  period)  will be  deducted  from  amounts  payable  to the  Foreign
Subsidiaries  or will be payable by the Foreign  Subsidiaries  under the License
Agreements  (the  excess of (A) over (B),  the "Net  Amount of Foreign  Eligible
Receivables"), in each case, as such amounts and deductions described in clauses
(A)  and (B) are  set  forth  on the  most  recent  Borrowing  Base  Certificate
delivered by the Company under Section  8.1(p) hereof or pursuant to the request
of the Agent,  in each case,  except to the extent that the Agent has determined
that any  amount  payable  to the  Foreign  Subsidiaries  under  any one or more
License  Agreements is not a Foreign Eligible  Receivable or has determined that
any amount  payable by the Foreign  Subsidiaries  should be increased,  and less
such reserves as the Agent shall deem appropriate.

     For the purposes of this Agreement,  the term "Foreign  Account" shall also
include, with respect to any License Agreement,  amounts described in clause (A)
of this  definition  payable to the  Foreign  Subsidiaries  under  such  License
Agreement  (whether or not due),  less the amounts  described in clauses (B)(a),
(B)(b)  and  (B)(c)  of this  definition  which  have  been or will be  deducted
therefrom or will be payable by the Foreign Subsidiaries.

     Without in any way limiting the discretion of the Agent to deem or not deem
any Foreign  Account  arising from any License  Agreement as a Foreign  Eligible
Receivable,  Agent  does not  currently  intend  to treat a Foreign  Account  as
eligible if:

     (a) any warranty or  representation  contained in any of the Loan Documents
applicable either to Accounts in general or to any such specific Foreign Account
or related  License  Agreement  has been  breached  with respect to such Foreign
Account or License Agreement;

     (b)  50% or more of the  outstanding  Foreign  Accounts  from  the  Foreign
Account Debtor which constituted  Foreign Eligible  Receivables at the time they
arose have become, or been determined by the Agent to be, ineligible;

     (c) such Foreign Account is owed by an Account Debtor which has commenced a
voluntary case under the bankruptcy or insolvency laws of any  jurisdiction,  or
made an assignment  for the benefit of  creditors,  or against which a decree or
order for relief has been  entered by a court in an  involuntary  case under the


                                       17

<PAGE>

bankruptcy or insolvency  laws of any  jurisdiction,  or against which any other
petition or other application for relief under the bankruptcy or insolvency laws
of any jurisdiction has been filed, or which has suspended business or consented
to or suffered a receiver,  trustee, liquidator or custodian to be appointed for
it or for all or a  significant  portion of its assets or affairs  (except  that
such a Foreign Account shall not be deemed  ineligible  under this clause (c) if
the Agent, in its discretion, deems such Foreign Account as not ineligible or to
the extent that and only so long as the Account  Debtor on such Foreign  Account
shall have a  debtor-in-possession  credit facility or other credit support,  in
each  instance  satisfactory  to the  Agent,  to assure  timely  payment of such
Foreign  Account and such  Foreign  Account (to the extent not covered by credit
insurance) shall constitute a post-petition claim against such Account Debtor);

     (d) any amount  payable in respect of such Foreign  Account is more than 60
days past due;

     (e) the License  Agreement under which such Foreign Account arises has been
terminated (or notice of termination given) or is otherwise not in full force or
effect (or, if not in effect because such License Agreement has been approved as
an  acceptable  arrangement  by the  Agent,  if the  Agent's  approval  has been
rescinded),  the Foreign  Subsidiaries or the licensor thereunder is in material
default  under such  License  Agreement,  or the  licensor  under  such  License
Agreement  is  entitled  to withhold  amounts  which may be  withheld  only upon
default by the Foreign Subsidiaries thereunder;

     (f) the Account  Debtor is an affiliate or employee of the Parent or any of
its Subsidiaries;

     (g) such Foreign  Account is subject to any claim or dispute by the Account
Debtor,  in which event such Foreign  Account will be deemed  ineligible  to the
extent of such claim or dispute;

     (h) such  Foreign  Account may become  subject to any setoff  (not  already
taken into account in clauses  (B)(a),  (B)(b) or (B)(c) of this  definition) by
the  Account  Debtor,  in  which  event  such  Foreign  Account  will be  deemed
ineligible to the extent of such setoff;

     (i) such Foreign Account is not owned by the Foreign  Subsidiaries free and
clear of all  Liens,  claims,  defenses  or rights of  others  except  any Liens
granted to the Agent  pursuant  to the Loan  Documents  or  otherwise  permitted
hereunder;

     (j) any sale taken into account in  determining  the amount  payable to the
Foreign  Subsidiaries  in respect of such Foreign  Account by the Account Debtor
was made  other  than in  accordance  with the terms of the  applicable  License
Agreement;

     (k) such  Foreign  Account is not a genuine,  bona fide  obligation  of the
Account  Debtor or is not valid,  binding  and  enforceable  against the Account
Debtor in accordance with its terms; or



                                       18
<PAGE>
 
     (l) such Foreign Account is evidenced by any note, draft,  trade acceptance
or other  instrument  for the payment of money which has not been  delivered  in
pledge to the Agent (endorsed in a manner acceptable to the Agent).

     "Foreign  Inventory" shall mean any and all now owned or hereafter acquired
inventory, goods, merchandise, and other tangible personal property intended for
sale or lease in the ordinary course of business,  in the custody or possession,
actual or  constructive,  of the  Foreign  Subsidiaries,  or in  transit  to the
Foreign  Subsidiaries,  including  such  inventory as is on consignment to third
party consignees,  leased to customers of the Foreign Subsidiaries, or otherwise
temporarily  out of the  custody  or  possession  of  the  Foreign  Subsidiaries
excluding any Consignment Inventory.

     "Foreign  Lender"  shall  mean any  Lender  which is not a  "United  States
person" (as such term is defined in Section 7701(a)(30) of the Code).

     "Foreign Subsidiary" shall mean a Subsidiary of the Parent organized
under the laws of a country  other than the United  States or any State  thereof
except for the purposes of Borrowing  Base  calculations,  Foreign  Subsidiaries
shall mean those subsidiaries in existence on the Closing Date.

     "Fourth  Amendment  Agreement"  shall mean  Amendment No. 4 to the Original
Credit Agreement dated as of October 28, 1994.

     "Fourth  Amendment  Effective Date" shall have the meaning set forth in the
Fourth Amendment Agreement.

     "GAAP"  shall mean,  for the Parent or any of its  Subsidiaries,  generally
accepted accounting principles in the United States of America,  consistent with
those applied in the  preparation of the financial  statements of the Parent and
its Subsidiaries from time to time; provided,  however, that for the purposes of
determining  compliance with the financial  covenants  contained in Section 8.17
hereof  (and  the  definitions  contained  herein  to  the  extent  employed  in
determining such compliance) only, GAAP shall mean such accounting principles as
in effect and as applied on the Closing Date.

     "GE  Capital"  shall have the  meaning  set forth in the  preamble  to this
Agreement.

     "Gelbfarb Service Agreement" shall mean the Service Agreement dated October
28,  1994  between  Sonab  and  Bernard  Gelbfarb,   as  amended,   modified  or
supplemented  from time to time in accordance with its terms and the limitations
set forth in Section 9.12 hereof.

     "Gold  Consignment  Agreement"  shall mean the Gold  Consignment  Agreement
dated as of June 15, 1995  between the Company and Rhode Island  Hospital  Trust


                                       19
<PAGE>


National  Bank,  as  amended,  modified  or  supplemented  from  time to time in
accordance with its terms and the limitations set forth in Section 9.12 hereof.

     "Gold  Consignment  Documents"  shall mean and include the Gold Consignment
Agreement and each of the Consignment  Documents (as defined therein) other than
the Intercreditor Agreement, in each case, as amended,  modified or supplemented
from time to time in accordance  with its terms and the limitations set forth in
Section 9.12  hereof;  provided  that the Gold  Consignment  Documents  shall be
subject at all times to the terms and provisions of the Intercreditor Agreement.

     "Guarantor"  shall mean, at any time,  the Company,  each present or future
direct and indirect  Subsidiary of the Company,  or other  Person,  in any case,
which shall have executed and delivered a Guaranty as of such time.

     "Guaranty"  shall mean any  guaranty  executed  and  delivered  pursuant to
Section 4.8 hereof, as each may be amended,  supplemented or otherwise  modified
from time to time in accordance with its terms.

     "Guaranty  Obligations"  shall mean the  obligations of any Guarantor under
the Loan Documents to which such Guarantor is a party.

     "Hazardous Material" shall mean any pollutant,  contaminant,  chemical,  or
industrial or hazardous or toxic waste,  substance or material, as defined in or
regulated by any Environmental Law and any other toxic,  reactive,  or flammable
chemicals, including (without limitation) any asbestos, any petroleum (including
crude oil or any fraction),  any radioactive  substance and any  polychlorinated
biphenyls; provided, in the event that any Environmental Law is amended so as to
broaden the meaning of any term  defined  thereby,  such broader  meaning  shall
apply subsequent to the effective date of such amendment; and provided, further,
to the extent  that the  applicable  laws of any state  establish  a meaning for
"hazardous material," "hazardous substance," "hazardous waste," "solid waste" or
"toxic substance" which is broader than that specified in any Environmental Law,
such broader meaning shall apply.

     "Hedge   Agreements"   shall  mean  and  include  (i)  interest  rate  swap
agreements,  currency swap agreements, interest rate cap agreements and interest
rate collar agreements,  (ii) other agreements or arrangements designed to hedge
against  fluctuations  in  interest  rates or foreign  exchange  rates and (iii)
precious  metal options and futures  contracts and other  precious metal hedging
obligations.

     "Indebtedness" of any Person shall mean all items which, in accordance with
GAAP, would be included in determining total liabilities of such Person as shown
on the  liability  side of a balance sheet as at the date  Indebtedness  of such
Person is to be determined and, in any event, shall include (without  limitation
and without duplication):

          (i) all trade accounts payable of such Person;



                                       20
<PAGE>

          (ii) any  liability  of such  Person  secured by any Lien on  property
     owned or acquired by such Person,  whether or not such liability shall have
     been assumed;

          (iii) all Contingent Obligations of such Person;

          (iv)  letters of credit  issued for the  account of such  Person or an
     Affiliate thereof, and all obligations of such Person relating thereto;

          (v) all obligations  (other than obligations to pay fees in connection
     therewith) of such Person in respect of Hedge Agreements; and

          (vi)  all  obligations  of such  Person  under  the  Gold  Consignment
     Documents, whether or not due; provided that if in accordance with GAAP any
     such obligations under the Gold Consignment Documents would not be included
     in determining  total  liabilities of such Person as shown on the liability
     side  of a  balance  sheet  of  such  Person,  then  for  purposes  of  the
     calculation  of the  financial  covenants  in  Section  8.17  hereof,  such
     excluded obligations shall not constitute "Indebtedness".

     "Indebtedness for Borrowed Money" of any Person shall mean all Indebtedness
for borrowed money or evidenced by notes, bonds, debentures or similar evidences
of Indebtedness  of such Person  (including in the event that any obligations of
such Person under the Gold Consignment Documents would, in accordance with GAAP,
be  included in  determining  total  liabilities  of such Person as shown on the
liability  side of a balance sheet of such Person,  such  obligations  under the
Gold Consignment Documents), all obligations of such Person for the deferred and
unpaid  purchase price of any property,  service,  or business (other than trade
accounts  payable  incurred in the ordinary course of business and  constituting
Current  Liabilities  and other than Hedge  Agreements),  and all obligations of
such Person under Capitalized Lease Obligations and finance leases.

     "Indemnification   Agreements"  shall  mean,  collectively,   each  of  the
Indemnification  Agreements  among the  Borrowers,  and each of their (and their
Subsidiaries') respective directors and executive officers, substantially in the
form  of  Exhibit  B  attached  hereto,  as each  may be  amended,  modified  or
supplemented  from  time to time in  accordance  with its  terms  and the  terms
hereof.

     "Indemnified  Party"  shall have the meaning set forth in Section  2.12 (c)
hereof.

     "Index Rate" shall mean,  for any day, a floating  rate equal to the higher
of (i) the rate publicly  quoted from time to time by The Wall Street Journal as
the "base rate on corporate loans at large U.S. money center  commercial  banks"
(or,  if The  Wall  Street  Journal  ceases  quoting  a base  rate  of the  type
described,  the  highest  per annum rate of  interest  published  by the Federal


                                       21
<PAGE>

Reserve  Board in  Federal  Reserve  statistical  release  H.15  (519)  entitled
"Selected  Interest Rates" as the Bank prime loan rate or its  equivalent),  and
(ii) the Federal Funds Rate plus fifty (50) basis points per annum.  Each change
in any interest  rate provided for in this  Agreement  based upon the Index Rate
shall take effect at the time of such change in the Index Rate.

     "Initial  Eurodollar  Office"  shall mean,  for any  Lender,  the branch or
affiliate of such Lender  designated  as the Initial  Eurodollar  Office of such
Lender in Exhibit A hereto.

     "Initial  License  Expense"  shall mean any franchise or other fee or other
expense paid in cash by the Company or a Foreign Subsidiary as consideration for
the initial granting of a license under a License Agreement.


     "Intercreditor  Agreement" shall mean the Intercreditor  Agreement dated as
of June 15, 1995 between the Agent and Rhode Island Hospital Trust National Bank
and acknowledged by the Company, as amended,  modified or supplemented from time
to time in accordance with its terms.

     "Interest  Expense" shall mean,  with respect to any Person for any period,
the interest  expense  (whether  cash or  accretion)  of such Person during such
period  determined  in  accordance  with GAAP,  and shall  include in any event,
without  limitation,  interest expense with respect to Indebtedness for Borrowed
Money (including with respect to the Company,  in the event that the obligations
and liabilities of the Company under the Gold  Consignment  Documents  would, in
accordance  with GAAP,  be  included in  determining  total  liabilities  of the
Company as shown on the liability side of a balance sheet of the Company, "Daily
Consignment  Fees" as such term is defined in the Gold Consignment  Agreement as
in effect on the date of execution  thereof) and payments under Hedge Agreements
that are  designed to hedge  against  fluctuations  in interest  rates and shall
exclude the write off of deferred financing fees.

     "Interest  Payment  Date"  shall  mean,  with  respect  to each  Eurodollar
Advance,  the last day of the  Interest  Period  for  such  Eurodollar  Advance;
provided,  however, that with respect to each Interest Period for any Eurodollar
Advance of a duration of more than three  months,  interest  shall be payable at
three-month intervals and on the last day of such Interest Period.

     "Interest  Period"  shall mean,  with respect to each  Eurodollar  Advance,
initially,  the  period  commencing  on, as the case may be,  the  borrowing  or
conversion  date with respect to such  Eurodollar  Advance and ending one,  two,
three or (if available) six months  thereafter,  as selected by a Borrower;  and
thereafter,  each  period  commencing  on the  last  day of the  next  preceding
Interest Period applicable to such Eurodollar Advance and ending one, two, three
or (if available) six months  thereafter,  as selected by a Borrower;  provided,
however,  that no Interest Period may be selected for a Eurodollar Advance which


                                       22
<PAGE>

expires  later than the  Maturity  Date;  provided,  further,  that any Interest
Period in respect of a Eurodollar  Advance which begins on the last Business Day
of a calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,  subject to
the  foregoing  proviso,  end on the  last  Business  Day of a  calendar  month.
Notwithstanding  the above, all Interest Periods shall be adjusted in accordance
with  Section  12.11  hereof.  "Inventory"  shall  mean any and all now owned or
hereafter acquired inventory,  goods,  merchandise,  and other tangible personal
property  intended for sale or lease in the ordinary course of business,  in the
custody or possession,  actual or constructive, of the Company, or in transit to
the  Company,  including  such  inventory  as is on  consignment  to third party
consignees,  leased to customers of the Company, or otherwise temporarily out of
the custody or possession of the Company excluding any Consignment Inventory.

     "Investment" shall have the meaning set forth in Section 9.4 hereof.

     "Issuing  Bank" shall mean and include each Issuing Lender and each Issuing
Non-Lender Bank.

     "Issuing Lender" shall mean (i) GE Capital (as to issuance of L/C Indemnity
Agreements  treated as Letters of Credit under  Article 2A), and (ii) any Lender
which issues a Letter of Credit pursuant to Article 2A hereof.

     "Issuing  Non-Lender  Bank"  shall mean any  commercial  bank (other than a
Lender)  which  shall be  selected by the Agent and which has issued a Letter of
Credit.

     "L/C Indemnity  Agreement" shall mean an indemnity  agreement,  in form and
substance  satisfactory  to GE  Capital,  by GE  Capital  in favor of an Issuing
Non-Lender  Bank  with  respect  to  Letters  of Credit  issued by such  Issuing
Non-Lender  Bank for the  account of the  Company.  Unless  otherwise  specified
herein, the term Letter of Credit,  when used in this Agreement shall include an
L/C  Indemnity  Agreement  and GE Capital shall for such purpose be deemed to be
the Issuing Lender with respect to such Letter of Credit.

     "Land"  shall have the meaning set forth in the  definition  of Real Estate
herein.

     "Landlord's  Certificate"  shall have the  meaning set forth in Section 4.3
hereof.

     "Lease" shall mean each lease or sublease of real property  existing on the
date hereof  under which any Credit  Party is the lessee or  sublessee  and each
future  lease or sublease of real  property  under which any Credit Party is the
lessee or sublessee;  provided, however, that in no event shall the term "Lease"
be deemed to include any License Agreement.  The exclusion of License Agreements
from  the  defined  term  "Lease"  shall  not  be  construed  as  an  admission,
determination or opinion of the Agent or any Lender that the License  Agreements
are not leases or  executory  contracts  for the  purposes of Section 365 of the
Federal Bankruptcy Code.



                                       23
<PAGE>

     "Leasehold  Mortgage" shall hav the meaning set forth in Section 4.4(a)(ii)
hereof.

     "Lee/Desai  Group" shall mean THL Equity  Holding  Corp.,  a  Massachusetts
corporation and Equity-Linked  Investors,  L.P. and  Equity-Linked  Investors-II
(together with their respective successors and assigns).  "Lee/Desai Investment"
shall mean a $30,000,000 investment by the Lee/Desai Group in the Parent made in
1993.

     "Lender" and "Lenders" shall have the respective  meanings set forth in the
preamble to this Agreement.

     "Lender  Debt"  shall mean and include all  Revolving  Advances  (including
Swing Line Advances),  Letter of Credit Obligations,  and all other Indebtedness
(including,  without limitation,  Additional  Indebtedness) owing at any time by
any  Credit  Party to the  Agent or any one or more of the  Lenders  (including,
without limitation, all principal,  interest, fees, indemnities,  costs, charges
and  other  amounts  payable  under  the  Loan  Documents)  arising  under or in
connection with this Agreement,  the Notes,  any Security  Document,  any of the
other Loan  Documents,  any Guaranty in favor of the Agent or any one or more of
the Lenders,  whether absolute or contingent,  secured or unsecured, due or not,
arising by operation  of law or  otherwise,  and all interest and other  charges
thereon.

            "Letter of Credit"  shall  mean any trade or  performance  letter of
credit issued for the account of the Company  under the terms of this  Agreement
and shall  include any L/C Indemnity  Agreement  issued by GE Capital under this
Agreement.  For purposes of this  Agreement  and the other Loan  Documents,  any
bankers acceptance  accepted pursuant to a Letter of Credit shall, until paid by
the  applicable  Issuing Bank,  be deemed to  constitute a trade or  performance
Letter of Credit in the  undrawn  amount at any time equal to the amount of such
bankers acceptance at such time and any such payment by such Issuing Bank shall,
until such payment is  reimbursed  by the Company,  constitute a drawing under a
Letter of Credit.

     "Letter of Credit  Agreement"  shall mean an application and agreement with
respect  to  the  issuance  of  a  Letter  of  Credit,  in  form  and  substance
satisfactory to the applicable Issuing Bank, the Company and the Agent.

     "Letter of Credit  Cash  Collateral"  shall have the  meaning  set forth in
Section 3.1(a) hereof.

     "Letter of Credit  Obligations"  shall mean and include at any time (i) the
undrawn  and  available  amount of  Letters  of Credit  at such  time,  (ii) the
unreimbursed  amount of drawings  under Letters of Credit at such time and (iii)
(without  duplication)  the  unreimbursed  amounts  of  payments  made under L/C
Indemnity Agreements at such time.



                                       24
<PAGE>

     "Leverage Ratio" shall mean, as of the end of any period,  the ratio of (a)
the aggregate  principal  amount of all  Indebtedness  for Borrowed Money of the
Parent and its  Subsidiaries  as of the end of such  period to (b) EBITDA of the
Parent and its Subsidiaries, for such period.

     "License  Agreement"  shall mean an  agreement  (or an  arrangement  not in
writing  which has been  described  by the  Company  in writing to the Agent and
approved  by the Agent in writing)  between the Company or a Foreign  Subsidiary
and another Person (which is not an Affiliate of the Company),  whether  entered
into prior to or after the  Closing  Date,  granting to the Company or a Foreign
Subsidiary  the right to operate a fine jewelry  department in an  establishment
owned or operated by such  Person,  in the form as in effect on the Closing Date
or as amended,  modified,  extended or supplemented in accordance with the terms
thereof and hereof. If a License  Agreement which is an approved  arrangement as
of the Closing Date is  memorialized  in a writing  signed by the licensor after
the  Closing  Date,  it shall be deemed  entered  into and  effective  as of the
Closing Date.  The failure of the Company to obtain the written  approval of the
Agent for an Unapproved License Agreement,  shall result in such arrangement not
constituting a License Agreement hereunder (including,  without limitation,  for
the purpose of the  definition  of  Eligible  Receivables  and Foreign  Eligible
Receivables) but shall not be a Default hereunder.

     The Agent reserves the right to withdraw at any time its approval
with  respect  to any  License  Agreement  which is not  evidenced  by a written
agreement  and  immediately  upon  such  withdrawal  of  its  approval  of  such
arrangement,  such arrangement shall cease to constitute a License Agreement for
purposes of this Agreement.

     "Lien" shall mean any lien,  mortgage,  pledge,  security interest or other
type of charge or  encumbrance  of any kind,  or any other type of  preferential
arrangement,  including, without limitation, the lien or retained security title
of a conditional  vendor and any easement,  right of way or other encumbrance on
title to real  property and any financing  statement  filed in respect of any of
the  foregoing.  For the  purposes of this  Agreement,  a Credit  Party shall be
deemed  to be the  owner of any  property  which it has  placed in trust for the
benefit  of the holder of  Indebtedness  of such  Credit  Party (or any agent or
trustee of such holder) which  Indebtedness is deemed to be  extinguished  under
GAAP but for which such Credit Party or trust remains legally  liable,  and such
trust shall be deemed to be a Lien.

     "Loan" shall mean the Revolving Loan.

     "Loan Documents" shall mean this Agreement,  each Security  Document,  each
Guaranty,  the Notes,  each Letter of Credit  Agreement  and each L/C  Indemnity
Agreement,  each Borrower's Certificate,  each Borrowing Base Certificate,  each
Landlord's Certificate, each Collecting Bank Agreement, the Fee Letter, and each
other  document or  instrument  now or  hereafter  delivered to the Agent or any
Lender pursuant to or in connection herewith or therewith.



                                       25
<PAGE>

     "Long Term  Incentive  Plan" shall mean the Long Term Incentive Plan of the
Parent, as amended, modified,  supplemented,  restated, renewed or replaced from
time to time in  accordance  with its terms and the terms  hereof,  which  shall
include the 1997 Long Term Incentive Plan of the Parent.

     "Majority  Lenders"  shall mean, at any time, (a) in the event there are at
least two or more  Lenders at such time,  at least two  Lenders  having at least
fifty-one percent (51%) of the amount of the Aggregate Revolving  Commitments of
the  Lenders  at such time or (b) in the event  there is only one Lender at such
time,  such  Lender  having  one  hundred  percent  (100%) of the  amount of the
Aggregate Revolving Commitments at such time.

     "Management  Agreements"  shall  mean,  collectively,  (i)  the  management
agreement dated as of May 26, 1993 between the Parent, the Company and Thomas H.
Lee Capital,  LLC (as assignee of Thomas H. Lee Company) and (ii) the management
agreement  dated as of May 26, 1993  between  the Parent,  the Company and Desai
Capital  Management  Incorporated,   as  each  may  be  amended,   modified,  or
supplemented  from  time to time in  accordance  with its  terms  and the  terms
hereof.

     "Material  Adverse Effect" shall mean a material  adverse effect on (i) the
business,  assets, prospects,  operations or financial or other condition of the
Parent and its Subsidiaries,  taken as a whole, (ii) the Parent's, the Company's
and their Subsidiaries'  collective ability to pay the Lender Debt in accordance
with the terms thereof or (iii) the Agent's Lien on any material  portion of the
Collateral or the priority of any such Lien.

     "Maturity Date" shall mean March 11, 2003.

     "Maximum  Lawful Rate" shall have the meaning set forth in Section  2.18(a)
hereof.

     "Maximum  Permissible  Rate"  shall have the  meaning  set forth in Section
2.18(b) hereof.

     "Mortgage" shall have the meaning set forth in Section 4.4(a)(i) hereof.

     "Multiemployer  Plan"  shall  mean a  "multiemployer  plan" (as  defined in
Section  4001(a)(3) in ERISA)  maintained or contributed to for employees of (i)
the Parent or any of its Subsidiaries; (ii) any Credit Party; or (iii) any ERISA
Affiliate.

     "Net Amount of Eligible  Receivables"  and "Net Amount of Foreign  Eligible
Receivables"  shall have the meanings set forth in the  definition  of "Eligible
Receivables" and "Foreign Eligible Receivables" contained herein, respectively.

     "Net Cash Proceeds" shall mean, with respect to any  transaction,  (i) cash
(freely  convertible  into U.S.  dollars)  received by a Credit  Party from such


                                       26
<PAGE>

transaction  (including  cash received as  consideration  for the  assumption or
incurrence of liabilities  incurred in connection  with or  anticipation of such
transaction),  after (a)  provision  for all income,  title,  recording or other
taxes  measured  by or  resulting  from such  transaction,  (b)  payment  of all
brokerage  commissions,  reasonable  investment banking and legal fees and other
fees and expenses  related to such  transaction,  (c)  deduction of  appropriate
amounts to be provided by such Credit  Party as a reserve,  in  accordance  with
GAAP, against any liabilities  associated with the assets sold or disposed of in
such  transaction  and  retained  by such Credit  Party after such  transaction,
including,  without  limitation,   pension  and  other  post-employment  benefit
liabilities  and  liabilities  related to  environmental  matters or against any
indemnification  obligations  associated  with the assets sold or disposed of in
such  transaction and (d) amounts paid to satisfy  Indebtedness  (other than any
Lender  Debt)  which  are  required  to be repaid  in  connection  with any such
transaction  and (ii)  promissory  notes received by such Credit Party from such
transaction or such other disposition upon the liquidation or conversion of such
notes into cash.

     "Notes"  shall mean and include each of the  Revolving  Notes and the Swing
Line Note.

     "Original  Credit  Agreement" shall have the meaning set forth in the first
"WHEREAS" clause to this Agreement.

     "Other Taxes" shall hav the meaning set forth in Section 2.22(c) hereof.

     "Parent"  shall  have  the  meaning  set  forth  in the  preamble  to  this
Agreement.

     "Parent's First  Supplemental  Indenture" shall mean the First Supplemental
Indenture to the Debenture Indenture,  dated as of October 28, 1994, between the
Parent and Marine Midland Bank, as trustee.

     "Parent's Second Supplemental Indenture" shall mean the Second Supplemental
Indenture to the  Debenture  Indenture,  dated as of July 14, 1995,  between the
Parent and Marine Midland Bank, as trustee.

     "Parent Revolving Credit Facility  Sublimit  Commitment" shall mean, at any
time,  an  amount  equal to  $25,000,000  plus any Net Cash  Proceeds  hereafter
received by Parent from the  issuance  of Equity  Interests,  to the extent that
such Proceeds are used to prepay the Revolving  Loan pursuant to Section  3.2(f)
hereof,  as such amount may from time to time be reduced pursuant to Section 2.5
hereof.

     "Parent's  Revolving  Loan"  shall  mean,  at  any  time,  the  outstanding
principal balance of all Revolving Advances made by the Lenders to the Parent.

     "Payment  Account"  shall  have the  meaning  set forth in  Section  2.4(c)
hereof.


                                       27
<PAGE>

     "PBGC"  shall  mean  the  Pension  Benefit  Guaranty  Corporation,  or  any
successor thereof under ERISA.

     "PCBs"  shal have the meaning set forth in the  definition  of  Contaminant
herein.

     "Pension  Benefit  Plan" shall mean any Employee Plan which is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA).

     "Percentage  Sales  Increase"  shall have the  meaning set forth in Section
9.4(k) hereof.

     "Permits"  shall  mean any  permit,  approval,  authorization,  license  or
variance  required from a governmental  authority having  jurisdiction  under an
applicable Environmental Law.

     "Person"  shall  mean an  individual,  trust,  firm,  partnership,  limited
liability  company,  corporation  (including  business  trust),   unincorporated
association,  joint venture,  government or any political  subdivision or agency
thereof  or any  other  form  of  public,  private  or  governmental  entity  or
authority.

     "Pledge  Agreement"  shall have the  meaning  set forth in  Section  4.1(a)
hereof.

     "pro rata" shall mean, with respect to each Lender,  a percentage  equal to
the ratio that the  Revolving  Commitment  of such Lender bears to the Aggregate
Revolving Commitments of all Lenders.

     "Proceeds" shall have the meaning set forth in Section 8.22 hereof.

     "Real Estate" shall mean all of those plots,  pieces or parcels of land now
owned or hereafter acquired by the Company and its Domestic  Subsidiaries or any
interest therein (the "Land"),  including,  without limitation,  those listed on
Schedule 11.5 hereto and more particularly described in the Mortgages,  together
with the right, title and interest of the Company and its Domestic Subsidiaries,
if any, in and to the streets,  the land lying in the bed of any streets,  roads
or avenues,  opened or proposed, in front of, adjoining, or abutting the Land to
the center line thereof,  the air space and development rights pertaining to the
Land and right to use such air space and development  rights, all rights of way,
privileges, liberties, tenements,  hereditaments, and appurtenances belonging or
in any way appertaining thereto,  awards from any condemnation or eminent domain
proceedings and insurance  proceeds  resulting from any casualty or other damage
to the buildings and other improvements on the Land, all fixtures, all easements
now or hereafter  benefiting the Land and all royalties and rights  appertaining
to the use and enjoyment of the Land, including,  without limitation, all alley,
vault,  drainage,  mineral,  water,  oil,  coal,  gas,  timber and other similar
rights,  together  with  all of the  buildings  and  other  improvements  now or
hereafter  erected on the Land,  all  fixtures  and all  additions  thereto  and
substitution and replacement thereof.



                                       28
<PAGE>

     "Reference Date" shall have the meaning set forth in Section 5.2(a) hereof.

     "Registration   Rights  Agreement"  shall  mean  the  registration   rights
agreement dated as of May 26, 1993 among the Parent, certain existing holders of
the common stock of the Parent and the Lee/Desai  Group, as such may be amended,
modified,  supplemented,  restated,  renewed  or  replaced  from time to time in
accordance  with its terms  and the  terms  hereof.  "Regulation  D" shall  mean
Regulation  D of the Board as from time to time in effect and any  successor  to
all or a portion thereof establishing reserve requirements.

     "Reiner Employment  Agreement" shall mean the Employment Agreement dated as
of January 3, 1995 (as originally in effect or as amended in accordance with its
terms and the  limitations  set forth in Section  9.12  hereof)  among Arthur E.
Reiner, the Company and the Parent.

     "Related  Party" shall mean with respect to any Person (i) any  controlling
stockholder,  general or limited  partner,  80% (or more) owned  subsidiary,  or
spouse or immediate  family member (in the case of an individual) of such Person
or (ii) any trust, corporation,  partnership or other entity, the beneficiaries,
stockholders,  partners,  owners or persons  beneficially holding an 80% or more
controlling  interest of which  consist of such Person and/or such other persons
referred to in the  immediately  preceding  clause (i),  and with respect to the
Parent,  "Related  Party" shall include any full-time  employee of the Thomas H.
Lee Company.

     "Release" shall mean any releasing,  spilling,  escaping, leaking, seepage,
pumping,  pouring,  emitting,  emptying,   discharging,   injecting,   leaching,
disposing or dumping.  The meaning of the term shall also include any threatened
Release.

     "Remedial Action" shall mean all actions required by any
Environmental  Law to (1)  clean  up,  remove,  treat or  dispose  of  Hazardous
Materials  in the indoor or outdoor  environment;  (2)  prevent  the  Release or
minimize the further  Release of  Hazardous  Materials so they do not migrate or
otherwise  endanger  or threaten  to  endanger  public  health or welfare or the
indoor  or  outdoor  environment;   or  (3)  perform  pre-remedial  studies  and
investigations  and  post-remedial  monitoring  and care in  respect  of actions
contemplated in the preceding clauses (1) and (2).

     "Reportable  Event" shall have the meaning set forth in Section 8.12 (b)(i)
hereof.

     "Revolving  Advance"  shall have the  meaning  set forth in Section  2.1(a)
hereof and shall include,  except where the context  otherwise  requires,  Swing
Line Advances.

     "Revolving Commitment" as to any Lender shall have the meaning set forth in
Section 2.2(b) hereof.



                                       29
<PAGE>

     "Revolving  Credit  Facility"  shall  mean,  collectively,  the  facilities
provided by the Lenders and the Issuing Banks to the Borrowers hereunder to make
Revolving  Advances  (including  Swing Line Advances) and to provide  Letters of
Credit and L/C Indemnity Agreements.

     "Revolving  Credit Facility  Commitment" shall mean, at any time, an amount
equal  to  $175,000,000  or such  lesser  amount  after  giving  effect  to each
reduction of the Revolving  Credit Facility  Commitment  pursuant to Section 2.5
hereof.

     "Revolving Loan" shall have the meaning set forth in Section 2.1(a) hereof.

     "Revolving Note" and "Revolving  Notes" shall have the respective  meanings
set forth in Section 2.3(a) hereof.

     "Revolving Sublimit Commitment" as to any Lender shall have the meaning set
forth in Section 2.2(b) hereof.

     "Second  Sonab  Intercompany  Note" shall mean the demand  promissory  note
dated  October 28,  1994 by Sonab to the order of the  Company in the  principal
amount of $33,000,000  together with any replacement or substitution thereof and
any amendment or modification thereof, in each case as permitted by Section 9.12
hereof.

     "Second  Supplemental  Indentures" shall mean,  collectively,  the Parent's
Second Supplemental Indenture and the Company's Second Supplemental Indenture.

     "Security  Agreement"  shall have the  meaning  specified  in  Section  4.3
hereof.

     "Security  Documents"  shall have the  meaning  specified  in  Section  4.3
hereof.

     "Senior Note  Indenture"  shall mean the indenture dated as of May 26, 1993
between the Company and Marine  Midland  Bank,  N.A., as trustee under which the
Senior Notes were issued, as such indenture is in effect on the Closing Date, as
supplemented  by the Company's  First  Supplemental  Indenture and the Company's
Second Supplemental Indenture.

     "Senior Notes" shall mean the Company's 10-5/8% Senior Notes due 2003.

     "Shareholders Agreement" shall mean the stockholders' agreement dated as of
May 26, 1993 among the Parent and certain  existing  holders of the common stock
of the Parent, as such may be amended, modified, supplemented, restated, renewed
or replaced from time to time in accordance  with its terms and the  limitations
set forth in Section 9.12 hereof.

     "Solvent"  and  "Solvency"  shall  mean,  with  respect  to any Person on a
particular date, that on such date,



                                       30
<PAGE>

     (a) the fair value of the property of such Person is greater than the total
amount of liabilities, including, without limitation, contingent liabilities, of
such Person; and

     (b) the present fair salable value of the assets of such Person is not less
than the amount  that will be  required to pay the  probable  liability  of such
Person on its debts as they become absolute and matured; and

     (c) such  Person  does not intend to,  and does not  believe  that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and

     (d) such Person is not engaged in  business  or a  transaction,  and is not
about to engage in business or a transaction,  for which such Person's  property
would constitute an unreasonably small capital.

     "Sonab" shall mean Societe Nouvelle  D'Achat De Bijouterie - S.O.N.A.B.,  a
French societe en nom collectif.

     "Sonab  Acquisition"  shall mean the  purchase by Sonab  Holdings and Sonab
International  of all the  outstanding  capital  stock of Sonab  and such  other
related transactions effected pursuant to the Sonab Acquisition Documents.

     "Sonab Acquisition Documents" shall mean the Sonab Share Purchase Agreement
and  such  other  documents  executed  and  delivered  in  connection  therewith
(including,  without  limitation,  the Sonab Intercompany Notes and the Gelbfarb
Service Agreement),  in each case as in effect on the Fourth Amendment Effective
Date, as amended,  modified or supplemented from time to time in accordance with
the terms thereof and the limitation set forth in Section 9.12 hereof.

     "Sonab Holdings" shall mean Sonab Holdings, Inc., a Delaware corporation.

     "Sonab  Intercompany  Notes"  shall  mean,  collectively,  the First  Sonab
Intercompany Note and the Second Sonab Intercompany Note.

     "Sonab  International"  shall mean Sonab  International,  Inc.,  a Delaware
corporation.

     "Specified  Default" shall mean an Event of Default under Sections 10.1(a),
including,  without limitation, by virtue of any payment required under Sections
3.1 or 3.2 hereof, 10.1(b),  10.1(d),  10.1(f),  10.1(g), 10.1(h) (to the extent
such Event of  Default  involves a judgment  of  $5,000,000  or more),  10.1(j),
10.1(k) or 10.1(l) hereof or, to the extent arising from a Default under Section
8.1(c),  Section 8.1(g), Section 8.1(p), Section 8.6 (to the extent such Default
involves the  maintenance  of  existence of the Company or the Parent),  Section
8.17, Section 8.22, any one or more of Sections 9.1 through 9.9 inclusive, 9.12,
9.14 or 9.20 hereof.


                                       31
<PAGE>

     "Subsidiary"  of any Person shall mean any  corporation  or other  business
entity of which more than  fifty  percent  (50%) of the  issued and  outstanding
securities  having  ordinary voting power for the election of directors is owned
or  controlled,  directly or  indirectly,  by a Person and/or one or more of its
Subsidiaries.  The use of the  term  Subsidiary  in the  phrase  Parent  and its
Subsidiaries  on  a  consolidated   basis,  or  the  like,  shall  only  include
Subsidiaries whose accounts or financial reports are consolidated with Parent in
accordance with GAAP, and in any event shall include the Company.

     "Supervisory  Policy"  shall have the meaning  set forth in Section  9.4(b)
hereof.

     "Swing Line Advance" has the meaning assigned to it in Section 2.1(c)(i).

     "Swing  Line  Availability"  has  the  meaning  assigned  to it in  Section
2.1(c)(i).

     "Swing  Line  Commitment"  shall  mean,  as to the Swing Line  Lender,  the
commitment of the Swing Line Lender to make Swing Line Loans in the amount of up
to  $15,000,000,  which  commitment  constitutes a subfacility  of the Revolving
Commitment of the Swing Line Lender.

     "Swing Line Lender" shall mean GE Capital.

     "Swing Line Loan" shall mean, as the context may require,  at any time, the
aggregate  amount of Swing Line Advances  outstanding  to any Borrower or to all
Borrowers.

     "Swing Line Note" has the meaning assigned to it in Section 2.1(c) (ii).

     "Tax Allocation Agreement" shall mean the tax allocation agreement dated as
of November 1, 1992 between the Parent and the Company,  as such may be amended,
modi fied or supplemented from time to time in accordance with its terms and the
terms hereof.

     "Taxes" shall have the meaning set forth in Section 2.22(a) hereof.

     "Trademark, Patent and Copyright Security Agreement" shall have the meaning
set forth in Section 4.2 hereof.

     "UCC" shall mean the Uniform  Commercial Code (or any successor statute) of
(i) the State of New York and (ii) each other  state to the  extent the  Uniform
Commercial  Code of which is required by Section 9-103 of the UCC of New York to
be applied in connection with the perfection of a security  interest in favor of
the Agent hereunder or under any Security Document.

     "U.S.  dollars" and "$" shall mean lawful  currency of the United States of
America.


                                       32
<PAGE>

     "UCP" shall have the meaning set forth in Section 2A.9 hereof.

     "Unapproved License Agreement" shall mean an unwritten arrangement (not yet
approved  in writing by the Agent or as to which the  approval  of the Agent has
been withdrawn)  between the Company or a Foreign Subsidiary and another Person,
granting  to the  Company  or a Foreign  Subsidiary  the right to operate a fine
jewelry department in an establishment owned or operated by such Person.

     "Written   Notice"  and  "in  writing"  shall  mean  any  form  of  written
communication or a communication by means of telex, telecopier device, telegraph
or cable.

     ss. 1.2. TERMS DEFINED IN THE UNIFORM COMMERCIAL CODE. Each term defined in
the UCC of the State of New York and used herein  shall have the  meaning  given
therein unless otherwise defined herein.

     ss. 1.3.  COMPUTATION OF TIME PERIODS. In this Agreement in the computation
of periods of time from a specified  date to a later  specified  date,  the word
"from"  shall mean "from and  including,"  the words "to" and "until" each shall
mean "to but excluding" and the word "through" shall mean "to and including."

     ss. 1.4.  ACCOUNTING  TERMS. All accounting terms not specifically  defined
herein shall be construed, as to a specified Person, in accordance with GAAP.

     ss. 1.5. OTHER PROVISIONS  REGARDING  DEFINITIONS.  (a) The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular  provision of
this Agreement.

     (b) The terms  defined in this  Section  1,  unless  the  context  requires
otherwise,  will have the meanings applied to them in this Section 1, references
to an  "Exhibit,"  "exhibit,"  "Schedule" or "schedule"  are,  unless  otherwise
specified,  to one of the exhibits or schedules  attached to this  Agreement and
references to a "section" or "Section" are, unless otherwise  specified,  to one
of the sections of this Agreement.

     (c) The term "or" is not exclusive.

     SECTION 2. AMOUNT AND TERMS.

     ss. 2.1. REVOLVING ADVANCES;  SWING LINE FACILITY.  (a) Each of the Lenders
severally  agrees to lend to the  Borrowers,  subject  to and upon the terms and
conditions  herein set  forth,  at any time or from time to time on or after the
Closing  Date and before the Maturity  Date,  such  Lender's pro rata share,  as
determined  under Section 2.4(c) hereof,  of such borrowings as may be requested
or be deemed  requested by the  Borrowers in  accordance  with the terms of this
Agreement  (each such  borrowing,  a  "Revolving  Advance"  and the  outstanding
principal balance of all Revolving Advances (including Swing Line Advances) from
time to time, the "Revolving  Loan"),  subject to the  limitations  contained in
Section 2.2 hereof.


                                       33
<PAGE>

     (b) Each  Revolving  Advance shall be in an amount equal to $100,000 or any
integral  multiple of $100,000  and shall be made on the date  specified  in the
Written Notice as described in Section 2.4(a) hereof; provided, however, that if
the Company  shall be deemed to request a Revolving  Advance  under Section 2A.4
hereof,  no notice of a borrowing  by the Company  shall be  necessary  and such
Revolving Advance shall be in the amount of the reimbursement  obligation of the
Company for the drawing made under the Letter of Credit for which such Revolving
Advance is deemed requested.  Each Revolving Advance shall be either a Base Rate
Advance or a Eurodollar  Advance,  or a combination  thereof,  as the applicable
Borrower shall request, subject to and in accordance with the provisions of this
Agreement.  Any  portion of a  Revolving  Advance  which  shall be a  Eurodollar
Advance  shall be in an  amount  equal to  $1,000,000  or any  greater  integral
multiple thereof.

     (c) Swing Line Facility.  (i) Agent shall notify the Swing Line Lender upon
Agent's receipt of any Written Notice requesting a Revolving Advance. Subject to
the terms and conditions  hereof,  the Swing Line Lender may, in its discretion,
make  available  from time to time until the Maturity  Date  advances  (each,  a
"Swing Line Advance") in accordance with any such notice.  The aggregate  amount
of Swing Line Advances  outstanding shall not exceed the lesser of (A) the Swing
Line  Commitment  and (B) the  aggregate  Borrowing  Base  less the  outstanding
balance  of the  Revolving  Loan and Letter of Credit  Obligations  at such time
("Swing Line Availability"). Until the Maturity Date, Borrowers may from time to
time borrow,  repay and  reborrow  under this  Section  2.1(c).  Each Swing Line
Advance  shall  be made  pursuant  to a  Written  Notice  of  Revolving  Advance
delivered to Agent by a Borrower in accordance with Section 2.4(a) hereof. Those
notices  must be given no later than 12:00 noon (New York time) on the  Business
Day of the proposed Swing Line Advance.  Notwithstanding  any other provision of
this Agreement or the other Loan Documents, the Swing Line Loan shall constitute
a Base Rate Advance and a Revolving Advance. Borrowers shall repay the aggregate
outstanding  principal  amount of the Swing Line Loan upon  demand  therefor  by
Agent.

     (ii) Each  Borrower  shall  execute  and deliver to the Swing Line Lender a
promissory note to evidence the Swing Line Commitment.  The note shall be in the


                                       34
<PAGE>

principal  amount of the Swing Line  Commitment of the Swing Line Lender,  dated
the Closing Date and substantially in the form of Exhibit 2.1(c)(ii) (the "Swing
Line Note"). The Swing Line Note shall represent the obligation of each Borrower
to pay the amount of the Swing Line Commitment or, if less, the aggregate unpaid
principal amount of all Swing Line Advances made to such Borrower  together with
interest thereon. The entire unpaid balance of the Swing Line Loan and all other
non-contingent  Lender  Debt  shall be  immediately  due and  payable in full in
immediately available funds on the Maturity Date if not sooner paid in full.

     (iii) Refunding of Swing Line Loans. The Swing Line Lender, at any time and
from time to time in its sole and absolute  discretion  (but no less  frequently
than once per week),  may on behalf of any Borrower  (and each  Borrower  hereby
irrevocably  authorizes  the Swing Line Lender to so act on its behalf)  request
each Lender  (including  the Swing Line  Lender) to make a Revolving  Advance to
such  Borrower  (which shall be a Base Rate  Advance) in an amount equal to such
Lender's pro rata share of the principal  amount of such  Borrower's  Swing Line
Loan (the  "Refunded  Swing Line Loan")  outstanding  on the date such notice is
given.  Unless any of the events described in Section 10 shall have occurred (in
which event the  procedures  of this  Section  shall  apply) and  regardless  of
whether the conditions  precedent set forth in this Agreement to the making of a
Revolving  Advance are then  satisfied,  each Lender shall disburse  directly to
Agent,  its pro rata  share of a  Revolving  Advance on behalf of the Swing Line
Lender,  prior to 3:00 p.m. (New York time),  in immediately  available funds on
the date such notice is given. The proceeds of such Revolving  Advances shall be
immediately  paid to the Swing Line  Lender and  applied to repay the Swing Line
Loan of the applicable Borrower.

     (iv) Participation in Swing Line Loans. If, prior to refunding a Swing Line
Loan with a Revolving Advance pursuant to Section 2.1(c)(iii), one of the events
described in Section 10 shall have occurred,  then, subject to the provisions of
Section  2.1(c)(v) below,  each Lender will, on the date such Revolving  Advance
was to have been made for the benefit of the applicable Borrower,  purchase from
the Swing Line Lender an undivided participation interest in the Swing Line Loan
to such  Borrower  in an amount  equal to its pro rata  share of such Swing Line
Loan. Upon request, each Lender will promptly transfer to the Swing Line Lender,
in immediately available funds, the amount of its participation.

     (v) Revolving Lenders' Obligations Unconditional.  Each Lender's obligation
to make  Revolving  Advances  in  accordance  with  Section  2.1(c)(iii)  and to
purchase participating  interests in accordance with Section 2.1(c)(iv) shall be
absolute  and  unconditional  and shall  not be  affected  by any  circumstance,
including (A) any setoff, counterclaim, recoupment, defense or other right which
such  Revolving  Lender may have against the Swing Line Lender,  any Borrower or
any other Person for any reason whatsoever; (B) the occurrence or continuance of
any Default or Event of Default;  (C) any  inability  of any Borrower to satisfy
the  conditions  precedent to borrowing set forth in this  Agreement on the date
upon which such  participating  interest  is to be  purchased;  or (D) any other
circumstance,  happening or event  whatsoever,  whether or not similar to any of
the foregoing.  If any Lender does not make available to Agent or the Swing Line
Lender, as applicable,  the amount required  pursuant to Section  2.1(c)(iii) or
2.1(c)(iv),  as the case may be,  the Swing Line  Lender  shall be  entitled  to
recover such amount on demand from such Lender,  together with interest  thereon
for each day from the date of  non-payment  until such amount is paid in full at
the  Federal  Funds  Rate for the first two  Business  Days and at the Base Rate
thereafter.

     ss. 2.2. REVOLVING CREDIT FACILITY  COMMITMENT AND BORROWING LIMIT. (a) The
aggregate  unpaid  principal  amount of the Revolving Loan  (including the Swing
Line Loan) at any time,  when added to the aggregate  amount of Letter of Credit
Obligations  at such time,  shall not exceed an amount (the  "Borrowing  Limit")
equal to the lesser of (i) the Revolving Credit Facility Commitment at such time



                                       35
<PAGE>

and (ii) except in the case of Revolving  Advances to be made under Section 2A.4
hereof as to which this  clause (ii) shall not apply to prevent  such  Revolving
Advances (but this exception  shall not limit the  application of Section 3.1(a)
hereof), an amount equal to the Borrowing Base at such time. Notwithstanding the
foregoing:  (i) except for  Revolving  Advances  to be made under  Section  2A.4
hereof, no Revolving Advance shall be made if, after giving effect to the making
of such Revolving  Advance,  a prepayment would be required under Section 3.1(a)
hereof,  and  (ii) no  Revolving  Advance  shall be made to the  Parent  if such
Revolving Advance, when added to the sum of the aggregate amount of the Parent's
Revolving  Loan plus the  aggregate  amount  theretofore  paid by the Company to
redeem Senior Notes,  would exceed the Parent Revolving Credit Facility Sublimit
Commitment.

     (b) Subject to the limitations of Sections 2 and 3 hereof,  the Company may
borrow, repay and reborrow the Revolving Loan. The portion of the Revolving Loan
to be funded by each Lender  shall not exceed in aggregate  principal  amount at
any one time  outstanding,  and no Lender shall have any  obligation to fund its
pro rata share of any  Revolving  Advance if, after giving effect  thereto,  the
outstanding  portions of Revolving  Advances made by such Lender shall be in the
aggregate in excess of, the revolving  commitment amount set forth opposite such
Lender's name on Exhibit A hereto for the Revolving Credit Facility  Commitment,
as reduced from time to time (for each Lender, its "Revolving Commitment").  The
portion of the  Revolving  Loan to be funded by each Lender to the Parent  shall
not exceed in aggregate  principal  amount at any one time  outstanding,  and no
Lender  shall have any  obligation  to fund its pro rata share of any  Revolving
Advance  to be  made  to  the  Parent  if,  after  giving  effect  thereto,  the
outstanding  portions of  Revolving  Advances  made by such Lender to the Parent
shall be in the  aggregate  in excess of,  the  revolving  commitment  set forth
opposite such Lender's name on Exhibit A hereto for the Parent  Revolving Credit
Facility Sublimit Commitment, as reduced from time to time (for each Lender, its
"Revolving Sublimit Commitment").

     ss.  2.3.  REVOLVING  NOTES.  (a) The pro  rata  portion  of the  Revolving
Advances  made by each  Lender  shall be  evidenced  by, and be  repayable  with
interest  in  accordance  with the terms  of, a  promissory  note  issued by the
Borrowers  payable to the order of such Lender,  in the maximum principal amount
of such Lender's  Revolving  Commitment and in the form of Exhibit 2.3(a) hereto
(together with any replacement,  modification,  renewal or substitution thereof,
individually, a "Revolving Note" and collectively, the "Revolving Notes").

     (b)  Each  Revolving  Note  shall  be dated  the  Closing  Date and be duly
completed,  executed and  delivered by the Borrowers  and such  Revolving  Notes
shall replace the  Revolving  Notes  previously  delivered by the Company to the
Lenders in connection with the Original Credit Agreement.

     (c) Each Lender shall endorse that portion of the amount of each  Revolving
Advance  which it has made to a  Borrower  and the  amount  of each  payment  or
prepayment  of  principal  thereon  in the  appropriate  space on the grid sheet



                                       36
<PAGE>

attached  to the  applicable  Revolving  Note (or so note same in its  records);
provided,  however,  that the failure of any Lender to make any such endorsement
or  recordation  shall not in any manner affect the obligation of the applicable
Borrower to repay to such Lender the portion of the Revolving  Advance  advanced
by such Lender under the applicable Revolving Note held by such Lender. Any such
endorsement or recordation shall represent  conclusive  evidence of the date and
amount of such  Lender's pro rata share of any  Revolving  Advance or payment or
prepayment of principal thereon, absent manifest error.

     (d) Each of the  Revolving  Notes  shall  mature on the  Maturity  Date (or
earlier as hereinafter provided), and shall be subject to payment and prepayment
as provided in Sections 2 and 3 hereof.

     ss.  2.4.  NOTICE OF  BORROWING;  BORROWER'S  CERTIFICATE.  (a)  Subject to
Section  3.2(e)  hereof,  whenever a Borrower  desires to make a borrowing  of a
Revolving Advance (other than the initial Revolving Advance),  it shall give the
Agent,  at its address set forth in Section  12.4  hereof,  not later than 12:00
noon (New York time), at least three (3) Business Days' prior Written Notice (or
same day prior Written Notice in the case of a Revolving  Advance which shall be
a Base Rate Advance) from an  Authorized  Representative  (which notice shall be
irrevocable)  of its desire to make a  borrowing  of a Revolving  Advance.  Each
notice of borrowing under this Section 2.4(a) shall be substantially in the form
of Exhibit 2.4 hereto (each a "Borrower's  Certificate") and specify the date on
which the applicable Borrower desires to make a borrowing of a Revolving Advance
(which in each instance shall be a Business Day), the amount of such  borrowing,
whether such borrowing shall be a Base Rate Advance or a Eurodollar Advance or a
combination thereof,  and, in the case of the selection of a Eurodollar Advance,
the  proposed  Interest  Period  therefor,  and shall  refer to the most  recent
Borrowing  Base  Certificate  delivered by the Company to the Agent  pursuant to
Section  8.1(p)  hereof  or at the  request  of the  Agent  and  set  forth  the
applicable Borrowing Base provided therein. If such notice shall be with respect
to a borrowing of a Eurodollar Advance but fails to state an applicable Interest
Period  therefor,  then  such  notice  shall be  deemed  to be a  request  for a
one-month Interest Period. If (x) the applicable Borrower shall fail to state in
any such notice whether such Revolving Advance shall be a Base Rate Advance or a
Eurodollar  Advance or (y) the Company  shall be deemed to make a borrowing of a
Revolving Advance pursuant to Section 2A.4 hereof,  then the applicable Borrower
shall be  deemed to have  selected  a Base Rate  Advance.  Subject  to the other
provisions of this  Agreement,  Revolving  Advances of more than one type may be
outstanding  at the same  time;  provided,  however,  that no more  than six (6)
Eurodollar Advances in the aggregate may be outstanding at any one time.

     (b)  Neither  Borrower  shall  be  permitted  to  select a  borrowing  of a
Eurodollar  Advance  in  any  Borrower's  Certificate  (x) to  the  extent  such
selection would be prohibited by Section 2.10 or Section 2.11 hereof or (y) if a
Default or an Event of Default shall be in existence as of the date of selection
or commencement of the applicable Interest Period.


                                       37
<PAGE>

     (c) Each Lender shall make  available  to the Agent such  Lender's pro rata
portion  of the  Revolving  Advance  to be made  on the  date  specified  in the
aforementioned notice (which for purposes of Revolving Advances made pursuant to
Section 2A.4 hereof shall be deemed to be the Business Day after  receipt of the
written or telephonic notice by the Agent to each such Lender of such borrowing)
not later than 2:00 p.m. (New York time) on such specified date in U.S.  dollars
in immediately  available  funds, at the account of the Agent located at Bankers
Trust Company, New York, New York, ABA Number: 021-001-





<PAGE>


033, Account Title: GECC/CAF Depository, Account Number: 50-232-854,  Reference:
Finlay  Fine  Jewelry or such  other  account as the Agent may from time to time
direct (the  "Payment  Account").  The portion of each  Revolving  Advance to be
funded by each Lender shall be an amount  equal to (x) the dollar  amount of the
Revolving Advance requested or deemed requested by the applicable Borrower under
Section  2.1(a)  or 2A.4  hereof,  multiplied  by (y) the  percentage  set forth
opposite  such  Lender's  name on  Exhibit  A hereto  for the  Revolving  Credit
Facility Commitment.

     (d) Except for  Revolving  Advances  made  pursuant to Section  2A.4 hereof
(which  Revolving  Advances  shall be applied to the  reimbursement  of drawings
under  the  Letter  of  Credit  for which  such  Revolving  Advance  was made in
accordance  with such Section 2A.4 hereof),  proceeds of each Revolving  Advance
received by the Agent shall be made available to the applicable  Borrower by the
Agent  at  such  Borrower's   Disbursement  Account  upon  satisfaction  of  all
applicable conditions.

     ss. 2.5. TERMINATION OR REDUCTION OF REVOLVING CREDIT FACILITY COMMITMENTS;
REDUCTION OF PARENT  REVOLVING  CREDIT SUBLIMIT  COMMITMENTS.  (a) The Borrowers
shall have the right,  upon not less than three (3) Business Days' prior Written
Notice to the Agent (and the Agent shall promptly  notify each Lender thereof in
writing or by  telephone  confirmed  promptly  in  writing),  to  terminate  the
Revolving  Credit  Facility  Commitment or, from time to time, to reduce ratably
(as among the  Lenders)  in part the  amount of the  Revolving  Credit  Facility
Commitment; provided, however, that:

          (i) any  such  partial  reduction  of the  Revolving  Credit  Facility
     Commitment shall be in the aggregate amount of at least  $25,000,000 (or an
     integral  multiple of $5,000,000 in excess  thereof) or following the first
     partial  reduction  under  this  Section  2.5(a)(i),  an  amount  equal  to
     $50,000,000  minus  the  amount  of such  first  partial  reduction  of the
     Revolving  Credit Facility  Commitment of $25,000,000 in excess thereof and
     shall be accompanied by prepayment of the Revolving Loan, together with the
     payment of any fees, premiums, costs and charges required to be paid by the
     Borrowers  pursuant to Section  2.12  hereof,  and accrued  interest on the
     amount so prepaid to the date of such  prepayment,  to the extent,  if any,
     that the aggregate  principal  amount of the sum of the Revolving  Loan and
     the Letter of Credit  Obligations  then  outstanding  exceeds the Borrowing
     Limit at such time (after giving effect to such  reduction in the Revolving
     Credit Facility  Commitment);  provided,  however, that notwithstanding the
     foregoing,  the Company shall not (x) reduce  (except in connection  with a
     termination)  the  Revolving  Credit  Facility   Commitment  by  more  than



                                       38
<PAGE>

     $50,000,000  in the  aggregate  during  the term of this  Agreement  or (y)
     reduce the Revolving Credit Facility  Commitment to an amount which is less
     than  the  sum  of the  aggregate  unpaid  principal  balance  of the  then
     outstanding Letter of Credit Obligations;

          (ii) any termination of the Revolving Credit Facility Commitment shall
     be  accompanied  by prepayment in full of the Revolving Loan (together with
     all other  Lender  Debt)  then  outstanding  hereunder,  together  with the
     payment of any  unpaid  fees owing  with  respect to the  Revolving  Credit
     Facility Commitment,  any fees, premiums,  costs and charges required to be
     paid by the Borrowers pursuant to Section 2.12 hereof, and accrued interest
     on the amount so prepaid to the date of such prepayment,  together with the
     cancellation  or termination of any  outstanding  Letters of Credit (or the
     providing of Letter of Credit Cash  Collateral  equal to the undrawn amount
     under all  outstanding  Letters of  Credit)  and the  reimbursement  of any
     unreimbursed Letters of Credit; and

          (iii) any  termination  of the Revolving  Credit  Facility  Commitment
     while  Eurodollar  Advances are  outstanding  thereunder  and any reduction
     thereof that reduces the amount of the Revolving Credit Facility Commitment
     below the principal  amount of such  Eurodollar  Advances then  outstanding
     thereunder  may be made  only on the  last day of the  respective  Interest
     Periods for such Eurodollar Advances.

     (b) Upon the giving of Written  Notice of  termination  or reduction of the
Revolving Credit Facility Commitment,  the amount of Revolving Advances required
to be  prepaid  in  subsection  (a) above  shall be due and  payable on the date
therein  specified for such reduction or termination,  together with all accrued
interest thereon to such date plus any fees, premiums, charges or costs provided
for hereunder, and the Revolving Credit Facility Commitment shall be permanently
reduced  pro rata  among  Lenders by the  amount of such  reduction  on the date
specified in such Written Notice for such reduction or termination.

     (c) Upon the sale of all or  substantially  all of the assets or any of the
capital  stock of Sonab,  the  Revolving  Credit  Facility  Commitment  shall be
permanently  reduced by $20,000,000 or such greater amount as may be agreed upon
by the Majority  Lenders and the Borrowers,  and such reduction in the Revolving
Credit Facility  Commitment  shall be accompanied by prepayment of the Revolving
Loan,  together  with the  payment  of any fees,  premiums,  costs  and  charges
required  to be paid by the  Borrowers  pursuant  to Section  2.12  hereof,  and
accrued interest on the amount so prepaid to the date of such prepayment, to the
extent, if any, that the aggregate  principal amount of the sum of the Revolving
Loan and the Letter of Credit Obligations then outstanding exceeds the Borrowing
Limit at such time  (after  giving  effect to such  reduction  in the  Revolving
Credit  Facility  Commitment).  Notwithstanding  the foregoing,  any sale of any
assets of Sonab (whether or not  constituting  all or  substantially  all of the
assets  thereof)  or  any  capital  stock  of  Sonab  shall  be  subject  to the
requirements and restrictions contained in Section 9.5 hereof.



                                       39
<PAGE>


     (d) The Parent  Revolving  Credit  Facility  Sublimit  Commitment  shall be
permanently  reduced by the amount of any  prepayment or repayment in respect of
the Parent's Revolving Loan.

     ss. 2.6. INTEREST. (a) Interest on Eurodollar Advances.  Except as provided
in  Section  2.6(c)  hereof,  the  Borrowers  shall pay  interest  on the unpaid
principal  amount  of each  Eurodollar  Advance  made to it  hereunder  which is
outstanding  from time to time,  on each  Interest  Payment Date with respect to
such Eurodollar  Advance,  at the date of conversion of such Eurodollar  Advance
(or portion  thereof) to a Base Rate Advance and at maturity of such  Eurodollar
Advance at an interest rate per annum equal during the Interest  Period for such
Eurodollar  Advance to the Adjusted  Eurodollar  Rate for the Interest Period in
effect  for such  Eurodollar  Advance,  and after  maturity  of such  Eurodollar
Advance  (whether by acceleration  or otherwise) upon demand.  Interest not paid
when due shall be payable on demand.

     (b) Interest on Base Rate  Advances.  Except as provided in Section  2.6(c)
hereof,  the Borrowers shall pay interest on the unpaid principal amount of each
Base Rate Advance and, to the extent due and  payable,  Additional  Indebtedness
incurred  by it,  in each  case,  which is  outstanding  from time to time at an
interest  rate per annum  equal to the Base  Rate in  effect  from time to time.
Interest on Base Rate Advances  shall be payable  monthly in arrears on the last
day of each  month,  upon  conversion  thereof to a  Eurodollar  Advance  and at
maturity  (whether by  acceleration  or  otherwise)  and  thereafter  on demand.
Interest on Additional Indebtedness shall be payable upon demand.

     (c)  Default  Interest.  During the  continuation  of any Event of Default,
interest on the Eurodollar  Advances,  Base Rate Advances and, to the extent due
and  payable,  Additional  Indebtedness,  and Letter of Credit fees  pursuant to
Section  2A.6(a)  hereof  shall  accrue and be payable at a rate two  percentage
points  (2%) in excess of the rate of interest or fee  otherwise  applicable  to
such  Eurodollar  Advances,  Base Rate  Advances,  Additional  Indebtedness,  or
Letters of Credit,  as the case may be, and  interest on any interest in default
shall accrue and shall be payable upon demand at a rate equal to two  percentage
points (2%) in excess of the rate then applicable to Base Rate Advances.

     (d)  Eurodollar  Rate  Determination.   The  Agent,  upon  determining  the
Eurodollar Rate and the Adjusted Eurodollar Rate for any Interest Period,  shall
promptly notify by telephone  (confirmed  promptly in writing) or in writing the
Borrowers and the Lenders thereof.  Such determination  shall, in the absence of
manifest error, be conclusive and binding upon the Borrowers,  the Agent and the
Lenders.

     (e) Changes in Index Rate.  After each change in the Index Rate,  the Agent
shall  promptly  notify the Borrowers and each Lender of the date of such change
and the new Index Rate; provided,  however,  that the failure of the Agent to so
notify the  Borrowers or any Lender shall not affect the  effectiveness  of such
change.


                                       40
<PAGE>

     (f) The Applicable Index Margin and Applicable  Eurodollar Margin,  will be
0.50% and 1.50% per annum, respectively,  as of the Closing Date. The Applicable
Margins will then be adjusted (up or down) prospectively on a quarterly basis as
determined by Parent's consolidated  financial performance for the trailing four
quarters  most  recently  then ended,  commencing  (such date being the "Initial
Adjustment  Date") on the fifth  Business  Day after  delivery  of the  Parent's
financial  statements to Lenders for the fiscal quarter ending October 31, 1998.
Adjustments  in  Applicable  Margins  will be  determined  by  reference  to the
following grids:


                                                   
      If Leverage             Applicable             Applicable
        Ratio is             Index Margin         Eurodollar Margin
---------------------   ---------------------  ----------------------
             >  5.00            1.00%                 2.00%
< 5.00   but >  4.25             .75%                 1.75%
< 4.25   but >  3.25             .50%                 1.50%
< 3.25   but >  2.50             .25%                 1.25%
< 2.50                           .00%                 1.00%


     All adjustments in the Applicable Margins after the Initial Adjustment Date
will be implemented  quarterly on a prospective  basis,  for each calendar month
commencing  after the date of delivery to Lenders of the quarterly  unaudited or
annual audited (as applicable) financial statements of the Parent evidencing the
need for an  adjustment.  Concurrently  with  the  delivery  of those  financial
statements,  the Company shall  deliver to the Agent and Lenders a  certificate,
signed by its chief financial  officer,  setting forth in reasonable  detail the
basis for the continuance of, or any change in, the Applicable Margins.  Failure
to timely  deliver such  financial  statements  in  accordance  with Section 8.1
shall, in addition to any other remedy provided for in this Agreement, result in
an increase  in the  Applicable  Margins to the  highest  level set forth in the
foregoing  grid,  until the first day of the first calendar month  following the
delivery of those financial  statements  demonstrating  that such an increase is
not  required.  If an Event of Default  shall have occurred and be continuing at
the time any  reduction in the  Applicable  Margins is to be  implemented,  that
reduction  shall be  deferred  until the first day of the first  calendar  month
following the date on which such Event of Default is waived or cured.

     ss. 2.7.  CONVERSION OF BORROWINGS;  RENEWALS.  (a) Each Borrower may, from
time to time  prior  to the  Maturity  Date  convert  (i)  all or a  portion  of
outstanding  Base Rate Advances to one or more  Eurodollar  Advances,  except as
provided  in the last  sentence  of Section  2.4(a) or in  Section  2.10 or 2.11
hereof,  and only in amounts of  $1,000,000 or more, or (ii) all or a portion of
outstanding  Eurodollar Advances to a Base Rate Advance so long as the aggregate
principal balance of the portion of the Eurodollar Advances not being converted,
if any,  is  $1,000,000  or any greater  integral  multiple  thereof;  provided,
however, that no Borrower shall be entitled to convert any Base Rate Advance, or
portion thereof, to a Eurodollar Advance unless all accrued interest on the Base
Rate  Advance,  or portion  thereof,  to be  converted  through the date of such
conversion  shall have been paid in full.  Each  conversion by a Borrower of any
Revolving  Advance or portion  thereof  (other  than a  conversion  pursuant  to
Section 2.10 or 2.11  hereof)  shall be made not later than 12:00 noon (New York
time) on a Business  Day on at least  three (3)  Business  Days'  prior  Written
Notice  from an  Authorized  Representative  to the Agent  (and the Agent  shall


                                       41
<PAGE>

promptly  notify  each  Lender  thereof  in writing  or by  telephone  confirmed
promptly in writing). Each such notice (which notice shall be irrevocable) shall
specify (i) the date of the conversion and the amount to be converted,  (ii) the
particular Base Rate Advance, or portion thereof, to be converted,  and (iii) in
the case of  conversion  of any Base Rate  Advance,  or  portion  thereof,  to a
Eurodollar  Advance,  the  duration of the Interest  Period for such  Eurodollar
Advance. Notwithstanding the above, no Borrower shall be entitled to convert any
Base Rate Advance,  or portion thereof,  to a Eurodollar Advance if a Default or
Event of Default  shall have occurred and be  continuing.  Except as provided in
Section 2.10 hereof, any conversion of a Eurodollar Advance, or portion thereof,
to a Base Rate Advance shall be made only on the last day of the Interest Period
with respect to such Eurodollar Advance.

            (b) Each renewal by a Borrower of an outstanding  Eurodollar Advance
or portion  thereof shall be made on Written  Notice to the Agent (and the Agent
shall promptly  notify each Lender thereof in writing or by telephone  confirmed
promptly  in  writing)  given not later  than  12:00 noon (New York time) on the
third Business Day prior to the last day of the Interest  Period just ending for
such  Eurodollar  Advance.  Each notice (which notice shall be irrevocable) by a
Borrower of the renewal of a Eurodollar Advance or portion thereof,  shall be in
writing from an  Authorized  Representative  and shall specify (i) the amount of
such renewal of the Eurodollar  Advance or portion thereof and (ii) the duration
of the  Interest  Period  for  such  renewal;  provided,  however,  that if such
Borrower fails to select the duration of any Interest  Period for the renewal of
such Eurodollar Advance or portion thereof, the duration of such Interest Period
shall be one month.  Notwithstanding the above, no Borrower shall be entitled to
renew a  Eurodollar  Advance  or a  portion  thereof,  (i) if at the time of the
selection of such renewal there shall exist a Default or an Event of Default, or
(ii) to the extent such  renewal  would be  prohibited  by the last  sentence of
Section 2.4(a) or by Section 2.10 or 2.11 hereof.

            (c) Any Eurodollar  Advance or portion thereof as to which the Agent
shall not have  received a proper notice of conversion or renewal as provided in
Section 2.7(a) or 2.7(b) hereof or notice of payment or prepayment by 12:00 noon
(New York time) at least  three (3)  Business  Days prior to the last day of the
Interest  Period just ending for such  Eurodollar  Advance shall (whether or not
any Default or Event of Default has  occurred)  automatically  be converted to a
Base Rate  Advance on the last day of the  Interest  Period for such  Eurodollar
Advance.

            ss. 2.8. COMPUTATION OF INTEREST. Interest on Base Rate Advances and
Eurodollar Advances and fees and other amounts calculated on the basis of a rate
per annum shall be computed on the basis of actual days  elapsed  over a 360-day
year. Any rate of interest on the Loan or Additional Indebtedness or on interest
which is  computed  on the basis of the Base Rate shall  change  when and as the
Index Rate changes.


                                       42
<PAGE>

            ss. 2.9.  INCREASED  COSTS. In the case of the pro rata share of any
Lender  in any  Eurodollar  Advance,  in  the  event  any  law,  treaty,  order,
directive, rule or regulation shall be adopted, issued or become effective after
the  Closing  Date or in the  event of any  change  in any law,  treaty,  order,
directive,  rule or regulation from that in effect on the Closing Date or in the
interpretation thereof by any governmental or other regulatory authority charged
with the administration  thereof  (including,  without  limitation,  in any case
Regulation D), in any case, which:

          (i) subjects  such Lender or any branch or Affiliate of such Lender to
     any tax, duty or other charge with respect to such share of such Eurodollar
     Advance (other than Excluded Taxes); or

          (ii) changes the basis of taxation (including,  without limitation, an
     increase in any applicable tax rate of payments to any Lender or any branch
     or Affiliate  of such Lender of principal of and/or  interest on such share
     of such Eurodollar  Advance and/or other fees and amounts payable hereunder
     with respect thereto (other than Excluded Taxes); or

          (iii) imposes,  modifies or deems  applicable any reserve,  deposit or
     similar  requirement  against any assets held by,  deposits with or for the
     account  of, or loans or  commitments  by,  an office of any  Lender or any
     branch or Affiliate of such Lender; or

          (iv)  imposes  upon such  Lender or any  branch or  affiliate  of such
     Lender any other  condition  with respect to such share of such  Eurodollar
     Advance or this Agreement;

and the result of any of the  foregoing  is to  increase  the actual  cost by an
amount such Lender  reasonably deems to be material to such Lender or any branch
or Affiliate of such Lender of making, funding or maintaining such share of such
Eurodollar Advance hereunder, or to reduce the amount of any payment (whether of
principal,  interest, or otherwise) received or receivable by such Lender or any
branch or Affiliate  of such Lender,  or to require such Lender or any branch or
Affiliate  of such Lender to make any  payment,  in each case by or in an amount
which such  Lender in its sole  judgment  deems  material,  then and in any such
case:

                  (1) such Lender shall promptly notify the Borrowers, the Agent
      and the other Lenders in writing of the happening of such event;

                  (2) such Lender shall promptly  deliver to the Borrowers,  the
      Agent and the other  Lenders a  certificate  stating the change  which has
      occurred,  or the reserve requirements or other conditions which have been
      imposed  on such  Lender or branch or  Affiliate  of such  Lender,  or the
      request,  directive or  requirement  with which it has complied,  together
      with the date thereof,  the amount of such  increased  cost,  reduction or
      payment and the way in which such amount has been calculated; and


                                       43
<PAGE>

                  (3) the  Borrowers  hereby  agree to pay to the  Agent for the
      benefit  of such  Lender on demand by such  Lender  (with a notice of such
      demand to be sent by such  Lender to the Agent)  such an amount or amounts
      as will  compensate  such  Lender  or its  branch  or  Affiliate  for such
      additional cost, reduction or payment.

The certificate of such Lender as to the additional  amounts payable pursuant to
this Section 2.09  delivered to the Borrowers and the Agent shall in the absence
of manifest  error be conclusive of the amount  thereof.  The protection of this
Section  2.09 shall be  available  to such  Lender  regardless  of any  possible
contention of  invalidity or  inapplicability  of the law,  regulation,  treaty,
order, directive, interpretation or condition which has been imposed.

     ss.  2.10.  CHANGE  IN LAW  RENDERING  EURODOLLAR  ADVANCES  UNLAWFUL.  (a)
Notwithstanding anything to the contrary herein contained, in the event that any
law, treaty, order,  directive,  rule or regulation adopted,  issued or becoming
effective  after  the  Closing  Date or any  change in any law,  treaty,  order,
directive,  rule or regulation from that in effect on the Closing Date or in the
interpretation thereof by any governmental or other regulatory authority charged
with the administration thereof (in any case, whether or not having the force of
law), should make it unlawful for any Lender to fund any portion of a Eurodollar
Advance or to give effect to its obligations as contemplated hereby with respect
to Eurodollar  Advances,  such Lender  shall,  upon the happening of such event,
notify the Agent, the other Lenders and the Borrowers thereof in writing stating
the reason therefor, and the obligation of such Lender to allow conversion to or
selection  or  renewal  with  respect  to its pro rata  share of any  Eurodollar
Advance by the Borrowers shall,  upon the happening of such event,  forthwith be
suspended for the duration of such  illegality and during such  illegality  such
Lender shall fund its share of all Revolving  Advances as Base Rate Advances and
there shall be no renewal of, or conversion  to, any share of such Lender in any
Eurodollar Advance. If and when such illegality ceases to exist, such suspension
shall cease and such affected Lender shall similarly notify the Agent, the other
Lenders and the Borrowers.

            (b)  Notwithstanding  anything to the contrary  contained herein, in
the event that any law, treaty,  order,  directive,  rule or regulation adopted,
issued or becoming  effective  after the Closing  Date or any change in any law,
treaty, order, directive,  rule or regulation from that in effect on the Closing
Date or in the  interpretation  thereof by any  governmental or other regulatory
authority charged with the  administration  thereof (in any case, whether or not
having the force of law) shall make it  commercially  impracticable  or unlawful
for any Lender to continue in effect the funding of any portion of a  Eurodollar
Advance previously made by it hereunder and then outstanding, such Lender shall,
upon the  happening of such event,  notify the Agent,  the other Lenders and the
Borrowers thereof in writing stating the reasons therefor, and such Lender's pro
rata share of such Eurodollar Advance shall automatically be converted to a Base
Rate Advance.  The applicable Borrower shall pay to the Agent for the benefit of
such Lender accrued interest owing on such converted  portion of such Eurodollar
Advance made to such Borrower through the date of such conversion, together with
any amounts  payable under Section 2.12 hereof with respect to such  prepayment.
After such notice shall have been given and until the circumstances  giving rise
to such notice no longer exist, each request for such Lender's pro rata share of


                                       44
<PAGE>

a Eurodollar  Advance or for  conversion to or renewal of such Lender's pro rata
share of a Eurodollar Advance shall be deemed a request by a Borrower for a Base
Rate Advance.  If and when such  impracticability or illegality ceases to exist,
such suspension  shall cease and such affected Lender shall similarly notify the
Agent, the other Lenders and the Borrowers.

     ss. 2.11. EURODOLLAR AVAILABILITY.  (a) In the event, and on each occasion,
that on the day two (2) Business Days prior to the  commencement of any Interest
Period for a Eurodollar  Advance,  the Agent shall have determined in good faith
that dollar  deposits in the amount of the principal  amount of such  Eurodollar
Advance are not generally available in the London (England) interbank market, or
that  the  rate at  which  such  dollar  deposits  are  being  offered  will not
accurately  reflect  the cost to one or more  Lenders of making or  funding  the
principal  amount of their  portions  of such  Eurodollar  Advance  during  such
Interest  Period,  or that reasonable  means do not exist for  ascertaining  the
Eurodollar  Rate,  the Agent  shall,  as soon as  practicable  thereafter,  give
written  or  telephonic  notice of such  determination  to the  Lenders  and the
Borrowers,  and any request by a Borrower for a Eurodollar  Advance  pursuant to
Section  2.4 hereof or for  conversion  to or renewal  of a  Eurodollar  Advance
pursuant  to Section 2.7 hereof  shall  thereupon,  and until the  circumstances
giving  rise to such  notice no longer  exist (as  notified  by the Agent to the
Borrowers and the Lenders),  be deemed a request by such Borrower for the making
of or conversion to a Base Rate Advance.

            (b) If,  at any time,  the  Agent  shall  have  determined  that any
contingency has occurred which adversely affects the London (England)  interbank
market or that any law, treaty,  order,  directive,  rule or regulation adopted,
issued  or  becoming  effective  after  the  Closing  Date or any  change in any
existing law, treaty, order,  directive,  rule or regulation from that in effect
on the Closing Date or in the  interpretation  thereof (in any case,  whether or
not having the force of law) or other circumstance affecting one or more Lenders
or the London  (England)  interbank market makes the funding of any portion of a
Eurodollar  Advance  impracticable,  the  Agent  shall,  as soon as  practicable
thereafter,  give  written or  telephonic  notice of such  determination  to the
Lenders and the Borrowers and any request by a Borrower for a Eurodollar Advance
pursuant to Section 2.4 hereof or for  conversion  to or renewal of a Eurodollar
Advance  pursuant  to  Section  2.7  hereof  shall  thereupon,   and  until  the
circumstances  giving  rise to such notice no longer  exist (as  notified by the
Agent to the Borrowers  and the  Lenders),  be deemed a request by such Borrower
for the making of or conversion to a Base Rate Advance.

     ss. 2.12.  INDEMNITIES.  (a) The Borrowers  hereby indemnify each Lender on
demand against any loss or reasonable expense which such Lender or its branch or
affiliate may sustain or incur as a consequence of:

          (i) any default in payment or prepayment  of the  principal  amount of
     any Eurodollar Advance made to it or any portion of any thereof or interest


                                       45
<PAGE>

     accrued thereon,  as and when due and payable (at the due date thereof,  by
     irrevocable notice of payment or prepayment, or otherwise),

          (ii) the effect of the  occurrence  of any Event of  Default  upon any
     Eurodollar  Advance made to it, including,  but not limited to, any loss or
     reasonable  expense  sustained  or incurred  in  liquidating  or  employing
     deposits from third parties  acquired to effect or maintain such Eurodollar
     Advance or any portion thereof,

          (iii)  the  payment  or  prepayment  of the  principal  amount  of any
     Eurodollar Advance made to it or any portion thereof, pursuant to Section 2
     or 3  hereof,  or  otherwise,  on any day  other  than  the  last day of an
     Interest  Period or the payment of any interest on any  Eurodollar  Advance
     made to it, or portion  thereof,  on a day other than an  Interest  Payment
     Date for such  Eurodollar  Advance,  or (iv) the failure by any Borrower to
     accept or make a borrowing  of a Eurodollar  Advance or a conversion  to or
     renewal  of a  Eurodollar  Advance  after  it  has  given  notice  of  such
     borrowing, conversion or renewal.

Each Lender shall  provide to the  Borrowers,  the Agent and the other Lenders a
statement,  supported where applicable by documentary  evidence,  explaining the
amount and  calculation of any such loss or expense it incurs,  which  statement
shall be conclusive absent manifest error.

            (b) If any law, treaty, order,  directive,  rule or regulation shall
be adopted, issued or becoming effective after the Closing Date or if any change
in any law, treaty, order, directive,  rule or regulation from that in effect on
the Closing Date or in the  interpretation  thereof by any governmental or other
regulatory  authority charged with the administration  thereof (and including in
any  event  all  risk  based  capital  guidelines   heretofore  adopted  by  the
Comptroller of the Currency,  the Board or any other banking  regulatory agency,
domestic or foreign, to the extent that any provision contained therein does not
have to be complied with as of the date hereof)  shall,  or if the compliance by
any  Lender  with  any  guideline  or  request  from any  central  bank or other
governmental authority, shall:

          (i) impose upon, modify,  require,  make or deem applicable to any one
     or more  Lenders,  or any of their  Affiliates  or  branches,  any  reserve
     requirement,  special deposit requirement,  insurance assessment or similar
     requirement against or affecting the Revolving  Commitment or the Revolving
     Sublimit  Commitment  of such  Lender  or  Lenders  or such  Affiliates  or
     branches, or

          (ii) impose any condition upon or cause in any manner the addition of,
     any  supplement  to or any increase of any kind to the capital or cost base
     of such Lender or Lenders,  or such  Affiliates  or branches  thereof,  for
     extending or maintaining the Revolving Commitment or the Revolving Sublimit
     Commitment  of such  Lender,  which  results in an  increase in the capital
     requirement  supporting the Revolving  Commitment or the Revolving Sublimit
     Commitment, or



                                       46
<PAGE>

          (iii) impose upon,  modify,  require,  make or deem applicable to such
     Lender  or  Lenders  or  any  such   Affiliates  or  branches  any  capital
     requirement, increased capital requirement or similar requirement,

and the result of any events  referred  to in clause  (i),  (ii) or (iii)  above
shall be to (A)  increase  the  amount of capital  required  or  expected  to be
required to be  maintained  by such Lender or any such  Affiliate  or branch and
such Lender  determines that the amount of such capital  requirement is incurred
by or based on the Revolving  Commitment or the Revolving Sublimit Commitment of
such  Lender  or other  commitments  of this type or (B)  increase  the costs or
decrease the benefit in any way to such Lender or Lenders, or any such Affiliate
or branch, of extending or maintaining the Revolving Commitment or the Revolving
Sublimit  Commitment  or  extending  or  maintaining  such  Lender's or Lenders'
portion  of the Loan or  holding  any  Collateral;  then and in such  event  the
Borrowers  shall,  on or prior to the tenth (10th) Business Day after the giving
of Written  Notice of such  increased  costs  and/or  decreased  benefits to the
Company  and the  Agent by such  Lender or  Lenders  (or any such  Affiliate  or
branch),  pay to the Agent for the  benefit of such  Lender or Lenders  all such
additional amounts which in the good faith calculation of such Lender or Lenders
are properly  allocable to the Revolving  Commitment  or the Revolving  Sublimit
Commitment of such Lender,  such Lender's or Lenders' portion of the Loan and/or
the Collateral, as the case may be, and which:

                  (1) in the case of events  referred  to in clause  (i)  above,
      shall be suffi cient to compensate it for all such increased  costs and/or
      decreased benefits, and/or

                  (2) in the case of  events  referred  to in  clauses  (ii) and
      (iii) above,  shall be an amount  equal to the  reduction,  as  reasonably
      determined  by  such  Lender,  in the  after-tax  rate of  return  on such
      Lender's capital  resulting from any such capital or increased  capital or
      similar requirement (including,  without limitation,  any such Lender's or
      Lender's Affiliates' or branches' cost of taking action in anticipation of
      the  effectiveness of any event described in clause (ii) or (iii) in order
      to enable such Lender,  Lenders,  Affiliate or branch to be in  compliance
      therewith  upon such  effectiveness),  all as  certified by such Lender or
      Lenders in said Written Notice to the Borrowers.  Such certification shall
      be conclusive and binding on the Company absent manifest error.

            (c) The Borrowers  hereby  indemnify and hold harmless the Agent and
each  Lender  and their  respective  Affiliates,  directors,  officers,  agents,
representatives,   counsel  and  employees  and  each  other  Person,   if  any,
controlling them or any of their Affiliates within the meaning of either Section
15 of the Securities Act of 1933, as amended, or Section 20(a) of the Securities
Exchange Act of 1934 (each an "Indemnified Party"), from and against any and all
losses, claims,  damages, costs, expenses (including reasonable counsel fees and
disbursements) and liabilities which may be incurred by or asserted against such


                                       47
<PAGE>

Indemnified  Party with respect to or arising out of the financing  contemplated
by this  Agreement,  the  commitments  hereunder  to make,  or the making of the
Revolving  Advances  or the  financings  contemplated  hereby,  the  other  Loan
Documents, the Collateral (including, without limitation, the use thereof by any
of such Persons or any other Person,  the exercise by the Agent or any Lender of
rights and  remedies  or any power of attorney  with  respect  thereto,  and any
action or inaction of the Agent or any Lender under any Security Document),  the
use  of  proceeds  of  any  financial  accommodations  provided  hereunder,  any
investigation,  litigation or other  proceeding  brought or threatened  relating
thereto,  or the role of any such  Person  or  Persons  in  connection  with the
foregoing whether or not they or any other Indemnified Party is named as a party
to any legal action or proceeding  ("Claims").  The Borrowers will not, however,
be responsible to any  Indemnified  Party hereunder for any Claims to the extent
that any such Claim shall have arisen out of or resulted  from actions  taken or
omitted  to be  taken by such  Indemnified  Party  which  constitute  the  gross
negligence or willful misconduct of such Indemnified Party ("Excluded  Claims").
Further,  should any of the Agent's or any of the Lender's employees be involved
in any legal action or
proceeding in connection with the transactions  contemplated  hereby (other than
relating to an Excluded  Claim),  the Borrowers hereby agree to pay to the Agent
and each  Lender an amount  equal to the actual per diem  compensation  for each
employee  for each day or portion  thereof  that such  employee  is  involved in
preparation and testimony pertaining to any such legal action or proceeding. The
Indemnified  Party shall give the Borrowers  prompt  written notice of any Claim
setting  forth a  description  of those  elements  of the  Claim  of which  such
Indemnified Party has knowledge.  The Borrowers shall have the right at any time
during  which a Claim is  pending  to select  counsel  to defend  and settle any
Claims so long as in any such event the Borrowers shall have stated in a writing
delivered to the applicable Indemnified Party that, as between the Borrowers and
such Indemnified  Party, the Borrowers are responsible to such Indemnified Party
with respect to such Claim;  provided,  however, that the Borrowers shall not be
entitled  to  control  the  defense  of any  Claim in the event  that  there are
defenses  available  to the  Indemnified  Party which are not  available  to the
Borrowers.  In any other  case,  the  Indemnified  Party shall have the right to
select counsel and control the defense of any Claims; provided, however, that no
Indemnified  Party  shall  settle  any Claim as to which it is  controlling  the
defense  without  the  consent  of the  Borrowers,  which  consent  shall not be
unreasonably  withheld  or  delayed.  With  respect  to any  Claim for which the
Borrowers are entitled to select counsel,  each Indemnified Party shall have the
right, at its expense, to participate in the defense of such Claim. In the event
that,  with  respect  to any Claim,  more than one  Indemnified  Party  shall be
permitted hereunder to select counsel to defend such Claim at the expense of the
Borrowers  and shall decide to do so, then all such  Indemnified  Parties  shall
select the same counsel to defend such Indemnified  Parties with respect to such
Claim;  provided,  however,  that if any  such  Indemnified  Party  shall in its
reasonable  opinion (or in the reasonable  opinion of its counsel) consider that
the  retention of one joint  counsel as aforesaid  shall result in a conflict of
interest to it, such  Indemnified  Party may, at the  reasonable  expense of the
Borrowers,  select its own counsel to defend such Indemnified Party with respect
to such Claim.  The Indemnified  Parties and the Borrowers and their  respective
counsel  shall  cooperate  with each  other in all  reasonable  respects  in any
investigation,  trial  and  defense  of any such  Claim and any  appeal  arising
therefrom.


                                       48
<PAGE>

            (d) If for any reason the foregoing  indemnity is unavailable to any
Indemnified  Party or  insufficient to hold it free and harmless as contemplated
by the  preceding  paragraph  (c), then the  Borrowers  shall  contribute to the
amount paid or payable by the Indemnified Party as a result of any Claim in such
proportion as is appropriate to reflect, not only the relative benefits received
by the Borrowers on the one hand and such  Indemnified  Party on the other hand,
but also the relative fault of the Borrowers and such Indemnified Party, as well
as any other relevant equitable considerations.

            ss. 2.13. DISBURSEMENT. Each Revolving Advance shall be disbursed by
the Agent from the Payment  Account to the  applicable  Disbursement  Account as
provided in Section  2.4(d)  hereof,  shall be charged,  together with interest,
fees and other amounts payable by any Borrower hereunder, to the account of such
Borrower  on the books of the Agent  from time to time,  and shall be payable to
the Payment  Account or to such other account or office as the Agent may specify
in writing to the Borrowers.

            ss.  2.14.  AGENT'S  AVAILABILITY  ASSUMPTION.  (a) Unless the Agent
shall have been  notified by any Lender by Written  Notice  prior to a borrowing
date that  such  Lender  does not  intend to make  available  to the Agent  such
Lender's pro rata portion of any  Revolving  Advance which it shall be obligated
to make on such date, the Agent may assume that such Lender has made such amount
available  to the Agent on the date for such  borrowing  and the Agent  may,  in
reliance  upon such  assumption,  make  available to the  applicable  Borrower a
corresponding amount. If such corresponding amount is not in fact made available
to the  Agent by such  Lender  on such date of  borrowing,  the  Agent  shall be
entitled to recover such corresponding  amount on demand from such Lender, which
demand shall be made in a reasonably  prompt manner. If such Lender does not pay
such corresponding amount forthwith upon the Agent's demand therefor,  the Agent
shall promptly notify the Lenders and the applicable  Borrower and such Borrower
shall pay such corre sponding amount to the Agent on demand.

            (b) The Agent shall also be entitled to recover  from such Lender or
such Borrower interest on such corresponding  amount in respect of each day from
the date  such  corresponding  amount  was made  available  by the Agent to such
Borrower to the date such  corresponding  amount is recovered by the Agent, at a
rate per  annum  equal to (x) if paid by such  Lender,  the cost to the Agent of
funding such amount as notified in writing by the Agent to such  Lender,  or (y)
if paid by a Borrower,  the applicable rate for Base Rate Advances or Eurodollar
Advances, as the case may be.

            (c) In the event  that any  Lender  shall  fail to fund its pro rata
share of any  Revolving  Advance  made  pursuant  to Section  2A.4 hereof or its
letter of credit participation under Section 2A.5 hereof, the Agent on behalf of
the Issuing  Lender shall be entitled to recover such amount on demand from such
Lender, which demand shall be made in a reasonably prompt manner. If such Lender
does not pay such amount forthwith upon the Agent's demand  therefor,  the Agent
shall notify  promptly the Lenders and the Company thereof and the Company shall


                                       49
<PAGE>

pay such amount to the Agent.  The Agent on behalf of the Issuing  Lender  shall
also be entitled to recover from such Lender or the Company, as the case may be,
interest on such corresponding  amount in respect of each day from the date such
Revolving  Advance was made,  or the date such purchase was to have been made or
funded,  to the date such amount is recovered by the Agent,  at a rate per annum
equal to (x) if paid by such Lender,  the cost to the Issuing  Lender of funding
the  payment of the drawing  under the Letter of Credit for which the  Revolving
Advance was made in the case of a  Revolving  Advance  made  pursuant to Section
2A.4  or a  participation  under  Section  2A.5  hereof,  or (y) if  paid by the
Company,  the applicable  rate for Base Rate Advances in the case of a Revolving
Advance made pursuant to Section 2A.5 hereof or a participation  purchased under
Section 2A.5 hereof.

            (d)  Nothing  herein  shall be deemed to relieve any Lender from its
obligation  to fund or purchase its pro rata share of any  Revolving  Advance or
purchase any  participation  as required  hereunder,  or to prejudice any rights
which any  Borrower  may have  against  any Lender as a result of any default by
such Lender hereunder. No Lender shall be
responsible for any default of any other Lender in respect of any other Lender's
obligation  to make its pro rata share of any Revolving  Advances  hereunder nor
shall the Revolving  Commitment of any Lender hereunder be increased as a result
of such  default of any other  Lender.  Each Lender  shall be  obligated  to the
extent provided herein  regardless of the failure of any other Lender to fulfill
its obligations hereunder.

            (e)  Notwithstanding  anything contained herein to the contrary,  so
long as any Lender  shall be in default in its  obligation  to fund its pro rata
share of any  Revolving  Advance (as  notified to such Lender by the Agent;  the
Agent  agreeing  to use good faith  efforts to give such  notification  promptly
following  the  occurrence  of such  default)  or shall have  rejected  any such
commitment,  then such Lender  shall not be entitled to receive any  payments of
principal  of or  interest  on its pro rata share of the  Revolving  Loan or its
share of any commitment or other fees payable hereunder unless and until (x) the
Loan and all interest thereon has been paid in full, (y) such failure to fulfill
its  obligation  to fund is cured and such Lender shall have paid, as and to the
extent provided in this Section 2.14, to the applicable  party, if any, interest
on the amount of funds that such Lender  failed to timely fund or (z) the Lender
Debt  under  this  Agreement  shall  have been  declared  or shall  have  become
immediately due and payable, and until the earlier to occur of (x) or (y) above,
for  purposes  of voting or  consenting  to  matters  with  respect  to the Loan
Documents,  such Lender shall be deemed not to be a "Lender"  hereunder and such
Lender's Revolving  Commitment or Revolving Sublimit  Commitment shall be deemed
to be zero (0). No Revolving  Commitment or Revolving Sublimit Commitment of any
Lender shall be increased or otherwise affected by any such failure or rejection
by any Lender.  Any  payments of  principal  of or interest on Lender Debt which
would,  but for this paragraph (e), be paid to any Lender,  shall be paid to the
Lenders who shall not be in default under their respective Revolving Commitments
and who  shall not have  rejected  any  Revolving  Commitment  or any  Revolving
Sublimit  Commitment,  for  application  to Lender Debt or to provide  Letter of
Credit Cash Collateral in such manner and order (pro rata among such Lenders) as
shall be determined by the Agent.


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<PAGE>

     ss. 2.15. PRO RATA TREATMENT AND PAYMENTS.  Except as contem plated by this
Agreement,  including,  without  limitation,  Sections 2.1(c),  2.9, 2.10, 2.12,
2.13, 2.14, 2.18,  12.1, 12.5 and 12.13(h)  hereof,  each Revolving  Advance and
each payment  (including  each  prepayment)  on account of the  principal of and
interest on the Loan and fees described in this Agreement shall be made pro rata
to each Lender according to the respective  percentages of each Lender set forth
opposite its name on Exhibit A hereto. The Agent will distribute each payment to
the Lenders in accordance with Section 2.19 hereof.

     ss. 2.16.  EURODOLLAR OFFICES. Each Lender intends to initially fulfill its
commitment  with  respect  to such  Lender's  pro rata  share of any  Eurodollar
Advance by causing  the  Initial  Eurodollar  Office of such Lender to make such
Lender's proportionate share of such Eurodollar Advance; provided, however, that
each Lender may at its option fulfill such  commitment by causing another branch
or an  Affiliate  of such  Lender to make such  Lender's  pro rata share of such
Eurodollar Advance; and provided,  further, that the selection by such Lender of
the  Initial  Eurodollar  Office  of such  Lender or any  other  such  branch or
Affiliate  shall not  affect  the  obligations  of the  Borrowers  to repay such
Lender's pro rata share of the Eurodollar  Advances in accordance with the terms
of this Agreement.

     ss. 2.17.  TELEPHONIC  NOTICE.  Without in any way limiting any  Borrower's
obligation  to  confirm  in  writing  any  telephonic  notice  of  a  borrowing,
conversion  or renewal,  the Agent may act without  liability  upon the basis of
telephonic  notice  believed by the Agent in good faith to be from an Authorized
Representative of any Borrower prior to receipt of written confirmation.

     ss. 2.18.  MAXIMUM  INTEREST.  (a) No  provision  of this  Agreement or any
Revolving  Note shall require the payment to any Lender or permit the collection
by any Lender of interest in excess of the maximum rate  permitted by applicable
law (the "Maximum Lawful Rate").

            (b) If the amount of interest computed without giving effect to this
Sect ion  2.18 and  payable  on any  interest  payment  date in  respect  of the
preceding  interest  computation  period  would  exceed the  amount of  interest
computed in respect of such period at the maximum rate of interest  from time to
time permitted (after taking into account all  consideration  which  constitutes
interest)  by laws  applicable  to any  Lender  (such  maximum  rate  being such
Lender's  "Maximum  Permissible  Rate"),  the amount of interest payable to such
Lender on such date in respect of such period shall be computed at such Lender's
Maximum Permissible Rate.

            (c) If at any time and from time to time (i) the amount of  interest
payable to any Lender on any  interest  payment  date shall be  computed at such
Lender's Maximum  Permissible  Rate pursuant to the preceding  paragraph (b) and
(ii) in  respect of any  subsequent  interest  computation  period the amount of
interest  otherwise  payable  to such  Lender  would be less than the  amount of
interest  payable to such Lender computed at such Lender's  Maximum  Permissible
Rate,  then the amount of  interest  payable  to such  Lender in respect of such
subsequent  interest  computation  period shall  continue to be computed at such


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<PAGE>

Lender's  Maximum  Permissible Rate until the amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest  had been  computed  without  giving
effect to the preceding paragraph (b).

            ss.  2.19.  RECEIPT OF  PAYMENTS.  (a) Each  payment by any Borrower
under  this  Agreement  shall  be  made  without  deduction,  set-off,  defense,
recoupment, claim or counterclaim, all of which are waived, not later than 12:00
noon (New York time) on the day when due in lawful money of the United States of
America in immediately available funds to the Agent's Payment Account. The Agent
will, upon any such payment to its Payment Account,  promptly thereafter (and in
any event on the same  Business Day as the date when received if such payment is
received at or prior to 12:00 noon (New York time) (or, if sent by wire transfer
in immediately  available funds, if such wire is initiated by such time)), cause
to be distributed like funds relating to the payment of principal or interest
ratably to the Lenders or as otherwise  provided above,  and like funds relating
to the payment of any other amount payable to any Lender to such Lender, in each
case to be applied in accordance with the terms of this Agreement.

            (b) Pursuant  and subject to Section  8.22  hereof,  the Company has
agreed to cause all Proceeds to be deposited into Blocked Accounts, and to cause
all such Proceeds to be  transferred to the Payment  Account in accordance  with
the Collecting  Bank  Agreements.  Subject to Section  2.20(a)  hereof,  on each
Business  Day,  the Agent shall  apply to Lender Debt (or invest as  hereinafter
provided)   effective  as  of  such  Business  Day,  all  Proceeds  credited  in
immediately  available  funds to the Payment  Account on such  Business Day (and
which shall not have theretofore  been credited to Lender Debt) as follows:  (i)
first, to the Revolving  Loan,  until the Revolving Loan shall have been paid in
full  and  (ii)  second,   invested  in  accordance  with  and  subject  to  the
requirements of Section 2.20(b) hereof.

            In the event the  Company  (or any  Affiliate  of the Company or any
Person  acting for or in concert with the Company)  shall,  notwithstanding  the
existence  of  any  lock-box  or  collection  arrangement  referred  to in  this
Agreement,  receive any monies, checks, drafts or other similar negotiable items
of payment  made with  respect to Accounts  (other than (x)  Accounts of Foreign
Subsidiaries not subject to a cash management arrangement with the Agent and (y)
payments in respect of accommodation sales and other miscellaneous  transactions
which  are not  store  settlements  so long as such  monies,  checks,  drafts or
similar items are deposited as required by this sentence no less frequently than
monthly (it being agreed that the Company  shall use its  reasonable  efforts to
cause  such  deposits  to be made no less  frequently  than once every two weeks
within  one  year  following  the  Closing  Date)  and in  any  event  when  the
undeposited  amount of such monies,  checks,  drafts or similar  items equals or
exceeds  $750,000  in the  aggregate  during  November,  December  or January or
$450,000 in the  aggregate at any other time),  the Company  shall no later than
the first Business Day following receipt thereof deposit or cause the same to be
deposited,  in kind, in a Blocked Account or as otherwise directed by the Agent.
Notwithstanding  anything  to the  contrary  herein,  all such  items of payment
shall, solely for purposes of determining the occurrence of an Event of Default,


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<PAGE>

be deemed received upon actual deposit to the Payment  Account,  unless the same
shall be  subsequently  dishonored for any reason  whatsoever in which case such
payment will not be deemed so received.

            (c) Subject to the provisions of Section 10.5 hereof,  any payments,
prepayments or other amounts applied or required to be applied by the provisions
of this  Agreement  to principal  outstanding  under the  Revolving  Loan shall,
unless  otherwise  directed by the Company in a Written Notice to the Agent,  be
applied as follows:  (i) first,  to principal  outstanding  under the  Company's
Revolving  Loan until paid in full and (ii)  second,  to  principal  outstanding
under the Parent's Revolving Loan until paid in full.

     ss. 2.20. APPLICATION OF PROCEEDS. (a) On and after an Event of Default and
while such Event of Default continues,  the Borrowers  irrevocably (x) waive the
right to direct the application of any and all payments  received at any time or
times  during  such  period by the Agent or any Lender  from or on behalf of the
Borrowers pursuant to the terms of this Agreement,  and (y) agree that the Agent
and Lenders shall have the continuing  exclusive right to apply any and all such
payments against any Lender Debt as the Agent may deem advisable or as otherwise
provided  herein.   Unless  otherwise   provided  herein   (including,   without
limitation,  under  Section  2.19(b)  hereof)  or in the  absence  of a specific
determination  by the Agent with respect  thereto,  the same shall,  when in the
form of immediately available funds, be applied in the following order: (i) then
due and payable fees and expenses owing under the Loan Documents;  (ii) then due
and payable interest and the principal outstanding on the Swing Line Loan; (iii)
then due and  payable  interest  payments  on the Lender  Debt;  (iv)  principal
outstanding  under the Revolving  Loan until paid in full;  and (v) other Lender
Debt then due and  payable  (including  being  held as  Letter  of  Credit  Cash
Collateral). Any amounts remaining after application of all items in clauses (i)
through (v) above shall be  deposited in the account of the Agent as provided in
paragraph (b) below.

            (b) Subject to  paragraph  (a) above,  all amounts  remaining  after
application  as provided in the last  sentence of  paragraph  (a) above shall be
deposited  into an  account  maintained  by the  Agent.  So long as no  Event of
Default or Default shall be continuing  the Borrowers may direct in writing that
the Agent release any and all amounts (and earnings  thereon) from such account.
Any amounts on deposit in such account may be,  unless and until  withdrawn by a
Borrower,  applied  by the Agent to the  payment  of Lender  Debt under the Loan
Documents  as provided in  paragraph  (a) above.  Any monies  remaining  in such
account shall be invested and  reinvested (so long as in such account) by and in
the name of the Agent in investments of the type permitted  under Section 9.4(b)
hereof with the type and maturity of such  investments to be mutually  agreed to
by the Agent and the  Borrowers  (until an Event of Default  shall  occur and be
continuing,  at which time the Agent  shall  have the sole right to choose  such
investments). All interest and other income on such investments shall be for the
account and risk of the Borrowers.  As collateral  security for the Lender Debt,
the Company hereby grants to the Agent a security  interest in (x) all monies in
such account and all investments  thereof,  including,  without limitation,  any
certificates  or instruments  evidencing  such  investments,  and all claims and
choses in action in respect of the foregoing,  (y) any interest or other payment


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<PAGE>

made in respect of such  investments  and (z) any and all proceeds of any of the
above and all claims and  choses in action in respect of the  foregoing  (all of
the  foregoing  constituting  part of the  Collateral).  To the extent the Agent
makes any such investments,  the Company hereby authorizes the Agent to hold any
certificate or instrument evidencing such investments.

            (c) The Agent is authorized to, and at its option may, make advances
on behalf of the Borrowers for payment of all fees,  expenses,  charges,  costs,
principal and interest incurred by the Borrowers hereunder.  Such advances shall
be made when and as the  Borrowers  fail to  promptly  pay such fees,  expenses,
charges,  costs,  principal and interest  and, at the Agent's  option and to the
extent  permitted by law and within the  Revolving  Commitments  of the Lenders,
shall be deemed  Revolving  Advances  constituting  part of the  Revolving  Loan
hereunder. Promptly following any advance made by the Agent under this paragraph
(c),  the  Agent  shall  deliver  a notice  of such  advance  to the  Borrowers;
provided,  however, that the Agent shall have no liability to the Borrowers as a
result of the failure of the Agent to deliver such notice to the Borrowers.

            ss. 2.21. ACCOUNTING. The Agent will provide a monthly accounting of
transactions  under the  Revolving  Loan to the  Borrowers.  Each and every such
accounting shall (absent manifest error) be deemed final, binding and conclusive
upon the Borrowers in all respects as to all matters reflected  therein,  unless
the  Borrower,  within 30 days after the date any such  accounting  is rendered,
shall notify the Agent in writing of any objection  which the Borrowers may have
to  any  such   accounting,   describing  the  basis  for  such  objection  with
specificity.  In that  event,  only those  items  expressly  objected to in such
notice  shall  be  deemed  to  be  disputed  by  the   Borrowers.   The  Agent's
determination,  based upon the facts  available,  of any item objected to by the
Borrowers in such notice shall  (absent  manifest  error) be final,  binding and
conclusive  on the  Borrowers,  unless a  Borrower  shall  commence  a  judicial
proceeding  to resolve  such  objection  within 90 days  following  the  Agent's
notifying the Borrowers in writing of such determination.

            ss.  2.22.  TAXES.  (a)  Subject to  subparagraph  (b)(iii)  of this
Section 2.22, each payment or prepayment hereunder and under the Revolving Notes
shall be made without set-off or counterclaim and free and clear of, and without
deduction  for,  any present or future  withholding  or other  taxes,  duties or
charges and all liabilities with respect thereto,  of any nature imposed on such
payments  or  prepayments  by or on behalf of any  government  or any  political
subdivision  or agency  thereof or therein,  except for Excluded Taxes (all such
taxes, levies,  duties,  imposts,  deductions,  charges and liabilities,  except
Excluded Taxes, being hereinafter referred to as "Taxes"). If any such Taxes are
so levied or imposed on any payment or  prepayment to any Lender or the Agent or
paid by such Lender or the Agent, the Borrowers will make additional payments to
the Agent in such amounts as may be necessary so that the net amount received by
such Lender or the Agent after  withholding  or  deduction  for or on account of
such Taxes,  including  deductions  applicable to additional  sums payable under
this Section  2.22(a) (other than Excluded  Taxes),  will be equal to the amount
provided for herein or in such  Lender's  Note or Notes.  Whenever any Taxes are
payable by any of the  Borrowers  with  respect to any  payments or  prepayments
hereunder or under any of the Notes, such Borrower shall furnish promptly to the



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Agent for the account of the applicable  Lender official receipts (to the extent
that the relevant  governmental  authority  delivers such  receipts)  evidencing
payment of any such Taxes so withheld or  deducted.  If a Borrower  fails to pay
any such Taxes when due to the appropriate taxing authority or fails to remit to
the Agent for the account of the applicable  Lender or the Agent, as applicable,
the  required  receipts  evidencing  payment  of any such Taxes so  withheld  or
deducted,  such Borrower shall  indemnify the affected  Lender or the Agent,  as
applicable,  for any  incremental  Taxes and any  incremental  Excluded Taxes or
interest or penalties  that may become  payable by such Lender or the Agent,  as
applicable, as a result of any such failure.

          (b) (i) Each  Lender  (which,  for  purposes  of Section  2.22 of this
     Agreement,  shall  include  any  Affiliate  of  a  Lender  that  makes  any
     Eurodollar  Advance pursuant to Section 2.16 of this Agreement) that is not
     a "United States person" (as such term is defined in Section 7701(a)(30) of
     the Code)  shall  submit  to the  Company  and the  Agent on or before  the
     Closing  Date (or, in the case of a Person  that became a Lender  after the
     Closing  Date by  assignment,  promptly  upon  such  assignment),  two duly
     completed  and signed  copies of either (1) Form 1001 of the United  States
     Internal Revenue Service entitling such Lender to a complete exemption from
     withholding  on all amounts to be received by such Lender  pursuant to this
     Agreement  and/or the Revolving Notes or (2) Form 4224 of the United States
     Internal  Revenue  Service  relating  to all amounts to be received by such
     Lender  pursuant to this Agreement  and/or the Revolving  Notes.  Each such
     Lender shall,  from time to time after submitting  either such form, submit
     to the Borrowers and the Agent such  additional  duly  completed and signed
     copies of one or the other  such  forms (or such  successor  forms or other
     documents  as shall be  adopted  from time to time by the  relevant  United
     States taxing authorities) as may be (1) reasonably requested in writing by
     the Borrowers or the Agent and (2)  appropriate  under then current  United
     States law or  regulations  to avoid  United  States  withholding  taxes on
     payments in respect of any  amounts to be received by such Lender  pursuant
     to this  Agreement  and/or  the  Notes.  Upon the  reasonable  request of a
     Borrower or the Agent, each Lender that has not provided the forms or other
     documents,  as provided above, on the basis of being a United States person
     shall  submit to such  Borrower and the Agent a  certificate  to the effect
     that it is such a "United States person."

          (ii) If any Lender which is not a "United  States  person"  determines
     that it is  unable  to  submit  to the  Borrowers  or the Agent any form or
     certificate  that  such  Lender is  requested  to  submit  pursuant  to the
     preceding paragraph,  or that it is required to withdraw or cancel any such
     form or  certificate,  or that  any  such  form or  certificate  previously
     submitted has otherwise become ineffective or inaccurate, such Lender shall
     promptly notify the Borrowers and the Agent of such fact.

          (iii)  Except as provided in Section  2.22(c) and Section 12.6 hereof,
     no Borrower  shall be required to pay any  additional  amount in respect of
     Taxes to any  Lender  if and only to the  extent  that (A) such  Lender  is
     


                                       55
<PAGE>

     subject  to such  Taxes (in such  case,  only to the extent of the tax rate
     then in effect) on the date this  Agreement  is executed by such Lender (or
     in the case of a Person  that  became a Lender  after the  Closing  Date by
     assignment,  on the date of such  assignment)  or would be  subject to such
     Taxes on such date if a payment hereunder or on the Notes had been received
     by it on  such  date;  (B)  such  Lender  becomes  subject  to  such  Taxes
     subsequent to the date referred to in clause (A) above (or in the case of a
     Lender  which is not a "United  States  person," the first date on which it
     delivers the appropriate form or certificate to the Borrowers and the Agent
     as referred to in paragraph (b) of this Section) as a result of a change in
     the  circumstances  of such Lender,  other than a change in applicable  law
     (including  without  limitation  an increase in any  applicable  tax rate),
     including  without   limitation  a  change  in  the  residence,   place  of
     incorporation or principal place of business of the Lender, a change in the
     branch or lending office of the Lender  participating  in the  transactions
     set forth herein or as a result of the sale by the Lender of  participating
     interests  in  such  Lender's  creditor  position(s)  hereunder;  provided,
     however,  that the Borrowers will be required to pay any additional  amount
     in respect of Taxes to any Lender to the extent  that after a change in the
     circumstances  (as described  above) of such Lender a subsequent  change in
     any  applicable  law  results in an  additional  amount that such Lender is
     subject  to with  respect to Taxes;  or (C) such Taxes  would not have been
     incurred  but for the failure of such  Lender to file with the  appropriate
     tax  authorities  and/or  provide to the Borrowers or the Agent any form or
     certificate that it was required so to do pursuant to paragraph (b) of this
     Section and entitled so to do under applicable law.

                   (iv) Within  thirty  (30) days after the  written  reasonable
      request of a  Borrower,  each  Lender  shall  execute  and deliver to such
      Borrower  such  certificates,  forms  or  other  documents  which  can  be
      furnished  consistent with the facts and which are reasonably necessary to
      assist  such  Borrower  in  applying  for  refunds  of Taxes  paid by such
      Borrower  hereunder  or  making  payment  of  Taxes  hereunder;  provided,
      however,  that no Lender  shall be required  to furnish to a Borrower  any
      financial information with respect to itself or other information which it
      in its sole discretion considers confidential.

            (c) In addition,  the  Borrowers  agree to pay any present or future
      stamp or documentary taxes, any intangibles tax or any other sales, excise
      or property  taxes,  charges or similar  levies now or hereafter  assessed
      that arise from and are  attributable  to the  execution,  delivery of, or
      otherwise  with  respect to, this  Agreement,  the Notes,  the  Mortgages,
      Leasehold  Mortgages or other Security Documents and any and all recording
      fees relating to any Loan Documents  securing any Lender Debt (hereinafter
      referred to as "Other Taxes").

            (d) The  Borrowers  shall  indemnify  and pay to each Lender and the
      Agent  the  full  amount  of  Taxes or  Other  Taxes  (including,  without
      limitation,  any  Taxes or Other  Taxes  imposed  by any  jurisdiction  on
      amounts  payable  under  this  Section  2.22) duly paid or payable by such


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<PAGE>

      Lender or the Agent and any liability (including  penalties,  interest and
      expenses)  arising  therefrom  or with  respect  thereto.  Indemnification
      payments  shall be made  within 30 days  from the date such  Lender or the
      Agent makes written demand therefor.

            (e) Without  prejudice to the survival of any other agreement of the
      Borrowers  hereunder,  the  agreements  and  obligations  of the Borrowers
      contained  in this Sec tion 2.22  shall  survive  the  payment  in full of
      principal and interest hereunder and under the Notes indefinitely.

            SECTION 2A. AMOUNT AND TERMS OF LETTERS OF
                        CREDIT AND PARTICIPATIONS THEREIN.

     ss. 2A.1. LETTERS OF CREDIT.  Upon the request of the Company not less than
three (3) Business Days in advance, each Issuing Lender agrees, on the terms and
conditions hereinafter set forth, to issue (or in the case of GE Capital, cause,
through  the  issuance  of one or more  L/C  Indemnity  Agreements,  an  Issuing
Non-Lender  Bank to issue) for the account of the Company one or more Letters of
Credit  from time to time  during the  period  from the  Closing  Date until the
Maturity Date in an aggregate  amount for all Letters of Credit not to exceed at
any time $30,000,000,  each such Letter of Credit upon its issuance to expire on
or before the earlier of (i) the date which occurs one year (or in the case of a
Letter of Credit in favor of the State of Missouri to secure sales tax payments,
one year which, in addition to drawings  permitted upon the non-payment of taxes
and like events,  may be drawn on any date prior to its expiration date if it is
not  renewed  for the  upcoming  year  within a  specified  period  prior to its
expiration date, such provision to be included in the original of such Letter of
Credit and the first three  renewals  thereof) from the date of its issuance and
(ii) the Maturity Date;  provided,  however,  that the Issuing Bank shall not be
obligated to issue any Letter of Credit if:

            (a) after giving  effect to such  issuance of such Letter of Credit,
      (i)  the  then  outstanding  aggregate  amount  of all  Letter  of  Credit
      Obligations and Revolving  Advances  (including Swing Line Advances) shall
      exceed the Borrowing Limit, (ii) the then outstanding  aggregate amount of
      all Letter of Credit Obligations shall exceed $30,000,000,  or (iii) there
      shall be a prepayment required under Section 3.1(a) hereof; or

            (b) the Company shall have failed to satisfy any condition precedent
      contained in Section 6 hereof.

            ss. 2A.2. ISSUING THE LETTERS OF CREDIT. Each Letter of Credit shall
be  issued on  Written  Notice by the  Company  to the Agent at least  three (3)
Business  Days (or such other period as the Agent and the Company may agree from
time to time) in advance,  which Written Notice shall specify the date,  amount,
expiry,  beneficiary and issuer thereof,  and shall be accompanied by the Letter
of Credit  Agreements  required by the Issuing Bank and  acceptable to the Agent


                                       57
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(which  shall  include the form of Letter of Credit  requested by the Company as
agreed to by the Issuing Bank),  each in form and substance  satisfactory to the
Agent and the Issuing Bank. On the date  specified by the Company in such notice
and upon fulfillment of the applicable conditions set forth in Section 2A.1, the
Issuing  Bank will issue  such  Letter of Credit in the form  specified  in such
notice  and such  Letter of  Credit  Agreements.  In the event  that a Letter of
Credit is to be issued by an Issuing  Non-Lender  Bank,  then the Written Notice
issued by the Company hereunder shall refer to an L/C Indemnity  Agreement to be
issued by GE Capital (and shall also  describe the Letter of Credit to be issued
by such Issuing  Non-Lender Bank) which L/C Indemnity  Agreement shall be deemed
to be a Letter of Credit under this  Agreement  as to which GE Capital  shall be
deemed to be the  Issuing  Lender.  The form of each  Letter  of Credit  and the
identity of each Issuing Non-Lender Bank shall be reasonably satisfactory to the
Agent.

            ss. 2A.3.  REIMBURSEMENT OBLIGATIONS.  Notwithstanding any
provisions to the contrary in any Letter of Credit Agreement with respect to any
Letter of Credit, the Company shall:

            (a) pay to the Agent for the account of the  Issuing  Bank an amount
      equal to, and in  reimbursement  for,  each amount  which the Issuing Bank
      pays under any Letter
      of Credit on or before the earlier of (i) the time  specified  therefor in
      the  applicable  Letter  of Credit  Agreement,  and (ii) the date on which
      payment of such  amount is made by the  Issuing  Bank under such Letter of
      Credit; and

            (b) pay to the Agent for the account of the Issuing Lender  interest
      on any amount  remaining unpaid by the Company to the Issuing Lender under
      subsection  (a) above from the date on which the Issuing  Lender pays such
      amount under any Letter of Credit until such amount is  reimbursed in full
      to the Issuing Lender pursuant to subsection (a) above, payable on demand,
      at a  fluctuating  rate per  annum  equal  to the sum of the Base  Rate in
      effect from time to time plus two percentage points (2%).

            ss. 2A.4.  REVOLVING  ADVANCES.  (a) Subject to  availability  under
Section  2.2  hereof,  and so long as the Lender  Debt under the Loan  Documents
shall  not  have  been  accelerated  (except  an  acceleration  which  has  been
rescinded)  and there  shall be no Event of  Default  under  Section  10.1(f) or
Section  10.1(g)  hereof,  the Company  shall make each payment  required  under
Section  2A.3  hereof  with the  proceeds  of a  Revolving  Advance.  Each  such
Revolving Advance shall be deemed to be requested by the Company, whether or not
the Company actually  requests such Revolving Advance in accordance with Section
2.4 hereof,  and subject to  availability  under the Revolving  Credit  Facility
Commitment, the Lenders shall make such Revolving Advance unless the Lender Debt
shall have been  accelerated  (and not  rescinded),  an Event of  Default  under
Section 10.1(f) or Section 10.1(g) has occurred or such Letter of Credit was not
properly issuable under Section 2A.1 hereof.

            (b) The Company  hereby  irrevocably  requests  each such  Revolving
Advance and  irrevocably  authorizes and directs the Agent to apply the proceeds
thereof   directly  to  the  Issuing  Bank  in  satisfaction  of  the  Company's


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<PAGE>

obligations  under Section 2A.3 hereof in respect of such Letter of Credit.  The
Letter of Credit in  respect  of which a  Revolving  Advance is to be made under
this  Section  2A.4 shall be deemed to be not  outstanding  for the  purposes of
determining  availability  under the  Revolving  Credit  Facility  Commitment in
making such Revolving Advance.

            (c) No Revolving Advance shall be required to be made by the Lenders
under this Section 2A.4 to the extent prevented by applicable law, following any
acceleration  of the Lender  Debt under the Loan  Documents  (which has not been
rescinded)  or while any Event of  Default  under  Section  10.1(f)  or  Section
10.1(g) hereof.

            ss. 2A.5.  SETTLEMENT BY LENDERS WITH ISSUING BANK.  (a)  With
respect to any Letter of Credit issued by an Issuing  Lender in accordance  with
the  provisions  of Section  2A.1  hereof,  the Issuing  Lender  shall be deemed
irrevocably  and  unconditionally  to have sold and  transferred  to each  other
Lender without recourse or warranty,  and each such other Lender shall be deemed
to have irrevocably and unconditionally  purchased and received from the Issuing
Lender, an undivided interest and participation,  to the extent of such Lender's
pro rata share of the Revolving  Credit Facility  Commitment in effect from time
to time, in such Letter of Credit and all Letter of Credit Obligations  relating
to such
Letter  of  Credit  and all  Letter  of  Credit  Agreements  and Loan  Documents
securing,  guaranteeing,  supporting or otherwise benefiting the payment of such
Letter of Credit Obligations.

            (b) As to each  Letter  of  Credit  issued  or to be  issued  by the
Issuing   Lender  in  which  the  Lenders  have   purchased  or  shall  purchase
participations, the Agent shall promptly notify each other Lender of such Letter
of Credit and its date of issue, amount, expiry and reference number.

            (c) With  respect  to any  Letter of Credit  in which  Lenders  have
purchased participations, if any reimbursement or other obligation under Section
2A.3 hereof is not paid when due to the Issuing  Lender with respect to any such
Letter of Credit,  the Issuing  Lender shall  promptly  notify the Agent to that
effect,  and the Agent shall  promptly  notify the Lenders of the amount of such
obligation and each Lender shall immediately pay to the Agent for the benefit of
the Issuing  Lender in respect of the purchase price for such  participation  in
such  Letter of Credit,  in lawful  money of the  United  States and in same day
funds,  an amount  equal to such  Lender's pro rata share (based on its share of
the  Revolving  Credit  Facility  Commitment at such time) of the amount of such
unpaid obligation, it being understood that the Issuing Lender shall not be paid
its pro  rata  share  (based  on its  share  of the  Revolving  Credit  Facility
Commitment then in effect) of such  reimbursement or other obligation.  Promptly
after the  Issuing  Lender  receives a payment on account of such an  obligation
with respect to any such Letter of Credit (other than under this paragraph (c)),
the Issuing Lender shall promptly pay to the Agent, and the Agent shall promptly
pay to each other Lender which funded its participation therein, in lawful money
of the United  States and in the kind of funds so  received,  an amount equal to
such Lender's ratable share thereof.


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<PAGE>

     (d) Upon the request of any Lender having  purchased a  participation  in a
Letter of Credit,  the Agent shall  furnish to such Lender copies of such Letter
of  Credit  and any  Letter  of  Credit  Agreements  related  thereto  as may be
reasonably requested by such Lender.

     (e) The  obligation  of each Lender to make  payments  under  paragraph (c)
above  shall be  unconditional  and  irrevocable  and  shall be made  under  all
circumstances  (except as otherwise  expressly provided in paragraph (a) above),
including,  without limitation,  any of the circumstances referred to in Section
2A.7(b) hereof.

     (f) If any  payment  received  on  account  of any  reimbursement  or other
obligation  with respect to a Letter of Credit and  distributed to a Lender as a
participant  under  Section  2A.5(c)  or (g) is  thereafter  recovered  from the
Issuing  Lender in  connection  with any  bankruptcy  or  insolvency  proceeding
relating to the Company, any other Credit Party or otherwise,  each Lender which
received such distribution shall, upon demand by the Agent, repay to the Issuing
Lender such Lender's  ratable share of the amount so recovered  together with an
amount equal to such Lender's  ratable share (according to the proportion of (i)
the  amount of such  Lender's  required  repayment  to (ii) the total  amount so
recovered) of any interest or other amount paid or payable by the Issuing Lender
in respect of the total  amount so  recovered.  (g) Upon the  expiration  of any
Letter of Credit or receipt by the  Issuing  Lender of payment on account of any
reimbursement  or other  obligation  with  respect to any Letter of Credit,  the
Issuing Lender, in its capacity as Lender, shall unconditionally settle with the
Lenders and, with respect to the receipt of a reimbursement  obligation,  pay to
the Agent, by paying to the Payment Account in same day funds, for reimbursement
to the Lenders,  such amount as may be necessary to adjust the  aggregate of the
Revolving  Loan and  Letter of  Credit  Obligations  of each  Lender so that all
Lenders  are,  with  respect  to  the  Revolving   Loan  and  Letter  of  Credit
Obligations, pro rata.

     ss. 2A.6. LETTER OF CREDIT FEES. (a) The Company shall pay to the Agent for
the pro rata  benefit of the Lenders  (after the  deduction of a portion of such
fee payable to the Issuing Non-Lender Banks on a pro rata basis) on the last day
of each  calendar  month  of each  year  and on the  date of the  full  drawing,
cancellation,  expiration  or  termination  of any  Letter of  Credit,  a fee in
respect of such Letter of Credit for such calendar month or shorter period, at a
rate,  with  respect to Letters of Credit,  equal to the  Applicable  Eurodollar
Margin  (calculated on the average daily undrawn amount of such Letter of Credit
for such  calendar  month or  shorter  period and  computed  on the basis of the
actual  number  of  days  elapsed  over a  year  of 360  days),  subject  to the
provisions of Section 2.6(c) hereof.

            (b) In addition to the amounts  payable under  paragraph (a) of this
Section  2A.6,  the Company  shall pay (i) to the Issuing  Bank on demand,  sums
equal to  standard  fees,  charges  and  expenses  (other than in respect of the
extension  of  credit)  which  the  Issuing  Bank  may  impose,  pay or incur in
connection   with  the   issuance,   amendment,   administration,   transfer  or


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cancellation  of any or all Letters of Credit or in connection  with any payment
by the Issuing Bank  thereunder and (ii) any costs and expenses  incurred by the
Agent in arranging for the issuance or guaranty of the Letters of Credit.

            ss. 2A.7. INDEMNIFICATION:  NATURE OF THE ISSUING BANK'S DUTIES. (a)
The Company  agrees to indemnify and save  harmless the Agent,  the Issuing Bank
and each  Lender from and  against  any and all  claims,  demands,  liabilities,
damages,  losses,  costs, charges and expenses (including  reasonable attorneys'
fees) which the Agent,  the Issuing  Bank or such Lender may incur or be subject
to as a  consequence,  direct or indirect,  of (i) the issuance of any Letter of
Credit or any action taken or omitted to be taken in connection therewith by the
Issuing Bank or (ii) any action or proceeding arising from or in connection with
the Letter of Credit,  including,  without limitation,  any action or proceeding
relating to a court order, injunction, or other process or decree restraining or
seeking to restrain  the Issuing Bank from paying any amount under any Letter of
Credit.  The  indemnities  contained  in this  Section  2A.7 shall  survive  the
expiration or  termination of the Letters of Credit and this Agreement and shall
be payable upon demand.

            (b) In  furtherance  and not in  limitation  of the  foregoing,  the
obligations of the Company hereunder shall be unconditional and irrevocable, and
shall  be  paid  strictly  in  accordance   with  the  terms  hereof  under  all
circumstances,   including,   without   limitation,   any   of   the   following
circumstances:
                  (i) any renewal,  extension or  modification  of any Letter of
      Credit (but not any increase in the outstanding amount thereof) so long as
      the terms of such Letter of Credit after giving effect to such  extension,
      renewal  or  modification  would be  permitted  hereunder,  or any lack of
      validity or  enforceability of or any change in the terms of any Letter of
      Credit or any agreement or instrument relating thereto;

                  (ii) the  existence  of any  claim,  setoff,  defense or other
      right which the Company may have at any time against the  beneficiary,  or
      any transferee,  of any Letter of Credit,  or the Issuing Bank, the Agent,
      any Lender or any other Person;

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

                  (iv) any lack of validity, effectiveness or sufficiency of any
      instrument  transferring  or assigning or purporting to transfer or assign
      any  Letter of Credit or the rights or  benefits  thereunder  or  proceeds
      thereof, in whole or in part;

                  (v) any loss or delay in the  transmission or otherwise of any
      document required in order to make a drawing under any Letter of Credit or
      of the proceeds thereof;


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<PAGE>

                  (vi) any failure of the  beneficiary  of a Letter of Credit to
      strictly  comply  with the  conditions  required in order to draw upon any
      Letter of Credit;

                  (vii) any  misapplication  by the beneficiary of any Letter of
      Credit of the proceeds of any drawing under such Letter of Credit; or

                  (viii) any other circumstance or happening whatsoever, whether
      or not similar to the foregoing;

provided that the Agent,  the Issuing Bank and each Lender shall not be relieved
of any  liability it may otherwise  have as a result of its gross  negligence or
willful misconduct.

     ss. 2A.8. INCREASED COSTS. (a) Change in Law Generally. If any law, treaty,
order, directive, rule or regulation adopted, issued or becoming effective after
the Closing Date or any change in any law or regulation or in the interpretation
thereof by any court or  administrative  or governmental  authority charged with
the  administration  thereof or compliance by any Issuing  Lender or Lender with
respect  thereto  from that in effect as of the  Closing  Date shall  either (i)
impose,  modify or deem  applicable  any  reserve,  special  deposit  or similar
requirement against letters of credit issued by the Issuing Lender or any Lender
or  participations  therein or (ii) impose on the Issuing  Lender or such Lender
any other condition regarding letters of credit or participations  therein,  and
the result of any event referred to in the preceding clause (i) or (ii) shall be
to increase the cost to the Issuing Lender of issuing or maintaining, or, in the
case of such Lender,  having a  participation  in, Letters of Credit then,  upon
demand by the  Issuing  Lender or such Lender  (with a copy to the  Agent),  the
Company shall promptly pay to the Agent for the benefit of the Issuing Lender or
such Lender from time to time as specified by the Issuing  Lender or such Lender
(with a copy to the Agent),  additional  amounts  which shall be  sufficient  to
compensate  the  Issuing  Lender  or such  Lender  for such  increased  cost.  A
certificate  as to such  increased  cost,  and amount and  computation  thereof,
incurred by the Issuing Lender or such Lender as a result of any event mentioned
in clause (i) or (ii) above,  submitted by the Issuing  Lender or such Lender to
the Company and the Agent,  shall be  conclusive  and binding for all  purposes,
absent manifest error.

            (b)  Capital.  If  any  law,  treaty,  order,  directive,   rule  or
regulation  shall be adopted,  issued or become effective after the Closing Date
or if any change in any law, treaty, order,  directive,  rule or regulation from
that in effect  on the  Closing  Date or in the  interpretation  thereof  by any
governmental  or other  regulatory  authority  charged  with the  administration
thereof (and including in any event all risk based capital guidelines heretofore
adopted  by the  Comptroller  of the  Currency,  the Board or any other  banking
regulatory  agency,  domestic  or  foreign,  to the  extent  that any  provision
contained  therein  does not have to be  complied  with as of the date  hereof),
shall,  or if the  compliance  by any  Issuing  Lender  or any  Lender  with any
guideline  or request  from any central  bank or other  governmental  authority,
shall  affect or would  affect the amount of capital  required or expected to be
maintained by the Issuing Lender or such Lender or any Affiliate of such Issuing
Lender or Lender,  and the  Issuing  Lender or such Lender  determines  that the
amount of such capital is increased by or based upon the existence of letters of
credit or participations therein (or similar contingent obligations), then, upon


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demand by the Issuing Lender or such Lender,  as the case may be (with a copy to
the Agent),  the  Company  shall pay to the Agent for the benefit of the Issuing
Lender  or such  Lender  from  time to time such  additional  amounts  as may be
specified by the Issuing Lender or such Lender as sufficient to compensate it in
light of such  circumstances,  to the  extent  that the  Issuing  Lender or such
Lender  determines  such  increase in capital to be allocable to the issuance or
maintenance  of the Letters of Credit,  or, in the case of such  Lender,  to its
participation  in the  Letters  of  Credit.  A  certificate  as to such  amounts
submitted  to the  Company  by the  Issuing  Lender  or  such  Lender  shall  be
conclusive and binding for all purposes, absent manifest error.

     ss. 2A.9.  UNIFORM  CUSTOMS AND PRACTICE.  The Uniform Customs and Practice
for Documentary Credits as most recently published by the International  Chamber
of Commerce and as revised  from time to time  ("UCP")  shall in all respects be
deemed a part of this Article 2A as if  incorporated  herein with respect to the
Letters of Credit.

     ss. 2A.10.  FOREIGN CURRENCY.  Any payments by the Issuing Bank of drawings
under any  Letter  of Credit in  foreign  currency  shall be  reimbursed  by the
Company (or,  under  Section 2A.5,  the Lenders) in U.S.  dollars at the rate of
exchange  for cable  transfers  in effect on the date of payment by the  Issuing
Bank of the drawing under such Letter of Credit.

     ss. 2A.11. REIMBURSEMENT OF CERTAIN COSTS. Unless at the time prohibited by
an order of a court of competent  jurisdiction,  the  obligations of the Company
hereunder with regard to Letters of Credit are absolute and unconditional  under
any and all  circumstances  and  irrespective  of any set off,  counterclaim  or
defense to payment  which the  Company may have  against any Person,  including,
without  limitation,  the Agent, the Lenders,  the beneficiary of such Letter of
Credit and any Issuing Bank and all sums payable by the Company  hereunder  with
respect to any such  Letter of Credit,  whether of  principal,  interest,  fees,
expenses  or  otherwise,  shall  be paid  in  full,  without  any  deduction  or
withholding whatsoever. In the event that the Company is compelled by applicable
law to make any such  deduction  or  withholding,  then,  unless  prohibited  by
applicable law and except as provided in Section  2.22(b)(iii)  hereof, it shall
pay to each Issuing Bank such additional amount as will result in the receipt by
such  Issuing  Bank of a net sum equal to the sum it would have  received  if no
such deduction or withholding had been required to be made.

            SECTION 3.  PAYMENTS AND PREPAYMENTS.

     ss.  3.1.  MANDATORY  PAYMENTS.  (a) If at any time the sum of (i) the then
outstanding  principal  amount of the Revolving  Loan  (including the Swing Line
Loan) plus (ii) the outstanding amount of Letter of Credit  Obligations  exceeds
the Borrowing Limit at such time, the Borrowers shall immediately eliminate such
excess by prepaying the Revolving Loan. In the event that reducing the Revolving
Loan to zero will not eliminate  such excess,  then the Company shall provide to


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<PAGE>

the Agent,  cash  collateral,  on terms and pursuant to documents and agreements
(each of  which  shall  constitute  a  Security  Document)  satisfactory  in all
respects  to the  Agent,  for  all  outstanding  Letter  of  Credit  Obligations
(hereinafter,  "Letter of Credit Cash  Collateral")  in an amount  sufficient to
eliminate such excess,  the Letter of Credit Obligations being deemed reduced by
the amount of Letter of Credit Cash Collateral so provided.

            (b)  In  the  event  that  for  any  reason  the  Letter  of  Credit
Obligations  exceed  $30,000,000  at any time,  the  Company  shall  immediately
provide  Letter of Credit Cash  Collateral in an amount  sufficient to eliminate
such excess, the Letter of Credit Obligations being deemed reduced by the amount
of Letter of Credit Cash Collateral so provided.

            (c)  The  Borrowers  shall  cause  for  a  period  of  at  least  30
consecutive  days during each Clean Down  Period (i) the  aggregate  outstanding
principal  balance of the  Revolving  Loan to be  reduced to an amount  equal to
$10,000,000  or less and (ii) the Letter of Credit  Obligations to be reduced to
an amount equal to $20,000,000 or less; provided, however, that in the event the
Letter of Credit  Obligations  exceed  $20,000,000  at any time, the Company may
provide  Letter of Credit Cash  Collateral in an amount  sufficient to eliminate
such excess and the Letter of Credit  Obligations shall be deemed reduced by the
amount of Letter of Credit Cash Collateral so provided.

            (d) In the event  that (i) a Change of Control  occurs,  (ii) all or
substantially all
of the assets of the Company shall be sold, transferred or conveyed,  whether in
a single transaction or in a series of related transactions or (iii) the Company
or the Parent shall consummate a transaction  otherwise prohibited under Section
9.5 hereof,  the Revolving Loan shall become  immediately  due and payable,  the
Revolving Credit Facility  Commitment shall be automatically  terminated and the
Borrowers shall immediately pay all Lender Debt (including,  without limitation,
Letter of Credit  Obligations,  for which Letter of Credit Cash Collateral shall
be immediately  provided),  unless, in the case of (i), (ii) or (iii) above, the
Borrowers have obtained the prior written consent of the Majority Lenders.

            (e) Any  prepayment of principal of the  Revolving  Loan pursuant to
this  Section  3.1 shall be made,  except as  provided  in Section  3.7  hereof,
without  premium  or penalty  but shall be subject to payment of any  applicable
indemnity  obligations  pursuant to Section  2.12  hereof.  Each  prepayment  of
principal of the Revolving Loan required under Section 3.1 or Section 3.2 hereof
shall be  accompanied  by the payment of interest and fees accrued and unpaid on
the amount of such prepayment through the date of prepayment.

     ss. 3.2.  CERTAIN  PAYMENTS.  (a) Upon receipt by either Borrower or any of
their  respective  Subsidiaries or by the Agent of any proceeds of any insurance
on any tangible property of the Company or any of its Subsidiaries,  there shall
become  immediately  due and payable a prepayment in respect of principal of the
Revolving Loan in the amount of such proceeds.

            (b)  Upon  the  receipt  by the  Company  or  any  of  its  Domestic
Subsidiaries of any Net Cash Proceeds from the sale by the Company or any of its


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<PAGE>

Domestic  Subsidiaries  of any  property,  other than sales of  Inventory in the
ordinary  course of business,  there shall become  immediately due and payable a
prepayment in respect of principal of the  Revolving  Loan in the amount of such
Net Cash Proceeds.

            (c) (i)  Upon  receipt  by the  Parent,  the  Company  or any of its
Domestic  Subsidiaries  of any Net Cash Proceeds from any source not referred to
in paragraphs (a), (b) or (f) of this Section 3.2 (other than sales of Inventory
in the ordinary  course of business and other than proceeds of Accounts),  there
shall become immediately due and payable a prepayment in respect of principal of
the Revolving  Loan in the amount of such Net Cash  Proceeds.  (ii) In the event
that the Parent, the Company or any of its Domestic  Subsidiaries is holding any
cash or cash  equivalents  the  receipt of which did not create the  requirement
under this  Agreement for a prepayment of principal of the Revolving  Loan or is
not otherwise under this Agreement (including, without limitation, under Section
8.22 hereof),  required to be applied to the  Revolving  Loan,  the Parent,  the
Company or its Domestic Subsidiary, as the case may be, shall apply such cash or
cash equivalent to the prepayment of the Revolving Loan under this Section 3.2.

            (d) In the  event  that  (i) the  amount  of  proceeds  or Net  Cash
Proceeds in respect of which a prepayment is required to be paid under paragraph
(a),  (b),  (c) or (f) of this  Section 3.2  exceeds  the amount of  outstanding
principal of the Revolving Loan,  then such excess shall be immediately  paid to
the Agent to be held as Letter of Credit Cash
Collateral  and (ii) the excess  referred to in clause (i) of this paragraph (d)
exceeds  the  amount of Letter of Credit  Obligations,  then the  amount of such
excess  (whether  such  excess is  created at the time of  establishment  of the
Letter of Credit Cash  Collateral or occurs by virtue of the reduction of Letter
of  Credit  Obligations  or  otherwise)  shall  be  held  by the  Agent  as cash
collateral  pursuant to the Cash Collateral  Agreement and released from time to
time in accordance  with paragraph (e) of this Section 3.2.  Interest earned and
paid on such cash  collateral  shall be for the  account  of the  Company or its
Domestic  Subsidiary  as provided  in the Cash  Collateral  Agreement  and until
release as provided in paragraph  (e) of this Section 3.2 shall be added to such
cash collateral.

            (e) In the event that the Agent is  holding  cash  collateral  under
clause (ii) of Section 3.2(d) hereof or Letter of Credit Cash  Collateral  under
clause (i) of Section 3.2(d) hereof,  the Agent shall release all or any portion
of same to the  Company to the extent  requested  by the  Company  upon  Written
Notice  to the  Agent,  so long as,  at the time of such  Written  Notice by the
Company,  the Company is in compliance  with clauses (i) and (ii) of Section 6.1
hereof  and so  certifies  in its  Written  Notice  and so long as  there  is no
requirement  under any other  provision  of this  Agreement  that the  Letter of
Credit Cash Collateral be maintained. Notwithstanding the foregoing, the Company
shall request  release of and exhaust cash  collateral held under clause (ii) of
Section  3.2(d)  hereof  prior to making any  request  for  release of Letter of
Credit Cash Collateral and,  notwithstanding  anything to the contrary contained
in Section 2 hereof,  shall give no notice of borrowing under Section 2.4 hereof
while  the  Agent is  holding  any  Letter of  Credit  Cash  Collateral  or cash
collateral under Section 3.2(d) hereof; provided,  however, that the Company may


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give a notice of borrowing in the event that Letter of Credit Cash Collateral is
being held other than as required under Section 3.2(d) hereof.

            (f) Upon  receipt  by the Parent of any Net Cash  Proceeds  from the
issuance of Equity Interests,  there shall become due and payable on the date of
such receipt a prepayment in respect of principal of the  Revolving  Loan in the
amount  of such  Net  Cash  Proceeds  if,  and to the  extent  permitted  by the
Debenture Indenture.

            (g) None of the  prepayments  required  under this Section 3.2 shall
result in a permanent reduction in the Revolving Credit Facility Commitment. Any
prepayment  required  under this  Section 3.2 shall be deemed paid to the extent
that Proceeds from the  transaction in respect of which the requirement for such
prepayment  arose  shall have been paid into the  Payment  Account  pursuant  to
Section 8.22 hereof.

     ss. 3.3.  OPTIONAL  PREPAYMENTS.  (a) Upon not less than three (3) Business
Days'  prior  Written  Notice to the Agent with  respect to  Revolving  Advances
constituting Eurodollar Advances and Written Notice to the Agent on the Business
Day of prepayment in the case of Base Rate  Advances,  the Borrowers  shall have
the right from time to time to prepay in whole or in part, without premium,  fee
or charge (except as provided in Section 2.12 and Section  2.5(a)(iii)  hereof),
the Revolving  Loan, so long as each such prepayment in part is in the amount of
$50,000 or an integral  multiple of $50,000 in excess  thereof,  and so long as,
concurrently with the making of any such prepayment, the Borrowers pay any fees,
premiums,  charges or costs  provided  for under  Section  2.12 or  Section  3.7
hereof. The provisions of this Section 3.3 shall not apply to mandatory payments
made with  respect  to the  Revolving  Loan  pursuant  to  Section  8.22 of this
Agreement.

            (b) Upon the  giving of notice of  prepayment,  the  amount  therein
specified to be prepaid  shall be due and payable on the date therein  specified
for such  prepayment,  together with all accrued  interest  thereon to such date
plus any fees,  premiums,  charges or costs  provided for under  Section 2.12 or
Section 2.5(a)(iii) hereof or in the Fee Letter. The Agent shall, promptly after
receipt of any notice of prepayment of any Loan as provided in this Section 3.3,
notify each Lender in writing or by telephone  confirmed  promptly in writing of
the Borrowers' intention so to prepay all or part of such Loan.

     ss. 3.4.  PROCEDURES  FOR PAYMENT.  Notwithstanding  anything  contained in
Section 3.2 hereof, the Agent shall not, to the extent requested in writing by a
Borrower,  apply any mandatory  prepayment  under such section to any portion of
the Revolving Loan which constitutes a Eurodollar  Advance until the last day of
the respective  Interest Period therefor or the earlier maturity of such portion
of such Revolving Loan by acceleration or otherwise,  such mandatory prepayment,
until it can be so applied,  to be applied to the  prepayment of such portion of
the Revolving  Loan  comprising  Base Rate  Advances.  If there shall remain any
portion of such  mandatory  prepayment  after payment in full of such portion of
the Revolving Loan  constituting  Base Rate Advances,  then until such remaining
portion of the mandatory prepayment can be applied to the Eurodollar Advances as


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aforesaid, such remaining portion of such mandatory prepayment shall be invested
and  reinvested  by and in the  name of the  Agent  in  investments  of the type
permitted  under  Section  9.4(b)  hereof  with the type  and  maturity  of such
investments  to be  mutually  agreed  to by the  Agent  and the  Borrowers.  All
interest  earned on such  investments  shall be for the  account and risk of the
Borrowers. Interest earned on any portion of principal applied to the Eurodollar
Advance  shall be, so long as no Default or Event of Default shall have occurred
and be continuing,  and to the extent received by the Agent,  turned over to the
Borrowers  promptly  following  application of such principal to such Eurodollar
Advance, as the Agent shall determine. As additional collateral security for the
Lender Debt, the Company  hereby grants to the Agent a security  interest in (x)
any such mandatory prepayments and any investments thereof,  including,  without
limitation, any certificates or instruments evidencing any such investments, and
all claims and choses in action in respect of the foregoing, (y) any interest or
other payment made in respect of such  investments  and (z) any and all proceeds
of any of the above and all  claims  and  choses  in  action in  respect  of the
foregoing (all of the foregoing  constituting  part of the  Collateral).  To the
extent the Agent makes any such  investments,  the Company hereby authorizes the
Agent to hold any certificate or instrument evidencing such investments.

     ss. 3.5.  UNUSED FACILITY FEE. The Borrowers shall pay to the Agent for the
account of each Lender on the last day of each month of each  calendar  year, in
arrears,  until the date of the  expiration,  termination or cancellation of the
Revolving  Credit  Facility  Commitment and on such date, an unused facility fee
for the calendar month or shorter period just ended of thirty-seven and one-half
basis  points (37.5 b.p.) per annum on the amount equal to the excess of (i) the
daily  average of the maximum  dollar amount of the  Revolving  Credit  Facility
Commitment (in any case determined without reference to the limitations  imposed
by the Borrowing Base) during such calendar month or longer period over (ii) the
sum of (A) the average daily outstanding principal balance of the Revolving Loan
during such calendar  month or longer period and (B) the average daily Letter of
Credit Obligations during such calendar month or longer period.

     ss. 3.6. FEES. The Company shall pay to GE Capital,  individually, the fees
specified in the Fee Letter at the times specified for payment therein including
all such fees that were payable on or prior to the Closing Date.

     SECTION 4. SECURITY AND GUARANTIES.

     As security for the full and timely  payment and  performance of the Lender
Debt, whether now existing or hereafter arising:

     ss.  4.1.  PLEDGE OF CAPITAL  STOCK AND NOTES.  Each of the Company and its
Subsidiaries  shall (to the extent of its  interest  therein)  duly  execute and
deliver to the Agent one or more pledge agreements, substantially in the form of
Exhib it 4.1(a) hereto (each as amended, supplemented or otherwise modified from
time to time in accordance with its terms, a "Pledge Agreement"),  covering,  to
the extent of such  Person's  interest  therein,  (i) all  capital  stock of all


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present and future  Subsidiaries  (direct and  indirect) of the Company,  now or
hereafter  issued and (ii) all  proceeds  thereof,  pursuant to which the Credit
Parties  (other than the Parent) shall grant to the Agent for the benefit of the
Agent and the Lenders a valid,  perfected and enforceable first priority Lien on
all of  the  foregoing,  together  with  certificates  representing  the  equity
interests or capital stock  referred to therein (to the extent,  with respect to
any Foreign Subsidiaries,  that certificates exist or certificates  representing
stock or equity interests are customarily issued by corporations incorporated or
formed in the  jurisdiction in which such Foreign  Subsidiary is incorporated or
formed),  accompanied by undated stock powers or assignments thereof executed in
blank. To the extent that the Pledge  Agreement may not be appropriate to create
a Lien in favor of the Agent on any capital  stock of any Foreign  Subsidiary as
determined by the Agent or that certain actions as determined by the Agent which
are not  contemplated  by this Section 4.1 or by the Pledge  Agreement  shall be
required  to  perfect  a Lien in favor of the  Agent in the  stock of a  Foreign
Subsidiary,  the relevant Credit Party which has an interest in such stock shall
as soon as reasonably  practical (and if not reasonably practical by the Closing
Date,  in any  event by not  later  than 30 days  after the  Closing  Date),  in
addition to  executing  the Pledge  Agreement  as provided in this  Section 4.1,
execute and deliver to the Agent and cause to be executed  and  delivered to the
Agent such documents and instruments,  in form and substance satisfactory to the
Agent, and shall take such actions as reasonably requested by the Agent, in each
instance,  in order to grant to the Agent for the  benefit  of the Agent and the
Lenders a valid,  perfected and  enforceable  first priority Lien on the capital
stock of such Foreign  Subsidiary to be pledged to the Agent as provided in this
Section 4.1.

            ss. 4.2.  SECURITY AGREEMENT - TRADEMARK, PATENT AND
COPYRIGHT.  Each of the Company and its Domestic Subsidiaries shall duly execute
and deliver to the Agent one or more security  agreements,  substantially in the
form of Exhibit 4.2 hereto,  covering the trademarks,  patents and copyrights of
such Credit Party (each as amended, supplemented or otherwise modified from time
to time in  accordance  with its  terms,  a  "Trademark,  Patent  and  Copyright
Security Agreement"), now owned and hereafter acquired, together with notices of
trademarks,  patents and copyrights and other similar documents in form suitable
for filing with the United States Patent and Trademark Office, the United States
Copyright Office or any other applicable  governmental  office or agency, as the
case  may  be,  and  one or more  special  powers  of  attorney  and  all  other
supplementary  notices  and  instruments  requested  by the Agent in  connection
therewith.

            ss.  4.3.  SECURITY  AGREEMENTS.  (a)  Each of the  Company  and its
Domestic  Subsidiaries  shall duly  execute and deliver to the Agent one or more
security  agreements,  substantially in the form of Exhibit 4.3(a) hereto (each,
as amended,  supplemented  or modified from time to time in accordance  with its
terms,  a  "Security  Agreement",  and,  together  with the  Pledge  Agreements,
Mortgages,  Leasehold  Mortgages,  the Trademark,  Patent and Copyright Security
Agreements,  each  Assignment  of Life  Insurance,  each  Assignment of Business
Interruption  Insurance,  the Cash  Collateral  Agreement,  the Collecting  Bank
Agreements, and any other agreement, now existing or hereafter created providing
collateral security for the payment or performance of any Lender Debt (including


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any such documents executed and delivered  pursuant to Section 8.25 hereof),  in
each case, as amended,  modified or supplemented from time to time, collectively
referred to as the "Security Documents"), and to the extent requested in writing
by the Agent on or prior to the  Closing  Date  (except as  provided  in Section
8.19(a) hereof), all consents of third parties necessary to permit the effective
granting of the Liens created in such security  agreements  (including,  without
limitation,   a  landlord's   waiver  and   certificate   (each  a   "Landlord's
Certificate") in respect of each property subject to a Lease),  in each case, in
form and substance satisfactory to the Agent, together with:

                  (A) evidence of the  completion of all  recordings and filings
      of or with  respect  to the  Security  Documents  that the  Agent may deem
      necessary or  desirable in order to perfect and protect the Liens  created
      thereby,

                  (B)  evidence  of the  insurance  required by the terms of any
      Security Document or this Agreement,

                  (C) to the  extent  requested  in  writing  by the Agent on or
      prior to the Closing Date, copies of each assigned  agreement  referred to
      in any Security  Document,  together with a consent to such  assignment in
      form and substance reasonably  satisfactory to the Agent, duly executed by
      each party to such assigned agreements other than the Company, and

                  (D)  evidence  that all other  action  that the Agent may deem
      necessary or  desirable in order to perfect and protect the Liens  created
      by the  Security  Documents  (and  the  priority  of such  Liens  required
      hereunder) has been taken.

            (b) The Agent shall have received (unless otherwise  consented to in
writing by the Agent):

                  (A) acknowledgment  copies or stamped receipt copies of proper
      financing  statements,  duly  filed on or  before  the day of the  initial
      borrowing  hereunder under the UCC of all jurisdictions that the Agent may
      deem  necessary  or  desirable  in order to perfect  and protect the Liens
      created by the Security  Documents,  covering the collateral  described in
      the Security Documents, and

                  (B) completed requests for information, dated on or before the
      date of the initial borrowing hereunder,  listing the financing statements
      referred  to in  clause  (A)  above  and  all  other  effective  financing
      statements, tax liens and judgments filed or recorded in the jurisdictions
      listed on Schedule 4.3(b)(B) hereto, that name any Credit Party as debtor,
      taxpayer or judgment debtor,  together with copies of such other financing
      statements.



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            ss. 4.4.  REAL PROPERTY; MORTGAGES; LEASEHOLD MORTGAGES;
TITLE INSURANCE.  (a)  To the extent requested by the Agent:

          (i) each of the  Company  and its  Domestic  Subsidiaries  shall  duly
     execute  and  deliver to the Agent  mortgages  or deeds of trust (each such
     mortgage or deed of trust,  as it may be amended,  modified or supplemented
     from time to time in accordance with its terms, a "Mortgage") in respect of
     real  property  owned by such  Credit  Party so as to create in the Agent's
     favor,  for the  benefit  of the Agent and the  Lenders,  upon  recordation
     thereof, a valid, perfected and enforceable first priority Lien on the real
     property  and  improvements   described  therein  (subject  only  to  Liens
     specifically  permitted under Section 9.2 hereof),  such Mortgages to be in
     form and substance reasonably  satisfactory to the Agent (with such changes
     thereto as may be necessary to provide that such  Mortgages  secure  Lender
     Debt not covered by such exhibit);

          (ii) except with respect to the Leases  listed on Schedule  4.4(a)(ii)
     hereto,  each of the  Company  and its  Domestic  Subsidiaries  shall  duly
     execute  and  deliver to the Agent  leasehold  mortgages  or deeds of trust
     (each  such  leasehold  mortgage  or deed of trust,  as it may be  amended,
     modified or supplemented  from time to time in accordance with its terms, a
     "Leasehold  Mortgage") in respect of real property  leased under a Lease by
     such Credit Party so as to create in the Agent's favor,  for the benefit of
     the Agent and the Lenders, upon recordation thereof, a valid, perfected and
     enforceable  first  priority  Lien on such Lease and the real  property and
     improvements  thereon  leased by such Credit Party  (subject  only to Liens
     specifically  permitted under Section 9.2 hereof), such Leasehold Mortgages
     to be in form and substance reasonably satisfactory to the Agent (with such
     changes  thereto  as  may be  necessary  to  provide  that  such  Leasehold
     Mortgages secure Lender Debt not covered by such exhibit); and

          (iii) each of the Company and its  Domestic  Subsidiaries  shall cause
     the Mortgages and the Leasehold  Mortgages  executed and delivered by it to
     be duly recorded in the appropriate  recording  office or offices and shall
     pay all fees and taxes payable in connection therewith.

            (b) Each of the Company and its Domestic Subsidiaries shall cause to
be executed and  delivered to the Agent such  amendments  to each of the Leases,
such consents of third  parties to the  Mortgages  and the  Leasehold  Mortgages
executed and  delivered  by it, and such  non-disturbance  agreements,  estoppel
certificates  and waivers as the Agent  shall  request (in each case in form and
substance satisfactory to the Agent).

            (c) Each of the Company and its Domestic  Subsidiaries shall furnish
to the Agent, in sufficient copies for each Lender, for the benefit of the Agent
and the  Lenders,  at the  expense of the Company or a Domestic  Subsidiary,  as
applicable,  one or  more  policies  of  mortgagee  title  insurance,  in  form,


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substance  and  amount  satisfactory  to the  Agent,  insuring  that each of the
Mortgages  and  Leasehold  Mortgages  executed  and  delivered by it pursuant to
Section  4.4(a) hereof is a valid and perfected  first priority Lien in favor of
the Agent on the fee or leasehold interest, as applicable,  of such Credit Party
(subject only to Liens specifically permitted under Section 9.2 hereof), in real
property and improvements described therein, and that such Credit Party has good
and marketable  title thereto,  issued by a title insurance  company  reasonably
satisfactory to the Agent,  together with  satisfactory  evidence that all title
insurance  premiums have been fully paid. Each Credit Party shall furnish to the
Agent, in sufficient copies for each Lender,  certified surveys of real property
to be subject to any Mortgage or Leasehold Mortgage to be executed and delivered
by it on or prior to the Closing Date and such other  certificates and documents
as the  Agent may  reasonably  request.  Each of the  Company  and its  Domestic
Subsidiaries shall additionally  provide to each Lender with respect to any real
property or leasehold interest to be subject to a Mortgage or Leasehold Mortgage
on or prior to the taking of such Mortgage or Leasehold Mortgage such appraisals
of such  real  property  or  leasehold  interest  as  shall  be  required  under
applicable law, including, without limitation, FIRREA.

     ss. 4.5.  ADDITIONAL  COLLATERAL.  Other than as set forth in any  Security
Document, each of the Company and its Domestic Subsidiaries acknowledges that it
is its intention to provide the Agent with a Lien on all its property (personal,
real and mixed), whether now owned or hereafter acquired,  subject only to Liens
specifically  permitted under Section 9.2 hereof.  Without limitation of Section
4.4 hereof, each of the Company and its Domestic Subsidiaries shall from time to
time promptly notify the Agent of the acquisition by it of any material property
in which the Agent  does not then hold a  perfected  Lien,  or the  creation  or
existence of any such property (including, without limitation, the entering into
by the Company or any Domestic  Subsidiary  of a Lease),  and such Person shall,
upon request by the Agent, promptly execute and deliver to the Agent or cause to
be executed and delivered to the Agent pledge agreements,  security  agreements,
mortgages or other like agreements with respect to such property,  together with
such other documents,  certificates, title insurance, surveys, consents of third
parties,  opinions of counsel and the like as the Agent shall reasonably request
in connection therewith,  in form and substance  satisfactory to the Agent, such
that the Agent shall receive valid and perfected  first  priority Liens (subject
only to Liens  specifically  permitted  under  Section  9.2  hereof) on all such
property.

     ss. 4.6.  FILING AND  RECORDING.  (a) Each of the Company and its  Domestic
Subsidiaries  shall,  at their  cost and  expense,  cause  all  instruments  and
documents  given as security  pursuant  to this  Agreement  to be duly  recorded
and/or filed or otherwise  perfected in all places necessary,  in the opinion of
the Agent, to perfect and protect the Lien of the Agent in the property  covered
thereby.

            (b)  Each  of the  Company  and  its  Domestic  Subsidiaries  hereby
authorizes  the Agent to file one or more financing  statements or  continuation
statements or amendments  thereto or assignments  thereof in respect of any Lien
created  pursuant to this Agreement and the Security  Documents which may at any


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time be  required  or which,  in the  opinion of the  Agent,  may at any time be
desirable without the signature of such Credit Party where permitted by law.

     (c) In the  event  that  any  re-recording  or  refiling  of any  financing
statement  (or the filing of any  statements  of  continuation  or  amendment or
assignment of any financing  statement) is required to protect and preserve such
Lien, each of the Company and its Domestic Subsidiaries shall, at their cost and
expense,  cause the same to be  recorded  and/or  refiled at the time and in the
manner requested by the Agent.

     ss. 4.7.  INTERPRETATION OF SECURITY DOCUMENTS. In the case of any conflict
between the terms and provisions of a Security Document and this Agreement,  the
terms and provisions of this Agreement  shall control,  unless the terms of such
Security Document expressly provide otherwise.

     ss. 4.8. GUARANTIES.  (a) On or prior to the Closing Date, all Subsidiaries
of the Company shall execute and deliver to the Agent a guaranty,  substantially
in the form of  Exhibit  4.8  hereto,  of all  present  and future  Lender  Debt
incurred by the Company.

     (b) Upon the  formation,  after the Closing Date, of any  Subsidiary of the
Company,  such  Subsidiary  shall  execute  and deliver to the Agent a guaranty,
substantially  in the form of Exhibit 4.8 hereto (modified in form and substance
satisfactory to the Agent),  of all then existing or thereafter  incurred Lender
Debt and such other Security  Documents and related  documents,  instruments and
certificates,  in form and  substance  satisfactory  to the Agent,  as the Agent
shall  request  in order to grant to the Agent for the  benefit of the Agent and
the Lenders a valid, perfected and enforceable first priority Lien on all assets
of such  Subsidiary.  Nothing  contained  in this  Section 4.8 shall  permit the
Company  or any  Subsidiary  of any  thereof  to form  any  Subsidiary  which is
otherwise prohibited by this Agreement.

     ss. 4.9.  ASSIGNMENTS OF INSURANCE.  (a) The Company shall duly execute and
deliver  to the  Agent  one or more  assignments,  substantially  in the form of
Exhibit 4.9(a) hereto (each, as amended, supplemented or otherwise modified from
time to time in accordance with its terms,  an "Assignment of Life  Insurance"),
and such other  instruments  and documents,  in each case, as may be required by
the Agent to grant to the Agent for the  benefit of the Agent and the  Lenders a
valid,  perfected  and  enforceable  first Lien,  to the extent of the Company's
interest  therein,  on any key person life insurance policy required pursuant to
Section  8.3(g)  hereof,  and the issuer of such policy shall have  acknowledged
such assignment.

     (b) The  Company  shall duly  execute  and deliver to the Agent one or more
assignments,  substantially in the form of Exhibit 4.9 hereto (each, as amended,
supplemented  or otherwise  modified  from time to time in  accordance  with its
terms,  an  "Assignment  of Business  Interruption  Insurance"),  and such other
instruments  and  documents,  in each case,  as may be  required by the Agent to
grant to the  Agent  for the  benefit  of the  Agent  and the  Lenders  a valid,


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perfected  and  enforceable  first Lien on any business  interruption  insurance
policy required pursuant to Section 8.3(e) hereof, and the issuer of such policy
shall have acknowledged such assignment.

            ss. 4.10. CASH COLLATERAL AGREEMENT.  The Company shall duly execute
and deliver to the Agent a cash collateral agreement,  substantially in form and
substance  satisfactory  to the Agent (as  amended,  supplemented  or  otherwise
modified from time to time in accordance  with its terms,  the "Cash  Collateral
Agreement"),  and such other instruments and documents,  in each case, as may be
required by the Agent to grant to the Agent for the benefit of the Agent and the
Lenders  a valid,  perfected  and  enforceable  first  Lien on the cash  covered
thereby, all investments thereof,  income thereon,  claims,  demands,  choses in
action in respect thereof and all other proceeds thereof.

            SECTION 5.  CONDITIONS PRECEDENT TO INITIAL BORROWINGS
                        AND ISSUANCE OF LETTERS OF CREDIT.

            The  obligation  of each Lender to lend its pro rata  portion of any
Revolving  Advance  or to  provide  any other  financial  accommodations  to the
Company on the Closing  Date is subject to the  following  conditions  precedent
being fulfilled to the  satisfaction of the Agent in each instance (or waived in
writing by the Majority Lenders):

            ss.  5.1.  OPINIONS  OF  COUNSEL.  The  Agent  shall  have  received
favorable opinions of Zimet,  Haines,  Friedman & Kaplan,  counsel to the Credit
Parties,  substantially  in the form  attached  hereto as Exhibit  5.1 (and such
other opinions of counsel, including, without limitation, of local counsel, each
in form and substance  satisfactory to the Agent, as the Agent may request);  it
being understood that to the extent that such opinions of counsel
shall rely upon any other  opinion of counsel,  each such other opinion shall be
in form and substance satisfactory to Agent and shall provide that the Agent and
Lenders may rely thereon.

            ss. 5.2.  FINANCIAL STATUS AND STATEMENTS.  (a) The Agent shall have
received  the  Parent's  and  the  Company's  audited   consolidated   financial
statements for the Parent's and the Company's fiscal year ended February 1, 1997
(the "Reference Date") prepared by the Parent or the Company, as the case may be
and certified by Arthur Andersen & Company and such financial  statements  shall
be  otherwise in all respects  satisfactory  to the Agent.  The Agent shall have
received such projections as the Agent shall have requested, in each case, based
on reasonable estimates of the Company and in form and substance satisfactory to
the Agent.

            (b) As of the time  immediately  prior to the Closing  Date,  in the
Agent's  judgment,  (i) no material  adverse  change shall have  occurred in the
business, operations,  liabilities,  assets, properties, prospects or condition,
financial or otherwise, of the Parent and its Subsidiaries,  since the Reference
Date  as  reflected  in  the  audited  consolidated  financial  statements  (the
"Financial  Statements")  of the Parent and its  Subsidiaries  as at and for the
period  ending on the  Reference  Date,  (ii)  there  shall  have been since the



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Reference Date no material increase in liabilities of the Parent or the Company,
liquidated or contingent,  whether or not reflected on any balance sheet, and no
material  decrease in the Parent's or the  Company's  assets,  other than in the
ordinary  course of  business,  (iii)  nothing  shall  have  occurred  since the
Reference Date which shall have materially changed the ability of the Company to
meet the targets  set forth in the  projections  dated July 23, 1997  previously
delivered by the Company to the Agent,  as such may be amended and  supplemented
as required by, and with the approval  of, the Agent,  (iv) since the  Reference
Date there  shall have been no  litigation  commenced  or  threatened,  which if
adversely  determined  would  have a Material  Adverse  Effect and (v) since the
Reference Date there shall have been no dividends or distributions by the Parent
or the Company to their  respective  stockholders  (other than as  permitted  by
Section 9.6(a)(ii) hereof). The Agent shall not have become aware of theretofore
previously undisclosed materially adverse information with respect to the Parent
and its Subsidiaries.

     ss. 5.3.  QUALIFICATION.  Each Credit Party shall be duly  qualified and in
good  standing in each  jurisdiction  in which it owns or leases  property or in
which the conduct of its  business  requires it to so qualify,  except where the
failure to so qualify would not have a material  adverse effect on its business,
operations,  liabilities,  assets, properties, prospects or condition (financial
or otherwise).

     ss. 5.4. SECURITY DOCUMENTS AND INSTRUMENTS. The Agent shall have received,
in sufficient copies for each Lender, (a) all the instruments and documents then
required to be delivered  pursuant to Section 4 hereof or any other provision of
this  Agreement  or pursuant to the  instruments  and  documents  referred to in
Section 4 hereof and the same shall be in full force and effect and shall  grant
or  create  the  Liens,  rights,  powers,  priorities,   remedies  and  benefits
contemplated  herein or therein,  as the case may be, (b) all necessary consents
relating  thereto  from  third  parties  so that the same shall be valid and not
result in any violation of any material agreement running in favor of such third
party and (c) all satisfactions of mortgages,  termination  statements under the
UCC and other  instruments  releasing  Liens as may be necessary or desirable in
connection with the foregoing.

     ss.  5.5.  EVIDENCE  OF  INSURANCE.  The  Agent  shall  have  received,  in
sufficient  copies for each Lender,  evidence,  in form, scope and substance and
with such  insurance  carriers  reasonably  satisfactory  to the  Agent,  of all
insurance  policies  required  pursuant to Section 8.3  hereof.  Such  insurance
coverage shall have been issued by responsible  carriers acceptable to the Agent
and shall  include,  without  limitation,  loss payee and  additional  insurance
endorsements  in form and substance  satisfactory  to the Agent and in any event
which require that at least thirty (30) days' prior  written  notice be provided
to the  Agent in the  event  of  cancellation,  nonrenewal  or  material  change
thereof.

     ss.  5.6.  EXAMINATION  OF BOOKS.  The Agent shall have been  afforded  the
opportunity prior to the Closing Date to review the books,  records  (including,
without limitation, computer records), contracts (including, without limitation,
all License  Agreements and Consignment  Agreements),  pension plans,  insurance
coverage and properties of the Parent and its  Subsidiaries,  to investigate the
operating  management  of the  Parent  and its  Subsidiaries  and the  business,


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affairs,  properties and prospects of the Parent and its Subsidiaries generally,
and  to  perform  such  other  due  diligence   regarding  the  Parent  and  its
Subsidiaries  as the Agent shall have required,  the results of which review and
due diligence shall be satisfactory to the Agent.

     ss. 5.7.  BORROWING  BASE.  The Agent shall have received a Borrowing  Base
Certificate  dated  the  Closing  Date  from the  Company.  The  Agent  shall be
satisfied  that on the Closing  Date,  the amount by which the  Borrowing  Limit
exceeds the  outstanding  Revolving Loan is at least  $10,000,000 or such lesser
amount which is otherwise acceptable to the Agent in its sole discretion.

     ss.  5.8.  NOTES.  Each  Lender  shall have  received  its Note,  each duly
completed, executed and delivered in accordance with Section 2.3 hereof.

     ss. 5.9. [Intentionally Omitted.]

     ss. 5.10. [Intentionally Omitted.]

     ss. 5.11. FEES AND EXPENSES.  All fees payable to the Agent and the Lenders
with respect to the financing hereunder  (including,  without limitation,  those
under the Commitment  Letter and the Fee Letter) on or prior to the Closing Date
shall have been paid in full to the  persons  entitled  thereto  in  immediately
available funds.

     ss. 5.12. MANAGEMENT.  (a) The Agent shall be satisfied with all agreements
by and among any two or more of the Lee/Desai  Group,  Desai Capital  Management
Incorporated,  the Parent,  the Company and any other investors in the Parent or
the  Company,  relating  to  the  Parent  or  the  Company  (including,  without
limitation,  the  Management  Agreements,  the  Shareholders  Agreement  and the
Registration Rights Agreement).  The Agent shall be satisfied with the corporate
structure and management of the Company and the Parent and the  composition  and
committee structure of the boards of directors of the Company and the Parent.

     (b) The Agent shall have  reviewed and approved  all  executive  employment
agreements and compensation arrangements (including without limitation bonus and
stock  options),  employee  or  management  incentive  plans and  consulting  or
management  arrangements  (including  without  limitation  the fees  payable  in
connection therewith) and confidentiality  agreements and non-compete agreements
to which the Parent or any of its Subsidiaries is a party.

     ss.  5.13.  DISBURSEMENT  AUTHORIZATION.  The Agent  shall have  received a
disbursement  authorization  letter,  substantially  in the form of Exhibit 5.13
hereto, duly executed and delivered by the Company as to the disbursement on the
Closing Date of the proceeds of the initial Revolving Advance.


                                       75

<PAGE>

     ss. 5.14.  LOCKBOX.  On or prior to the Closing  Date,  the Company and its
Domestic  Subsidiaries  selected by the Agent shall have  established a lock box
pursuant to a lock box  agreement as required by Section 8.22 hereof,  and which
in any event provides to the Agent a perfected first priority  security interest
in all  Proceeds,  now existing or hereafter  acquired,  of the Company and such
Subsidiaries.  All deposit accounts of the Company and its Domestic Subsidiaries
shall be covered by Collecting Bank  Agreements,  which shall have been executed
and delivered to the Agent and shall constitute Blocked Accounts.

     ss. 5.15.  LITIGATION.  There shall be no  litigation  involving any Credit
Party or (relating to this transaction) any Lender, which in the judgment of the
Agent has a  reasonable  likelihood  of being  determined  adversely to any such
Person, and if so adversely  determined,  would have a materially adverse effect
on the  business,  operations,  liabilities,  assets,  properties,  prospects or
condition,  financial or otherwise, of the Parent and its Sub sidiaries taken as
a whole or such  Lender,  or the  ability  of the  Parent,  the  Company  or any
Guarantor to perform its obligations under the Loan Documents.

     ss. 5.16.  TAX MATTERS.  (a) The Agent,  in its sole  discretion,  shall be
satisfied  that each Credit  Party shall have made all  appropriate  tax filings
required  under,  and shall have complied with all provisions of, all applicable
tax laws in connection with the issuance of the credit facilities.

     (b) The Tax Allocation  Agreement shall have been executed and delivered by
the  Parent  and the  Company,  shall be in full force and effect and shall have
been approved as to form, scope and substance by the Agent.

     ss. 5.17.  COMPLIANCE  WITH LAW. The Agent shall be satisfied that (a) each
Credit  Party is in  compliance  with in all material  respects,  and shall have
obtained  appropriate  approvals  pertaining  to, all  applicable  governmental,
environmental,  labor, ERISA and other  requirements,  regulations and laws; and
(b)  the  credit  facilities  herein  provided,   and  all  other   transactions
contemplated  herein shall be in  compliance  in all material  respects with all
applicable  laws and  regulations and shall not contravene any term or condition
of any charter, bylaw, debt instrument or other agreement of any Credit Party.

     ss. 5.18. PROCEEDINGS; RECEIPT OF DOCUMENTS. All requisite corporate action
and proceedings in connection  with the  borrowings,  the issuance of Letters of
Credit  and  the  execution  and  delivery  of  the  Loan  Documents,  shall  be
satisfactory  in form and  substance  to the  Agent  and the  Agent  shall  have
received  all  information  and  copies  of all  documents,  including,  without
limitation,  records of requisite  corporate action and  proceedings,  which the
Agent may have requested in connection therewith, such documents where requested
by the Agent to be certified by appropriate  corporate  Persons or  governmental
authorities.  Without limiting the generality of the foregoing,  the Agent shall
have received on or before the Closing Date the  following,  each dated such day
(unless otherwise  specified),  in form and substance  satisfactory to the Agent
(unless otherwise specified) and in sufficient copies for each Lender:


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<PAGE>

          (i) A copy of the certificate of  incorporation  of each Credit Party,
     and all amendments  thereto,  certified (as of a date  reasonably  near the
     date of the initial  financial  accommodation  to be made hereunder) by the
     Secretary of State or other applicable official of each of their respective
     states or countries as being a true and correct copy thereof.

          (ii) Certified  copies of the resolutions of the Board of Directors of
     each Credit Party approving this Agreement,  the Notes, and each other Loan
     Document  to  which  it is a party  or by  which  it is  bound,  and of all
     documents  evidencing  other necessary  corporate  action and  governmental
     approvals, if any, with respect to this Agreement, the Notes and each other
     Loan Document.

          (iii) A copy of a certificate  of the Secretary of State of each State
     where each Credit Party is doing business dated a date  reasonably near the
     date of the initial financial accommodations to be made hereunder,  stating
     that each Credit Party,  as the case may be, is duly  qualified and in good
     standing as a foreign entity in such State.

          (iv) A  certificate  of each  Credit  Party  signed  on behalf of such
     Person by its chairman, president, any vice-president, treasurer, secretary
     or assistant secretary,  certifying as to (A) the absence of any amendments
     to the charter of such Person  since the date of the  Secretary  of State's
     (or other official's) certificate for such Person referred to above and (B)
     a true and  correct  copy of the by-laws of such Person as in effect on the
     date of the initial financial accommodations to be made hereunder.

          (v) A certificate  of the Secretary or an Assistant  Secretary of each
     Credit Party  certifying  the names and true  signatures of the officers of
     such Person  authorized to sign, on behalf of such Person,  this Agreement,
     the Revolving  Notes and each other Loan Document to which such Person is a
     party or by which it is bound.

     ss. 5.19.  ENVIRONMENTAL  MATTERS AND APPRAISALS.  (a) The Agent shall have
received such studies or reports from an independent  third party  acceptable to
the  Agent,  as to  environmental  matters  relating  to  the  Company  and  its
Subsidiaries and their respective properties,  as the Agent shall have requested
in writing on or prior to the Closing  Date,  the substance and results of which
shall be satisfactory to the Agent.

     (b) The Agent shall have received  such  appraisals of (i) real property to
be covered by a Mortgage  or  Leasehold  Mortgage as shall be  required,  in the
opinion of special  counsel to the Agent,  under  FIRREA for  Lenders  which are
subject to regulation thereunder and (ii) the Company's receivables,  inventory,
equipment  and  intangible  assets  as shall be  requested  by the Agent and the
results of such appraisals shall be satisfactory to the Agent.

     ss. 5.20. [Intentionally Omitted.]


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<PAGE>

     ss. 5.21. SPECIAL COUNSEL FEES. Weil, Gotshal & Manges LLP, special counsel
to the  Agent,  shall  have  received  payment  in full of all  fees,  costs and
expenses billed on or prior to the Closing Date.

     ss. 5.22. CONSIGNMENT AGREEMENTS. To the extent requested by the Agent, the
Agent shall have  received  from each Person  which is a consignor  of Consigned
Inventory  (pursuant to any  Consignment  Agreement or  otherwise),  a Consignor
Letter.

     ss. 5.23. [Intentionally Omitted.]

     ss.  5.24.  INSURANCE  POLICIES.  The Company  shall have  obtained (i) key
person life  insurance  policies  required to be maintained  pursuant to Section
8.3(g)  hereof and (ii) a business  interruption  insurance  policy or  policies
required to be maintained  pursuant to Section  8.3(e)  hereof,  which  policies
shall be  satisfactory  to the Agent and shall be assigned to the Agent (for the
ratable benefit of the Lenders).


            SECTION 5A.  CONDITIONS PRECEDENT TO AMENDMENT AND
                              RESTATEMENT.

     The effectiveness of this Agreement is subject to the following  conditions
precedent being fulfilled to the  satisfaction of the Agent in each instance (or
waived in writing by the Majority Lenders):

     ss.  5A.1.  OPINIONS OF COUNSEL.  The Agent shall have  received  favorable
opinions of Zimet,  Haines,  Friedman & Kaplan,  counsel to the Credit  Parties,
substantially  in the form  attached  hereto as  Exhibit  5A.1  (and such  other
opinions of counsel,  including,  without limitation,  of local counsel, each in
form and substance  satisfactory  to the Agent,  as the Agent may  request);  it
being  understood  that to the extent that such  opinions of counsel  shall rely
upon any other opinion of counsel,  each such other opinion shall be in form and
substance satisfactory to Agent and shall provide that the Agent and Lenders may
rely thereon.

     ss. 5A.2.  QUALIFICATION.  Each Credit Party shall be duly qualified and in
good  standing in each  jurisdiction  in which it owns or leases  property or in
which the conduct of its  business  requires  it to so qualify,  except when the
failure to so qualify would not have a material  adverse effect on its business,
operations,  liabilities,  assets, properties, prospects or condition (financial
or otherwise).

     ss. 5A.3. AMENDMENTS TO SECURITY DOCUMENTS AND INSTRUMENTS. The Agent shall
have  received,  in  sufficient  copies  for each  Lender,  (a) all  appropriate
amendments to the instruments  and documents  previously  delivered  pursuant to
Section 4 hereof or any other  provision  of this  Agreement  or pursuant to the
instruments and documents  referred to in Section 4 hereof and the same shall be
in full force and effect and shall  grant or create the Liens,  rights,  powers,


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<PAGE>

priorities,  remedies and benefits  contemplated  herein or therein, as the case
may be, and (b) all necessary  consents  relating  thereto from third parties so
that the same shall be valid and not  result in any  violation  of any  material
agreement running in favor of such third party.

     ss.  5A.4.  NOTES.  Each Lender  shall have  received  its Note,  each duly
completed, executed and delivered in accordance with Section 2.3 hereof.

     ss. 5A.5. FEES AND EXPENSES.  All fees payable to the Agent and the Lenders
with  respect  to the  financing  hereunder  shall have been paid in full to the
persons entitled  thereto in immediately  available  funds,  including,  but not
limited to, all fees to be paid by the Borrower  pursuant to the Original Credit
Agreement.

     ss. 5A.6.  LITIGATION.  There shall be no  litigation  involving any Credit
Party or (relating to this transaction) any Lender, which in the judgment of the
Agent has a  reasonable  likelihood  of being  determined  adversely to any such
Person, and if so adversely  determined,  would have a materially adverse effect
on the  business,  operations,  liabilities,  assets,  properties,  prospects or
condition,  financial or otherwise, of the Parent and its Sub sidiaries taken as
a whole or such  Lender,  or the  ability  of the  Parent,  the  Company  or any
Guarantor to perform its  obligations  under the Loan Documents and no judgment,
order,  injunction  or other  similar  restraint  prohibiting  any of the  other
transactions contemplated under this Agreement.

     ss. 5A.7.  COMPLIANCE  WITH LAW. The Agent shall be satisfied that (a) each
Credit  Party is in  compliance  with in all material  respects,  and shall have
obtained  appropriate  approvals  pertaining  to, all  applicable  governmental,
environmental,  labor, ERISA and other  requirements,  regulations and laws; and
(b)  the  credit   facilities   herein  provided  and  all  other   transactions
contemplated  herein shall be in  compliance  in all material  respects with all
applicable  laws and  regulations and shall not contravene any term or condition
of any charter, bylaw, debt instrument or other agreement of any Credit Party.

     ss. 5A.8. PROCEEDINGS; RECEIPT OF DOCUMENTS. All requisite corporate action
and proceedings in connection  with the  borrowings,  the issuance of Letters of
Credit  and  the  execution  and  delivery  of  the  Loan  Documents   shall  be
satisfactory  in form and  substance  to the  Agent  and the  Agent  shall  have
received  all  information  and  copies  of all  documents,  including,  without
limitation,  records of requisite  corporate action and  proceedings,  which the
Agent may have requested in connection therewith, such documents where requested
by the Agent to be certified by appropriate  corporate  Persons or  governmental
authorities.  Without limiting the generality of the foregoing,  the Agent shall
have received on or before the Closing Date the  following,  each dated such day
(unless otherwise  specified),  in form and substance  satisfactory to the Agent
(unless otherwise specified) and in sufficient copies for each Lender:


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<PAGE>


               (i) A copy of the certificate of  incorporation of each Borrower,
      and all amendments  thereto,  certified (as of a date  reasonably near the
      Closing  Date) by the Secretary of State or other  applicable  official of
      each of their  respective  states or countries as being a true and correct
      copy thereof.

              (ii) Certified copies of the resolutions of the Board of Directors
      of each Borrower  approving  this  Agreement,  the Notes,  each other Loan
      Document  to  which it is a party  or by  which  it is  bound,  and of all
      documents  evidencing  other necessary  corporate  action and governmental
      approvals,  if any,  with  respect to this  Agreement,  the Notes and each
      other Loan Document.

             (iii) A copy of a  certificate  of the  Secretary  of State of each
      State where each Borrower is doing business dated a date  reasonably  near
      the Closing Date,  stating that each Credit Party,  as the case may be, is
      duly qualified and in good standing as a foreign entity in such State.

              (iv) A  certificate  of each  Borrower  signed  on  behalf of such
      Person  by  its  chairman,   president,  any  vice-president,   treasurer,
      secretary or assistant secretary,  certifying as to (A) the absence of any
      amendments  to the charter of such Person since the date of the  Secretary
      of State's (or other  official's)  certificate for such Person referred to
      above and (B) a true and  correct  copy of the bylaws of such Person as in
      effect on the Closing Date.

              (v) A certificate  of the  Secretary or an Assistant  Secretary of
      each Borrower  certifying the names and true signatures of the officers of
      such Person authorized to sign, on behalf of such Person,  this Agreement,
      the Revolving Notes and each other Loan Document to which such Person is a
      party or by which it is bound.

            ss. 5A.9.  PURCHASE OF SHARE.  On the Closing Date, each Lender who
was not a Lender  immediately  prior to the  Closing  Date shall  wire  transfer
immediately  available funds to the Agent in an amount required to purchase such
Lender's pro rata share of the then  outstanding  amount of the Revolving  Loan.
Such Funds will be paid by the Agent to each Lender who was a Lender immediately
prior to the Closing  Date so as to reduce such  Lender's  pro rata share of the
Revolving  Loan  immediately  prior to the Closing Date to its pro rata share of
the Revolving Loan on the Closing Date.

            SECTION 5B. CONDITIONS PRECEDENT TO INITIAL
                        BORROWINGS TO THE PARENT.

            The  obligation  of each Lender to lend its pro rata  portion of any
Revolving Advance or to provide any other financial accommodations to the Parent
is  subject  to  the  Agent  having  received  such  approvals  of  governmental
authorities or documents or opinions as the Agent may have reasonably requested.


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<PAGE>

            SECTION 6.  CONDITIONS PRECEDENT TO EACH BORROWING
                        AND ISSUANCE OF LETTERS OF CREDIT.

            The  obligation  of  the  Lenders  to  make  any  Revolving  Advance
(including  on the  Closing  Date)  (other  than any  Revolving  Advances  under
Sections  2.1(c) and 2A.4 hereof) or of any Issuing Lender to cause the issuance
of any Letter of Credit  (including  any L/C Indemnity  Agreement) is subject to
the following conditions precedent:

            ss. 6.1. CONDITIONS. No Lender shall have any obligation to make any
Revolving Advance to a Borrower (other than any Revolving Advances under Section
2A.4  hereof) and no Issuing  Lender  shall  issue,  or cause the issuance of, a
Letter of Credit  unless,  in each  instance,  (x) with  respect to a  Revolving
Advance  (other than a Revolving  Advance under Section 2.1(c) and 2A.4 hereof),
such Borrower  delivers to the Agent a Borrower's  Certificate dated the date of
such Revolving Advance and (y) the following  conditions precedent are fulfilled
to the satisfaction of the Agent (or waived in writing by the Majority Lenders):

              (i) all  representations and warranties made by each of the Credit
      Parties   contained   herein  or  otherwise  made  in  any  Loan  Document
      (including,  without limitation,  each Borrower's Certificate),  officer's
      certificate or any agreement, instrument,  certificate,  document or other
      writing  delivered  to the Agent or any Lender in  connection  herewith or
      therewith,  shall be true and correct in all  material  respects  with the
      same effect as though such representations and warranties had been made on
      and as of the date of such  borrowing  or  issuance  of a Letter of Credit
      (unless  any such  representation  or warranty  speaks as of a  particular
      date, in which case it shall be deemed repeated as of such date);

             (ii) on  the date of such  borrowing  or  issuance  of a Letter  of
      Credit  there  shall  exist  no  Default  or  Event  of  Default   (either
      immediately before or after giving effect thereto);

            (iii) if the Company  shall be  requesting  a Letter of Credit,  the
      Agent on behalf of the Issuing Bank shall have (to the extent requested by
      any such Issuing Bank)  received a duly  executed and delivered  Letter of
      Credit Agreement with respect thereto;

             (iv) such  Borrower  shall have  complied with all  procedures  and
      given all certificates, notices and other documents required hereunder for
      such advance or issuance; and

              (v) the  Agent  shall  have  received  such  other   approvals  of
      governmental  authorities  or documents  as the Agent may have  reasonably
      requested.



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<PAGE>

            ss. 6.2. WRITTEN NOTICE. Prior to the time of each Revolving Advance
or the renewal or conversion of any Revolving Advance, or portion thereof, or of
the issuance of a Letter of Credit, the Agent shall have received Written Notice
of such  Revolving  Advance  or the  renewal  or  conversion  of such  Revolving
Advance, or portion thereof, or of the issuance of such Letter of Credit, as the
case may be, in  accordance  with and to the extent  required by Section 2 or 2A
hereof, as appropriate.

            SECTION 7.  USE OF PROCEEDS.

            (a)  [Intentionally Omitted.]

            (b) From and after the Closing Date,  proceeds of Revolving Advances
to the  Company  shall be used for the working  capital  and  general  corporate
purposes  (including,  without  limitation,  for the  purpose of (i) opening and
maintaining  not more than  twenty-two  factory  outlet  stores  operated by the
Company to the extent set forth in Sections 9.1 and 9.24 hereof,  (ii) operating
fine jewelry departments in not more than ten Debenhams stores to the extent set
forth in Section 9.23 hereof and (iii) operating fine jewelry departments in (x)
not more than fifty-five  Monoprix and related stores and (y) a store in Berlin,
Germany, each to the extent set forth in Section 9.25 hereof) of the Company and
its Subsidiaries to the extent such purposes are permitted hereunder (including,
without  limitation,  for any  intercompany  loans by the  Company  to Sonab for
working capital and general corporate  purposes as evidenced by the Second Sonab
Intercompany  Note) and to repurchase  Senior Notes to the extent such purchases
are permitted hereunder.

            (c) Notwithstanding  anything to the contrary set forth in paragraph
(b) above,  from and after the Closing  Date,  Revolving  Advances to the Parent
shall be used only to  repurchase  Debentures  and/or to pay the original  issue
discount  thereon  to the extent  such  purchases  and  payments  are  permitted
hereunder.

            (d) Notwithstanding  anything to the contrary set forth in paragraph
(b)  above,  no  more  than  $7,000,000  in the  aggregate  may be  expended  in
connection with the operation of fine jewelry departments in Debenhams stores to
the  extent  the  operation  of  such  fine  jewelry  departments  is  permitted
hereunder.
            (e) Notwithstanding  anything to the contrary set forth in paragraph
(b)  above,  no more  than  $13,000,000  in the  aggregate  may be  expended  in
connection  with the  opening  and  operation  of fine  jewelry  departments  in
Monoprix  and related  stores to the extent the  operation  of such fine jewelry
departments is permitted hereunder.

            SECTION 8.  AFFIRMATIVE COVENANTS.

            Each of the  Borrowers  covenants  and agrees  that,  so long as any
Revolving  Advance  or Letter of Credit is  outstanding  or any  Lender  has any
Revolving  Commitment  hereunder,  unless  specifically  waived by the  Majority
Lenders in writing:


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<PAGE>

            ss. 8.1.  FINANCIAL STATEMENTS AND OTHER INFORMATION.  The   Company
or, where applicable,  the Parent shall furnish or cause to be furnished to  the
Agent and each Lender:

            (a) Within 30 days after the end of each fiscal month of the Parent,
(i) a copy of the internally  prepared unaudited  consolidated  balance sheet of
the Parent  and its  Subsidiaries  as of the end of such  month and the  related
consolidated  statement  of income for that portion of the Fiscal Year ending as
of the  end of  such  month,  and  (ii) a  copy  of the  unaudited  consolidated
statement of income of the Parent and its Subsidiaries  for such month,  setting
forth in  comparative  form in each case  referred  to in  clauses  (i) and (ii)
above,  actual figures for such period as against  budgeted  figures  (including
variances in dollars and percent) for such period in the current Fiscal Year and
actual  figures as against actual  figures  (including  variances in dollars and
percent) for the comparable  period during the prior Fiscal Year and accompanied
by (A) management  letters  prepared by the Designated  Officer of the Parent or
the Company explaining any material variances from the corresponding budgets and
prior Fiscal  Years'  figures  related to the  foregoing,  (B) a schedule  which
shows, by License  Agreement,  each Account which is past due and, to the extent
not available to the Agent by computer  on-line (as required by Section 8.7(b)),
a schedule  detailing  write-offs  and returns,  and (C) upon  Agent's  request,
copies  of  any  reports  generated  from  the  Company's   investigation   into
discrepancies noted in any of the internal inventory control reporting.

            (b) Within 45 days after the end of each fiscal month of the Parent,
(i) a copy of the  unaudited  consolidated  balance  sheet of the Parent and its
Subsidiaries as of the end of such month and the related consolidated  statement
of income and cash flow for that  portion  of the  Fiscal  Year as of the end of
such month,  each prepared in  accordance  with GAAP (subject to normal year end
adjustments and without footnotes) and (ii) a copy of the unaudited consolidated
statement  of income and cash flow of the Parent and its  Subsidiaries  for such
month prepared in accordance with GAAP (subject to normal  year-end  adjustments
and without  footnotes)  setting forth in comparative form in each case referred
to in clauses (i) and (ii) above,  actual  figures as against actual figures for
the comparable period during the prior Fiscal Year.

            (c) Within 45 days after each fiscal  quarter of the  Parent,  (i) a
copy of the  unaudited  consolidated  and  consolidating  balance  sheets of the
Parent  and  its  Subsidiaries  as of  the  end of  such  quarter,  the  related
consolidated and consolidating statements of income and the related consolidated
statement  of cash flows for that  portion of the Fiscal  Year ending as of such
quarter,  each  prepared  in  accordance  with GAAP  (subject to normal year end
adjustments and without footnotes) and (ii) a copy of the unaudited consolidated
and consolidating statements of income and the related consolidated statement of
cash flows of the Parent  and its  Subsidiaries  for such  quarter  prepared  in
accordance  with  GAAP  (subject  to normal  year end  adjustments  and  without
footnotes) setting forth in comparative form in each case referred to in clauses
(i) and (ii) above for consolidated  information  only,  actual figures for such
period as against  actual  figures for the  comparable  period  during the prior
Fiscal Year.


                                       83
<PAGE>

     (d) For each of (b) and (c)  above,  the  certification  of the  Designated
Officer of the Parent or Company, as applicable, shall accompany such statements
and shall certify that (i) all such  statements  are complete and correct in all
material  respects and are presented  fairly in accordance with GAAP (subject to
normal  year  end  adjustments  and  without  footnotes)  and  (ii) to the  best
knowledge of such Designated  Officer,  no Default or Event of Default exists as
of such time or, if any Default or Event of Default then exists,  specifying the
details and anticipated effect thereof.

     (e)  Within  45 days  after the end of each  month  for  which a  quarterly
reporting period ends for the Parent,  a schedule  showing in reasonable  detail
the calculations  used in determining  compliance (for the fiscal quarter ending
on the last day of each such month) with the covenants  contained in Section 9.1
and Section 8.17 hereof.

     (f) Not later than March 30 in each year,  a report  detailing  the highest
target shortage locations of the Company and its Subsidiaries.

     (g)  Within  90 days  after the close of each  Fiscal  Year,  a copy of the
annual audited  consolidated  financial statements of each of the Parent and its
Subsidiaries  and the Company  and its  Subsidiaries,  consisting  of the annual
consolidated  balance  sheet,  statement  of  income,  cash flow and  changes in
stockholders'  equity,   setting  forth  in  comparative  form,  in  each  case,
consolidated figures for the prior Fiscal Year, which financial statements shall
be prepared in accordance with GAAP, certified without qualification (other than
a  qualification   approved  by  the  Agent)  by  independent  certified  public
accountants  of  recognized  national  standing  selected  by the Parent and the
Company  respectively,  and  acceptable to the Agent (Arthur  Andersen & Company
being acceptable to the Agent),  and accompanied by (i) unaudited  consolidating
financial  statements of the Parent and its Subsidiaries and the Company and its
Subsidiaries,   consisting  of  the  annual  consolidating  balance  sheets  and
statements  of  income,  setting  forth  in  comparative  form,  in  each  case,
consolidating  figures for the prior  Fiscal Year  (which  financial  statements
shall be prepared in  accordance  with  GAAP),  (ii) a schedule  prepared by the
Company and  certified by such  independent  accountants,  showing in reasonable
detail  the  calculations  used in  determining  compliance  with the  financial
covenants under Section 8.17 hereof, (iii) a report from such accountants to the
effect  that in  connection  with their audit  examination,  nothing has come to
their  attention to cause them to believe that a Default or Event of Default had
occurred  or, if they  believe  a  Default  or Event of  Default  has  occurred,
specifying  the details  thereof,  and (iv) a  certification  of the  Designated
Officer of the Parent and the  Company  certifying  that (A) all such  financial
statements are complete and correct in all material  respects and present fairly
in accordance with GAAP the consolidated and  consolidating  financial  position
and the consolidated and  consolidating  results of operations and cash flows of
each of the Parent and its  Subsidiaries and the Company and its Subsidiaries as
at the end of such Fiscal Year and (B) to the best knowledge of such  Designated
Officer,  no  Default  or Event of  Default  exists  as of such  time or, if any
Default or Event of Default then exists,  specifying the details and anticipated
effect thereof.


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     (h) As soon  as  practicable,  but in any  event  not  later  than  two (2)
Business Days after the Parent and/or the Company becomes aware of the existence
of any  Default or Event of Default,  or any  development  or other  information
which might reasonably be expected to have a Material Adverse Effect, telephonic
or telegraphic  notice specifying the nature of such Default or Event of Default
or development or information,  including the anticipated effect thereof,  which
notice shall be promptly confirmed in writing within five days.

     (i) Not later than February 15 in each year, an annual  operating  plan for
the Parent and its  Subsidiaries  for such Fiscal Year (approved by the board of
directors of each of the Parent and the Company),  in form,  scope and substance
reasonably satisfactory to the Agent, setting forth:

          (i)  projected  consolidated  balance  sheets  of the  Parent  and its
     Subsidiaries for such Fiscal Year, on a monthly basis;

          (ii) projected consolidated statements of income of the Parent and its
     Subsidiaries for such Fiscal Year, on a monthly and quarterly basis;

          (iii) projected consolidated statements of cash flow of the Parent and
     its  Subsidiaries,   including  summary  details  of  cash   disbursements,
     including  Capital  Expenditures,  and  projected  operating  profit of the
     Parent and its Subsidiaries for such Fiscal Year, on a monthly basis; and

          (iv)  projected  Borrowing  Base for such  Fiscal  Year,  on a monthly
     basis;

     together  with (x)  projections  of the nature  requested  in  clauses  (i)
through (iv) above,  computed on an annual basis for each Fiscal Year  remaining
until the Maturity  Date and (y)  appropriate  supporting  details as reasonably
requested  by any Lender  (including,  without  limitation,  same  store  growth
assumptions).  The  projections  of the nature  requested in clauses (i) through
(iii) above shall also set forth such  information  with  respect to each of the
outlet stores and Sonab.  The annual operating plan delivered in connection with
this Section 8.1(i) shall be accompanied by evidence  satisfactory  to the Agent
that such plan shall have been  approved by the boards of  directors  of each of
the Parent and the Company.

     (j) If requested  by the Agent,  copies of all  federal,  state,  local and
foreign tax returns and reports in respect of income,  franchise  or other taxes
on or  measured by income  (excluding  sales,  use or like  taxes)  filed by the
Parent or any of its Subsidiaries.

     (k) Concurrently with the delivery of the statements referred to in Section
8.1(a) hereof,  supplements or amendments to Schedules,  if any, as described in
Section 8.20 hereof.


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<PAGE>

     (l) As soon as available,  but in any event not later than thirty (30) days
after the end of each Fiscal Year of the Parent, a report, in form and substance
satisfactory  to the Agent,  (i) updating the list of contracts,  agreements and
documents  of the Parent and its  Subsidiaries  in  existence at the end of such
Fiscal Year which are required to be set forth on Schedule  11.24 hereto so that
the  representation  and warranty made in Section 11.24 hereto shall be true and
correct as of such date and (ii)  specifying  which  contracts,  agreements  and
documents  included  on such  schedule  at any time  during the Fiscal Year just
ended have been  terminated,  entered into or  materially  modified  during such
Fiscal Year, and, promptly after requested by the Agent,  copies of any such new
contracts, agreements or other documents and material modifications.

     (m) Promptly upon the filing thereof,  copies of all reports, if any, to or
other  documents  filed  by the  Parent  or any of  its  Subsidiaries  with  the
Securities  and  Exchange  Commission  under the  Securities  Act of 1933 or the
Securities  Exchange  Act of 1934  (other  than on  Form  S-8 or 8-A or  similar
forms), and all reports, notices or statements sent or received by the Parent or
any of its  Subsidiaries  to or from the holders of any equity  interests of the
Parent or any such Subsidiary or of any  Indebtedness  for Borrowed Money of the
Parent or any such Subsidiary  registered under the Securities Act of 1933 or to
or from the trustee under any indenture under which the same is issued.

     (n)  Promptly  upon  the  commencement  thereof,   written  notice  of  any
litigation,   including   arbitrations,   and  of  any  proceedings  before  any
governmental agency, affecting the Parent or any of its Subsidiaries (other than
any described in paragraph (r) below),  which would,  if successful,  materially
affect the Parent or any of its  Subsidiaries  or where the amount  involved  in
excess of available  insurance,  if successful,  would reasonably be expected to
exceed $250,000.

     (o) With  reasonable  promptness,  such other  information  respecting  the
business,  operations  and  financial  condition  of  the  Parent  or any of its
Subsidiaries as any Lender may from time to time reasonably request.

     (p) (x) On the Closing  Date,  (y) not later than  Monday,  12:00 noon (New
York time) of each week,  and (z) within  three (3) days  following  the written
request of the Agent, a certificate dated Friday of the previous week just ended
(or with  respect  to a request  made  under  clause  (z)  above,  an  estimated
certificate  dated  the  date of  delivery)  from  the  Company,  in  each  case
substantially in the form of Exhibit 8.1(p) hereto,  each such certificate to be
signed by the  Designated  Officer  of the  Company  (each such  certificate,  a
"Borrowing Base  Certificate").  The delivery of the Borrowing Base  Certificate
pursuant  to clause  (y) of this  Section  8.1(p)  shall be  accompanied  by the
following,  each of which shall be in form, scope and substance  satisfactory to
the Agent, (i) a copy of the receivables aging trial balances of the Company and
each of its  Subsidiaries  as of the end of the prior  month,  together  with an
accounts  receivable  reconciliation to the Borrowing Base Certificate date, and
(ii) a schedule of Eligible Inventory and Foreign Eligible Inventory,  valued at
the lesser of cost (on a specific  identification basis) or current market value
and setting  forth the  locations  of all such  Eligible  Inventory  and Foreign
Eligible  Inventory (which may be done by reference to the computer  information


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<PAGE>

to which the Agent has on-line  access to the extent  required by Section 8.7(b)
hereof), including, without limitation, Domestic Inventory and Foreign Inventory
in transit and Domestic Inventory and Foreign Inventory not in the possession of
the Company and the name of the Person in possession thereof. In addition to the
foregoing,  each  Borrowing  Base  Certificate  shall  set  forth  (or  shall be
accompanied  by a  certificate  of a Designated  Officer of the Company  setting
forth) the aggregate unpaid principal  balance of all loans or advances from the
Company to Sonab at such time.

            (q) Within 15 days after receipt  thereof but in no event later than
June 30 of each year, a copy of all management  reports and management  letters,
if issued,  prepared for each of the Parent and its Subsidiaries and the Company
and its Subsidiaries by independent  certified public  accountants of recognized
national  standing  selected by the Parent or the  Company,  as  applicable  and
acceptable  to the Agent  together with any response by any of the Parent or any
of its Subsidiaries or the Company or any of its Subsidiaries, as applicable, to
such  management  reports or management  letters;  it being  understood that the
Parent and the Company  shall  request from such  independent  certified  public
accountants such management  reports and/or management letters with the delivery
of any annual audited financial statements required to be delivered to the Agent
hereunder.

            (r)  Promptly,  and in any  event  within  ten  (10)  business  days
thereof, notice:

                    (i) of  any  Environmental  Claim or  Adverse  Environmental
      Condition of which any Credit Party has knowledge or any written notice of
      an allegation which may reasonably give rise to an Environmental  Claim or
      Adverse Environmental Condition, where such Environmental Claim or Adverse
      Environmental  Condition  may  reasonably  be  expected  to  result  in  a
      liability to any
      Credit Party in excess of $50,000;

                   (ii) of the  occurrence of a Release of a Hazardous  Material
      upon,  under or affecting  any  Facilities,  of which any Credit Party has
      knowledge or Hazardous  Materials at levels or in amounts that may have to
      be  reported,  remedied or responded  to under any  Environmental  Law, of
      which any Credit Party has knowledge,  or that have been detected on or in
      the soil or groundwater, of which any
      Credit  Party  has  knowledge,  provided  the  cost to the  Parent  or its
      Subsidiaries of  investigating,  remedying,  or responding to such Release
      may reasonably be expected to exceed $50,000;

                  (iii) that a Credit  Party is  reasonably  likely to be liable
      for any costs of  cleaning  up or  otherwise  responding  to a Release  of
      Hazardous  Materials,  provided  the  cost  of  cleanup  or  response  may
      reasonably be expected to exceed $50,000;

                 (iv) that written notice has been received that any part of the
      Facilities is or may be subject to a Lien under any Environmental Law; and



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                 (v) that a  Credit  Party  will undertake or has undertaken any
      Remedial Action with respect to any Hazardous Material,  provided the cost
      of cleanup or response may reasonably be expected to exceed $50,000.

            (s)  Within 30 days  after the end of each  Fiscal  Year and at such
other times as the Agent may request, a list, in detail reasonably  satisfactory
to the Agent,  of all bank accounts  maintained  by the Parent,  the Company and
each of their respective Subsidiaries.

            (t) On February 15, May 15,  August 15 and November 15 of each year,
a report of the Company and its Subsidiaries detailing the amount of "consigned"
or "memo"  inventory and owned inventory of the Company and its  Subsidiaries in
each of the  following  categories:  (i)  inventory  under two years  old,  (ii)
inventory  between two and three years old,  (iii)  inventory  between three and
four years old and (iv) inventory more than four years old.

            (u)  Contemporaneously  with the  delivery  thereof to Rhode  Island
Hospital Trust National Bank,  copies of all Consignment  Limit Reports (as such
term is defined in the Gold  Consignment  Agreement)  provided by the Company to
Rhode  Island  Hospital  Trust  National  Bank  under  or  pursuant  to the Gold
Consignment Agreement.

            ss. 8.2. TAXES AND CLAIMS. (a) Each of the Borrowers shall and shall
cause their respective Subsidiaries to pay and discharge when due (a) all taxes,
assessments  and  governmental  charges upon or against it or its  properties or
assets prior to the date on which  penalties  attach  thereto and (b) all lawful
claims, whether for labor, materials, supplies, services or anything else, which
might or could,  if  unpaid,  become a Lien or  charge  upon its  properties  or
assets,  unless, in each case, the validity or amount thereof is being contested
in good faith by appropriate proceedings,  the Parent or any such Subsidiary has
established  adequate  reserves in  accordance  with GAAP with respect  thereto,
Liens (other than Liens which,  in the  aggregate,  are permitted  under Section
9.2(i) hereof) arising from the  non-payment  thereof when due have not attached
to any of the property or assets of the Parent or any of its  Subsidiaries  in a
manner which could have priority over the Lien of the Agent thereon and there is
no imminent risk of the sale of or  foreclosure on any property or assets of the
Parent or any of its  Subsidiaries  by the holder of any Liens  arising from the
non-payment thereof when due.

            (b) The  Borrowers and GE Capital agree that all fees payable to the
Agent for the benefit of GE Capital as provided in Section 3.6 hereof,  shall be
reported for all tax purposes in  accordance  with Treasury  Regulation  Section
1.1273-2(j)(2).  Such amount that is  properly  treated as a reduction  in issue
price will be treated by the parties as original  issue discount and reported as
interest  income  and  interest  expense  to  the  extent  permitted  under  the
applicable provisions of the Code and the regulations promulgated thereunder.

            ss. 8.3.  INSURANCE.  (a)  Schedule  8.3 lists all  insurance of any
nature  maintained by the Parent and its  Subsidiaries,  as well as a summary of
the terms of such  insurance.  The Company or the Parent shall, at its sole cost


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<PAGE>

and  expense,  maintain  "All Risk"  physical  damage  insurance on all real and
personal property of the Parent and its Subsidiaries including,  but not limited
to,  fire  and  extended  coverage,   boiler  and  machinery  coverage,   flood,
earthquake,  theft,  explosion,  collapse,  and  all  other  hazards  and  risks
ordinarily  insured  against  by owners or users of such  properties  in similar
businesses.  All policies of insurance on such real and personal  property shall
contain an endorsement,  in form and substance  acceptable to the Agent, showing
loss  payable to the Agent as its  interest  appears.  Such  endorsement,  or an
independent  instrument furnished to the Agent, shall provide that the insurance
companies add the Agent as an additional  insured and give the Agent at least 30
days' prior written notice before any significant change in coverage provided by
or  cancellation  of such  policy  or  policies  of  insurance  and that no act,
omission or default of the Parent or any of its Subsidiaries or any other Person
shall  affect the right of the Agent or any Lender to recover  under such policy
or policies of insurance in case of loss or damages.

            (b) The Company or the Parent  shall,  at its sole cost and expense,
maintain   commercial  general  liability  insurance  covering  itself  and  its
Subsidiaries  on  an  "occurrence   basis"  (unless  such  insurance  cannot  be
reasonably  obtained  at  commercially  reasonable  rates,  in which  case  such
insurance shall be on a "claims made" basis) against claims for personal injury,
bodily  injury  and  property  damage  with a minimum  limit of  $1,000,000  per
occurrence and $1,000,000 in the aggregate.  Such coverage shall include but not
be  limited  to   premises/operations,   broad   form   contractual   liability,
underground,  explosion and collapse hazard, independent contractors, broad form
property coverage, products and completed operations liability.

            (c) The Company or the Parent  shall,  at its sole cost and expense,
maintain workers'  compensation  insurance  covering itself and its Subsidiaries
including  employer's  liability in the minimum  amount of  $1,000,000  for each
accident,  $1,000,000 disease-policy limit, and $1,000,000 disease-each employee
with excess coverage under umbrella liability  insurance policies with a minimum
limit of $20,000,000 per occurrence and $20,000,000 in the aggregate.

            (d) The Company or the Parent  shall,  at its sole cost and expense,
maintain automobile liability insurance covering itself and its Subsidiaries for
all owned,  non-owned or hired  automobiles  against claims for personal injury,
bodily injury and property damage with
a minimum  combined  single  limit of  $1,000,000  per  occurrence  with  excess
coverage under  umbrella  liability  insurance  policies with a minimum limit of
$20,000,000 per occurrence and $20,000,000 in the aggregate.

            (e) The Company or the Parent  shall,  at its sole cost and expense,
maintain business  interruption  insurance  covering itself and its Subsidiaries
with the policy limits not less than those as in effect immediately prior to the
Closing Date.

            (f) All policies of liability  insurance  required to be  maintained
under  this  Agreement  shall  name the Agent and each  Lender as an  additional
insured,  contain at least a 30-day notice of significant  change in coverage or


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<PAGE>

cancellation  and be in form and with  insurers  recognized  as  adequate by the
Agent and, except as required hereby, all such policies shall be in such amounts
as may be satisfactory to the Agent.  Upon the request of the Agent,  the Parent
and each of its  Subsidiaries  shall  deliver  to the  Agent  the  original  (or
certified  copy) of each  policy of  insurance  and  evidence  of payment of all
premiums  therefor and of compliance with all provisions of this  Agreement.  In
addition,  the  Parent  and each of its  Subsidiaries  shall  notify  the  Agent
promptly of any  occurrence  causing a material  loss or decline in value of any
real or personal  property and the estimated (or actual, if available) amount of
such loss or decline.  The Parent and each of its Subsidiaries  each irrevocably
make,  constitute  and appoint the Agent (and all officers,  employees or agents
designated  by the Agent) as the  Parent's and each such  Subsidiary's  true and
lawful attorney (and agent-in-fact), acting at any time after the occurrence and
during  the  continuance  of an Event of  Default,  for the  purpose  of making,
settling and adjusting  claims under such policies of insurance  (provided  that
the Agent shall  consult  with the Parent prior to finally  making,  settling or
adjusting  claims under such policies of  insurance),  endorsing the name of the
Parent or any such Subsidiary on any check,  draft,  instrument or other item of
payment for the  proceeds  of such  policies  of  insurance,  and for making all
determinations and decisions with respect to such policies of insurance.  In the
event the Parent or any Subsidiary at any time or times  hereafter shall fail to
obtain or maintain any of the policies of insurance required above or to pay any
premium in whole or in part  relating  thereto,  the Agent,  without  waiving or
releasing any  obligations  or default by the Parent or any of its  Subsidiaries
hereunder,  may at any time or times  thereafter (but shall not be obligated to)
obtain and maintain such policies of insurance and pay such premium and take any
other action with respect thereto which the Agent deems  advisable.  All sums so
disbursed  by the Agent,  including  reasonable  attorneys'  fees,  court costs,
expenses and other charges relating thereto, shall be payable, on demand, by the
Parent  or  any  of its  Subsidiaries  to the  Agent  and  shall  be  Additional
Indebtedness hereunder secured by the Collateral.

            (g) The Company shall  maintain a key person life  insurance  policy
with  responsible   insurance   carriers  and  pursuant  to  insurance  policies
reasonably  acceptable to the Agent,  covering  David B. Cornstein and Arthur E.
Reiner in an amount of not less than $5,000,000 each.

            (h) The Agent  reserves the right at any time,  upon a change of the
Parent's or
any of its  Subsidiaries'  risk  profile or upon the  occurrence  of an external
event, to require additional forms and limits of insurance which, in the Agent's
sole opinion, will adequately protect any Lender's investment.

            ss. 8.4.  BOOKS AND RESERVES.  Each of the Borrowers shall and shall
cause each of their respective Subsidiaries to:

            (a) maintain,  at all times,  true and complete  books,  records and
accounts in which true and correct entries shall be made of its  transactions in
accordance with GAAP; and

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            (b) by means of appropriate entries,  reflect in its accounts and in
all  financial  statements  furnished  pursuant  to Section  8.1  hereof  proper
liabilities and reserves for all taxes and proper provision for depreciation and
amortization of its properties and bad debts, all in accordance with GAAP.

            ss. 8.5.  PROPERTIES  IN  GOOD  CONDITION.  Except  as  permitted in
Section 9.5 hereof,  each of the Borrowers  shall keep,  and shall cause each of
their respective  Subsidiaries to keep, its material  properties in good repair,
working order and condition,  ordinary wear and tear excepted, and, from time to
time, make all necessary and proper repairs, renewals,  replacements,  additions
and  improvements  thereto,  so that the business carried on may be properly and
advantageously  conducted  at all  times in  accordance  with  prudent  business
management.

            ss. 8.6. MAINTENANCE OF EXISTENCE, ETC. Except as otherwise provided
in Section 9.5(e) hereof, each of the Borrowers shall preserve and maintain, and
cause each of their  respective  Subsidiaries  to  preserve  and  maintain,  its
statutory existence, rights and franchises.

            ss. 8.7.  INSPECTION  BY THE AGENT AND THE LENDERS.  (a) Each of the
Borrowers shall allow, and shall cause each of their respective  Subsidiaries to
allow,  any  representative  of any  Lender or of the  Agent,  at the  Company's
expense,  to visit and visually  inspect any of its  properties,  to examine its
books of account and other  records and files  (including,  without  limitation,
computer records and files),  to make copies thereof and to discuss its affairs,
business,  finances and accounts with its officers and employees and independent
accountants  (and  each  of the  Borrowers  hereby  irrevocably  authorizes  its
independent  accountants to discuss with the Agent and the Lenders the financial
affairs of the Parent and its Subsidiaries), all at such reasonable times and as
often as any  Lender  or the  Agent  may  reasonably  request  and  without  any
unnecessary  interference  with the  business of the  Borrowers  or any of their
respective Subsidiaries.

            (b) At all times,  the  Parent  shall  allow,  and cause each of its
Subsidiaries  to allow,  the  Agent or any  representative  of the Agent  direct
continuous access (including,  without limitation,  by modem or any other direct
computer linkage means), without any ability to alter any such records or change
or enter any data to all computer records or files
concerning the business or properties of the Company or any of its  Subsidiaries
for the purpose of monitoring,  among other things, the Accounts,  Inventory and
Consigned Inventory of the Company and its Subsidiaries.

            ss. 8.8. PAY  INDEBTEDNESS  TO LENDERS AND PERFORM OTHER  COVENANTS.
The Borrowers shall (a) make full and timely payment of all payments required to
be  made by the  Company  in  respect  of the  Lender  Debt,  including  without
limitation,  the Loan, whether now existing or hereafter  arising,  (b) strictly
comply, and cause each of the other Credit Parties to strictly comply,  with all
the terms and  covenants  contained  in each Loan  Document  to which  each such
Credit Party is a party, all at the times and places and in the manner set forth


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therein and (c) except for the filing of continuation  statements and the making
of other  filings by the Agent as secured  party or assignee,  at all times take
all action  necessary  to maintain  the Liens  provided for under or pursuant to
this  Agreement or any  Security  Document as valid and  perfected  Liens on the
property  intended to be covered thereby (subject to no other Liens except those
liens  expressly  permitted under Section 9.2 hereof) and supply all information
to the Agent or the Lenders necessary for such maintenance.

     ss. 8.9. NOTICE OF DEFAULT. Each of the Borrowers shall promptly, and shall
cause each of their respective Subsidiaries to promptly (and in any event within
five (5) days),  notify the Agent in writing of any  Default or Event of Default
or a default under any other agreement in respect of  Indebtedness  for Borrowed
Money to which a Borrower or any of its  Subsidiaries  is a party,  in each case
describing  the nature  thereof and the action such party  proposes to take with
respect thereto.

     ss. 8.10. REPORTING OF MISREPRESENTATIONS. In the event that a Borrower, or
any of its respective Subsidiaries discovers that any representation or warranty
made in any Loan  Document by any Credit  Party was  incorrect  in any  material
respect  when made,  such  party  shall  promptly  report,  or shall  cause such
Subsidiary  promptly to report,  the same to the Agent and take,  or cause to be
taken,  all  available  steps to  correct  such  misrepresentation  or breach of
warranty.

     ss. 8.11. COMPLIANCE WITH LAW. Each of the Borrowers shall, and shall cause
each of their  respective  Subsidiaries  to, comply with and duly observe in all
material  respects all laws and  regulations  and all rules and orders,  in each
case,  applicable to it and all legal  requirements  imposed by any governmental
authorities,   including,   without  limitation,   ERISA,  those  regarding  the
collection,  payment and deposit of employees'  income,  unemployment and social
security  taxes,  those relating to public and employee  health and safety,  and
those relating to environmental  matters,  except a non-compliance or failure to
observe which would not have a Material Adverse Effect.

     ss. 8.12.  ERISA.  (a) Each of the Borrowers  shall pay and discharge,  and
shall  cause  each  other  Credit  Party  and each  ERISA  Affiliate  to pay and
discharge, when due (including any permissible extensions) any liability imposed
upon it pursuant to the provisions of Title IV of ERISA.

     (b) Each of the Borrowers shall deliver to the Agent  promptly,  and in any
event within ten (10) days, after

          (i) such party knows,  or has reason to know, of the occurrence of any
     Reportable  Event (as defined in Section  4043(b) of ERISA) with respect to
     any Pension Benefit Plan subject to Title IV of ERISA ("Reportable Event"),
     a copy of the materials that are filed by the applicable plan administrator
     with the PBGC, or the materials  that would have been filed if the PBGC had
     not waived the notice requirements;


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<PAGE>

          (ii) the receipt of notice by a Credit Party or any ERISA Affiliate or
     any  administrator  of any  Pension  Benefit  Plan who is an  employee of a
     Credit Party or any ERISA  Affiliate from the PBGC of the PBGC's  intention
     to  terminate  any such  Pension  Benefit  Plan or to  appoint a trustee to
     administer any such Pension Benefit Plan, a copy of such notice;

          (iii) the filing thereof with the Internal Revenue Service,  copies of
     each annual  report that is filed on Treasury Form 5500 with respect to any
     Pension  Benefit  Plan  subject to Title IV,  together  with any  actuarial
     statements on Schedule B to such Form 5500;

          (iv) a Credit Party or any ERISA Affiliate or any administrator of any
     Pension  Benefit Plan who is an employee of any Credit Party,  or any ERISA
     Affiliate files with  participants,  beneficiaries  or the PBGC a notice of
     intent to terminate any Pension Benefit Plan, a copy of any such notice;

          (v) a Credit Party or any ERISA  Affiliate knows or has reason to know
     of any  event  or  condition  which  might  constitute  grounds  under  the
     provisions  of  Section  4042  of  ERISA  for  the  termination  of (or the
     appointment  of a trustee to  administer)  any  Pension  Benefit  Plan,  an
     explanation of such event or condition;

          (vi) an application has been made to the Secretary of the Treasury for
     a waiver of the minimum  funding  standard  under the provisions of Section
     412 of the Code with  respect to any Pension  Benefit  Plan, a copy of such
     application; and

          (vii) the  receipt by any Credit  Party or any ERISA  Affiliate  of an
     assessment  of  withdrawal  liability  under  Section  4201 of ERISA from a
     Multiemployer Plan, a copy of such assessment;

in each case described above, together with a statement signed by an appropriate
officer of such Credit Party or ERISA Affiliate setting forth details as to such
Reportable Event, filing, notice, event or condition,  assessment or application
and the action that will be taken with respect thereto.

            ss. 8.13. FURTHER ASSURANCES. Each of the Borrowers shall, and shall
cause each of their respective  Subsidiaries  to, at its cost and expense,  upon
request of the Agent, duly execute and deliver, or cause to be duly executed and
delivered,  to the Agent such  further  instruments  and do and cause to be done
such further acts as may be necessary or proper in the reasonable opinion of the
Agent  to  carry  out more  effectually  the  provisions  and  purposes  of this
Agreement or any other Loan Document.

            ss. 8.14. CONSIGNMENT  AGREEMENTS.  The Company shall deliver to the
Agent  Consignor  Letters duly executed by consignors of  "consigned"  or "memo"
inventory  (pursuant  to  any  written   consignment   agreement  or  otherwise)


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representing  at  least  ninety  percent  (90%)  of the  "memo"  or  "consigned"
inventory  (based on book  value) of the Company  and at no time  following  the
Closing Date shall the Company  suffer or permit more than ten percent  (10%) of
its "memo" or "consigned"  inventory  (based on book value) to be on consignment
from  consignors  who have not  executed and  delivered  to the Agent  Consignor
Letters.  The Company  further  agrees to use its best efforts to deliver to the
Agent  Consignor  Letters from each of its  consignors of "memo" or  "consigned"
inventory  and the Company  further  agrees that it shall not from and after the
Closing  Date enter  into any  consignment  agreement  or  arrangement  with any
consignor who has not delivered to the Agent a Consignor Letter. Notwithstanding
the  foregoing,  no  Consignor  Letter  shall be  required  to be  executed  and
delivered by Rhode Island  Hospital Trust  National Bank in connection  with the
Gold  Consignment  Documents so long as the  Intercreditor  Agreement is in full
force and effect.

            ss. 8.15. AUDITS. Each of the Borrowers shall allow, and shall cause
each of their  respective  Subsidiaries  to allow,  the Agent or its designee to
perform such audits of the Parent and its Subsidiaries, at the Company's expense
as to reasonable  out-of-pocket  expenses of the Agent or its  designee,  as the
Agent may request.

            ss. 8.16.  ENVIRONMENTAL  MATTERS,  ETC.  (a) Each of the  Borrowers
shall, and shall cause each of their  respective  Subsidiaries to, (i) comply in
all material  respects with the  Environmental  Laws  applicable to it, and (ii)
promptly forward to the Agent a copy of any order, notice,  Permit, or any other
written   communication  or  report  received  by  the  Parent  or  any  of  its
Subsidiaries  in  connection  with  any  Adverse   Environmental   Condition  or
Environmental  Claim or any written  allegation which may reasonably be expected
to give rise to an Adverse Environmental Condition or Environmental Claim.

     (b) The Company  shall  fully and  promptly  pay,  perform,  discharge,  if
requested,  defend,  indemnify and hold harmless each Indemnified Party from and
against any action,  claim, loss,  liability,  damage, cost,  deficiency,  fine,
penalty or expense (including,  without limitation,  reasonable attorneys' fees,
disbursements, investigation, removal, cleanup and remedial costs and reasonable
equipment  modification  costs  incurred to permit  continued or resumed  normal
operation of the  Facilities)  suffered or incurred by such  Indemnified  Party,
whether  as  mortgagee  pursuant  to any  Mortgage  or  Leasehold  Mortgage,  as
mortgagee  in  possession,  or as successor in interest to the Company or any of
its  Subsidiaries  as owner,  operator or lessee of any  Facilities by virtue of
foreclosure or acceptance in lieu of  foreclosure or otherwise:  (i) under or on
account of the  Environmental  Laws as they may apply to the Parent,  any of its
Subsidiaries or the Facilities,  including the assertion of any Lien thereunder;
(ii) with respect to any  Environmental  Claim,  Release or  Hazardous  Material
affecting such  Facilities,  whether or not the same originates or emanates from
such  Facilities or any contiguous  real estate,  including any loss of value of
such Facilities as a result of a Release or Hazardous  Material;  and (iii) with
respect to any other matter affecting such Facilities within the jurisdiction of
any federal, state, or municipal authority administering the Environmental Laws.
The foregoing  indemnity shall survive the expiration or earlier  termination of
this Agreement and the satisfaction of the Lender Debt under the Loan Documents.
Further,  the foregoing indemnity shall not be available with respect to matters
arising  solely  out  of  the  gross  negligence  or  willful  misconduct  of an


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Indemnified  Party  or such  Person's  employees,  successors  or  assigns.  The
indemnification  rights  provided by this Section  8.16(b) shall  constitute the
sole  indemnity  available  to  Indemnified  Parties with respect to the matters
addressed under this Section.

     (c) The Agent and each  Lender  agree that in the event any  investigation,
litigation  or  proceeding  is asserted or  threatened  in writing or instituted
against it or any  Indemnified  Party, or any Remedial Action is requested of it
or any Indemnified Party, for which indemnity is available under Section 8.16(b)
and the Agent or any Lender may desire indemnity or defense hereunder, the Agent
or such Lender shall  promptly  notify the Company in writing,  setting  forth a
description of those  elements of which it has knowledge,  but any failure to so
notify the  Company  shall not  relieve  the  Company of any of its  obligations
hereunder,  except to the extent such  failure  materially  interferes  with the
Company's  ability  to  defend  the  investigation,  litigation,  proceeding  or
requested Remedial Action. The Company at the request of the Agent or any Lender
shall have the  obligation to defend against such  investigation,  litigation or
proceeding  or  requested  Remedial  Action,  and the  Company  in any event may
participate  in the  defense or  settlement  thereof  with legal  counsel of its
choice; provided, however, that the Company shall not be entitled to control the
defense described above in the event that the Company shall not have admitted in
writing to the Agent and the  Lenders  that as between the  Company,  on the one
hand,  and the Agent and the Lenders on the other hand, the Company is liable to
the  Agent and  Lenders  as to such  investigation,  litigation,  proceeding  or
Remedial Action or there are defenses  available to the Indemnified  Party which
are not  available  to the  Company.  In the event  that the Agent or any Lender
requests  the  Company  to defend  against  such  investigation,  litigation  or
proceeding or requested Remedial Action, such party shall promptly do so and the
Agent or the  affected  Lender  shall  have the  right  to  participate  in such
defense,  at such party's expense,  with legal counsel of its choice,  and shall
cooperate with the Company in the conduct of such defense.  No Indemnified Party
shall  settle any such  investigation,  litigation  or  proceeding  or requested
Remedial Action as to which it is controlling the defense without the consent of
the Company, which consent shall not be unreasonably withheld or delayed. In the
event that the Company  controls such defense,  the Company and the  Indemnified
Party or Parties shall cooperate in the conduct of such defense, and the Company
shall not settle any such  investigation,  litigation or proceeding or requested
Remedial Action without the consent of the Indemnified  Party or Parties,  which
consent  shall not be  unreasonably  withheld.  No action taken by legal counsel
chosen by the  Agent,  the Agent or any  Lender in  defending  against  any such
investigation,  litigation  or  proceeding  or requested  Remedial  Action shall
vitiate or impair the Company's  obligation  and duty hereunder to indemnify and
hold  harmless  the  Indemnified  Parties.  Any and all  amounts  payable by the
Company as  indemnification  under this Section 8.16(c) shall be due and payable
within thirty days of receipt of written  notice to the Company and,  after such
thirty day period,  shall be added,  together with interest  thereon at the rate
set forth in Section 2.6(c) hereof, to the Lender Debt.

     (d) In the  event of any  Adverse  Environmental  Condition  affecting  any
Facilities, whether or not the same originates or emanates from such


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Facilities or any  contiguous  real estate,  and if the Parent or any Subsidiary
shall  fail to  comply  in all  respects  with  any of the  requirements  of the
applicable Environmental Laws, or, in the case of a leasehold, if required to do
so under the applicable  lease,  the Agent (at its option or at the direction of
the Majority  Lenders) may, but shall not be obligated to, cause such work to be
performed  or  take  actions   reasonably   necessary  to  remedy  such  Adverse
Environmental  Condition or cure such failure to comply after providing  written
notice to the Company of an intent to do so,  allowing a  reasonable  time after
receipt of such notice for the Company to cure such failure. Any amounts paid by
the Agent as a result  thereof,  together with interest  thereon at the rate set
forth in Section 2.6(c)  hereof,  shall be due and payable by the Company within
thirty days of receipt of an invoice and  supporting  documentation  and,  after
such  thirty  day  period,  shall be added to the Lender  Debt.  Nothing in this
Agreement  shall be construed as limiting or impeding the Parent's or any of its
Subsidiary's  rights or  obligations  to take any and all actions  necessary  or
desirable to remedy any Adverse Environmental Condition. Any partial exercise by
the Agent of the remedies  hereinabove  set forth or any partial  undertaking on
the  part of the  Agent to cure  the  Parent's  failure  or the  failure  of any
Subsidiary thereof to comply with the Environmental Laws, shall not obligate the
Agent to complete the actions taken or require the Agent to expend  further sums
to cure the Parent's or any such Subsidiary's  noncompliance;  neither shall the
exercise  of any such  remedy  operate to place upon the Agent or any Lender any
additional responsibility for the operation, control, care, management or repair
of the Real Estate or make the Agent or any Lender the "owner" or  "operator" of
the Real Estate or "owner" or  "generator"  of  Hazardous  Materials  within the
meaning of the Environmental Laws.

     (e) If an Event of Default occurs, or if an Adverse Environmental Condition
should arise which would  reasonably be expected to result in a Material Adverse
Effect, the Agent (at its option or at the direction of the Majority Lenders) in
the reasonable  exercise of its discretion and with reasonable  notice under the
circumstances,  may at any time,  and at the  Company's  sole  cost and  expense
(which  shall  be added to the  Lender  Debt),  take  any  action  to incur  any
reasonable  expense,   including  without  limitation,  to  cause  one  or  more
environmental  assessments  of the Real Estate to be  undertaken.  Environmental
assessments  may  include  a  detailed  visual  inspection  of the Real  Estate,
including,  without limiting the generality of the foregoing, all storage areas,
storage tanks,  drains,  dry wells, and leaching areas, as well as the taking of
soil samples,  surface water samples,  and ground water samples,  and such other
investigation  or analysis  as is  reasonably  necessary  or  appropriate  for a
complete  assessment  of the  compliance  of the  Real  Estate  and  the use and
operation  thereof with all  Environmental  Laws;  provided,  however,  any such
inspection  and sampling  shall be  performed  by a qualified,  and if necessary
licensed,  environmental  consultant,  retained by Agent and provided,  further,
that no such  inspection  and  sampling  shall take  place on any real  property
leased to the Parent or any of its Subsidiaries that requires the consent of the
landlord for such  inspection and sampling  without first obtaining such consent
(the  Company  agreeing  to use its best  efforts to obtain such  consent).  The
Company shall be given the  opportunity  to review and comment upon the scope of
work and work plan developed by the consultant for the environmental  assessment
prior to such  assessment;  provided that such review and comments  shall not be
unreasonably  withheld  or delayed.  The Agent shall give the Company  three (3)
Business  Days'  advance  notice that the  consultant  intends to enter the Real

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<PAGE>

Estate  for  the  purpose  of  conducting   an   environmental   assessment.   A
representative  of the Company shall have the right to accompany the  consultant
as the consultant performs any portion of the environmental assessment, provided
such  representative is reasonably  available,  and the consultant shall provide
split samples to the Company's representative upon request. The consultant shall
take all  reasonable  measures to restore the property to the condition in which
the property was found prior to the environmental assessment.

            The Agent  promptly  shall  provide the  Company  with a copy of any
reports  (including  draft reports) and analytical  data prepared or gathered by
the consultant relating to the environmental assessment of the Real Estate.

            (f)  The  Company  shall,  and  shall  cause  each  of its  Domestic
Subsidiaries  to, without regard to whether any Credit Party is in default,  and
at such party's sole cost and expense, cause one or more "phase I" environmental
assessments to be undertaken by an environmental  consultant satisfactory to the
Agent (and in any event,  in form and substance  sufficient to entitle the Agent
and the Lenders to an exemption  under any  applicable  state or federal law for
lenders or financial  institutions  holding a lien or security  interest) before
any such  party  shall (i) enter into a contract  for the  purchase  of any real
property  or (ii)  enter  into any lease  with a term in  excess of six  months;
provided,  however,  that no such "phase I" environmental  assessments  shall be
required  prior to entry  into a lease of real  property  to be used  solely for
retail or office purposes. If any such "phase I" environmental  assessment shall
identify any Adverse Environmental Condition or Environmental Claim with respect
to such real property, such party shall refrain from entering into such contract
or lease, as the case may be, unless such party shall ensure to the satisfaction
of the Agent that such  further  Remedial  Action as any  Lender may  reasonably
request is undertaken at the sole expense of such party or a third party.

     ss.  8.17.  FINANCIAL  COVENANTS.  (a)  Leverage  Ratio.  The Parent  shall
maintain,  or cause to be maintained,  a Leverage  Ratio,  as of the end of each
period of four  consecutive  quarters of the Parent ending on or about the dates
set forth below, of not more than the ratio set forth below opposite such date:


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<PAGE>


            Four Fiscal Quarters
            Ending On or About                       Ratio

            October 31, 1997                         5.75
            January 31, 1998                         3.90
            April 30, 1998                           5.50
            July 31, 1998                            5.50
            October 31, 1998                         5.25
            January 31, 1999                         3.60
            April 30, 1999                           5.25
            July 31, 1999                            5.25
            October 31, 1999                         5.25
            January 31, 2000                         3.50
            April 30, 2000                           4.75
            July 31, 2000                            4.75
            October 31, 2000                         4.75
            January 31, 2001                         3.30
            April 30, 2001                           4.25
            July 31, 2001                            4.25
            October 31, 2001                         4.25
            January 31, 2002                         3.00
            April 30, 2002                           4.25
            July 31, 2002                            4.25
            October 31, 2002                         4.25
            January 31, 2003                         3.00
            April 30, 2003 and each Fiscal           4.25
              Quarter thereafter


            (b) Fixed Charge Coverage Ratio. The Parent shall maintain, or cause
to be  maintained,  as of the end of each  period  of  four  consecutive  fiscal
quarters  of the Parent  ending on or about the dates set forth  below,  a Fixed
Charge Coverage Ratio of not less than:


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<PAGE>




            Four Fiscal Quarters
            Ending On or About                         Ratio

            October 31, 1997                            1.2
            January 31, 1998                            1.3
            April 30, 1998                              1.3
            July 31, 1998                               1.3
            October 31, 1998                            1.3
            January 31, 1999 and each Fiscal            1.5
              Quarter thereafter


            (c) EBITDA.  The Parent shall  maintain,  or cause to be maintained,
EBITDA for each period of four consecutive  fiscal quarters of the Parent ending
on or about  the dates set  forth  below of not less than the  amount  set forth
below opposite such date:

            Four Fiscal Quarters
            Ending On or About                  Amount

            October 31, 1997                    $55,000,000
            January 31, 1998                    $57,000,000
            April 30, 1998                      $59,000,000
            July 31, 1998                       $59,000,000
            October 31, 1998                    $60,000,000
            January 31, 1999                    $60,000,000
            April 30, 1999                      $60,000,000
            July 31, 1999                       $60,000,000
            October 31, 1999                    $60,000,000
            January 31, 2000                    $64,000,000
            April 30, 2000                      $64,000,000
            July 31, 2000                       $65,000,000
            October 31, 2000                    $66,000,000
            January 31, 2001                    $69,000,000
            April 30, 2001                      $70,000,000
            July 31, 2001                       $71,000,000
            October 31, 2001                    $72,000,000
            January 31, 2002 and each Fisc      $74,000,000
              Quarter thereafter


            (d) Sonab EBITDA.  Sonab shall  maintain,  or cause to be maintained
EBITDA for each period of four consecutive fiscal quarters of Sonab ending on or
about  the dates set forth  below of not less than the  amount  set forth  below
opposite such dates.


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<PAGE>


            Four Fiscal Quarters
            Ending On or About                   Amount

            October 31, 1997                    $2,700,000
            January 31, 1998                    $2,700,000
            April 30, 1998                      $2,700,000
            July 31, 1998                       $2,700,000
            October 31, 1998                    $2,700,000
            January 31, 1999                    $2,800,000
            April 30, 1999                      $2,800,000
            July 31, 1999                       $2,800,000
            October 31, 1999                    $2,800,000
            January 31, 2000                    $3,000,000
            April 30, 2000                      $3,000,000
            July 31, 2000                       $3,000,000
            October 31, 2000                    $3,000,000
            January 31, 2001                    $3,200,000
            April 30, 2001                      $3,200,000
            July 31, 2001                       $3,200,000
            October 31, 2001                    $3,200,000
            January 31, 2002 and each Fiscal    $3,400,000
              Quarter thereafter


     ss. 8.18. LEASES; NEW REAL ESTATE. Within five Business Days after becoming
a party  thereto,  the Company  shall  provide,  or shall  cause the  applicable
Subsidiary  to provide,  the Agent with copies of all Leases of real property or
similar  agreements (and all amendments  thereto) entered into by the Company or
any Domestic Subsidiary of the Company after the Closing Date, whether as lessor
or  lessee.  The  Company  shall  comply and shall  cause  each of its  Domestic
Subsidiaries  to  comply  in all  material  respects  with all of its and  their
material  obligations under all Leases now existing or hereafter entered into by
it or them with respect to real  property  including,  without  limitation,  all
Leases listed on Schedule  11.5 hereto.  The Company  shall,  or shall cause the
appropriate  Subsidiary  to, (i) provide the Agent with a copy of each notice of
default  received  by the  Company  or such  Subsidiary  under  any  such  lease
immediately  upon  receipt of any such notice and deliver to the Agent a copy of
each  notice of default  sent by the Company or such  Subsidiary  under any such
lease  simultaneously  with its delivery of such notice  under such lease;  (ii)
notify  the  Agent  at least 14 days  prior  to the  date  the  Company  or such
Subsidiary  takes  possession of any new leased premises or becomes liable under
any Lease  having a term of greater than six months,  whichever is earlier;  and
(iii) if  requested  by the Agent,  obtain and deliver to the Agent a Landlord's
Certificate,  and with respect to any  leasehold in which the Agent has obtained
or expects to obtain a Leasehold  Mortgage,  such consents and other  agreements
from  landlords  relating  to,  among  other  things,  mortgageability  and such
non-disturbance  agreements  from  mortgagees of the landlord,  as the Agent may


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request, each in form and substance satisfactory to the Agent, prior to entering
into any new lease.

            ss. 8.19. LICENSE AGREEMENTS. (a) If a Specified Default occurs, the
Company shall,  upon the request of the Agent,  use its best efforts to grant to
the Agent for the  benefit of the Agent and the  Lenders  pursuant  to  security
agreements and/or collateral assignments each in form and substance satisfactory
to the Agent,  a valid,  perfected and  enforceable  first  priority Lien on all
right, title and interest of the Company in, to and under all Unapproved License
Agreements  and  License  Agreements  as to  which  the  Agent  shall  have  not
heretofore received such a valid,  perfected and enforceable first priority Lien
(together  with any legal opinions  reasonably  requested by the Agent as to the
validity, enforceability and perfection of such Liens). In connection therewith,
the Company  shall use its best efforts to obtain all consents of third  parties
(including,  without limitation,  any licensor consents) necessary to permit the
effective  granting  of such Liens.  In the event such  security  agreements  or
collateral  assignments  (together any legal opinions requested by the Agent and
third party  consents  deemed  necessary  by the Agent to permit the granting of
such  Liens) are not  delivered  to the Agent  within 45 days after the  Agent's
request therefor and the Agent has not otherwise received a valid, perfected and
enforceable  first  priority  security  interest  in  such  Unapproved   License
Agreements and License Agreements,  such failure on the part of any Credit Party
shall constitute an Event of Default  hereunder in addition to any other Default
or Event of Default existing at such time.

            (b) The Company shall promptly (i) upon entering into any Unapproved
License Agreement or License Agreement provide the Agent with copies of same (or
if such Unapproved  License  Agreement or License  Agreement is not in writing a
written  description  thereof),  (ii) upon  entering  into any  amendment to any
Unapproved  License Agreement or License Agreement provide the Agent with a copy
of same, it being understood that the Company shall not need the approval of the
Agent or any Lender to enter into or terminate any Unapproved  License Agreement
or License  Agreement,  (iii) promptly upon entering into any Unapproved License
Agreement or License  Agreement after the Closing Date,  provide to the Agent an
internally  generated  projection  of gross  revenues  for any  such  Unapproved
License Agreement or License Agreement for the twelve month period following the
first date of  operation  under such  Unapproved  License  Agreement  or License
Agreement,  (iv) comply in all material  respects  with all  Unapproved  License
Agreements or License  Agreements  now existing or hereafter  entered into by it
(including,  without  limitation,  those License  Agreements  listed on Schedule
11.25  hereof),  and (v)  provide the Agent with  Written  Notice of any default
under any Unapproved  License  Agreement or License  Agreement  immediately upon
becoming aware of any default thereunder and of any termination of an Unapproved
License Agreement or License Agreement.

     ss. 8.20.  SUPPLEMENTAL  DISCLOSURE.  From time to time as may be necessary
(in the event that such information is not otherwise  delivered by the Parent or
the  Company to the Lenders  pursuant to this  Agreement),  the  Borrowers  will
promptly supplement or amend each Schedule or representation herein with respect


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<PAGE>

to any matter  hereafter  arising which, if existing or occurring at the date of
this  Agreement,  would have been  required to be set forth or described in such
Schedule or as an  exception  to such  representation  or which is  necessary to
correct  any  information  in such  Schedule  or  representation  which has been
rendered  inaccurate  thereby in any material respect.  No such supplement shall
cure any Default arising from any misrepresentation being corrected, unless such
supplement has been approved by the Majority Lenders.

     ss. 8.21. AGREEMENTS.  Each of the Borrowers shall, and shall cause each of
their  respective  Subsidiaries  to,  perform,  within all required time periods
(after giving effect to any applicable  grace  periods),  all of its obligations
and  enforce  all of its  rights  under each  agreement  to which it is a party,
including,  without limitation, any leases to which any such company is a party,
where the  failure to so perform  and  enforce  is  reasonably  likely to have a
Material  Adverse  Effect.  The Parent shall not, and shall not suffer or permit
any of its  Subsidiaries  to,  terminate or modify in any manner  adverse to any
such  party  any  provision  of any  agreement  to  which  it is a  party  which
termination  or modi  fication is reasonably  likely to have a Material  Adverse
Effect.
 
     ss. 8.22. COLLECTION AND PAYMENT; LOCK BOX; BANK ACCOUNTS.  (a) The Company
shall enter into, and cause its Domestic  Subsidiaries to enter into, a lock box
agreement,  in form,  scope and substance  satisfactory to the Agent,  with each
Collecting Bank. Pursuant to each such lock box agreement, on each Business Day,
all items  deposited in the applicable lock box shall be credited to the Blocked
Account (other than a Disbursement  Account) maintained by such Collecting Bank.
On each Business Day, each Collecting Bank shall transfer to the Payment Account
all amounts  collected in good funds on such Business Day in the Blocked Account
maintained by such Collecting  Bank. The Company shall not nor shall the Company
suffer or permit any Domestic Subsidiary to terminate, alter or suffer or permit
to be terminated or to lapse any such lock box agreement.

            (b) Subject to the provisions of Section 2.19(b) hereof, the Company
shall, and shall cause its Domestic  Subsidiaries  to, deposit,  on the Business
Day  immediately  following  the Business  Day of receipt,  in such lock box all
payments  and  proceeds  received  or  derived  from or in  connection  with the
operations and business of the Company and its Domestic  Subsidiaries,  together
with all other payments constituting  proceeds of any assets,  including real or
personal  property now owned or hereafter  acquired by the Company or any of its
Domestic  Subsidiaries,  and all other  proceeds,  payments  and  other  amounts
received  by the  Company or any of its  Domestic  Subsidiaries  from any source
whatsoever including,  without limitation, all payments under License Agreements
("Proceeds"),  in the identical  form  received,  whether in cash or by check or
otherwise. Subject to the provisions of Section 2.19(b) hereof, upon the request
of the Agent, the Company shall,  and shall cause its Domestic  Subsidiaries to,
cause all  proceeds  to be  directly  deposited  in such  lockbox by each of the
account debtors of the Company and its Domestic Subsidiaries (including, without
limitation, each licensor or lessor of a store location to the Company or any of
its Domestic Subsidiaries).


                                      102
<PAGE>

            (c) All items and all cash in the lock box and all funds,  deposits,
earnings and claims in respect thereof in the Blocked Accounts shall be the sole
and exclusive property of the Agent, subject to the sole dominion and control of
the Agent,  in accordance  with the provisions of Section  2.19(b) hereof and of
the lock box agreement and Collecting Bank Agreements.

            (d) The  Company  shall  cause each  Collecting  Bank to execute and
deliver  to the  Agent a  Collecting  Bank  Agreement  and shall  instruct  each
Collecting Bank to transfer,  prior to the close of business on any Business Day
on which Proceeds are received by such  Collecting  Bank,  such Proceeds (to the
extent  collected in good funds) in accordance  with the terms of the Collecting
Bank Agreement.

            (e) The Company shall pay to the Agent all fees,  costs and expenses
which the Agent pays or incurs in  connection  with  maintaining  or opening the
Blocked Accounts,  collecting and depositing for collection all checks and items
of payment  received  or  delivered  to any  Collecting  Bank for deposit in the
Blocked  Accounts and shall  reimburse the Agent for all amounts which the Agent
may pay to any Collecting Bank arising from obligations  undertaken by the Agent
under the Collecting Bank Agreement.

            Notwithstanding  clauses (a) through (e) above,  so long as the Gold
Consignment Documents and Intercreditor  Agreement are in full force and effect,
the deposit account  established and maintained by the Company with Rhode Island
Hospital Trust National Bank  (referred to as the "Cash  Collateral  Account" in
the Cash Collateral  Agreement,  as such term is defined in the Gold Consignment
Agreement)  holding  the Cash  Deposits  (as  defined  in the  Gold  Consignment
Agreement)  and the  investments  of funds in such account in Time  Deposits (as
such  term is  defined  in the Cash  Collateral  Agreement),  in each  instance,
pursuant  to  the  Cash  Collateral  Agreement  shall  not  be  subject  to  the
collection, payment and lockbox arrangements required by this Section 8.22.

            ss.  8.23.  EMPLOYMENT  AGREEMENTS.  After  the  Closing  Date,  the
Borrowers shall obtain the written  approval of the Agent prior to entering into
any Employment  Agreement with an Affiliate of the Parent, the Company or any of
their  respective  Subsidiaries.  The  Company  shall  cause Sonab to obtain the
written  approval of the Agent prior to entering into any  employment  agreement
with  an  Affiliate  of the  Parent,  the  Company  or any of  their  respective
Subsidiaries.

            ss. 8.24.  SONAB LOCK BOX AND BLOCKED  ACCOUNTS.  Each of the Parent
and the Company  shall cause  Sonab to enter into and  maintain  lock box and/or
cash   management   arrangements   with  the  Agent  and  such  other  financial
institutions  that are  acceptable to the Agent with respect to the  receivables
and other cash of Sonab,  such  arrangements to be substantially  similar to the
lock box and/or cash  management  arrangements of the Company as in existence on
the  Fourth  Amendment  Effective  Date  or  otherwise  in  form  and  substance
satisfactory to the Agent.


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            ss. 8.25. SONAB SECURITY.  Upon the request of the Agent,  within 45
days following the Closing Date,  each of the Parent and the Company  shall,  at
their sole cost and expense,  cause Sonab to duly execute and deliver,  or cause
to be duly executed and delivered,  to the Agent such further instruments and do
and  cause to be done such  further  acts as may be  necessary  or proper in the
reasonable opinion of the Agent to grant to the Agent a valid and perfected Lien
(which may be on a first  priority  basis) on all other  personal  property  and
assets of Sonab (including,  without limitation, all inventory of Sonab) if such
security is deemed  necessary or advisable in the  reasonable  discretion of the
Agent, it being understood that the granting of such Lien and the  documentation
prepared in connection  therewith shall conform with, and may be limited by, the
requirements  of French and other  applicable law. In addition to the foregoing,
upon the  request of the Agent,  each of the Parent and the  Company  shall,  at
their sole cost and expense,  cause Sonab to duly execute and deliver,  or cause
to be duly  executed  and  delivered,  to the  Agent (or any  Affiliate  thereof
designated  by the Agent) such further  instruments  and do and cause to be done
such further acts as may be necessary or proper in the reasonable opinion of the
Agent to grant to any  Affiliate of the Agent a valid and  perfected  Lien (on a
first priority basis) in the accounts receivable of Sonab in substitution of the
Lien granted to the Agent in the accounts  receivable  of Sonab  pursuant to the
Sonab Security Agreement (as defined in the Fourth Amendment  Agreement) if such
actions are deemed  necessary or advisable in the  reasonable  discretion of the
Agent, it being understood that the granting of such Lien and the  documentation
prepared in connection  therewith shall conform with, and may be limited by, the
requirements of French and other applicable law.

            SECTION 8.26 NEW STORES. The Company shall deliver written notice to
the Agent at least five business  days (or such shorter  period as the Agent may
agree) prior to the Company or any of its  Subsidiaries (i) opening or operating
any new fine jewelry  department or (ii) opening of any new factory outlet store
provided  however,  that the  Company  shall  provide  the Agent  with a list of
projected fine jewelry department and outlet store openings on a biweekly basis.

            SECTION 9.  NEGATIVE COVENANTS.

            Each of the  Borrowers  covenants  and agrees  that,  so long as any
Revolving  Loan or Letter of Credit  Obligation is outstanding or any Lender has
any Revolving  Commitment or any Revolving Sublimit  Commitment  hereunder,  the
Borrowers  shall not,  and shall not  suffer or permit  any of their  respective
Subsidiaries  (and with respect to Section 9.11,  shall not suffer or permit any
ERISA Affiliate) to, without the prior written consent of the Majority Lenders:

     ss. 9.1. CAPITAL EXPENDITURES. Make Capital Expenditures in any Fiscal Year
of the Parent in an amount  exceeding (i) $17,600,000 for the Fiscal Year ending
in 1997 (it being agreed that of such amount, (A) no more than $4,000,000 may be
expended  for the  purpose of opening  and  maintaining  factory  outlet  stores
operated by the Company and  permitted to be opened  under  Section 9.24 hereof,
(B) no more than  $2,000,000  may be  expended  for the  purpose of opening  and


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maintaining  fine  jewelry  departments  in  Debenhams  stores  permitted  to be
operated  under  Section  9.23  hereof  and (C) no more than  $2,000,000  may be
expended for the purpose of opening and maintaining fine jewelry  departments in
Monoprix and related stores and a store in Berlin, Germany, to the extent stores
are permitted to be operated under Section 9.25 hereof),  (ii)  $18,500,000  for
the Fiscal Year ending in 1998, or (iii)  $15,000,000 in any  subsequent  Fiscal
Year.

            ss. 9.2. LIENS.  Create,  incur,  assume or suffer to exist any Lien
upon or defect in title to or restriction  upon the use of any of its properties
or assets  of any  character,  whether  owned at the date  hereof  or  hereafter
acquired,  or hold or acquire  any  property  or assets of any  character  under
conditional  sales,  finance lease or other title  retention  agreements,  other
than:

          (a)  Liens in  favor of the  Agent  or the  Lenders  pursuant  to this
     Agreement or the Security Documents;

          (b) (iLiens for taxes,  assessments or governmental charges or levies,
     provided  payment  thereof  shall not at the time be required in accordance
     with the provisions of Section 8.2 hereof;

          (ii)  deposits,  Liens or  pledges  to secure  payments  of  workmen's
     compensation and other payments,  unemployment and other insurance, old-age
     pensions or other social security obligations,  or the performance of bids,
     tenders, leases, contracts (other than contracts for the payment of money),
     public or statutory  obligations,  surety,  stay or appeal bonds,  or other
     similar obligations arising in the ordinary course of business;

          (iii) mechanics',  workmen's, repairmen's,  warehousemen's,  vendors',
     suppliers',  materialmen's  or  carriers'  Liens,  or other  similar  Liens
     arising in the ordinary  course of business and securing sums which are not
     past due or which are being  contested in good faith (and there shall be no
     material  risk of  forfeiture  of the  property  subject  to  such  Lien or
     foreclosure of such Lien),  or deposits or pledges to obtain the release of
     any such Liens;

          (iv)  zoning  restrictions,  easements,  rights of way,  licenses  and
     restrictions on the use of real property or minor  irregularities  in title
     thereto,  which do not  materially  impair the use of such  property in the
     normal  operation of the business of the Parent or any of its  Subsidiaries
     or the value of such property for the purpose of such business;

          (c)  existing  Liens set forth in Schedule 9.2 hereof and any renewals
     thereof,  but not any  increase  in amount  thereof  and not any  extension
     thereof to other property;

          (d) purchase money mortgages or other purchase money Liens (including,
     without limitation,  Capital Leases), or any refinancing of any thereof, in
     favor of  non-Affiliates  of the Parent and its Subsidiaries upon any fixed

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     or capital  assets  hereafter  acquired  by the  Company or any  Subsidiary
     thereof  constituting  real  property  interests or related  machinery  and
     equipment,  or purchase money  mortgages  (including,  without  limitation,
     Capital  Leases) on any such assets  hereafter  acquired or existing at the
     time of  acquisition  of  such  assets  by the  Company  or any  Subsidiary
     thereof,  whether  or not  assumed,  so long as (i) any such  Lien does not
     extend  to or  cover  any  other  asset  of  the  Company  or  any  of  its
     Subsidiaries,  (ii) such Lien  secures the  obligation  to pay the purchase
     price of such asset (or the obligation under such Capital Leases), interest
     thereon and other customary  incidental  obligations relating thereto only,
     and (iii) the original  principal amount (or in the case of Capital Leases,
     notional  principal  amount) of the aggregate  Indebtedness  secured by all
     such purchase money Liens (and Capital Leases) shall not exceed  $3,000,000
     at any time;

            (e) Liens in favor of Marine  Midland  Bank,  N.A.  pursuant  to the
      "Pledge  Agreement" (as defined in the Debenture  Indenture)  covering the
      capital stock of the Company;

            (f)  Liens on  Consignment  Inventory  in favor  of any  Person  who
      retains title to such Consignment Inventory;

            (g) Liens  granted to lessors or licensors of store  locations  with
      respect to fixtures and  equipment at store  locations  leased or licensed
      from such lessors or licensors  not to exceed  $2,000,000 in the aggregate
      at any time;

            (h) Liens for  judgments,  attachments,  seizures  or levies  not to
      exceed $500,000 in the aggregate outstanding at any time;

            (i) Liens on property other than Inventory,  Accounts or Proceeds of
      either, not exceeding  $100,000 in the aggregate  outstanding at any time;
      and

            (j) Liens in favor of Rhode Island  Hospital Trust National Bank (or
      any  successor  or  assignee  thereof)  pursuant  to the Gold  Consignment
      Documents,  subject to the provisions of the  Intercreditor  Agreement and
      subject  to there  being no  filings  of  financing  statements  under the
      Uniform   Commercial  Code  with  respect  thereto  other  than  financing
      statements containing  collateral  descriptions in the form of Exhibits 1A
      and 1B to the First Amendment.

     ss.  9.3.   INDEBTEDNESS.   Create,   incur,  assume  or  suffer  to  exist
contingently or otherwise, any Indebtedness (including,  without limitation, any
intercompany Indebtedness), other than:

            (a)  Indebtedness under the Loan Documents;

            (b) unsecured Current Liabilities incurred in the ordinary course of
      business other than unsecured  Current  Liabilities for  Indebtedness  for
      Borrowed Money;



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            (c) Indebtedness of the Company or any Subsidiary thereof secured by
      Liens permitted by Sections 9.2(b), (c) and (d) hereof;

            (d)  Indebtedness to the extent expressly permitted by Sections  9.4
      and 9.16 hereof;

            (e)  Indebtedness  of Sonab (i) to the Company as  evidenced  by the
      Sonab  Intercompany  Notes and (ii) to other  Persons  in an amount not to
      exceed in the aggregate for all such Persons at any time the lesser of (A)
      $10,000,000  and (B) an amount equal to the sum at such time of (1) 60% of
      the  book  value of  Sonab's  inventory  and (2) 85% of the book  value of
      Sonab's  accounts  receivable,  but only so long as recourse in respect of
      such Indebtedness under this clause (ii) is limited exclusively to Sonab;

            (f) existing  Indebtedness  of the  Borrowers  and their  respective
      Subsidiaries  listed on Schedule 9.3 hereof (but not any increase  thereof
      or any refinancings,  renewals,  extensions,  replacements or exchanges of
      any thereof except  refinancings,  renewals,  extensions,  replacements or
      exchanges  on terms no less  favorable  to the  Company or any  Subsidiary
      thereof  than  that  being  refinanced,  renewed,  extended,  replaced  or
      exchanged);

            (g)  Indebtedness of the Borrowers  arising under the Tax Allocation
      Agreement;

            (h)  Indebtedness of the Company evidenced by the Senior Notes;

            (i)  Indebtedness of the Parent evidenced by the Debentures;

            (j) Indebtedness of the Company under (i) any Hedge Agreement of the
      Company  which is not  speculative  in nature,  which is designed to hedge
      against  fluctuations  in the price of gold,  and which is in the ordinary
      course of business in keeping with the Company's  past  practices and (ii)
      any Hedge  Agreement  which is designed to hedge against  fluctuations  in
      interest rates; provided, however, that in the case of any Hedge Agreement
      constituting  an interest  rate swap for which a Credit  Party has swapped
      away  exposure  on a fixed rate in  exchange  for taking on  exposure on a
      floating rate, such Hedge Agreement covers a notional  principal amount of
      not more than $50,000,000;

            (k) Indebtedness of the Company or any Subsidiary thereof to lessors
      or licensors  of store  locations  with respect to fixtures and  equipment
      located at such store  location not to exceed  $2,000,000 in the aggregate
      outstanding at any time;

            (l) Indebtedness of the Company or any Subsidiary thereof to lessors
      or licensors of store  location with respect to Inventory  purchased  from
      such  lessors  or  licensors  not to exceed  $2,000,000  in the  aggregate
      outstanding at any time;



                                      107
<PAGE>

            (m)  Indebtedness  of the  Company  or any  Subsidiary  thereof  for
      judgments,  attachments,  seizures or levies not to exceed $500,000 in the
      aggregate outstanding at any time;

            (n) to the extent  such  expenses  have not been paid by the Company
      through a dividend  to the Parent  permitted  under  Section  9.6  hereof,
      Indebtedness  of the  Company  to the Parent  for  expenses  of the Parent
      incurred in the ordinary course of business not to exceed in the aggregate
      in any  Fiscal  Year of the  Parent  0.25% of the  Company's  net sales as
      indicated in the Company's  audited  annual  financial  statements for the
      immediately   preceding   Fiscal  Year  (it  being  understood  that  such
      Indebtedness shall not be evidenced by a promissory note, bond,  debenture
      or other instrument);

            (o)  Indebtedness of the Company and its  Subsidiaries not to exceed
      $1,000,000 in the aggregate outstanding at any time;

            (p) subject to Section 9.6(a)(ii) hereof, Indebtedness of the Parent
      under the Shareholders  Agreement and the Reiner Employment  Agreement (or
      under any option  agreement  executed  pursuant to the Long Term Incentive
      Plan);

            (q)  Indebtedness of Sonab,  Sonab Holdings and Sonab  International
      pursuant to the terms of the First Supplemental Indentures; and

            (r) Indebtedness of the Company under the Gold Consignment Documents
      not to  exceed  $25,000,000  at  any  time  in  respect  of the  aggregate
      outstanding amount of Consigned Precious Metal (as such term is defined in
      the Gold Consignment Agreement).

Nothing  contained  in this Section 9.3 shall be deemed to permit the Company or
any of its  Subsidiaries to incur,  create or suffer or permit to be outstanding
any Indebtedness for Borrowed Money owing by the Company to the Parent.

            ss. 9.4.  LOANS, INVESTMENTS AND GUARANTEES.  Lend or advance
money or credit to any Person, or invest in (by capital  contribution,  creation
of  Subsidiaries  or  otherwise),   or  purchase  or  repurchase  the  stock  or
Indebtedness,  or all or a substantial part of the assets or properties,  of any
Person,  or enter into any exchange of securities with any Person, or guarantee,
assume,  endorse or otherwise become  responsible for (directly or indirectly or
by any  instrument  having  the  effect of  assuring  any  Person's  payment  or
performance or capability) the Indebtedness,  performance, obligations, stock or
dividends of any Person (each of the foregoing, an "Investment"), or agree to do
any of the foregoing, other than:

            (a)  endorsement of negotiable instruments for deposit or collection
      in the ordinary course of business;


                                      108
<PAGE>

            (b) (i) Investments in securities  issued,  or that are directly and
      fully guaranteed or insured, by the United States Government or any agency
      or  instrumentality  thereof  having  maturities  of not more than  twelve
      months from the date of acquisition,  (ii) time deposits and  certificates
      of deposit having  maturities of not more than twelve months from the date
      of acquisition of (x) any Lender or (y) any other domestic commercial bank
      having capital and surplus in excess of $500,000,000,  the holding company
      of  which  has  outstanding  commercial  paper  meeting  the  requirements
      specified in clause (iv) below, (iii) repurchase agreements with a term of
      not more than thirty-one (31) days for underlying  securities of the types
      described  in clauses  (i) and (ii) above  (provided  that the  underlying
      securities of the type described in clause (i) may not have  maturities of
      more than six months from the date of  acquisition)  entered into with any
      Lender or any other bank  meeting the  qualifications  specified in clause
      (ii) above or with  securities  dealers of recognized  national  standing,
      provided that the terms of such agreements  comply with the guidelines set
      forth in the Federal  Financial  Institutions  Examination  Council  Super
      visory  Policy  Repurchase  Agreements  of  Depositary  Institutions  With
      Securities  Dealers  and  Others  as  adopted  by the  Comptroller  of the
      Currency on October 31, 1985 (the  "Supervisory  Policy"),  and  provided,
      further,  that  possession  or control  of the  underlying  securities  is
      established as provided in the  Supervisory  Policy,  and (iv)  commercial
      paper  rated (as of the date of  acquisition  thereof) at least A-1 or the
      equivalent  thereof  by  Standard  &  Poor's  Corporation  and  P-1 or the
      equivalent thereof by Moody's Investors  Service,  Inc. and in either case
      maturing within six (6) months after the date of its acquisition;

            (c)  Investments  representing  stock or  obligations  issued to the
      Parent or any of its  Subsidiaries  in  settlement  of claims  against any
      other  Person by  reason of a  composition  or  readjustment  of debt or a
      reorganization of any debtor of the Parent or such Subsidiary;

            (d) Investments representing the Indebtedness of any Person owing as
      a result  of the sale by the  Company  or any of its  Subsidiaries  in the
      ordinary  course of business of products or services (on  customary  trade
      terms);

            (e)  Investments in the stock of (i) any Subsidiary  existing on the
      Closing Date, (ii) Sonab, Sonab Holdings or Sonab  International  existing
      on the  Fourth  Amendment  Effective  Date up to an  aggregate  amount  of
      $500,000  or (iii) any other  Subsidiary  created  with the prior  written
      consent of the Majority  Lenders,  but for each of the foregoing,  not any
      additional  investments therein other than additional Investments approved
      in writing by the Majority Lenders and increases in Investments  solely by
      reason of increases in the retained earnings of such Subsidiary;

            (f)  the Guaranties;

            (g)  Investments  outstanding  on the date hereof and  described  on
      Schedule 9.4 hereto, but not any additional investments therein;


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            (h)  Investments  represented by the Blocked  Accounts and the other
      bank accounts, if any, permitted hereunder;

            (i)  Investments  by the  Company  with  respect  to  its  officers,
      directors or employees  not to exceed at any time $20,000 in the aggregate
      to any one  individual  or $150,000 in the  aggregate  outstanding  at any
      time, plus (i) advances to employees for travel and  entertainment  in the
      ordinary  course of business,  (ii) advances to employees  for  relocation
      expenses  not to exceed at any time  $50,000 in the  aggregate  to any one
      individual or $200,000 in the aggregate at any one time  outstanding,  and
      (iii) advances to employees in respect of bonuses  actually earned by such
      employees so long as a Designated  Officer has certified in writing to the
      Agent that such bonuses were actually earned by such employees and that at
      the time of each such  advance or  advances no Default or Event of Default
      was continuing;

            (j) payments required pursuant to the Tax Allocation Agreement;

            (k)  advances  to  consignment  vendors  in the  ordinary  course of
      business  consistent with past practices (which are secured by a perfected
      security   interest  in  the  inventory  and  proceeds   thereof  of  such
      consignment  vendors  in a  manner  acceptable  to  the  Agent;  provided,
      however,  that the Company  shall have no obligation to obtain a perfected
      security interest in the inventory and proceeds of any consignment  vendor
      until the aggregate  outstanding amount of advances by the Company to such
      consignment   vendor  exceeds   $2,000,000)  not  to  exceed   $12,000,000
      outstanding  at any one time plus, as of the end of any Fiscal Year (after
      the Fiscal Year ending in January 1993), a percentage  (not to exceed 15%)
      of the foregoing amount in effect under this clause as of the beginning of
      such Fiscal Year equal to the percentage increase in sales for such Fiscal
      Year over that of the immediately  preceding  Fiscal Year, as reflected in
      the Company's audited year end financial statements (the "Percentage Sales
      Increase"),  provided that (i) the amount of such advances made to any one
      Person and its  Affiliates  does not exceed (x) $5,000,000 at any one time
      outstanding  plus, as of the end of any Fiscal Year (after the Fiscal Year
      ending in January 1993), a percentage (not to exceed 15%) of the amount in
      effect under this clause (i) as of the beginning of such Fiscal Year equal
      to the Percentage Sales Increase or (y) an amount  outstanding at any time
      which  exceeds  50% of the book  value at such time of such  Person's  (or
      Affiliate's)  "memo" or  "consigned"  inventory as shown on the  Company's
      books or  computer  records,  (ii) the  amount of such  advances  shall be
      reduced to zero for at least  thirty  (30)  consecutive  days  during each
      Fiscal Year of the Company,  (iii) within  thirty (30) days  following the
      end of each  month,  the  Company  shall  deliver  to the Agent a detailed
      Schedule  showing all  outstanding  advances  under this Section 9.4(k) in
      form and content  satisfactory to the Agent and (iv) the Company shall put
      in place a system  satisfactory  to the  Agent to set  appropriate  credit
      limits, track its credit experience and obtain financial  information from
      Persons to whom advances are made under this Section 9.4(k);


                                      110
<PAGE>


            (l) Investments  constituting  Initial License Expense not exceeding
      $1,500,000 in the aggregate in any Fiscal Year of the Parent;

            (m) Investments as a result of any transaction permitted pursuant to
      Section 9.6 hereof;

            (n)  Investments  of the Company as a result of any Hedge  Agreement
      which is not  speculative  in nature,  which is designed to hedge  against
      fluctuations  in the price of gold and which is in the ordinary  course of
      business in keeping with the Company's past practices;

            (o)  Investments  of the  Company  as a result  of any  other  Hedge
      Agreement which is not prohibited under the terms of this Agreement;

            (p) Investments up to $12,000,000 in the aggregate by the Company in
      Sonab (i) in the form of  intercompany  Indebtedness  for  Borrowed  Money
      existing on the Closing Date as evidenced by the First Sonab  Intercompany
      Note  or  (ii)  in  the  form  of  common   equity   resulting   from  the
      conversion/exchange  of the First Sonab  Intercompany Note into/for common
      equity of Sonab;

            (q)  Investments by the Company in Sonab in the form of intercompany
      Indebtedness  for  Borrowed  Money  existing  after  the  Closing  Date as
      evidenced  by the  Second  Sonab  Intercompany  Note;  provided  that  the
      aggregate  unpaid amount of the  Indebtedness for Borrowed Money evidenced
      by the  Second  Sonab  Intercompany  Note  shall  not at any  time  exceed
      $33,000,000.

            (r)  Investments by Sonab  represented by the bank accounts of SONAB
      listed on Schedule 11.19 annexed hereto;  provided,  however,  that at any
      time  prior  to  the  completion  of  the  lockbox  and  cash   management
      arrangements with respect to Sonab as contemplated by Section 8.24 hereof,
      the balance of any one such bank account shall not exceed  $1,500,000  and
      the aggregate  balance of all such bank accounts of Sonab shall not exceed
      $2,000,000; and

            (s)  the First  Supplemental  Indentures and the Second Supplemental
Indentures.

            ss. 9.5. MERGER,  SALE OF ASSETS,  DISSOLUTION,  ETC. Enter into any
transaction  of merger or  consolidation,  change  its  name,  acquire  all or a
substantial  portion of the assets of any Person,  or  transfer,  sell,  assign,
lease,  or  otherwise  dispose of (other than sales by the Company or any of its
Subsidiaries  of  Inventory  of the Company or such  Subsidiary  in the ordinary
course  of  business  or  sales by the  Company  or any of its  Subsidiaries  of
Inventory  or  fixtures  of the Company or such  Subsidiary  at any  location in
connection with the termination of any License  Agreement or lease covering such


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location) all or any part of its  properties  or assets,  or any of its notes or
Accounts (including, without limitation,  Eligible Receivables), or any stock or
Indebtedness of the Company or any of its Subsidiaries, or wind up, liquidate or
dissolve, or agree to do any of the foregoing, except:

            (a)  sales  in  the  ordinary  course  of  business  of  assets  and
      properties of the Company and its Subsidiaries no longer necessary for the
      proper conduct of their  respective  businesses  having a value,  together
      with  the  value  of all  other  such  property  of the  Company  and  its
      Subsidiaries so sold in the same Fiscal Year of the Parent, of not greater
      than $250,000;

            (b)  sales  by the  Company  and its  Subsidiaries  of  worn  out or
      obsolete  personal  property  of the Company or such  Subsidiary  having a
      value,  together  with the value of all other such property of the Company
      and its Subsidiaries so sold in the same Fiscal Year of the Parent, of not
      greater than  $250,000  plus sales of obsolete  jewelry,  watches or other
      merchandise  which the Company believes cannot be  advantageously  sold in
      the ordinary course of business;

            (c)  sales  of  equipment  and  fixtures  in  connection   with  the
      termination of License  Agreements (or similar  agreements or arrangements
      regarding the operation of jewelry  departments  or stores by Sonab or the
      Company) as to any one or more locations, to the extent such equipment and
      fixtures were used or retained at such locations in the ordinary course of
      business;

            (d) the  abandonment  of any assets and properties of the Company or
      any of its  Subsidiaries  which are no longer  useful in its  business and
      cannot be sold;

            (e) the merger of a wholly-owned  Domestic Subsidiary of the Company
      with the  Company  (so long as the  Company is the sole  survivor  of such
      merger) or with another wholly owned Domestic Subsidiary of the Company or
      the transfer or sale of any assets from any  Subsidiary  of the Company to
      the Company;

            (f) upon thirty days prior written notice to the Agent,  the Company
      and any of its  Subsidiaries may change its name provided that such entity
      executes all documentation  reasonably  requested by the Agent (including,
      without  limitation,  UCC  financing  statements)  in order to protect the
      Agent's  interest  in the  Collateral  or any other  interest of the Agent
      under the Loan Documents; and

            (g) the sale,  transfer or assignment  of collateral  subject to the
      "Pledge  Agreement"  referred to in Section 9.2(e) hereof by virtue of the
      exercise of remedies by the pledgee thereunder.

            ss. 9.6.  DIVIDENDS, REDEMPTIONS AND OTHER PAYMENTS.
(a)  Declare  or make any  dividend  payment  or other  distribution  of assets,
properties,  cash,  rights,  obligations  or securities on account of any of its
capital stock, or purchase,  redeem,  retire,  defease or otherwise  acquire for


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value any capital stock of the Parent,  the Company or such  Subsidiaries or any
other equity  securities or any warrants,  rights or options to acquire any such
capital stock or other securities, whether now or hereafter outstanding,  except
that:

             (i) any  wholly-owned Subsidiary of the Company may declare or pay
      cash dividends to the Company or to any other  wholly-owned  Subsidiary of
      the Company which is its shareholder;

             (ii) so long as no Default or Event of Default  shall have occurred
      and be continuing or would result  therefrom,  (A) the Company may declare
      or pay  dividends  to the Parent on an annual basis to pay expenses of the
      Parent  incurred in the  ordinary  course of business of the Parent not to
      exceed in the  aggregate  in any Fiscal  Year of the  Parent  0.25% of the
      Company's net sales as indicated in the Company's audited annual financial
      statements for the immediately  preceding  Fiscal Year and (B) the Company
      and/or the  Parent may  purchase,  repurchase,  redeem,  retire or acquire
      Equity Interests from former employees, officers and directors pursuant to
      the Long Term Incentive Plan, the Equity Plan, Employment Agreements,  the
      Shareholders  Agreement or other written  agreements  permitted hereby and
      may make payments in respect of promissory notes or other  Indebtedness or
      evidence  thereof issued or incurred in connection with any such purchase,
      repurchase, redemption, retirement or acquisition, and the Company may pay
      dividends to the Parent in an amount  sufficient  to make such  purchases,
      repurchases,  redemptions,  retirements  and  acquisitions  so long as the
      amount  of  such  purchases,  repurchases,  redemptions,  retirements  and
      acquisitions  (including,  without limitation,  amounts paid in respect of
      promissory  notes or other  Indebtedness  or  evidence  thereof  issued or
      incurred in connection  with any such  purchase,  repurchase,  redemption,
      retirement or acquisition)  does not exceed in the aggregate in any Fiscal
      Year the sum of $1,000,000  plus the amount of cash received by the Parent
      from  employees,  officers and  directors in respect of purchases of stock
      during such Fiscal Year; provided,  however,  that the portion, if any, of
      such sum which is not applied to such purchases, repurchases, redemptions,
      retirements or acquisitions (or to the payment of dividends by the Company
      to the Parent  therefor)  in any Fiscal Year may be applied to  purchases,
      repurchases,  redemptions, retirements or acquisitions of Equity Interests
      from former  employees of the Company whose  employment  was terminated in
      such  Fiscal  Year (and for the  payment of  dividends  by the  Company to
      Parent  therefor) so long as such application (and payment) is made during
      the first three months of the immediately  succeeding Fiscal Year, and any
      such  portion so paid during such first three  months as permitted by this
      proviso shall not be included in calculating  the sum for such  succeeding
      Fiscal Year;

            (iii) the Parent may redeem, repurchase, retire or otherwise acquire
      any Equity  Interest of the Parent in exchange for, or out of net proceeds
      of the  substantially  concurrent  sale (other than to a Subsidiary of the
      Parent) of, other Equity Interests (other than Disqualified  Stock) of the
      Parent; and



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          (iv) so long as no Default or Event of Default is  continuing,  on any
     tax payment  date,  the Company may make  payments to the Parent of amounts
     required to be paid on such tax payment date under  sections  4(c) and 5 of
     the Tax Allocation Agreement; provided, however, that (x) no payment on any
     tax payment  date made by the Company to the Parent shall exceed the amount
     payable by the Parent to any taxing authority on such tax payment date, and
     (y) in any taxable year (or portion thereof),  the aggregate amount payable
     by the Company to the Parent  under this Section  9.6(a)(iv)  in respect of
     federal,  state and local  income  taxes shall not exceed the lesser of (A)
     the  federal,  state and local  income tax  liability  that would have been
     payable  by  the  Company  for  such  taxable  year  (or  portion  thereof)
     determined as if the Company had filed  separate  federal,  state and local
     income tax returns for such taxable  year (or portion  thereof) and for all
     previous  taxable  years  beginning  after  October 31,  1992,  computed in
     accordance with actual elections, conventions and other determinations with
     respect to the Company reflected in the consolidated or combined returns of
     the Parent and including any carryforwards of tax attributes from all prior
     taxable  years (as  limited  under the  Code) and (B) the  consolidated  or
     combined federal,  state and local income tax liability of the consolidated
     or combined group that includes the Company and the Parent. For purposes of
     subsection  (y) above the  provisions  relating  to state and local  income
     taxes shall only apply if and to the extent the Company and the Parent file
     consolidated or combined income tax returns in such jurisdictions.

            (b) Make any  payment or  prepayment  of  principal  or  interest on
account  of, or  purchase,  defease,  acquire or redeem,  any  Indebtedness  for
Borrowed Money (or give any notice thereof or establish a sinking fund,  reserve
or like set aside of funds or other property therefor) other than (i) the Lender
Debt,  (ii)  regular,  scheduled  payments by the  Company of  interest  on, and
required  payments of principal of (in each case to the extent due and payable),
the Senior Notes,  and (iii) payments of Indebtedness  of the Company  permitted
under  paragraphs  (b),  (c), (d), (f), and (g) of Section 9.3, in each case, to
the extent due and payable and except that:

          (i) so long as no Default or Event of Default  shall have occurred and
     be  continuing  or  would  result  therefrom  the  Parent  may  pay  up  to
     $40,000,000 of the original  issue  discount of the Debentures  pursuant to
     the  terms of the  Debenture  Indenture;  provided,  however,  that (x) the
     Company shall not make any payments or distributions to the Parent for such
     purpose (provided further that this shall not prohibit  Revolving  Advances
     to the Parent otherwise  permitted  hereunder) and nothing contained herein
     or elsewhere in this Agreement shall be deemed to constitute an approval on
     the part of the Agent or any Lender to any such  payments or  distributions
     by the Company to the Parent for such  purpose;  (y) the Parent  shall have
     received  after the Closing Date at least  $27,000,000 of Net Cash Proceeds
     from the  issuance  of Equity  Interests  which are  applied  to prepay the
     Revolving  Credit  Loan if, and to the extent  permitted  by the  Debenture
     Indenture;  and (z) the Parent  timely files all necessary tax returns with
     respect thereto and applies any tax refund  proceeds,  if and to the extent
     permitted by the  Debenture  Indenture,  to the  repayment of the Revolving
     Credit Loan;



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<PAGE>

          (ii) the Company may, from time to time,  repurchase Senior Notes with
     the proceeds of Revolving  Advances  made to it provided,  that such Senior
     Notes are repurchased at prices deemed  favorable by the Company's board of
     directors; provided, however, that no Senior Notes shall be permitted to be
     repurchased  under this  clause (ii) if the amount to be paid in respect of
     their repurchase, when added together to the sum of the aggregate amount of
     the Parent's  Revolving Loan plus the aggregate amount  theretofore paid by
     the  Company  to  repurchase  Senior  Notes,  would  exceed  the  Aggregate
     Revolving Sublimit Commitment;

          (iii) the Parent may, from time to time,  repurchase  Debentures  with
     the proceeds of  Revolving  Advances  made to it and the Net Cash  Proceeds
     hereafter  received  by it from the  issuance  of Equity  Interests  to the
     extent such  Proceeds are not  required to be used to prepay the  Revolving
     Loan,  provided,  that such  Debentures can be repurchased at prices deemed
     favorable by the Parent's board of directors;  provided,  however,  that no
     Debentures shall be permitted to be repurchased  under this clause (iii) if
     the amount to be paid in respect of their  repurchase,  when added together
     to the sum of the aggregate amount of the Parent's  Revolving Loan plus the
     aggregate amount theretofore paid by the Company to repurchase Senior Notes
     would exceed the Aggregate Revolving Sublimit Commitment;

          (iv)  Sonab may at any time and from time to time  make  payments  and
     prepayments  in whole or in part to the  Company in cash  without  discount
     under  the two  promissory  notes  issued  by Sonab to the  Company  in the
     respective principal amounts of $12,000,000 and $33,000,000; and

          (v) the  Company  may at any time and from time to time make  payments
     and prepayments under the Gold Consignment Documents.

            ss.  9.7.  TRANSACTIONS  WITH  AFFILIATES.  Except for  transactions
specifically  required or permitted by the terms of this  Agreement  (including,
without limitation, the transactions contemplated pursuant to the Tax Allocation
Agreement,   the  Management  Agreements,   the  Shareholders   Agreement,   the
Registration Rights Agreement and the Stock Purchase Agreement, in each case, as
in effect on the Closing  Date or as amended in  accordance  with  Section  9.12
hereof,  the Parent's  Restated  Certificate of  Incorporation  in effect on the
Closing  Date or as amended  in  accordance  with  Section  9.12  hereof and the
Indemnification  Agreements  or as  amended  in  accordance  with  Section  9.12
hereof); enter into or perform any transaction,  including,  without limitation,
the purchase,  leasing,  sale or exchange of property or assets or the rendering
of any service,  with any Affiliate of the Lee/Desai Group or the Parent, except
(i) for any  transaction  which is in the  ordinary  course of  business  of the
Company  and any  Subsidiary  thereof,  and which  transaction  is upon fair and
reasonable  terms no less favorable to the Company and such Subsidiary than each


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party to such transaction could obtain in a comparable arm's length  transaction
with a Person  not an  Affiliate  of such  Person,  or (ii) with  respect to any
transaction  between the Company and any of its  Subsidiaries  which is on terms
more  favorable  to the Company  than the Company  could  obtain in a comparable
arm's-length transaction with a Person not an Affiliate of the Company.

     ss. 9.8. BLOCKED  ACCOUNTS.  Suffer or permit (i) without the prior written
consent of the Agent,  any Blocked  Account to be closed or  terminated,  or the
Collecting Bank Agreement relating thereto to be terminated or no longer in full
force  and  effect,  or (ii)  any  deposit,  checking  or  other  account  to be
maintained  at any  bank,  savings  and  loan  association  or  other  financial
institution which accepts deposits, other than Blocked Accounts.

     ss. 9.9. MANAGEMENT COMPENSATION AND OTHER PAYMENTS. Except as specifically
permitted  under Section 9.6 and 9.7 hereof,  pay,  directly or indirectly,  any
management,  consulting or similar fees,  make any other payments of any kind in
respect of employment,  management, consulting, servicing or similar services or
in respect of any non-competition or similar agreement or make any other kind of
payment of any nature to, any Affiliate of the Parent, the Lee/Desai Group or to
any  officer,  director,  member of  management,  stockholder  or partner of the
Parent or any  Subsidiary of the Parent or any  Affiliate of any thereof,  other
than (i)  payments  of  salary  and  ordinary  course of  business  compensation
(excluding  bonuses and incentive  compensation  other than sales commission) to
full time  employees  of the  Company in the  ordinary  course of  business  and
consistent  with past  practices and severance  payments  which have accrued and
become  payable  in the  ordinary  course of  business  of the  Borrowers,  (ii)
payments of bonuses and  incentive  compensation  to full time  employees of the
Company and its  Domestic  Subsidiaries  so long as such  bonuses and  incentive
compensation (x) are consistent with the Company's historical practices, and (y)
are paid in accordance  with  Employment  Agreements or the Long Term  Incentive
Plan or, if not paid under an  Employment  Agreement or the Long Term  Incentive
Plan,  are paid in  accordance  with other  policies a  description  of which is
attached as Schedule 9.9 hereto,  as such policies may be amended,  supplemented
or replaced from time to time with the approval of the Board of Directors of the
Company  or  Parent  so long as no such  amendment,  supplement  or  replacement
represents a material increase in bonus levels or calculations, (iii) so long as
there  shall be  continuing  no Default  or Event of  Default in the  payment of
principal of any Revolving Advance or any interest thereon,  (x) fees payable to
Thomas H. Lee Capital,  LLC and Desai Capital  Management  Incorporated  (or any
Affiliate  thereof)  by the  Company  pursuant  to the  terms of the  Management
Agreements,  not exceeding $240,000 plus reasonable expenses in the aggregate in
any Fiscal Year and (y) amounts  payable by the Parent or the Company  under the
Registration Rights Agreement and to the extent permitted by Section 9.6 hereof,
under the  Shareholders  Agreement in each case,  as such  payments are required
pursuant to such  documents as in effect on the Closing  Date,  (iv) payments of
fees,  expense  reimbursements  or other  amounts to  independent  directors  or
consultants  (which  are not  Affiliates  of the Parent or the  Company)  in the
ordinary  course of business and (v) amounts  payable by the Borrowers under the
Indemnification  Agreements.  Notwithstanding anything to the contrary set forth
herein,  Sonab  shall  be  permitted  to  make  payments  of  salary  and  other
compensation  (including  bonuses) to (i) Bernard Gelbfarb pursuant to the terms


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of the Gelbfarb Service Agreement and (ii) other full time employees of Sonab so
long as such  payments are paid in the ordinary  course of Sonab's  business and
are consistent  with Sonab's past practices.  In addition to the foregoing,  the
Company shall be permitted to pay Bernard Gelbfarb and other full time employees
of Sonab bonuses and other  compensation  pursuant to the terms of the Long Term
Incentive  Plan so long as such bonuses and other  compensation  are paid in the
ordinary course of the Company's  business and are consistent with the Company's
past practices.

     ss.  9.10.  COMPROMISE  OF  RECEIVABLES.  Compromise  or adjust  any of the
Receivables or other accounts (or extend the time for payment  thereof) or grant
any discounts, allowances or credits thereon other than, so long as there exists
no Default or Event of Default, discounts,  adjustments,  allowances and credits
granted with respect to accounts in the ordinary course of business.

     ss.  9.11.  NONCOMPLIANCE  WITH  ERISA.  (a) Engage in any  transaction  in
connection  with which a Credit Party or any ERISA Affiliate could be reasonably
expected to be subject to either a material civil penalty  assessed  pursuant to
the  provisions  of Section  502(i) of ERISA or a material tax imposed under the
provisions of Section 4975 of the Code;

            (b) adopt an amendment to any Pension  Benefit  Plan  requiring  the
provision of security  under  Section 307 of ERISA or Section  401(a)(29) of the
Code;

            (c)  terminate  any Pension  Benefit Plan under  Section  4041(c) of
ERISA without the prior consent of the Agent;

            (d) fail in any material respect to make payment when due (including
permissible  extensions)  of all  amounts  which,  under the  provisions  of any
Employee  Plan or  Multiemployer  Plan,  it is required to pay as  contributions
thereto or as premiums  to the PBGC,  or,  with  respect to any Pension  Benefit
Plan, permit to exist any "accumulated  funding  deficiency" (within the meaning
of Section 302 of ERISA and Section 412 of the Code); or

            (e) enter into a new agreement or agreements  that would  obligate a
Credit Party or any ERISA  Affiliate to make  contributions  to a  Multiemployer
Plan  subject to subtitle (e) of Title IV of ERISA in excess of $50,000 per year
or $250,000 in the aggregate  during the term of this  Agreement,  or to create,
extend or increase  an  obligation  to provide  health or medical  benefits  for
retirees  (other than at retiree's  sole  expense) of a Credit Party or an ERISA
Affiliate.

     ss. 9.12. AMENDMENT AND MODIFICATION OF CERTAIN DOCUMENTS.  (a) Directly or
indirectly,  amend,  modify,  supplement,  waive  compliance with, seek a waiver
under, or assent to noncompliance with, any term,  provision or condition of the
Senior Note  Indenture or any Senior Note, the Debenture  Indenture,  the pledge
agreement  thereunder  or any  Debenture,  the  Tax  Allocation  Agreement,  the


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articles or certificate of  incorporation or by-laws (other than to increase the
number of  authorized  shares of common stock of the Parent) of the Parent,  the
Company or any Subsidiary thereof or any certificate of designation of preferred
stock of any  thereof  or, in a manner  adverse  to the Agent or any  Lender any
material term or provision of (i) any  Employment  Agreement with any Person who
is, without regard to such Employment  Agreement or duties or roles  thereunder,
an Affiliate of the Parent, the Company or any of their respective Subsidiaries,
(ii) the Shareholders Agreement,  (iii) the Registration Rights Agreement,  (iv)
the Management Agreements,  (v) the Indemnification  Agreements, or (vi) any one
or more of the Gold Consignment Documents (other than modifying the advance rate
percentages set forth in the definition of "Consignment Limit" and modifying the
percentage  in clause (b) of the  definition  of  "Consignment  Fixed Rate" to a
percentage not exceeding three percent (3%)).

            (b)  Directly  or  indirectly,   amend,  modify,  supplement,  waive
compliance  with,  seek a waiver under,  or assent to  noncompliance  with,  any
material  term or provision of any other  agreement,  instrument  or document to
which  the  Parent or any of its  Subsidiaries  is a party  (including,  without
limitation,  the Long Term  Incentive Plan and the Equity Plan) in a manner that
will have a Material Adverse Effect.

            (c)  Directly  or  indirectly,   amend,  modify,  supplement,  waive
compliance with, seek a waiver under, or assent to noncompliance  with, any term
or provision of any of the Sonab Acquisition  Documents (other than the Gelbfarb
Service Agreement) or directly or indirectly,  amend, modify, supplement,  waive
compliance  with,  seek a waiver under,  or assent to  noncompliance  with,  any
material term or provision of the Gelbfarb Service Agreement in a manner adverse
to the Agent or any Lender.

            ss. 9.13.  FISCAL YEAR.  Change its Fiscal Year.

            ss. 9.14.  CHANGE OF  BUSINESS.  Alter the nature of its business in
any material respect or except as provided in Section 9.5(a) and 9.5 (b) hereof,
sell any Inventory  other than (i) Inventory  sold under a License  Agreement or
(ii)  Inventory  which is sold by the  Company  from any  factory  outlet  store
operated by the Company in a premises which is owned by the Company or leased by
the  Company  and in which only  Inventory  of the  Company  and/or  Consignment
Inventory is sold (in any case,  subject to the  provisions of 9.1 hereof).  The
foregoing  provisions shall not apply to Sonab;  provided,  however,  that Sonab
shall not alter the nature of its business as conducted on the Fourth  Amendment
Effective Date in any material respect.

            ss.  9.15.  NO NEGATIVE  PLEDGES.  Enter into or become  subject to,
directly or indirectly, including, without limitation, as a non-party Subsidiary
of a party to any agreement, any agreement other than agreements entered into on
or  before  the  Closing  Date  (including,  without  limitation,  the  Restated
Certificate of Incorporation  of the Parent and the Gold Consignment  Documents)
(a) prohibiting or restricting, in any manner (including, without limitation, by
way of  covenant,  representation  or event  of  default),  (i) the  incurrence,


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creation or assumption of any Indebtedness, or any Lien upon any property of any
Credit Party,  except  restrictions  in a Capital Lease or other  purchase money
financing   agreement   permitted  hereunder  relating  to  the  asset  financed
thereunder,  (ii) the sale,  disposition  or  pledge of any asset of any  Credit
Party,  except restrictions in a Capital Lease or other purchase money financing
agreement permitted hereunder relating to the asset financed  thereunder,  (iii)
any investments of any Credit Party, (iv) any Capital Expenditures by any Credit
Party, (v) any acquisition,  merger or consolidation involving any Credit Party,
(vi) any  change in  control  of any Credit  Party,  or (vii) any  amendment  or
supplement to or
waiver  under  this  Agreement  or any other  Loan  Document  or other  document
relating  to the Lender  Debt,  or (b) which  provides  that any  default by any
Credit  Party  which  is not a party to such  agreement  of any  obligation  not
arising under such agreement is a default under such agreement.

            ss. 9.16. RENTAL  OBLIGATIONS.  Incur,  create,  assume or permit to
exist, in respect of leases of real or personal property, (a) obligations in any
amount in respect of percentage rentals, except under the License Agreements, or
(b) rental  obligations or other commitments  thereunder (other than Capitalized
Lease  Obligations) to make any direct or indirect  payment,  whether as rent or
otherwise,  for  fixed or  minimum  rentals  (including  minimum  payments  (and
excluding all other  payments)  under the License  Agreements)  in excess of (i)
$15,000,000 for the Parent and its Subsidiaries  for any Fiscal Year;  provided,
however,  that the amount set forth in this clause (i) shall not include  rental
obligations  incurred  by the  Company  with  respect to factory  outlet  stores
permitted to be opened by the Company pursuant to Section 9.24 hereof;  and (ii)
$2,000,000  for  the  Company  for  any  Fiscal  Year  with  respect  to  rental
obligations  for factory  outlet  stores  permitted  to be opened by the Company
pursuant to Section 9.24 hereof.

            ss.  9.17.  LEASE-BACKS.  Enter into any  arrangements,  directly or
indirectly,  with any Person, whereby the Parent or any Subsidiary thereof shall
sell or transfer any property,  whether now owned or hereafter acquired, used or
useful in its business,  in connection  with the rental or lease of the property
so sold or  transferred  or of other property which the Parent or any Subsidiary
thereof  intends to use for  substantially  the same  purpose or purposes as the
property so sold or transferred.

            ss.  9.18.  CAPITAL  STOCK.  Issue or  sell,  or  permit  any of its
Subsidiaries to issue or sell, any of its capital stock or any rights,  warrants
or options to acquire any of its capital stock, or sell or otherwise dispose of,
or permit any of its  Subsidiaries to sell or otherwise  dispose of, any capital
stock of any of its  Subsidiaries  other  than,  subject  to  Sections  9.22 and
10.1(j) hereof,  issuances or sales by the Parent of common stock or warrants or
other rights to purchase common stock of the Parent.

            ss. 9.19.  DEBT INCURRENCE AND PAYMENTS TO THE PARENT.
Incur,  agree to incur or suffer to exist the incurrence of any obligation to or
for the account of the Parent or any Subsidiary  thereof or make,  agree to make
or suffer to exist the making of any (i)  payment,  (ii)  distribution  or (iii)
transfer or other  disposition  of assets or property,  in each  instance of any
kind (whether in cash, assets, stock or otherwise), to or for the account of the
Parent or any  Subsidiary  thereof  (whether  in the form of a  dividend,  loan,


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return of capital,  management or consulting  fee or  otherwise),  other than as
expressly permitted under this Agreement.

     ss. 9.20.  THE PARENT.  Except as permitted  under Section 9.6 hereof,  the
Parent shall engage in no business other than ownership of stock of the Company,
and shall not own, acquire or lease any property, other than such stock.

     ss. 9.21.  INDENTURE  GUARANTEES.  Other than as set forth in Schedule 9.21
hereto,  engage in any  transaction  (or series of related  transactions)  which
would  cause any  Subsidiary  of the Parent to be  obligated  to  guarantee  the
obligations  of the Parent or the  Company  under the  Debentures  or the Senior
Notes, as the case may be.

     ss. 9.22. PRIVATE SALE OF STOCK. Suffer or permit to occur any private sale
by any Person of common stock of the Parent if such sale shall (i) not have been
approved  in  writing  by the  Majority  Lenders,  which  approval  shall not be
unreasonably  withheld  and (ii)  result in a "person"  or "group"  (within  the
meaning of Sections 13(d) and 14(d)(2) of the  Securities  Exchange Act of 1934)
or any  Related  Party of such  person or group  other  than any person or group
which is a holder of common  stock of the Parent as of the Closing  Date (or any
Related  Party of such  person  or  group)  having  the  largest  fully  diluted
beneficial  ownership  interest  in the  common  stock of the Parent (x) if such
fully diluted  beneficial  ownership  interest  represents 10% or more of common
stock having  ordinary  voting power for the election of directors of the Parent
or (y) if such person or group or Related Party  immediately after such sale has
the power to direct or cause the direction of the management and policies of the
Parent, directly or indirectly,  whether through ownership of voting securities,
by contract or otherwise.  For the purposes of this Section 9.22 (i) a person or
group  shall be  deemed to have  beneficial  ownership  of common  stock if such
person or group,  directly or  indirectly,  has the power to vote, or direct the
voting of, such common stock and (ii) in  determining  whether a person or group
has the largest  fully  beneficial  ownership  interest  in common  stock of the
Parent, the beneficial  ownership interest in common stock of the Parent held by
persons or groups who are Affiliates of each other shall be aggregated.

     ss. 9.23.  DEBENHAMS LICENSE  AGREEMENTS.  Enter into License Agreements to
operate fine jewelry departments in more than ten (10) Debenhams stores.

     ss. 9.24. FACTORY OUTLET STORES.  Notwithstanding  anything to the contrary
contained elsewhere in this Agreement (including,  without limitation,  Sections
7(b)  and  9.1  hereof)  or in any  other  Loan  Document,  open or  enter  into
commitments  to open more  than  twenty-two  (22)  factory  outlet  stores to be
operated by the Company  provided  that any store to be opened  after the Fiscal
Year ending in 1997 shall require the prior written consent of the Agent.

     ss. 9.25.  MONOPRIX LICENSE  AGREEMENTS.  Enter into License  Agreements to
operate fine jewelry  departments in more than (x) fifty-five  (55) Monoprix and
related stores and (y) one store in Berlin, Germany.


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     SECTION 10. DEFAULTS AND REMEDIES.

     ss. 10.1.  EVENTS OF DEFAULT.  If any one or more of the  following  events
(herein called "Events of Default")  shall occur for any reason  whatsoever (and
whether such  occurrence  shall be voluntary or  involuntary or come about or be
effected by operation of law or pursuant to or in compliance  with any judgment,
decree  or  order  of  any  court  or  any  order,  rule  or  regulation  of any
administrative or governmental body):

                (a) default shall be made in the due and punctual payment of the
      principal of the Revolving  Loan or in the due and punctual  reimbursement
      of any  payments  made by any  Issuing  Bank  under  any  Letter of Credit
      (including  any L/C  Indemnity  Agreement)  or of any payments made by any
      Lender to such Issuing Bank in respect of  indemnity  obligations  of such
      Lender to such Issuing  Bank with respect to a Letter of Credit,  when and
      as the same shall become due and payable whether  pursuant to Section 2 or
      2A, at maturity, by acceleration or otherwise; or

                (b) default shall be made in the due and punctual payment of any
      amount of interest on the Loan or of any fee or other  amount owing to any
      Lender,  any  Issuing  Bank,  or the  Agent  pursuant  to any of the  Loan
      Documents,  when and as such amount of interest, fee or other amount shall
      become due and  payable and such de fault shall  continue  unremedied  for
      three (3) days; or

                (c) default shall be made in the  performance  or observance of,
      or shall occur under, any covenant,  agreement or provision (other than as
      described in clause (a) or (b) above)  contained in this  Agreement or any
      other  Loan  Document  or in any  instrument  or  document  evidencing  or
      creating  any  obligation,  guaranty  or Lien in  favor  of the  Agent  or
      delivered to the Lenders, any Issuing Bank or the Agent in connection with
      or pursuant to this Agreement or any Lender Debt,  and, except in the case
      of the agreements  and covenants  contained in Sections 8.1, 8.2, 8.3, 8.6
      through and including 8.14, 8.16, 8.17 and 8.19 through and including 8.22
      and  Section 9 (as to each of which  Sections  no  notice or grace  period
      shall apply), continuance of such default for a period of thirty (30) days
      following Written Notice to the Company, or if this Agreement or any other
      Loan Document or any such other  instrument or document shall terminate or
      be terminated or become void or unenforceable for any reason whatsoever or
      any Lien created under any Security Document shall cease to be a valid and
      perfected  first  priority  Lien  (except as  otherwise  permitted by this
      Agreement) in any of the Collateral purported to be covered thereby; or

          (d)  (i)  one or more  defaults  shall  occur  in the  payment  of any
     principal,  interest  or  premium  with  respect  to any  Indebtedness  for
     Borrowed Money or any  obligation  which is the  substantive  equivalent of
     Indebtedness for Borrowed Money (including, without limitation, obligations
     under  conditional  sales contracts,  Capital Leases and the like) of which
     any Credit Party is principal,  guarantor or other surety, and such default



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     shall  continue  for more  than the  period  of  grace,  if any,  specified
     therefor in the  documents  governing  same,  or (ii) one or more  defaults
     shall occur under any  agreement or  instrument  under or pursuant to which
     any such  Indebtedness  for  Borrowed  Money or  obligation  may have  been
     issued, created, assumed, guaranteed or secured by any Credit Party and, in
     the case of clause (ii) of this  Subsection  10.1(d),  such  default  shall
     continue for more than the period of grace, if any, therein  specified,  or
     (iii) any such  Indebtedness  for  Borrowed  Money or  obligation  shall be
     declared  due and payable  prior to the stated  maturity  thereof;  and the
     aggregate  principal amount of all such Indebtedness for Borrowed Money and
     obligations  as to which any such matters  under clauses (i), (ii) or (iii)
     occur shall exceed $500,000; or

                (e) any  representation,  warranty  or other  statement  of fact
      given  herein or in any writing,  certificate,  report or statement at any
      time furnished to any Lender, any Issuing Bank or the Agent pursuant to or
      in connection  with this Agreement  (including,  without  limitation,  any
      Borrower's Certificate and any Borrowing Base Certificate), any other Loan
      Document, or any other document or instrument furnished to any Lender, any
      Issuing Bank or the Agent  relating to the  transactions  contemplated  by
      this  Agreement or the Sonab  Acquisition,  shall be false in any material
      respect when given or deemed given; or

                (f) any  Credit  Party  shall  (i) be  unable  to pay its  debts
      generally as they become due or admit in writing its  inability to pay its
      debts generally;  (ii) file a petition to take advantage of any insolvency
      act;  (iii) make an  assignment  for the  benefit of its  creditors;  (iv)
      commence  a  proceeding  for  the  appointment  of  a  receiver,  trustee,
      liquidator  or  conservator  of itself or of the whole or any  substantial
      part of its property; (v) file a petition or answer seeking reorganization
      or arrangement or similar relief under the Federal  Bankruptcy Code or any
      other applicable law or statute of the United States of America, any state
      or commonwealth thereof or otherwise;  or (vi) by appropriate  proceedings
      of the board of  directors of any Credit  Party or other  governing  body,
      authorize the filing of any such  petition,  making of such  assignment or
      commencement of such a proceeding; or

                (g) a court of  competent  jurisdiction  shall  enter an  order,
      judgment or decree appointing a custodian,  receiver,  trustee, liquidator
      or conservator of any Credit Party or of the whole or any substantial part
      of its  properties,  or approve a petition  filed against any Credit Party
      seeking  reorganization or arrangement or similar relief under the Federal
      Bankruptcy  Code or any other  applicable  law or  statute  of the  United
      States of America, any state or commonwealth thereof or otherwise;  or if,
      under the provisions of any other law for the relief or aid of debtors,  a
      court of competent  jurisdiction  shall  assume  custody or control of any
      Credit Party or of the whole or any substantial part of its properties; or
      if there is commenced  against any Credit Party any  proceeding for any of
      the foregoing relief and such proceeding or petition  remains  undismissed
      for a period  of  thirty  (30)  days;  or if any  Credit  Party by any act
      indicates  its consent to or approval of any such  proceeding or petition;
      or


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          (h) (i) a final  judgment  shall be  rendered  against a Credit  Party
     which, by itself or with other  outstanding  final  judgments  against such
     Credit Party,  exceeds in the aggregate $500,000 and if, within thirty (30)
     days after entry thereof,  such judgment shall not have been  discharged or
     execution  thereof  stayed pending  appeal,  or if, within thirty (30) days
     after the  expiration of any such stay,  such judgment  shall not have been
     discharged;  or (ii) any of the assets of a Credit Party shall be attached,
     seized,  levied  upon  or  subject  to an  injunction,  execution,  writ or
     distress  warrant and shall remain  unstayed or undismissed for a period of
     thirty (30) days,  which by itself or together with all other  attachments,
     seizures,  levies,  injunctions,  executions,  writs or  distress  warrants
     against  properties of such Credit Party remaining  unstayed or undismissed
     for a period of thirty (30) days,  is for an amount in excess of  $500,000;
     or (iii) any final non-monetary judgment or order shall be rendered against
     a Credit Party that might reasonably be expected to have a Material Adverse
     Effect  and  if,  within  thirty  (30)  days  after  entry  thereof,   such
     non-monetary  judgment or order shall not have been discharged or execution
     thereof  stayed  pending  appeal,  or if, within thirty (30) days after the
     expiration  of any such stay,  such  judgment  or order shall not have been
     discharged; or

          (i) (i) a  Reportable  Event  shall have  occurred  with  respect to a
     Pension  Benefit  Plan  other  than a  Reportable  Event  as to  which  the
     provision  of 30  days  notice  to the  PBGC  is  waived  under  applicable
     provisions;

          (ii) any Credit Party or any ERISA  Affiliate or an  administrator  of
     any Pension Benefit Plan shall have filed a notice of intent to terminate a
     Pension  Benefit Plan in a "distress  termination"  under the provisions of
     Section 4041(c) of ERISA;

          (iii) any Credit Party or any ERISA Affiliate or an administrator of a
     Pension  Benefit  Plan  shall  have  received  a  notice  that the PBGC has
     instituted pro ceedings to terminate (or appoint a trustee to administer) a
     Pension Benefit Plan;

          (iv) any other event or  condition  exists which might  reasonably  be
     expected,  in the reasonable opinion of the Majority Lenders, to constitute
     grounds under the provisions of Section  4042(a)(1) or (2) of ERISA for the
     termination of (or the  appointment of a trustee to administer) any Pension
     Benefit Plan by the PBGC;

          (v) any Credit Party or any ERISA  Affiliate has incurred or is likely
     to incur a liability  under the provisions of Section 4063, 4064 or 4201 of
     ERISA;

          (vi) any Person shall engage in any  transaction  in  connection  with
     which any Credit Party or any ERISA  Affiliate could be subject to either a
     civil penalty  assessed  pursuant to the  provisions  of Section  502(i) of
     ERISA or a tax imposed under the provisions of Section 4975 of the Code;



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     (vii) any Credit Party or any ERISA  Affiliate fails to pay the full amount
of any  installment  due under  Section  412(m) of the Code or any  "accumulated
funding  deficiency" (within the meaning of Section 302 of ERISA and Section 412
of the Code) shall exist with respect to any Pension  Benefit Plan;  and in each
case in clauses (i) through (vii) above, in the opinion of the Majority Lenders,
such event or  condition,  together  with all other such  events or  conditions,
could reasonably be expected to subject a Credit Party or any ERISA Affiliate to
any tax, penalty or other  liabilities  which in the aggregate would be material
in  relation  to the  business,  operations,  liabilities,  assets,  properties,
prospects or condition  (financial  or  otherwise)  of such Credit Party or such
ERISA Affiliate; or

                (j)  a Change of Control shall occur; or

                (k) either  Borrower  shall  suspend the operation of a material
      portion of its  business as  presently  conducted or there shall occur the
      loss, theft,  substantial damage to, condemnation of, exercise of right of
      eminent domain with respect to or destruction of, any Collateral not fully
      covered by  insurance  (except for  deductibles),  which by itself or with
      other such losses,  thefts,  damage,  condemnation  or destruction  of, or
      exercise of right of eminent  domain with  respect to,  Collateral,  shall
      constitute a Material Adverse Effect; or

                (l)  (A)  (i)  any  Unapproved   License  Agreement  or  License
      Agreement shall be cancelled,  terminated  (other than  termination at the
      end  of the  originally  scheduled  or  renewed  or  extended  term  of an
      Unapproved  License  Agreement or License  Agreement) or no longer in full
      force or effect  (excluding any License Agreement which continues to be an
      arrangement approved in writing by the Agent, whether or not such approval
      has been  rescinded)  or the licensor or licensors  under such  Unapproved
      License  Agreement or License Agreement shall be debtors under any Chapter
      of the Federal  Bankruptcy Code (any of the foregoing  events,  a "License
      Termination  Event"),  (ii) as of the date  three  months  following  such
      License  Termination  Event,  the  excess  of (x) the  amount of the gross
      revenues of the Company arising from such Unapproved  License Agreement or
      License Agreement plus the gross revenues arising from Unapproved  License
      Agreements and License Agreements as to which previous License Termination
      Events shall have occurred during the period beginning on the Closing Date
      and ending on the date of  determination  (gross revenues being calculated
      by the Agent, in the case of any Unapproved  License  Agreement or License
      Agreement  which had been in effect for at least twelve calendar months as
      of the end of such period, for such period of twelve calendar months, and,
      in the case of any Unapproved License Agreement or License Agreement which
      had been in effect for less than twelve  calendar  months as of the end of
      such period,  on a seasonally  adjusted twelve month pro forma basis based
      upon  results for the number of full  calendar  months  during  which such
      Unapproved License Agreement or License Agreement was in effect), over (y)
      the amount of gross  revenues of the Company  arising from any  Unapproved
      License  Agreements and License  Agreements entered into within the period
      beginning  on the Closing  Date and ending on such date of  determination,
      and  remaining  in full force and effect as of such date of  determination
      (gross  revenues  being  calculated  by  the  Agent,  in the  case  of any


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      Unapproved License Agreements or License Agreements which have been in
      effect for at least twelve months,  on a seasonally  adjusted twelve month
      pro forma basis based upon results for the number of full calendar  months
      during which such Unapproved License Agreement or License Agreement was in
      effect,  and, in the case of any Unapproved  License  Agreement or License
      Agreement which has been in effect for less than twelve months, based upon
      the Company's  internally  generated projection of gross revenues for such
      Unapproved  License  Agreement or License  Agreement  for the twelve month
      period following the first date of operation under such Unapproved License
      Agreement or License  Agreement  as  delivered to the Agent under  Section
      8.19(b)  hereof)  shall  equal or exceed 10% of the gross  revenues of the
      Company  for  the  period  of  twelve  consecutive  full  calendar  months
      (treating  the month  ending on the last  Saturday  of  January  as a full
      calendar month) ending on or nearest  preceding such date of determination
      and (iii)  such  License  Termination  Event  shall  represent  a Material
      Adverse Effect or (B) there shall occur a License  Termination  Event with
      respect to an  Unapproved  License  Agreement  or License  Agreement  that
      accounted  for, in any fiscal period of twelve  consecutive  full calendar
      months  (treating  the month  ending on the last  Saturday of January as a
      full calendar month),  more than 20% of the gross revenues of the Company;
      or

                (m) any  "Event of  Default"  under and as  defined  in the Gold
      Consignment Agreement shall occur;

then,  and in any such  event and at any time  thereafter,  if such or any other
Event of Default shall then be continuing:

                  (A) either or both of the following  actions may be taken: (i)
      the Agent may, at its option,  or, the Agent shall,  upon the direction of
      the Majority Lenders, declare any obligation to lend or issue or cause the
      issuance  of  Letters  of  Credit  hereunder  terminated,  whereupon  such
      obligation to make further loans or issue or cause the issuance of Letters
      of Credit hereunder, as the case may be, shall terminate immediately,  and
      (ii) the Agent may, at its option, or, the Agent shall, upon the direction
      of the Majority  Lenders,  declare any or all of the Lender Debt to be due
      and  payable,  and the same,  all interest  accrued  thereon and all other
      obligations  of the  Borrowers  to the Agent,  each  Issuing  Bank and the
      Lenders under or in connection  with the Loan  Documents  shall  forthwith
      become due and payable without presentment,  demand,  protest or notice of
      any kind, all of which are hereby  expressly  waived,  anything  contained
      herein or in any  instrument  evidencing  the Lender Debt to the  contrary
      notwithstanding;  provided,  however,  that  notwithstanding the above, if
      there shall  occur an Event of Default  under  paragraph  (f) or (g) above
      (other than under clause (i) of paragraph (f)), then the obligation of the
      Lenders to lend and of any Issuing  Bank to issue or cause the issuance of
      any Letters of Credit hereunder shall automatically  terminate and any and


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      all of the Lender Debt shall be  immediately  due and payable  without any
      action by the Agent, any Issuing Bank or any Lender;

          (B) the Agent shall have and may exercise all rights and remedies of a
     mortgagee  or a secured  party  under the UCC in effect in the State of New
     York at such time,  whether or not  applicable to the affected  Collateral,
     and otherwise,  including,  without limitation,  the right to foreclose the
     Liens granted  herein or in any of the Security  Documents by any available
     judicial  procedure  and/or  to  take  possession  of  any  or  all  of the
     Collateral,  the  other  security  for the  Lender  Debt and the  books and
     records  relating  thereto,  with  or  without  judicial  process;  for the
     purposes of the preceding sentence,  the Agent may enter upon any or all of
     the premises where any of the  Collateral,  such other security or books or
     records may be situated and take  possession and remove the same therefrom;
     and

          (C) the  Agent  shall  have  the  right,  in its sole  discretion,  to
     determine  which  rights,  Liens or remedies  it shall at any time  pursue,
     relinquish,  subordinate,  modify or take any  other  action  with  respect
     thereto,  without in any way  modifying or affecting  any of them or any of
     the  Lenders'  or any  Issuing  Bank's  rights  hereunder;  and any moneys,
     deposits, Accounts (including,  without limitation,  Eligible Receivables),
     balances or other  property  which may come into any Lender's,  any Issuing
     Bank's or the Agent's  hands at any time or in any manner,  may be retained
     by such  Lender,  any  Issuing  Bank or the Agent and applied to any of the
     Indebtedness  of the Credit  Parties to the Agent any Issuing  Bank and the
     Lenders hereunder.

            ss. 10.2. SUITS FOR  ENFORCEMENT.  In case any one or more Events of
Default shall occur and be  continuing,  the Agent on behalf of the Agent,  each
Issuing Bank and the Lenders may proceed to protect and enforce  their rights or
remedies either by suit in equity or by action at law, or both,  whether for the
specific  performance of any covenant,  agreement or other  provision  contained
herein or in any document or instrument delivered in connection with or pursuant
to this Agreement or any other Loan  Document,  or to enforce the payment of the
Lender Debt or any other legal or equitable right or remedy.

            ss. 10.3. RIGHTS AND REMEDIES CUMULATIVE.  No right or remedy herein
conferred  upon the  Lenders,  any  Issuing  Bank or the Agent is intended to be
exclusive of any other right or remedy  contained herein or in any instrument or
document delivered in connection with or pursuant to this Agreement or any other
Loan  Document,  and every such right or remedy shall be cumulative and shall be
in addition to every other such right or remedy  contained herein and therein or
now or hereafter existing at law or in equity or by statute, or otherwise.

            ss.  10.4.  RIGHTS AND  REMEDIES  NOT  WAIVED.  No course of dealing
between any of the Credit Parties and any Lender,  any Issuing Bank or the Agent
or any failure or delay on the part of any Lender, any Issuing Bank or the Agent
in exercising any rights or remedies  hereunder shall operate as a waiver of any


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rights or remedies of the  Lenders,  any Issuing Bank or the Agent and no single
or partial  exercise  of any rights or  remedies  hereunder  shall  operate as a
waiver or preclude the exercise of any other rights or remedies  hereunder or of
the same right or remedy on a future occasion.

     ss. 10.5.  APPLICATION  OF PROCEEDS.  After the  occurrence  of an Event of
Default and acceleration of the Lender Debt as herein provided,  the proceeds of
the Collateral and of property of Persons other than the Credit Parties securing
the Lender Debt and collections from each Guaranty shall be applied by the Agent
to  payment  of the  Lender  Debt in the  following  order,  unless  a court  of
competent jurisdiction shall otherwise direct:

          (i) FIRST,  to payment of all costs and  expenses  of the Agent,  each
     Issuing   Lender  and  the  Lenders   incurred  in   connection   with  the
     preservation,  collection  and  enforcement  of  the  Lender  Debt  or  any
     Guaranties,  or of any of the Liens  granted to the Agent  pursuant  to the
     Security Documents or otherwise, including, without limitation, any amounts
     advanced by the Agent or the Lenders to protect or preserve the Collateral;

          (ii)   SECOND,   to  payment  of  that  portion  of  the  Lender  Debt
     constituting  accrued and unpaid interest and fees and indemnities  payable
     under Sections 2, 2A and 3 hereof,  ratably amongst the Agent, each Issuing
     Lender and the Lenders in accordance with the proportion  which the accrued
     interest and fees and indemnities payable under Sections 2, 2A and 3 hereof
     constituting  the Lender Debt owing to the Agent,  each Issuing  Lender and
     each such  Lender at such time  bears to the  aggregate  amount of  accrued
     interest and fees and indemnities payable under Sections 2, 2A and 3 hereof
     constituting  the Lender Debt owing to the Agent,  each Issuing  Lender and
     all of the Lenders at such time until such interest,  fees and  indemnities
     shall be paid in full;

          (iii)  THIRD,  to the Agent in an amount  equal to the then  aggregate
     contingent   Letter  of  Credit   Obligations  (to  the  extent  that  such
     obligations exceed Letter of Credit Cash Collateral securing the payment of
     same) to be held by the  Agent  for the  payment  of such  Letter of Credit
     Obligations when and if due and payable;

          (iv)  FOURTH,  to payment of the  principal  of the Lender Debt (which
     shall exclude all contingent Letter of Credit Obligations and shall include
     all the other unpaid  Letter of Credit  Obligations),  ratably  amongst the
     Lenders and each Issuing Bank in accordance  with the proportion  which the
     principal  amount of such Lender Debt owing to each such Lender and Issuing
     Lender bears to the aggregate principal amount of such Lender Debt owing to
     all of such Lenders and Issuing Lenders until such principal of such Lender
     Debt shall be paid in full;

          (v) FIFTH,  to the payment of all other Lender Debt,  ratably  amongst
     the  Lenders in  accordance  with the  proportion  which the amount of such
     other  Lender  Debt  owing  to each  such  Lender  bears  to the  aggregate



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     principal  amount of such other  Lender  Debt  owing to all of the  Lenders
     until such other Lender Debt shall be paid in full; and

          (vi) SIXTH, the balance, if any, after all of the Lender Debt has been
     satisfied,  shall,  except as otherwise provided in the Security Documents,
     be deposited  by the Agent in an operating  account of the Company with the
     Agent  designated  by the  Company,  or paid over to such  other  Person or
     Persons as may be required by law.

            In the event that the amount of monies  received  by the Agent under
clause  (iii)  above  with  respect  to a Letter of Credit  for which  there are
contingent  Letter of Credit  Obligations at the time of the Agent's  receipt of
such monies shall,  together with any Letter of Credit Cash Collateral  securing
such contingent Letter of Credit Obligations which is not securing other Lenders
Debt,  exceed the amount of actual payments the applicable  Issuing Lender shall
have made with  respect to such Letter of Credit  after the  Agent's  receipt of
such monies,  which  determination shall be made after such Letter of Credit has
been  terminated  or has expired,  then the Agent shall apply such excess monies
and Letter of Credit Cash Collateral in accordance with this Section 10.5.

            SECTION 11.  REPRESENTATIONS AND WARRANTIES.

     Each of the  Parent and the  Company  hereby  represents  and  warrants  as
follows (which  representations  and warranties  shall survive the execution and
delivery of this Agreement and the making of each Revolving Advance and shall be
deemed to be incorporated in each Borrower's  Certificate submitted to the Agent
pursuant to Section 2.4 hereof,  and shall be deemed repeated and confirmed with
respect  to, and as of the date of (except  that a  representation  or  warranty
expressly  made as of a specific date shall be deemed  repeated and confirmed as
of such date),  each  borrowing  hereunder  (whether  requested by a Borrower or
deemed requested by a Borrower) and of each issuance of a Letter of Credit):

     ss. 11.1.  CORPORATE STATUS.  (a) Each Credit Party is a duly organized and
validly existing corporation in good standing under the laws of the state of its
incorporation with perpetual  corporate  existence,  and has the corporate power
and authority to own its  properties and to transact the business in which it is
engaged or presently proposes to engage.

            (b) Each Credit Party is qualified as a foreign  corporation  and in
good standing in each other  jurisdiction in which it owns or leases property of
a nature,  or transacts  business of a type, that would make such  qualification
necessary,  except  where the  failure to so  qualify  would not have a Material
Adverse Effect.

            (c) The capital  stock of each Credit Party is owned as set forth on
Schedule  11.1  hereto  (which  shall  be  updated  from  time to time  upon the
formation  of any new  Subsidiary  of the Parent and  delivered to the Agent and
each  Lender).  The capital stock of the Company and its  Subsidiaries  is owned
free and  clear of all  Liens,  except  (i)  Liens in favor of the Agent for the

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benefit  of the  Lenders  and (ii)  with  respect  to the  capital  stock of the
Company, Liens in favor of the trustee under the Debenture Indenture.

     (d) None of the Credit Parties has any Subsidiaries  except as set forth on
Schedule 11.1 hereto,  which Schedule 11.1 correctly sets forth the name of each
such  Subsidiary,  its  jurisdiction  of  incorporation  and a statement  of the
outstanding   capitalization  and  ownership  of  capital  stock  of  each  such
Subsidiary as of the date of delivery of such Schedule  11.1.  Other than Sonab,
no Subsidiary of the Company engages in any business ------------- operations or
owns any real or personal property.

            ss. 11.2.  POWER AND  AUTHORITY.  Each of the Credit Parties has the
corporate  power and  authority  to  execute,  deliver and perform the terms and
provisions of this Agreement and the other Loan Documents to which it is a party
and all  instruments  and documents  delivered by it pursuant hereto and thereto
and each of the  Credit  Parties  has duly  taken or caused to be duly taken all
necessary corporate action (including,  without limitation, the obtaining of any
consent of stockholders  required by law or its certificate of  incorporation or
by-laws), to authorize the execution, delivery and performance of this Agreement
and each  other  Loan  Document,  in each  case to which it is a party,  and the
instruments and documents  delivered by it pursuant hereto and thereto.  Each of
this Agreement,  the other Loan Documents, and each of the other instruments and
documents  executed and delivered by any of the Credit Parties  pursuant  hereto
and  thereto  to which it is a party  constitutes  a legal,  valid  and  binding
obligation of such Person,  and is  enforceable  in  accordance  with its terms,
except as the enforceability  thereof may be limited by bankruptcy,  insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally and by general equity principles.

            ss. 11.3. NO VIOLATION OF AGREEMENTS.  None of the Credit Parties is
in violation of any provision of its  certificate or articles of  incorporation,
as the case  may be,  or its  by-laws  or is in  default  under  any  indenture,
mortgage, deed of trust, agreement or other instrument to which any of them is a
party or by which any of them may be bound,  which default is reasonably  likely
to have a Material  Adverse  Effect.  Neither the execution and delivery of this
Agreement,  the other Loan Documents, or any of the instruments and documents to
be delivered  pursuant hereto or thereto,  the  consummation of the transactions
herein and therein  contemplated  nor the compliance  with any of the provisions
hereof or thereof,  will violate any provision of the certificate or articles of
incorporation,  as the case may be, or by-laws of any Credit Party or any law or
regulation, or any order or decree of any court or governmental instrumentality,
or will (i) conflict  with,  or result in the breach of, or constitute a default
or permit termination under, any material lease,  indenture,  mortgage,  deed of
trust,  agreement or other instrument to which any Credit Party is a party or by
which any of them or their  respective  properties may be bound,  or (ii) except
for (x) Liens in favor of the Agent for the benefit of the Lenders and (y) Liens
in favor of Marine  Midland Bank,  N.A.  pursuant to the "Pledge  Agreement" (as
defined in the Debenture)  covering the capital stock of the Company,  result in
the creation or imposition of any Lien on any property of any Credit Party.


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            ss.  11.4.  NO  LITIGATION.  (a)  There  are no  actions,  suits  or
proceedings  pending,  or, to the best  knowledge  of the Parent or the  Company
threatened,  against  any of the  Credit  Parties  or  any of  their  respective
Subsidiaries before any court, arbitrator or governmental or administrative body
or  agency  which  challenge  the  validity  or  propriety  of the  transactions
contemplated under this Agreement, the other Loan Documents, or the
documents,  instruments  and  agreements  executed or  delivered  in  connection
herewith,  therewith or related  thereto,  and which,  if adversely  determined,
might reasonably be expected to have a Material Adverse Effect.

            (b) No Credit Party or any  Subsidiary  thereof is in default in any
material respect under any applicable statute, rule, order, decree or regulation
of any court, arbitrator or governmental body or agency having jurisdiction over
such Credit Party or Subsidiary.

            (c) No judgment,  order,  injunction or other similar restraint with
respect to any Credit Party or any Subsidiary thereof exists which prohibits any
of the other  transactions  contemplated  hereby or in  connection  therewith or
herewith.

            ss.  11.5.  GOOD  TITLE TO  PROPERTIES.  (a)  Except as set forth on
Schedule  11.5 hereto,  neither the Credit  Parties nor any of their  respective
Subsidiaries  own  title to any real  estate.  Schedule  11.5  hereto  correctly
identifies, categorized by the Company or Subsidiary of the Company, each parcel
of real  estate  leased or owned by or to the Company or any  Subsidiary  of the
Company,  together in each case with an accurate  street address and description
of the use of such  parcel,  and each other  interest  in real  property  owned,
leased or granted to or held by the Company or any  Subsidiary  of the  Company.
All real  property  leased or owned by the Company and its  Subsidiaries  is set
forth on Schedule 11.5. Neither the Company nor its Subsidiaries is lessor under
any leases other than as set forth on Schedule  11.5.  With respect to each such
leased  property (it being  understood  that the  provisions  of clauses (i) and
(iii) below shall only apply to leases covering entire  facilities or structures
and not space leases) except as set forth on Schedule 11.5:

          (i) no structure  owned or leased by the Company or any  Subsidiary of
     the  Company  fails to  conform in any  material  respect  with  applicable
     ordinances,  regulations,  zoning laws and restrictive covenants (including
     in any such case and without  limitation  those  relating to  environmental
     protection)  nor encroaches  upon property of others,  nor is any such real
     property  encroached upon by structures of others in any case in any manner
     that would reasonably likely have a Material Adverse Effect;

          (ii) no  charges  or  violations  have  been  filed,  served,  made or
     threatened,  to the knowledge of the Company and its Subsidiaries,  against
     or relating  to any such  property or  structure  or any of the  operations
     conducted at any such property or  structure,  as a result of any violation
     or  alleged   violation  of  any   applicable   ordinances,   requirements,
     regulations,  zoning laws or restrictive  covenants  (including in any such
     case and without limitation those relating to environmental  protection) or


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     as a result of any  encroachment on the property of others where the effect
     of same is reasonably likely to have a Material Adverse Effect;

          (iii) other than pursuant to applicable  laws,  rules,  regulations or
     ordinances,  covenants  that  run  with  the  land  or  provisions  in  the
     applicable  leases or matters  described on Schedule 11.5,  there exists no
     restriction on the use, transfer or mortgaging of any such property;

          (iv) the Company and each of its Subsidiaries  has adequate  permanent
     rights of ingress to and egress from any such  property  used by it for the
     operations conducted thereon;

          (v) there are no  developments  affecting  any of the real property or
     interests  therein  identified on Schedule 11.5 pending or threatened which
     might  reasonably  be  expected  to curtail or  interfere  in any  material
     respect with the use of such  property for the purposes for which it is now
     used;

          (vi)  neither the Company nor any of its  Subsidiaries  has any option
     (other than under any lease disclosed on Schedule 11.5) in, or any right or
     obligation to acquire any interest in, any real property;

          (vii) all permits,  licenses and approvals from  governmental  bodies,
     agencies or authorities  having  jurisdiction over each such property which
     are  necessary  and required to be obtained by the tenant to permit the use
     and  occupancy  of such  property for the purposes for which it is now used
     have been duly and validly issued and are in full force and effect,  except
     for permits,  licenses or approvals  which, if not in full force and effect
     would not have a Material Adverse Effect;

          (viii) the Company or its Subsidiaries  have all the right,  title and
     interest of the lessee in each such lease and presently occupy the property
     leased by them as lessee under each such lease to the extent not subleased;
     no consent  under any such lease is necessary for the  consummation  of the
     transactions  contemplated  hereby;  no event has occurred  which (with the
     giving of notice or passage of time or both) would impair any right of such
     party to exercise and obtain the  benefits of any options  contained in any
     such  lease;  and there is no  default  under or any  reasonable  basis for
     acceleration  or termination of, nor has any event occurred which (with the
     giving of notice or passage  of time or both)  would  constitute  a default
     under,  any such lease,  except for any such default which would not have a
     Material Adverse Effect; and

          (ix) municipal water service,  storm sewer, sanitary sewer facilities,
     and  telephone,  electric  and/or gas  service are  available  to serve all
     parcels of real  property  identified  on Schedule 11.5 at the lot lines of
     such parcels,  except where the failure to have such availability would not
     have a Material Adverse Effect.



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            (b) The buildings, improvements and fixtures, if any, of the Company
and its Subsidiaries  are in all material  respects  structurally  sound with no
known material  defects and are in good operating  condition and repair,  normal
wear and tear excepted.

            (c) Neither the whole nor any portion of the property or  leaseholds
of the Company or any of its Subsidiaries  described on Schedule 11.5 is subject
to  any  governmental  decree  or  order  to  be  sold  or is  being  condemned,
expropriated or otherwise taken by any governmental body or other entity with or
without  payment  of  compensation  therefor,  nor  has any  such  condemnation,
expropriation or taking been proposed to the Company or any of its Subsidiaries.

            (d)  Each  of  the  Company  and  its  Subsidiaries  owns  good  and
marketable  title to, or valid leasehold  interests in or license rights in, all
of the property and assets necessary to properly conduct its business subject to
no Liens except the Liens permitted pursuant to Section 9.2 hereof.

            (e) As to any fee simple  title any of the Credit  Parties and their
respective  Subsidiaries shall hereafter acquire,  each of them shall be deemed,
as of the date of such acquisition and as of the date of each Revolving  Advance
thereafter to have repeated the representations and warranties  contained in (a)
through (d) above with respect to such property.

            ss.  11.6.  FINANCIAL  STATEMENTS  AND  CONDITION.  (a)  Each of the
Financial  Statements  presents fairly in accordance with GAAP (i) the financial
position  of the Parent and its  Subsidiaries  as of the date of such  financial
statements and (ii) the results of operations of the Parent and its Subsidiaries
for such period. Neither the Parent nor its Subsidiaries had any material direct
or indirect  contingent  liabilities as of the date of the Financial  Statements
which are not reserved for therein or which in  accordance  with GAAP would have
to be included in footnotes thereto.  Each of the Financial  Statements has been
prepared in  accordance  with GAAP  applied on a basis  consistently  maintained
throughout the period involved (except as described therein).  There has been no
material  adverse  change  in the  business,  operations,  liabilities,  assets,
properties,  prospects or condition  (financial  or otherwise) of the Parent and
its Subsidiaries, taken as a whole, since the Reference Date.

            (b)  The  Agent  has  been  furnished   projections  of  the  future
performance of the Parent and its  Subsidiaries.  The  projections and pro forma
financial  information  contained  in such  materials  are based upon good faith
estimates  and  assumptions  believed  by  the  Parent  and  the  Company  to be
reasonable  at the time  made,  it being  recognized  by the  Lenders  that such
projections  as to future  events are not to be viewed as facts and that  actual
results during the period or periods covered by such projections may differ from
the  projected  results.  No fact is known to any Credit Party as of the Closing
Date which would have a Material Adverse Effect,  that has not been set forth in
the financial statements referred to in this Section 11.6 or disclosed herein or
otherwise disclosed to the Agent in writing prior to the Closing Date.


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            ss. 11.7. TRADEMARKS,  PATENTS, ETC. Each of the Credit Parties owns
or possesses all the trademarks,  trade names, copyrights,  patents, licenses or
rights in any thereof adequate for the conduct of its business,  without, to the
best of its knowledge, conflict with the rights or claimed rights of others.

            ss. 11.8. TAX LIABILITY.  All federal income tax returns required to
be filed by the Parent and its  Subsidiaries  (and each Affiliate with which the
Parent or its Subsidiaries files consolidated,  combined or unitary returns) and
all other  material tax returns,  reports and  statements,  domestic or foreign,
have been filed with the appropriate  governmental agencies in all jurisdictions
in which such returns,  reports and statements are required to be filed, and all
Charges and other impositions shown thereon to be due and payable have been paid
prior to the date in which any fine, penalty,  interest,  of late charge or loss
may be  added  thereto  for  nonpayment  thereof,  or any  such  fine,  penalty,
interest,  late  charge  or loss  has  been  paid.  Each of the  Parent  and its
Subsidiaries  (and  each  such  Affiliate)  has paid  when due and  payable  all
material  Charges  required to be paid by it.  Proper and accurate  amounts have
been withheld by the Parent and its Subsidiaries  (and each such Affiliate) from
their respective  employees for all periods in full and complete compliance with
the tax, social security and unemployment  withholding  provisions of applicable
federal,  state,  local and foreign law and such  withholdings  have been timely
paid to the respective governmental agencies. Schedule 11.8 sets forth, for each
of the Parent and its  Subsidiaries  (and each such  Affiliate),  those  taxable
years for which its tax returns have been for all periods after December 1, 1994
or are being  audited as of the date hereof by the Internal  Revenue  Service or
any other applicable governmental authority. No issue has been raised in writing
or, if not in writing,  to the Company's knowledge in any such examination that,
by  application of similar  principles,  reasonably may be expected to result in
assertion of a material  deficiency  for any other  taxable year not so examined
that has not been accrued on the Financial  Statements that would be required to
be so accrued in  accordance  with GAAP.  Except as set forth in  Schedule  11.8
hereto,  neither  the Parent  nor any of its  Subsidiaries  has,  as of the date
hereof,  executed  or  filed  with  the  Internal  Revenue  Service  or,  to its
knowledge,  any other  governmental  authority any  agreement or other  document
extending,  or having the effect of  extending,  the  period for  assessment  or
collection of any Charges.  Except as set forth on Schedule 11.8 hereto, neither
the Parent nor any of its  Subsidiaries has agreed or has been requested to make
any  adjustment  under Code Section  481(a) by reason of a change in  accounting
method initiated by the Company or any of its  Subsidiaries.  Except for the Tax
Allocation  Agreement,  neither the Parent nor any of its  Subsidiaries  has any
obligation under any tax sharing agreement.

            ss. 11.9.  GOVERNMENTAL  ACTION.  No action of, or filing with,  any
governmental  or  public  body  or  authority   (other  than  normal   reporting
requirements  or  filing as to  Collateral  under the  provisions  of  Section 4
hereof) is required to authorize,  or is otherwise  required in connection with,
the  execution,  delivery  or  performance  by the  Borrowers  or  any of  their
respective Subsidiaries of this Agreement, the Security Documents, any Guaranty,
the Notes, the other Loan Documents or any of the instruments or documents to be
delivered  pursuant hereto or thereto,  except such as have been made or will be
made as contemplated by such agreements.


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     ss.  11.10.  DISCLOSURE.  Neither the Schedules  hereto,  nor the Financial
Statements,  nor  the  certificates,  statements,  reports  or  other  documents
furnished  to any  Lender  or the  Agent by or on  behalf  of any of the  Credit
Parties  in  connection   herewith  or  in  connection   with  any   transaction
contemplated hereby, nor this Agreement or any other Loan Document, contains, at
the time  furnished,  any untrue  statement of a material fact or omits to state
any  material  fact  (known to any such Person in the case of any  document  not
furnished by it) necessary in order to make the statements  contained  herein or
therein  not  misleading  in light of the  circumstances  in which the same were
made.

     ss.  11.11.  REGULATION  U.  None of the  Credit  Parties  or any of  their
respective  Subsidiaries  owns any  "margin  stock" as such term is  defined  in
Regulation U, as amended (12 C.F.R. Part 221), of the Board. The proceeds of the
borrowings  made  hereunder  will be used  only for the  purposes  set  forth in
Section 7 hereof. None of the proceeds will be used, directly or indirectly, for
the purpose of  purchasing  or carrying  any margin  stock or for the purpose of
reducing or retiring any Indebtedness which was originally  incurred to purchase
or carry margin stock or for any other purpose which might  constitute  the Loan
under this Agreement a "purpose  credit" within the meaning of said Regulation U
or Regulation X (12 C.F.R. Part 224) of the Board. None of the Credit Parties or
any of their respective Subsidiaries or any agent acting in its behalf has taken
or will take any action which might cause this Agreement or any of the documents
or instruments  delivered pursuant hereto to violate any regulation of the Board
or to  violate  the  Securities  Exchange  Act of 1934 or any  applicable  state
securities laws.

     ss. 11.12.  INVESTMENT COMPANY.  None of the Credit Parties or any of their
respective  Subsidiaries is an "investment  company," or an "affiliated  person"
of, or "promoter" or "principal  underwriter"  for, an "investment  company," as
such terms are defined in the  Investment  Company  Act of 1940,  as amended (15
U.S.C.  ss.ss.  80a-1, et seq.).  None of the transactions  contemplated by this
Agreement,  the other Loan Documents or any of the Sonab  Acquisition  Documents
shall violate the Investment Company Act of 1940, as amended.

     ss. 11.13.  EMPLOYEE BENEFIT PLANS.  Neither any Credit Party nor any ERISA
Affiliate  maintains or  contributes  to any Employee Plan or any  Multiemployer
Plan other than those listed on Schedule  11.13 hereto.  Each plan of any Credit
Party or any  ERISA  Affiliate  which is not a  Multiemployer  Plan and which is
intended to be tax qualified under Code Section  401(a),  has been determined by
the  Internal  Revenue  Service to qualify  under Code Section  401(a),  and the
trusts created  thereunder  have been determined to be exempt from tax under the
provisions of Code Section 501(a).  Nothing has occurred with regard to any such
plan which would cause the loss of such  qualification  or the imposition of any
Code or ERISA  tax  liability  or  penalty  to any  Credit  Party,  or any ERISA
Affiliate.  Except as set forth on Schedule  11.13 hereto,  with respect to each
Employee Plan, all reports  required under ERISA or any other  applicable law or
regulation  to be filed by any  Credit  Party or any  ERISA  Affiliate  with the
relevant  governmental  authority  have been duly filed and all such reports are


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true and correct in all  material  respects  as of the date  given.  Neither any
Credit Party nor any ERISA Affiliate has engaged in a "prohibited  transaction,"
as such term is defined in Code Section 4975 and Title I of ERISA, in connection
with any  Employee  Plan  which  would  subject  any  Credit  Party or any ERISA
Affiliate  (after  giving  effect  to  any  exemption)  to a tax or  penalty  on
prohibited  transactions  imposed by Code  Section  4975 or Section 502 of ERISA
which is either material or is attributable to a knowing  violation of either of
such  sections.  No plan has  incurred an ERISA Event,  nor has any  accumulated
funding  deficiency (as defined in Code Section  412(a)) been incurred  (without
regard to any waiver granted under Code Section 412), nor has any funding waiver
from the Internal Revenue Service been received or requested with respect to any
Pension  Benefit  Plan.  The value of the assets of each  Pension  Benefit  Plan
subject to Title IV of ERISA  equalled  or  exceeded  the  present  value of the
"benefit  liabilities,"  as  defined in Title IV of ERISA of such plan as of the
end of the preceding plan year using plan actuarial assumptions as in effect for
such plan year. The funding methods used in connection with each Pension Benefit
Plan are acceptable  under ERISA and the actuarial  assumptions and methods used
in connection with such funding are reasonable.  There are no claims (other than
claims for  benefits  in the normal  course),  actions or  lawsuits  asserted or
instituted  against,  and neither any Credit Party nor any ERISA  Affiliate  has
knowledge of any threatened litigation or claims (other than claims for benefits
in the ordinary  course),  against (i) the assets of any Pension Benefit Plan or
against any fiduciary of such Plan with respect to the operation of such Plan or
(ii) the assets of any employee welfare benefit plan within the meaning of ERISA
Section 3(l) or against any  fiduciary  thereof with respect to the operation of
any such plan. Neither any Credit Party nor any ERISA Affiliate has incurred (a)
any liability to the PBGC (other than routine claims and premium payments),  (b)
any withdrawal  liability (and no event has occurred  which,  with the giving of
notice  under  Section  4219 of ERISA,  would  result in such  liability)  under
Section  4201 of ERISA as a result of a complete or partial  withdrawal  (within
the meaning of Section 4203 or 4205 of ERISA) from a  Multiemployer  Plan or (c)
any liability  under ERISA  Section 4062 to the PBGC, or to a trustee  appointed
under ERISA Section  4042. No Credit Party or ERISA  Affiliate has been notified
or  otherwise  has  knowledge  that any  Multiemployer  Plan is  insolvent or in
reorganization  within the meanings of Sections 4245 and 4241 of ERISA.  Neither
any  Credit  Party nor any ERISA  Affiliate  nor any  organization  to which any
Credit Party or any such ERISA  Affiliate  is a successor or parent  corporation
within the meaning of ERISA Section 4069(b) has engaged in a transaction  within
the meaning of ERISA  Section  4069(a).  Neither any Credit  Party nor any ERISA
Affiliate  maintains an established  welfare  benefit plan within the meaning of
Section 3(1) of ERISA,  other than those listed on Schedule 11.13 hereto,  which
provides for continuing benefits or coverage for any participant  --------------
or any  beneficiary  of a participant  after such  participant's  termination of
employment  except  as  may  be  required  by the  Consolidated  Omnibus  Budget
Reconciliation Act of 1985, as amended ("COBRA"), and the regulations thereunder
or by applicable federal or other statutory law or regulation  (whether domestic
or foreign).  Each Credit Party and each ERISA  Affiliate  maintaining a welfare
benefit plan within the meaning of Section  3(1) of ERISA has complied  with the
notice  and  continuation  coverage  requirements  of COBRA and the  regulations
thereunder so as not to result in any material  loss of deduction  under Section
162 of the Code or any  material  tax,  penalty or  liability to any such Credit
Party or any such ERISA Affiliate.


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     ss. 11.14. DEBENTURE COLLATERAL.  The Liens in favor of the trustee for the
holders of the  Debentures  if any,  secure only the  obligations  of the Parent
under or with respect to the Debentures.

     ss. 11.15.  PERMITS, ETC. (a) Each Credit Party and each Subsidiary thereof
possesses  all material  permits,  licenses,  approvals and consents of Federal,
state and local governments and regulatory  authorities  required to conduct its
business as presently conducted and proposed to be conducted;

            (b) Each such permit,  license,  approval and consent is and will be
in full force and effect, and no event has occurred which permits the revocation
or  termination  of  any  such  permit,  license,  approval  or  consent  or the
imposition of any restriction thereon of such nature as may materially limit the
operation of the business covered thereby;

            (c) All approvals, applications, filings, registrations, consents or
other actions required of any local,  state or Federal  authority to enable each
Credit  Party and the  Subsidiaries  thereof  to use any such  permit,  license,
approval or consent has been obtained or made;

            (d) No Credit Party nor any Subsidiary of any Credit Party (i) is in
violation of any duty or  obligation  required by law or any rule or  regulation
applicable to the operation of any of its  businesses,  or (ii) has received any
written notice from the granting body or any other  governmental  authority with
respect to any material breach of any covenant  under,  or any material  default
with respect to, any such permit, license, approval or consent;

            (e) Before and upon giving effect to this  Agreement,  the Notes and
the other  Loan  Documents,  no  material  default  shall have  occurred  and be
continuing under any such permit, license, approval or consent;

            (f) All consents and approvals of, filings and  registrations  with,
and all other actions in respect of, all governmental  agencies,  authorities or
instrumentalities  required to maintain  any such permit,  license,  approval or
consent in full  force and  effect  prior to the  scheduled  date of  expiration
thereof has been, or, prior to the time when required, will have been, obtained,
given, filed or taken and are or will be in full force and effect;

            (g) There is not  pending  or  threatened,  any  action  to  revoke,
cancel, suspend, modify or refuse to renew any such permit, license, approval or
consent and each  business  covered by each such  permit,  license,  approval or
consent is being operated in substantial  compliance with such permit,  license,
approval or consent;

            (h) There is not now issued or  outstanding or threatened any notice
of any hearing,  violation or complaint  against such Credit Party or Subsidiary
thereof  with respect to any such  permit,  license,  approval or consent and no


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Credit Party or Subsidiary  thereof has any knowledge that any Person intends to
contest the renewal of any such permit, license, approval or consent; and in the
case of clauses (a) through (h) of this Section 11.15,  the breach of which will
not reasonably be expected to have a Material Adverse Effect.

     ss.  11.16.  ENVIRONMENTAL  STATUS.  Except as disclosed on Schedule  11.16
hereto, (i) the operations of the Company and each of its Subsidiaries comply in
all material respects with all applicable  Environmental  Laws; (ii) the Company
and each of its Subsidiaries  have no  environmental,  health and safety Permits
and to the best of the  Company's  knowledge,  no such permits are necessary for
its operation;  (iii) the Company and each of its  Subsidiaries and all of their
present Facilities or operations, as well as to the knowledge of the Company and
its  Subsidiaries  their past  Facilities or operations,  are not subject to any
outstanding  written  order or  agreement  with any  governmental  authority  or
private party respecting (a) any Environmental Laws, (b) any Remedial Action, or
(c) any  Environmental  Claims arising from the Release of a Hazardous  Material
into the  environment;  (iv) none of the operations of the Company or any of its
Subsidiaries is subject to any judicial or  administrative  proceeding under any
Environmental  Law;  (v) to the best of the  knowledge  of the  Company  and its
Subsidiaries,  none of the operations of the Company or any of its  Subsidiaries
is the  subject of any  Federal or state  investigation  evaluating  whether any
Remedial Action is needed to respond to a Release of any Hazardous Material into
the environment in violation of any Environmental  Law; (vi) neither the Company
nor  any of its  Subsidiaries  or to  the  knowledge  of  the  Company  and  its
Subsidiaries  any  predecessor  of the Company or any  Subsidiary  has filed any
notice under Environmental Law indicating past or present treatment, storage, or
disposal of a hazardous waste in violation of any Environmental Law or reporting
a Release of a Hazardous Material into the environment; (vii) to the best of the
knowledge  of the Company and its  Subsidiaries,  neither the Company nor any of
its Subsidiaries has any contingent  liability in connection with any Release of
any Hazardous Material into the environment; (viii) none of the Company's or any
Subsidiary's  operations  involve the generation,  transportation,  treatment or
disposal of hazardous  waste,  as defined  under 40 C.F.R.  Parts 260-270 or any
applicable  state   equivalent;   (ix)  neither  the  Company  nor  any  of  its
Subsidiaries  has disposed of any Hazardous  Material by placing it in or on the
ground or waters of any  premises  owned,  leased or used by the Company or such
Subsidiary and to the knowledge of the Company and its Subsidiaries  neither has
any lessee,  prior  owner,  or other  person;  (x) to the best  knowledge of the
Company no underground storage tanks or surface impoundments,  as referred to in
the  Environmental  Laws,  are on  the  Company's  or  any of its  Subsidiaries'
Facilities;  and (xi) to the best  knowledge  of the Company no Lien in favor of
any  governmental  authority for (A) any liability under  Environmental  Laws or
regulations,  or (B) damages arising from or costs incurred by such governmental
authority in response to a Release of a Hazardous Material into the environment,
has  been  filed  or  attached  to the  Company's  or  any of its  Subsidiaries'
Facilities;  provided that a breach of a representation under this Section 11.16
by the  Company  or any of its  Subsidiaries  shall not  constitute  an Event of
Default  under  Section  10.1 unless such breach may  reasonably  be expected to
result in  liability  to the  Company  or any of its  Subsidiaries  in excess of
$100,000 or result in a Material Adverse Effect.  The foregoing  representations


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and  warranties  shall  survive the  expiration or earlier  termination  of this
Agreement until such time as the environmental  indemnity referred to in Section
8.16 hereof is terminated.

            ss. 11.17.  SOLVENCY.  Both  before and after   giving effect to the
making of the initial Revolving Advance, each of the Borrowers was Solvent.

            ss.  11.18.   PROJECTIONS.   The  Parent's  or  the  Company's,   as
applicable,  (i) monthly forecasts on a consolidated  basis for each Fiscal Year
and (ii) annual  forecasts  on a  consolidated  basis,  consolidated  results of
operations  and cash flows and balance  sheets for each Fiscal  Year,  copies of
which have been delivered to Agent on or prior to the Closing Date, disclose all
material  assumptions  expressly made in formulating such projections.  No facts
exist on the Closing Date which would  result in any  material  change in any of
such  projections.  The  projections  are based upon  reasonable  estimates  and
assumptions,  all of which  are  reasonable  in light  of the  conditions  which
existed at the time the  projections  were made, have been prepared on the basis
of the  assumptions  stated  therein,  and  reflect as of the  Closing  Date the
reasonable  estimate of each of the Borrowers of the results of  operations  and
other information  projected therein,  it being recognized that such projections
as to future events are not to be viewed as facts and that actual results during
the  period  or  periods  covered  by  such  projections  may  differ  from  the
projections.

            ss. 11.19.  BANK ACCOUNTS.  The names and addresses of all the banks
holding one or more Blocked  Accounts,  together with the account numbers of the
Blocked  Accounts at such banks,  are specified in Schedule  11.19  hereto.  The
Borrowers  and Sonab have no bank  accounts  other than as set forth on Schedule
11.19 hereto.

            ss. 11.20.  EMPLOYMENT  AGREEMENTS.  Except as set forth on Schedule
11.20 hereto,  the Employment  Agreements  constitute all agreements of the type
described  in Section  5.12(b)  hereof  between  any Credit  Party and any other
Person,  a true and  complete  copy of each of which has been  furnished  to the
Agent.

            ss.  11.21.  LABOR  MATTERS.  There are no  strikes  or other  labor
disputes  against the Company or any of its  Subsidiaries  pending or threatened
which would have a Material Adverse Effect.  Hours worked by and payment made to
employees of the Company and its Subsidiaries  have not been in violation of the
Fair Labor  Standards Act or any other  applicable law dealing with such matters
the violation of which would have a Material  Adverse  Effect.  All payments due
from the Company or any of its  Subsidiaries  on account of employee  health and
welfare  insurance  which would have a Material  Adverse Effect if not paid have
been  paid or  accrued  as a  liability  on the  books  of the  Company  or such
Subsidiary.  Except  as  set  forth  on  Schedule  11.21  hereto,  there  are no
collective  bargaining or other labor  agreements  covering any employees of the
Company or any of its Subsidiaries.


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     ss. 11.22. OTHER VENTURES. Neither the Parent nor any Subsidiary thereof is
engaged in any joint venture or  partnership  with any other Person,  except for
the  Investment in Sonab,  Sonab  Holdings or Sonab  International  permitted by
Section 9.4(e) hereof.

     ss. 11.23.  BROKERS AND CONSULTANTS.  Except as set forth on Schedule 11.23
hereto, no broker, finder or consultant acting on behalf of the Parent or any of
its  Subsidiaries  brought about the  obtaining,  making or closing of the loans
made  pursuant to this  Agreement,  and  neither  the Parent nor any  Subsidiary
thereof has any obligation to any Person in respect of any finder's,  consulting
or brokerage fees in connection with the Loan contemplated by this Agreement.

     ss. 11.24. MATERIAL CONTRACTS. Schedule 11.24 sets forth all the contracts,
agreements  and  documents  (other  than  those set forth on any other  Schedule
hereto or constituting  an Exhibit  hereto) that materially  affect or relate to
the business or operations of the Parent and its Subsidiaries.

     ss. 11.25. LICENSE AGREEMENTS. Schedule 11.25 sets forth all the
License  Agreements of the Company,  and each of the License  Agreements  listed
thereon is in full force and effect  (or have been  approved  in writing  (which
approval has not been rescinded in writing) as an acceptable  arrangement by the
Agent), and except as disclosed by the Company in writing to the Agent from time
to time, the Company is in compliance  with the material terms thereof and there
exists  no  default  on  the  part  of the  Company  under  any  of the  License
Agreements.

     ss. 11.26.  UNWRITTEN  AGREEMENTS.  Neither the Company nor any  Subsidiary
thereof  is party to any  arrangement  which,  if  approved  by the Agent  would
constitute  a  License  Agreement  or  Consignment  Agreement  and  which is not
evidenced by a written  agreement other than those  previously  disclosed to the
Agent.

     ss. 11.27.  UCC FINANCING  STATEMENTS.  Any documents  (including,  without
limitation,  financing  statements)  required  to be filed  (if any) in order to
create  in favor of the  Agent  for the  benefit  of the  Lenders,  a  perfected
security  interest in the Collateral  with respect to which a security  interest
may be perfected by a filing under the UCC have been duly executed and delivered
by the  Company  on the  Closing  Date  and  will  be  properly  filed  in  each
jurisdiction  required  in order to create in favor of the Agent for the benefit
of the Lenders a perfected  Lien on the  Collateral  immediately  following  the
Closing Date.

            SECTION 12.  MISCELLANEOUS.

     ss. 12.1.  COLLECTION  COSTS. If an Event of Default occurs,  the Borrowers
shall pay all court costs and costs of collection  paid or incurred by the Agent
and Lenders in  connection  with the Lender Debt,  the  Collateral  and the Loan
Documents,   including,  without  limitation,   reasonable  fees,  expenses  and


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disbursements  of counsel  employed in  connection  with any and all  collection
efforts. The attorney's fees arising from such services,  including those of any
appellate proceedings,  and all expenses, costs, charges and other fees incurred
by such counsel in any way or with respect to or arising out of or in connection
with or relating to any of the events or actions  described in this Section 12.1
shall be payable by the  Borrowers to the Agent,  each  Issuing  Lender and each
Lender, as the case may be, on demand, and shall be additional obligations under
this Agreement. Without limiting the generality of the foregoing, such expenses,
costs, charges and fees may include: recording costs, appraisal costs, paralegal
fees, costs and expenses; accountants' fees, costs and expenses; court costs and
expenses;  photocopying and duplicating expenses; court reporter fees, costs and
expenses;  long  distance  telephone  charges;  air  express  charges;  telegram
charges;  telecopier  charges;  secretarial  overtime charges;  and expenses for
travel,  lodging  and  food  paid or  incurred  in  connection  with  any of the
foregoing.

     ss.  12.2.   AMENDMENT,   MODIFICATION   AND  WAIVER.   (a)  No  amendment,
modification  or waiver of any provision of the Loan Documents and no consent by
the Agent, any Issuing Lender or any Lender to any departure therefrom by any of
the Credit Parties shall be effective  unless such  amendment,  modification  or
waiver  shall be in  writing  and  signed by a duly  authorized  officer  of the
appropriate  Credit Party,  the Agent,  the Lenders,  each Issuing Lender or the
Majority Lenders,  as the case may be (as more fully described  below),  and the
same shall then be effective  only for the period and on the  conditions and for
the specific instances and purposes specified in such writing.

            (b) No notice to or demand on any of the Credit  Parties in any case
shall entitle any of the Credit Parties to any other or further notice or demand
in similar or other circumstances.

            (c) Any term or  provision  of any Loan  Document  may be amended or
modified and the  observance of any provision of any Loan Document may be waived
with the  written  consent  of the  Credit  Parties  being a party to such  Loan
Document and the Majority Lenders;  provided,  however,  that no such amendment,
modification  or waiver shall,  without the prior written  consent of the Agent,
amend or waive any of the  provisions  of  Section  3.6,  12.13 or 12.15 of this
Agreement,  or otherwise  change any of the rights or  obligations  of the Agent
under any of the Loan  Documents  or,  without the prior  written  consent of GE
Capital,  amend or waive any of the provisions of Section 12.13 or Section 12.15
hereof; provided, further, that no such amendment, modification or waiver shall,
without the prior written  consent of each Issuing  Lender which has any Letters
of Credit, or any Commitment to issue Letters of Credit,  outstanding,  amend or
waive  any of the  provisions  of  Section  2A of this  Agreement  or  otherwise
materially  adversely  affect any of the rights or  obligations  of such Issuing
Lender under any of the Loan  Documents;  and  provided,  further,  that no such
amendment,  modification  or waiver shall,  without the prior written consent of
all of the Lenders:

                    (i) extend  the due date of any  principal  of any Loan,  or
      portion  thereof,  extend the final scheduled  maturity of any Loan or the
      Revolving Credit Facility  Commitment,  reduce the rate of interest on any
      Loan,  or portion  thereof,  reduce the amount of any principal or accrued

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      interest  payable  on any Loan,  or  portion  thereof,  or reduce the fees
      payable to any Lender hereunder;

                   (ii) substitute,  discharge,  release  or  surrender  all  or
      substantially  all of the  Collateral  (which defined term for purposes of
      this clause (ii) shall  include  any  Guaranties  of any or all the Lender
      Debt);

                  (iii) except as provided in Sections 2.14(e) and 12.15 hereof,
      change  the  proportion  of  any  Lender's  Revolving  Commitment  to  the
      aggregate  Revolving  Commitments  of all  Lenders  or the  amount  of any
      Lender's Revolving Commitment;

                   (iv) modify any provision of this  Section 12.2 or any  other
      provision which expressly requires the consent of all Lenders;

                   (v) amend the definition of "Majority Lenders"; or

                  (vi) amend the last sentence of Section 4.4(c) hereof or amend
      Section 10.5 hereof.

            The Agent, the Lenders other than GE Capital, and the Credit Parties
hereby  agree to  cooperate  with GE Capital to  effectuate  the  provisions  of
Section 12.15 of this Agreement,  including, without limitation, with respect to
the  execution  of one or more  amendments  of this  Agreement or any other Loan
Document.

            (d) From and after the Closing Date,  "Lender Debt" arising under or
in connection  with the Original  Credit  Agreement shall continue to be "Lender
Debt" arising under or in connection with this Agreement.

            ss. 12.3.  NEW YORK LAW.  THIS AGREEMENT AND THE NOTES
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK.

            ss.  12.4.  NOTICES.  All  notices,   requests,   demands  or  other
communications  provided  for  herein  shall  be in  writing  (unless  otherwise
expressly  provided  herein)  and shall be  deemed to have been  given (a) if by
registered or certified mail, return receipt  requested,  four (4) Business Days
following  the date when  sent,  (b) if by  telex,  when  sent and  answer  back
received, (c) if by overnight courier, when received, (d) if by telecopier, when
sent, or (e) if personally  delivered or delivered by messenger,  when receipted
for, in each case,  addressed to the  appropriate  Credit Party or to the Agent,
any Issuing Lender or any Lender, at its respective office under its name on the
signature  pages  of  this  Agreement  and to the  attention  of the  Person  so
designated,  or to such Person or address as any party hereto shall designate to
the other from time to time in writing  forwarded in like  manner.  All notices,
requests,  demands or other communications given or deemed given to any Borrower
shall be deemed given to both Borrowers.


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     ss. 12.5. FEES AND EXPENSES. Whether or not any Revolving Advances or other
financial  accommodations  are  made  hereunder,  the  Borrowers  shall  pay all
reasonable  out-of-pocket costs and expenses paid or incurred by the Agent or GE
Capital in connection  with the Loan  Documents  and the financing  contemplated
thereunder,  including but not limited to appraisal fees, reasonable syndication
fees (excluding  fees payable to any syndicate  member taking an assignment from
GE Capital of any portion of the Loan or  Commitment  of GE Capital  hereunder),
title insurance fees,  audit fees,  recording  fees,  travel and  transportation
fees,  search and filing  fees,  and the  reasonable  fees and expenses of Weil,
Gotshal & Manges LLP, special counsel,  and all local counsel to the Agent or GE
Capital  and  of  any  industry,   environmental,   tax,  accounting  and  other
consultants  retained  by the Agent or GE  Capital.  Such  expenses  shall  also
include,  without  limitation,  any costs  paid or  incurred  by the Agent or GE
Capital in connection with the  administration  of the financial  accommodations
herein  provided  (including  of  any  Collateral),   any  waivers,  amendments,
modifications,  extensions,  renewals,  renegotiations  or  "work-outs"  of this
Agreement or any instrument or document delivered in connection herewith and any
consents or approvals  provided  hereunder or otherwise  requested by any Credit
Party. Without limiting the generality of the foregoing,  such expenses,  costs,
charges and fees may  include,  to the extent they are  out-of-pocket  as to the
Agent or GE Capital: recording costs, appraisal costs, paralegal fees, costs and
expenses;  accountants'  fees, costs and expenses;  photocopying and duplicating
expenses;  long  distance  telephone  charges;  air  express  charges;  telegram
charges;  telecopier  charges;  secretarial  overtime charges;  and expenses for
travel,  lodging  and  food  paid or  incurred  in  connection  with  any of the
foregoing.

     ss. 12.6. STAMP OR OTHER TAX. Should any stamp or excise tax become payable
in respect of this  Agreement,  any Note,  any other Loan  Document,  the Lender
Debt, the Collateral or any modification  hereof or thereof,  each of the Credit
Parties  shall  pay,  the  liability  of which is joint  and  several,  the same
(including  interest and  penalties,  if any) and shall hold the Lenders and the
Agent harmless with respect thereto.

     ss. 12.7. WAIVER OF JURY TRIAL AND SET-OFF.  In any litigation in any court
with respect to, in connection  with, or arising out of this  Agreement,  any of
the  Revolving  Advances,  any  of  the  Notes  or  other  Loan  Documents,  the
Collateral,  or any instrument or document delivered pursuant to this Agreement,
or the validity, protection, interpretation,  collection or enforcement thereof,
or any other claim or dispute howsoever arising,  between any Credit Parties and
any of the Lenders,  any Issuing Bank party hereto or the Agent, (a) EACH OF THE
CREDIT PARTIES  HEREBY,  to the fullest extent it may  effectively do so, waives
the right to interpose any set-off,  recoupment,  counterclaim or cross-claim in
connection with any such litigation, irrespective of the nature of such set-off,
recoupment,  counterclaim  or  cross-claim,  unless  such  set-off,  recoupment,
counterclaim  or cross-claim  could not, by reason of any applicable  Federal or
State procedural laws, be interposed, pleaded or alleged in any other action and
(b) EACH OF THE CREDIT  PARTIES AND THE  LENDERS,  TO THE FULLEST  EXTENT IT MAY
EFFECTIVE LY DO SO, WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION.


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EACH OF THE CREDIT  PARTIES  AGREES  THAT THIS SEC TION 12.7 IS A  SPECIFIC  AND
MATERIAL  ASPECT OF THIS  AGREEMENT  AND  ACKNOWLEDGES  THAT NONE OF THE LENDERS
WOULD  EXTEND TO THE  COMPANY ANY  FINANCIAL  ACCOMMODATIONS  HEREUNDER  IF THIS
SECTION 12.7 WERE NOT PART OF THIS AGREEMENT.

            ss. 12.8.  TERMINATION  OF  AGREEMENT.  (a)  The Agent on  behalf of
the  Lenders  shall  have the right to, or the Agent upon the  direction  of the
Majority  Lenders  shall,  terminate this  Agreement  immediately,  at any time,
during the continuance of an Event of Default under Section 10 hereof.

            (b) The termination of this Agreement shall not affect any rights of
the  Credit  Parties,  any  Lender,  any  Issuing  Lender  or the  Agent  or any
obligation of any of the Credit Parties,  any Lender,  any Issuing Lender or the
Agent  to the  others,  arising  on or  prior  to the  effective  date  of  such
termination,  and the  provisions  hereof shall  continue to be fully  operative
until all Lender Debt and obligations of the Credit Parties  hereunder  incurred
on or prior to such termination have been paid and performed in full.

            (c) Upon the giving of notice of termination of this Agreement,  all
Lender Debt (including,  without  limitation,  the Revolving Loan and amounts in
respect  of  Letters  of  Credit)  shall  be due  and  payable  on the  date  of
termination specified in such notice.

            (d) The Liens and rights granted to the Agent on behalf of the Agent
and  the   Lenders   hereunder   shall   continue  in  full  force  and  effect,
notwithstanding the termination of this Agreement,  until all of the Lender Debt
has  been  paid  (or  in  the  case  of  Letters  of  Credit  Obligations,  cash
collateralized  to the  satisfaction of the Agent) in full or the Credit Parties
have  furnished  the  Lenders,  each  Issuing  Lender  and  the  Agent  with  an
indemnification satisfactory to the Lenders, such Issuing Lenders and the Agent;
provided that  notwithstanding  anything herein or in any other Loan Document to
the  contrary  in the  event  that  all  Lender  Debt is paid (or in the case of
Letters of Credit  Obligations,  cash  collateralized to the satisfaction of the
Agent)  in full (or such  satisfactory  indemnification  is  provided)  and this
Agreement is  terminated,  the Liens in favor of the Agent shall  terminate (and
the Agent shall execute and deliver in accordance  with the  requirements of the
UCC, appropriate UCC-3 termination statements).

            (e)  All  representations,   warranties,   covenants,   waivers  and
agreements  contained herein shall survive  termination  hereof unless otherwise
provided.

            (f) Notwithstanding  the foregoing,  if after receipt of any payment
of all or any part of the Lender  Debt,  the Agent,  any  Issuing  Lender or any
Lender is for any reason  compelled to  surrender  such payment to any Person or
entity  because  such  payment  is  deter  mined  to be  void or  voidable  as a
preference,  an  impermissible  set-off,  a diversion  of trust funds or for any
other  reason,  this  Agreement  shall  continue in full  force,  and the Credit
Parties,  as appropriate,  shall be liable to, and shall indemnify and hold such
Lender,  such Issuing Lender or the Agent, as the case may be, harmless for, the


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amount of such payment surrendered until such Lender, such Issuing Lender or the
Agent, as the case may be, shall have been finally and irrevocably paid in full.
The  provisions  of  the  foregoing  sentence  shall  be  and  remain  effective
notwithstanding  any  contrary  action which may have been taken by the Lenders,
such Issuing  Lender or the Agent in reliance  upon such  payment,  and any such
contrary  action so taken  shall be  without  prejudice  to the  Lenders',  such
Issuing  Lender's or the Agent's rights under this Agreement and shall be deemed
to have been conditioned upon such payment having become final and irrevocable.

            (g) All indemnities  provided for under this Agreement and the other
Loan  Documents,  including,  without  limitation,  under Sections 2.12 and 12.5
hereof and this Sec tion 12.8,  shall survive the  termination of this Agreement
and the payment in full of the Lender Debt.

            ss.  12.9.  CAPTIONS.  The  captions  of the  various  sections  and
paragraphs  of this  Agreement  have  been  inserted  only for the  purposes  of
convenience;  such  captions are not a part of this  Agreement  and shall not be
deemed  in any  manner  to  modify,  explain,  enlarge  or  restrict  any of the
provisions of this Agreement.

            ss.  12.10.  LIEN;  SET-OFF BY LENDERS.  Each of the Credit  Parties
hereby grants to each Lender and the Agent a continuing Lien for all Lender Debt
upon any and all monies,  securities and other property of such Credit Party and
the proceeds  thereof,  now or hereafter  held or received by, or in transit to,
such Lender or the Agent from or for such Credit Party, whether for safekeeping,
custody,  pledge,  transmission,  collection or otherwise, and also upon any and
all deposits (general or special) and credits of such Credit Party with, and any
and all claims of such Credit  Party  against,  any Lender or the Agent,  at any
time  existing  (which  shall  constitute  part  of the  Collateral).  Upon  the
occurrence and during the  continuance  of an Event of Default,  each Lender and
the Agent is hereby authorized at any time and from time to time, without notice
to such  Credit  Party,  to  set-off,  appropriate  and  apply  any or all items
hereinabove referred to against all Lender Debt under the Loan Documents.

            ss. 12.11.  PAYMENT DUE ON NON-BUSINESS DAY. Whenever any payment to
be made  hereunder or under any other Loan Document or on any Revolving  Advance
shall be stated to be due and payable,  or whenever the last day of any Interest
Period would otherwise occur, on a day which is not a Business Day, such payment
shall be made and the last day of such  Interest  Period shall occur on the next
succeeding  Business  Day and  such  extension  of time  shall  in such  case be
included in  computing  interest on such  payment;  provided,  however,  if such
extension would cause a payment of a Eurodollar  Advance to be made, or the last
day of such  Interest  Period for a  Eurodollar  Advance  to occur,  in the next
following  calendar  month,  such payment shall be made and the last day of such
Interest Period shall occur on the next preceding Business Day.

            ss. 12.12.  SERVICE OF PROCESS.  Each of the Credit  Parties  hereby
irrevocably  consents to the jurisdiction of the courts of the State of New York



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and of any Federal Court located in the City of New York in connection  with any
action or proceeding arising out of or relating to this Agreement, any Guaranty,
any of the Security  Documents,  all or any of the Lender Debt, the  Collateral,
all or any of the Notes,  any other Loan  Document or any document or instrument
delivered pursuant to this Agreement. In any such litigation, each of the Credit
Parties waives, to the fullest extent it may effectively do so, personal service
of any summons,  complaint or other process and agrees that the service  thereof
may be made by certified or registered  mail directed to any Credit Party at its
address set forth in Section  12.4  hereof.  Each of the Credit  Parties  hereby
waives,  to the fullest  extent it may  effectively do so, the defenses of forum
non conveniens and improper venue.

            ss. 12.13.  GENERAL   ELECTRIC   CAPITAL   CORPORATION,  AS   AGENT.
(a) Each Lender  hereby  irrevocably  designates  and appoints GE Capital as the
agent of such  Lender  under each of the Loan  Documents  in which GE Capital is
named as agent, and each such Lender hereby  irrevocably  authorizes GE Capital,
as the agent for such Lender to take such action on behalf of each Lender  under
the  provisions  of the Loan  Documents  and to exercise such powers and perform
such  duties as are  expressly  delegated  to the Agent by the terms of the Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding  any provision to the contrary  elsewhere in the Loan Documents,
the Agent shall not have any duties or  responsibilities  except those expressly
set forth in the Loan Documents,  nor any fiduciary relationship with any Lender
and no implied covenants,  functions,  responsibilities,  duties, obligations or
liabilities shall be read into the Loan Documents or otherwise exist against the
Agent.

            (b) The Agent may execute any of its duties under the Loan Documents
by or through  agents or  attorneys-in-fact  and shall be  entitled to advice of
counsel concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agents or  attorneys-in-fact
selected by it with reasonable care.

            (c) Neither the Agent nor any of its officers, directors, employees,
agents,  attorneys-in-fact  or  affiliates  shall be (i)  liable  for any action
lawfully  taken  or  omitted  to be  taken  by it or  such  Person  under  or in
connection  with the Loan  Documents  (except for its or such Person's own gross
negligence  or wilful  misconduct),  or (ii)  responsible  in any  manner to any
Lender for any recitals,  statements,  representations or warranties made by any
of the Credit  Parties or any of their  respective  Subsidiaries  or any officer
thereof contained in the Loan Documents or in any certificate, report, statement
or other document referred to or provided for in, or received by the Agent under
or  in  connection  with  the  Loan  Documents,  or  for  the  value,  validity,
effectiveness,  genuineness, enforceability or sufficiency of the Loan Documents
or for any  failure  of any of the  Credit  Parties  or any of their  respective
Subsidiaries  to perform its  obligations  under the Loan  Documents.  The Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the  observance  or  performance  of any  of the  agreements  contained  in,  or
conditions  of, the Loan  Documents,  or to  inspect  the  properties,  books or
records of any of the Credit Parties or any of their respective Subsidiaries.


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            (d) The  Agent  shall  be  entitled  to  rely,  and  shall  be fully
protected  in relying,  upon any Note,  writing,  resolution,  notice,  consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message,  statement, order or other document or conversation reasonably believed
by it to be genuine  and correct  and to have been  signed,  sent or made by the
proper  Person or  Persons  and upon  advice  and  statements  of legal  counsel
(including,  without  limitation,  counsel to the Credit  Parties),  independent
accountants and other experts selected by the Agent.

            (e) The Agent  shall be fully  justified  in failing or  refusing to
take any action  under the Loan  Documents  unless it shall first  receive  such
advice or  concurrence  of the Majority  Lenders as it deems  appropriate  or it
shall first be indemnified to its  satisfaction  by the Lenders  against any and
all  liability  and  expense  which may be incurred by it by reason of taking or
continuing  to take any  such  action.  The  Agent  shall in all  cases be fully
protected in acting,  or in refraining from acting,  under the Loan Documents in
accordance  with a request of the  Majority  Lenders  (or where  required by the
terms of this Agreement,  the Lenders), and such request and any action taken or
failure to act  pursuant  thereto  shall be binding upon all the Lenders and all
future holders of the Notes.

            (f) The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default  hereunder  unless the Agent shall
have  received  notice from a Lender or one of the Credit  Parties  referring to
this  Agreement,  describing  such  Default or Event of Default and stating that
such notice is a "notice of default." In the event that the Agent  receives such
a notice,  the Agent shall give prompt notice thereof to the Lenders.  The Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Majority Lenders;  provided that, unless and until
the Agent shall have received such  directions,  the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such  Default  or Event of Default  as it shall  deem  advisable  in the best
interests of the Lenders.

            (g) Each Lender  expressly  acknowledges  that neither the Agent nor
any  of  its  officers,  directors,  employees,  agents,   attorneys-in-fact  or
affiliates has made any  representations  or warranties to it and that no act by
the Agent  hereafter  taken,  including  any review of the affairs of any of the
Credit  Parties  or any of their  respective  Subsidiaries,  shall be  deemed to
constitute  any  representation  or warranty  by the Agent to any  Lender.  Each
Lender  represents to the Agent that it has,  independently and without reliance
upon the Agent or any other Lender,  and based on such documents and information
as it has deemed  appropriate,  made its own appraisal of and investigation into
the  business,   operations,   property,   financial  and  other  condition  and
creditworthiness   of  each  of  the  Credit   Parties   and  their   respective
Subsidiaries,  and made its own  decision to make its loans and other  financial
accommodations  hereunder  and  enter  into this  Agreement.  Each  Lender  also
represents that it will,  independently  and without  reliance upon the Agent or
any other Lender,  and based on such documents and  information as it shall deem
appropriate at the time,  continue to make its own credit  analysis,  appraisals
and decisions in taking or not taking action under this  Agreement,  and to make
such  investigation  as it deems  necessary to inform itself as to the business,
operations,   liabilities,   assets,  properties  and  condition  (financial  or
otherwise)  and  creditworthiness  of  each  of the  Credit  Parties  and  their


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respective  Subsidiaries.  Except  for  notices,  reports  and  other  documents
expressly  required to be furnished to the Lenders by the Agent  hereunder,  the
Agent shall not have any duty or  responsibility  to provide any Lender with any
credit or other  information  concerning  the  business,  operations,  property,
financial and other condition or  creditworthiness  of any of the Credit Parties
or any of their  respective  Subsidiaries  which may come into the possession of
the   Agent   or  any   of   its   officers,   directors,   employees,   agents,
attorneys-in-fact or affiliates.

            (h) Each Lender  agrees to  indemnify  the Agent in its  capacity as
such (to the extent not  reimbursed by the Credit  Parties and without  limiting
the obligation of the Credit Parties to do so),  ratably  according to the total
loan  percentages  set forth  opposite  its name on  Exhibit  A hereto  from and
against  any and  all  liabilities,  obligations,  losses,  damages,  penalties,
actions,  judgments,  suits,  costs,  expenses  or  disbursements  of  any  kind
whatsoever  which  may at any time  (including  without  limitation  at any time
following  the  payment of the Notes) be imposed  on,  incurred  by or  asserted
against the Agent in any way  relating to or arising out of the Loan  Documents,
the financing thereunder or any of the transactions  contemplated thereby or any
action  taken or omitted  by the Agent  under or in  connection  with any of the
foregoing;  provided  that no Lender  shall be  liable  for the  payment  of any
portion of such liabilities,  obligations,  losses, damages, penalties, actions,
judgments,  suits, costs,  expenses or disbursements  resulting from the Agent's
gross negligence or wilful  misconduct.  The agreements in this Section 12.13(h)
shall survive the payment of the Notes and the Lender Debt.

            (i) The Agent and its affiliates may make loans to, accept  deposits
from and  generally  engage in any kind of business  with the Credit  Parties as
though  the Agent  were not the Agent  hereunder.  With  respect to its pro rata
share of the Revolving Advances made or renewed by it and any Note issued to it,
the Agent  shall have the same  rights and powers  under this  Agreement  as any
Lender  and may  exercise  the same as though it were not the  Agent.  The terms
"Lender" and "Lenders" shall include the Agent in its individual capacity.

            (j) The Agent may resign as Agent  upon  thirty  (30) days'  written
notice to the Lenders. In the event that the Agent shall enter receivership or a
proceeding  in  bankruptcy  or  insolvency  shall be commenced by or against the
Agent,  then the Lenders (other than the Lender which is the acting as Agent, if
applicable)  may by unanimous  consent of such  Lenders,  remove the Agent under
this  Agreement.  If the Agent shall give a notice of its intention to resign as
Agent under this  Agreement  or the Agent shall be  removed,  then the  Majority
Lenders  shall  appoint  a  successor  agent  for the  Lenders,  whereupon  such
successor agent shall succeed to the rights, powers and duties of the Agent, and
the term "Agent" shall mean such successor agent effective upon its appointment,
and the former Agent's  rights,  powers and duties as Agent shall be terminated,
without any other or further act or deed on the part of such former Agent or any
of the parties to this Agreement or any holders of the Notes. After any retiring
Agent's resignation hereunder as Agent or any Agent's removal, the provisions of


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this Section 12.13 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement.

     (k) Each Lender agrees that (i) all  obligations  of the Credit  Parties to
each  Lender  under  this  Agreement  and under the Notes rank pari passu in all
respects with each other, and (ii) if any Lender shall,  through the exercise of
a right of banker's lien,  set-off,  counterclaim  or otherwise,  obtain payment
with respect to its Revolving  Commitment  which  results in its receiving  more
than its pro rata share of the  aggregate  payments in respect of the  Aggregate
Revolving   Commitments,   then  (A)  such  Lender   shall  be  deemed  to  have
simultaneously purchased from each of the other Lenders a share in its Revolving
Advances so that the amount of the  Revolving  Advances of all Lenders  shall be
pro rata and (B) such other adjustments shall be made from time to time as shall
be equitable to insure that all Lenders share such payments  ratably.  If all or
any portion of any such excess  payment is thereafter  recovered from the Lender
which received the same, the purchase provided in this Section 12.13(k) shall be
deemed to have been rescinded to the extent of such recovery,  without interest.
Each of the Credit Parties expressly consents to the foregoing  arrangements and
agrees that each Lender so  purchasing  a portion of another  Lender's  loan may
exercise all rights of payment  (including,  without  limitation,  all rights of
set-off, banker's lien or counterclaim) with respect to such portion as fully as
if such Lender were the direct holder of such portion.

     (l) The Agent agrees that it shall  promptly  deliver to each Lender copies
of all notices, demands,  statements and communications which the Agent gives to
the Credit  Parties,  except for routine  notices of payments due under the Loan
Documents   and   other   miscellaneous   notices,   demands,   statements   and
communications, which are not material to the interests of any Lender. The Agent
shall have no liability to any Lender, nor shall a cause of action arise against
the Agent,  as a result of the failure of the Agent to deliver to any Lender any
such notice, demand, statement or communication.

     (m) The Agent shall endeavor to exercise the same care in administering the
Loan Documents as it exercises with respect to similar  transactions in which it
is involved and where no other co-lenders or participants are involved; provided
that the  liability  of the  Agent  for  failing  to do so shall be  limited  as
provided in the preceding paragraphs of this Section 12.13.

            (n) (If at any time or times it shall be  necessary  or  prudent  in
      order  to  conform  to any law of any  jurisdiction  in  which  any of the
      Collateral  shall be  located,  or the Agent  shall be advised by counsel,
      that it is so necessary or prudent in the interest of the Lenders,  or the
      Agent shall deem it necessary for its own protection in the performance of
      its duties hereunder,  the Agent and (to the extent required by the Agent)
      each Credit Party shall execute and deliver all instruments and agreements
      reasonably  necessary  or  proper  to  constitute  another  bank or  trust


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      company,  or one or more individuals  approved by the Agent (to the extent
      necessary or requested by the Agent) (each an "Approved Delegate"), either
      to  act  as  co-agent  or  co-agents  or  trustee  of  all  or  any of the
      Collateral,  jointly  with  the  Agent  originally  named  herein  or  any
      successor,  or to act as  separate  agent or agents or trustee of any such
      Collateral.  In the event  that any of the Credit  Parties  shall not have
      joined  in the  execution  of such  instruments  or  agreements  with  any
      Approved  Delegate within thirty (30) Business Days after the receipt of a
      written  request  from the Agent to do so, or in case an Event of  Default
      shall have occurred and be  continuing,  each of the Credit Parties hereby
      irrevocably  appoints  the Agent as its agent and  attorney  to act for it
      under  the  foregoing   provisions  of  this  Section   12.13(n)  in  such
      contingency.

          (i) Every separate  agent and every co-agent and every trustee,  other
     than any agent which may be appointed as successor to the Agent,  shall, to
     the extent  permitted by  applicable  law, be appointed to act and be such,
     subject to the following provisions and conditions, namely:

                  (A) except as otherwise provided herein, all rights, remedies,
            powers,  duties and obligations  conferred upon, reserved or imposed
            upon the Agent in respect of the custody,  control and management of
            moneys,  paper or securities  shall be exercised solely by the Agent
            hereunder;

                  (B) all  rights,  remedies,  powers,  duties  and  obligations
            conferred  upon,  reserved  to or imposed  upon the Agent  hereunder
            shall be  conferred,  reserved or imposed and exercised or performed
            by the Agent  except to the extent  that the  instrument  appointing
            such separate  agent or separate  agents or co-agent or co-agents or
            trustee shall otherwise provide, and except to the extent that under
            any law of any  jurisdiction in which any particular act or acts are
            to be performed,  the Agent shall be  incompetent  or unqualified to
            perform  such act or acts,  in which  event such  rights,  remedies,
            powers,  duties and obligations  shall be exercised and performed by
            such  separate  agents  or co-  agent  or  co-agents  to the  extent
            specifically directed in writing by the Agent;

                  (C) no power given  hereby to, or which it is provided  hereby
            may be exercised by, any such separate  agent or separate  agents or
            co-agent or co- agents or trustee  shall be  exercised  hereunder by
            such separate  agent or separate  agents or co-agent or co-agents or
            trustee  except jointly with, or with the consent in writing of, the
            Agent, anything herein contained to the contrary notwithstanding;

                  (D) no separate agent or co-agent or trustee constituted under
            this Section  12.13(n)  shall be personally  liable by reason of any
            act or  omission of any other  agent,  separate  agent,  co-agent or
            trustee hereunder; and

                  (E) the  Agent,  at any  time  by an  instrument  in  writing,
            executed  by it, may accept  the  resignation  of or remove any such
            separate  agent or  co-agent  or  trustee,  and in that case,  by an


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            instrument in writing  executed by the Agent and the Credit  Parties
            (to the extent  necessary or requested  by the Agent)  jointly,  may
            appoint a successor to such  separate  agent or co-agent or trustee,
            as the  case  may be,  anything  herein  contained  to the  contrary
            notwithstanding.  In the event that any of the Credit  Parties shall
            not have  joined  in the  execution  of any such  instrument  with a
            Person or entity within ten (10) days after the receipt of a written
            request  from the Agent to do so, or in the case an Event of Default
            shall have occurred and be continuing,  the Agent, acting alone, may
            appoint a successor  and may execute any  instrument  in  connection
            therewith,  and the Credit  Parties hereby  irrevocably  appoint the
            Agent its agent and  attorney  to act for it in such  connection  in
            either or such contingencies.

            ss. 12.14.  CONCERNING   JOINT   AND   SEVERAL   LIABILITY   OF  THE
BORROWERS.  (a) Each of the Borrowers is accepting  joint and several  liability
hereunder in consideration of the financial accommodations to be provided by the
Lenders,  the Issuing Banks and the Agent under this  Agreement,  for the mutual
benefit,  directly and indirectly, of each of the Borrowers and in consideration
of the  undertakings  of each of the  Borrowers  to  accept  joint  and  several
liability for the obligations of each of them.

            (b) Each of the Borrowers  jointly and severally hereby  irrevocably
and  unconditionally  accepts,  not merely as a surety but also as a  co-debtor,
joint and  several  liability  with each  other  Borrower,  with  respect to the
payment and performance of all of the obligations  arising under this Agreement,
it being the intention of the parties hereto that all the  obligations  shall be
the joint and several  obligations of all the Borrowers  without  preferences or
distinction among them.

            (c) If and to the  extent  that any of the  Borrowers  shall fail to
make any payment  with respect to any of the  obligations  hereunder as and when
due or to perform any of such  obligations in accordance with the terms thereof,
then in each such event the other  Borrower  will make such payment with respect
to, or perform, such obligation.

            (d) The  obligations  of each Borrower  under the provisions of this
Section  12.14(d)   constitute  full  recourse   obligations  of  such  Borrower
enforceable  against  it to the  full  extent  of  its  properties  and  assets,
irrespective of the validity,  regularity or enforceability of this Agreement or
any other circumstance whatsoever.

            (e) Except as otherwise  expressly  provided  herein,  each Borrower
hereby waives notice of acceptance of its joint and several liability, notice of
any and all  Revolving  Advances  made or  Letters of Credit  issued  under this
Agreement,  notice of occurrence  of any Event of Default,  or of any demand for
any  payment  under  this  Agreement,  notice of any action at any time taken or
omitted by the  Lenders,  the Issuing  Banks or the Agent under or in respect of
any of the obligations  hereunder,  any requirement of diligence and, generally,
all demands, notices and other formalities of every kind in connection with this
Agreement.  Each Borrower hereby assents to, and waives notice of, any extension


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or postponement of the time for the payment of any of the obligations hereunder,
the  acceptance of any partial  payment  thereon,  any waiver,  consent or other
action or  acquiescence  by the Lenders,  the Issuing  Banks or the Agent at any
time or times in respect of any default by any  Borrower in the  performance  or
satisfaction  of any term,  covenant,  condition or provision of this Agreement,
any and all other  indulgences  whatsoever by the Lenders,  the Issuing Banks or
the  Agent in  respect  of any of the  obligations  hereunder,  and the  taking,
addition, substitution or release, in whole or in part, at any time or times, of
any  security  for any of such  obligations  or the  addition,  substitution  or
release,  in whole or in part, of any Borrower.  Without limiting the generality
of the foregoing,  each Borrower  assents to any other action or delay in acting
or failure to act on the part of the  Lenders,  the  Issuing  Banks or the Agent
including,  without limitation, any failure strictly or diligently to assert any
right or to pursue  any  remedy  or to  comply  fully  with  applicable  laws or
regulations  thereunder,  which might,  but for the  provisions  of this Section
12.14,  afford grounds for terminating,  discharging or relieving such Borrower,
in whole or in part,  from any of its  obligations  under this Section 12.14, it
being the  intention of each Borrower  that,  so long as any of the  obligations
hereunder  remain  unsatisfied,  the  obligations  of such  Borrower  under this
Section 12.14 shall not be discharged except by performance and then only to the
extent of such performance.  The obligations of each Borrower under this Section
12.14  shall not be  diminished  or  rendered  unenforceable  by any winding up,
reorganization,  arrangement, liquidation,  reconstruction or similar proceeding
with respect to any Borrower or the Lenders, the Issuing Banks or the Agent. The
joint and several  liability of the Borrowers  hereunder  shall continue in full
force and effect  notwithstanding  any absorption,  merger,  amalgamation or any
other  change  whatsoever  in the  name,  membership,  constitution  or place of
formation of any Borrower or the Lenders, the Issuing Banks or the Agent.

            (f) The provisions of this Section 12.14 are made for the benefit of
the Lenders,  the Issuing Banks and the Agent and their  successors and assigns,
and may be enforced by them in accordance  with the terms of this Agreement from
time to time  against any of the  Borrowers  as often as occasion  therefor  may
arise and without  requirement on the part of the Lenders,  the Issuing Banks or
the Agent first to  marshall  any of their  claims or to  exercise  any of their
rights against the other  Borrower or to exhaust any remedies  available to them
against  the  other  Borrower  or to  resort  to any  other  source  or means of
obtaining  payment  of any of the  obligations  hereunder  or to elect any other
remedy.  The  provisions  of this Section 12.14 shall remain in effect until all
the  obligations  hereunder  shall  have  been paid in full or  otherwise  fully
satisfied.  If at any time, any payment, or any part thereof, made in respect of
any of the  obligations,  is rescinded or must otherwise be restored or returned
by the Lenders,  the Issuing Banks or the Agent upon the insolvency,  bankruptcy
or reorganization of the Borrowers, or otherwise, the provisions of this Section
12.14 will  forthwith be  reinstated  in effect,  as though such payment had not
been made.

            (g)  Notwithstanding  the  provisions of this Section  12.14,  in no
event  shall the  amount  of the  Lender  Debt for  which  the  Parent is liable
hereunder at any time exceed the  outstanding  Parent's  Revolving  Loan at such
time plus accrued and unpaid interest thereon.


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     ss. 12.15.  BENEFIT OF AGREEMENT.  (a) This Agreement shall be binding upon
and inure to the benefit of the parties hereto, and their respective  successors
and assigns,  except that the  obligation of the Lenders and any Issuing  Lender
hereto to make Revolving Advances and other financial  accommodations  hereunder
shall not inure to the benefit of any successors and assigns of the Borrowers.

     (b) No  Borrower  may  assign or  transfer  any of its  interest  hereunder
without the prior written consent of the Lenders.  Each of the Lenders may make,
carry or transfer its pro rata share of the Revolving Advances at, to or for the
account  of any of its  branch  offices  or the  office  of one or  more  of its
Affiliates.

     (c) Following  the Closing Date (or for GE Capital,  either  before,  on or
following the Closing Date),  each Lender may, with the prior written consent of
the Agent, which consent shall not be unreasonably  withheld or delayed (and, so
long as no Event of Default  shall have  occurred and be  continuing,  the prior
written  consent of the Company as to the  identity of the  proposed  assignees,
which consent shall not be unreasonably withheld or delayed),  assign its rights
and  delegate  its  obligations  under this  Agreement  and may,  with the prior
written consent of the Agent,  which consent shall not be unreasonably  withheld
or delayed  (and,  so long as no Event of Default  shall  have  occurred  and be
continuing,  the prior written  consent of the Company as to the identity of the
proposed  assignees,  which  consent  shall  not  be  unreasonably  withheld  or
delayed),  assign,  sell,  or without the  consent of the Agent or the  Company,
grant  participations in, all or any part of its pro rata share of any Revolving
Advance or Revolving  Advances  made by it or its  Revolving  Commitment  or any
other  interest  herein  or in its  Notes to  another  bank or  other  financial
institution, in which event:

              (i) in the case of an  assignment,  upon  notice  thereof  by such
      Lender to the  Borrowers,  the assignee  shall have, to the extent of such
      assignment  (unless  otherwise  provided  therein),  the same  rights  and
      benefits as it would have if it were such Lender  hereunder and the holder
      of a Note, and

              (ii) n the case of a participation, the participant shall not have
      any rights  under this  Agreement  or any Note or any other Loan  Document
      (the  participant's   rights  against  such  Lender  in  respect  of  such
      participation  to be those set  forth in the  agreement  executed  by such
      Lender in favor of the participant  relating thereto which agreement shall
      not, in any event, grant to the participant the right of consent as to any
      matter under the Loan Documents other than those which require the consent
      of all Lenders).

            (d) Subject to the confidentiality  requirement set forth in Section
12.18  hereof,  each Lender may furnish any  information  concerning  the Credit
Parties and their respective  Subsidiaries in the possession of such Lender from
time to time to assignees and participants  (including prospective assignees and
participants).


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     (e) In the event  that any Lender  shall  assign or sell all or any part of
its pro rata share of any Revolving Advance or Revolving  Advances made by it or
its Revolving  Commitment or any other  interests  herein or in its Notes,  such
Lender shall at the time of such  assignment or sale give written  notice to the
Agent of the name and address of the assignee (including the name of the account
officer if  applicable),  and,  with  respect to the  assignment  or sale of its
Notes, shall make all endorsements to the grid schedule attached thereto to make
the information  contained therein accurate.  Further, and as a condition to the
effectiveness  of any such  assignment  or sale,  the assignee  shall pay to the
Agent a fee of $2,500 to record such assignment or sale.

     (f) Notwithstanding anything herein to the contrary, any partial assignment
of the Revolving Loan and/or the Revolving  Credit Facility  Commitment shall be
in  an  aggregate   amount  at  least  equal  to  $10,000,000  and  any  partial
participation of the Loan and/or the Revolving Credit Facility  Commitment shall
be in an aggregate amount at least equal to $10,000,000.

     (g) The Parent and the Company will assist GE Capital in  effectuating  any
such  assignments,  sales or participations by GE Capital (or such other Lenders
referred to above) in whatever manner GE Capital (or such other Lenders referred
to above)  deems  necessary,  including,  but not limited to,  assisting  in the
preparation by GE Capital of offering memoranda and the participation of members
of  the  Borrowers'  management  in  meetings  with  prospective  assignees  and
participants.

     (h)  Notwithstanding  any other provision set forth in this Agreement,  any
Lender may at any time  create a security  interest in all or any portion of its
rights to receive monies under this Agreement  (including,  without  limitation,
under  its  share of the Loan and  Notes  held by such  Lender)  in favor of any
Federal Reserve Bank of the Board of Governors of the Federal Reserve System.

     (i) Any  assignment  and  delegation  by a  Lender  of any  portion  of its
Revolving  Commitment made in accordance with the terms hereof after the Closing
Date shall  relieve such Lender of the portion of its  Revolving  Commitment  so
assigned and delegated.

     ss. 12.16.  COUNTERPARTS;  FACSIMILE  SIGNATURE.  (a) This Agreement may be
executed by the parties hereto  individually  or in any  combination,  in one or
more  counterparts,  each of which shall be an  original  and all of which shall
together constitute one and the same agreement.

     (b)  Delivery  of an  executed  counterpart  of a  signature  page  to this
Agreement by  telecopier  shall be effective as delivery of a manually  executed
counterpart of this Agreement.

     ss. 12.17. INVALIDITY.  Whenever possible, each provision of this Agreement
shall be  interpreted  in such  manner as to be  effective  and valid  under all



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applicable laws and  regulations.  If, however,  any provision of this Agreement
shall be prohibited by or invalid under any such law or regulation,  it shall be
deemed  modified  to  conform  to  the  minimum  requirements  of  such  law  or
regulation,  or, if for any  reason it is not  deemed so  modified,  it shall be
ineffective  and invalid only to the extent of such  prohibition  or  invalidity
without  the  remainder  thereof  or any of the  remaining  provisions  of  this
Agreement being prohibited or invalid.

     ss. 12.18.  DISCLOSURE OF FINANCIAL INFORMATION.  The Agent and each Lender
are each hereby  authorized to deliver a copy of any financial  statement or any
other information relating to the business, operations or financial condition of
the Parent and each of its  Subsidiaries  which may be furnished to it hereunder
or  otherwise,  to any Affiliate of such Lender,  any other  Lender,  any court,
regulatory body or agency having  jurisdiction over the Agent or such Lender, to
any Person which shall, or shall have any right or obligation to, succeed to all
or any part of the Agent's or such  Lender's  interest  in any of the  Revolving
Advances,  this  Agreement and any  Collateral  or to any actual or  prospective
participant therein or assignee thereof. Subject to the foregoing, the Agent and
each Lender (i) agree to take all  reasonable  precautions  and to exercise  due
care to maintain the  confidentiality  of all information  provided to it by the
Parent and its  Subsidiaries in connection  with this Agreement,  (ii) agree and
undertake  that  neither  it nor  any of  its  Affiliates  shall  use  any  such
information  other than for the  purpose of the  financing  contemplated  by the
Agreement  or as  otherwise  permitted  above,  and (iii)  shall  treat all such
information  confidentially  and shall  cause each  prospective  participant  or
assignee of the type  described in this Section 12.18 or participant or assignee
of such Lender to agree in writing to treat such information  confidentially and
to abide by the  provisions of this sentence.  Information  that is available to
the  public  shall not be subject to the  confidentiality  requirements  of this
Section  12.18.  In no event shall the Agent or any Lender be liable  under this
Section  12.18 for any  direct,  indirect,  consequential  or  punitive  damages
resulting from disclosure permitted under this Section 12.18.

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed by their respective  officers  thereunto duly authorized as of the
day and year first above written.

                        FINLAY FINE JEWELRY CORPORATION


                        By: /s/ Barry D. Scheckner
                            -------------------------------
                            Name:  Barry D. Scheckner
                            Title: Senior Vice President and 
                            Chief Financial Officer   

                        Address:
                        529 Fifth Avenue, 5th Flr.
                        New York, New York  10017
                        Attention:  Barry Scheckner
                        Telecopier: (212) 867-3326

                                      154
<PAGE>




                        

                        FINLAY ENTERPRISES, INC.


                        By: /s/ Barry D. Scheckner
                            -------------------------------
                            Name:  Barry D. Scheckner
                            Title: Senior Vice President and 
                            Chief Financial Officer   

                        Address:
                        521 Fifth Avenue, 3rd Flr.
                        New York, New York  10175
                        Attention:  Bonni G. Davis, Esq.
                        Telecopier: (212) 557-3848

             with copies of all notices and other communications to be sent to:

                        Finlay Fine Jewelry Corporation
                        521 Fifth Avenue, 3rd Flr.
                        New York, New York  10175
                        Attention:  Bonni G. Davis, Esq.
                        Telecopier: (212) 557-3848

                              - and -

                        Zimet, Haines, Friedman & Kaplan
                        460 Park Avenue
                        New York, New York  10022
                        Attention:  James Martin Kaplan, Esq.
                        Telecopier: (212) 223-1151


                                      155
<PAGE>


                        GENERAL ELECTRIC CAPITAL
                        CORPORATION, Individually and
                        as Agent


                        By: /s/ Rick Luck
                            --------------------------------  
                            Name:  Rick Luck
                            Title: Its Duly Authorized Signatory

                        Address:
                        201 High Ridge Road
                        Stamford, Connecticut  06927
                        Attention: Account Manager - Finlay
                        Telecopier: (203)

           with copies of all notices and other communications to be sent to:

                        General Electric Capital Corporation
                        201 High Ridge Road
                        Stamford, Connecticut  06927
                        Attention:  Commercial Finance Group Legal Counsel
                        Telecopier:  (203) 840-4520

                              -and-


                        Weil, Gotshal & Manges LLP
                        767  Fifth Avenue
                        New York, New York  10153
                        Attention:  Ted S. Waksman, Esq.
                        Telecopier:  (212) 310-8007


                                      156
<PAGE>


                        FLEET PRECIOUS METALS, INC.



                        By: /s/ David P. Berube 
                            -------------------------------
                            Name:  David P. Berube
                            Title: Assistant Vice President


                        By: /s/ Anthony J. Capuano
                            -------------------------------
                            Name:  Anthony J. Capuano
                            Title: Senior Vice President

                        Address:
                        111 Westminster Street
                        Providence, Rhode Island 02903
                        Attention: Anthony Capuano, Senior Vice President
                        Telecopier: (401) 278-3077


                        GOLDMAN SACHS CREDIT PARTNERS L.P.



                        By: /s/ Ed Forst
                            ----------------------------  
                            Name:  Ed Forst
                            Title: Managing Director 

                        Address:
                        85 Broad Street
                        New York, N.Y. 10004
                        Attention:  Doug Hitchner, Vice President
                        Telecopier:  (212) 357-1500


                        THE CHASE MANHATTAN BANK



                        By: /s/ Dolores A. Walsh
                            -----------------------------
                            Name:  Dolores A. Walsh
                            Title: Vice President

                        Address:
                        111 West 40th Street, 10th Floor
                        New York, N.Y. 10018
                        Attention: Dolores Walsh, Vice President
                        Telecopier: (212) 403-5112


                                      157
<PAGE>


Each of the Guarantors and parties to the Security Documents,  by signing below,
confirms in favor of the Agent and the Lenders that it consents to the terms and
conditions of this Amended and Restated Credit  Agreement and agrees that it has
no defense, offset, claim, counterclaim or recoupment with respect to any of its
obligations or liabilities  under its respective  Guaranty or Security  Document
and that all terms of such Guaranty or Security  Document shall continue in full
force and effect,  subject to the terms thereof and shall continue to secure the
Lender Debt as amended thereby.


FINLAY JEWELRY, INC.


By: /s/ Barry D. Scheckner
    -------------------------------
    Name:  Barry D. Scheckner
    Title: Senior Vice President and 
    Chief Financial Officer    



SONAB HOLDINGS, INC.


By: /s/ Barry D. Scheckner
    -------------------------------
    Name:  Barry D. Scheckner
    Title: Senior Vice President and 
    Chief Financial Officer     



SONAB INTERNATIONAL, INC.


By: /s/ Barry D. Scheckner
    -------------------------------
    Name:  Barry D. Scheckner
    Title: Senior Vice President and 
    Chief Financial Officer    



SOCIETE NOUVELLE D'ACHAT DE BIJOUTERIE - S.O.N.A.B.


By: /s/ Barry D. Scheckner
    -------------------------------
    Name:  Barry D. Scheckner
    Attorney-in-Fact  


                                      158
<PAGE>



                                   EXHIBIT A

              LENDERS, COMMITMENTS AND INITIAL EURODOLLAR OFFICES


Lender and Initial                       Revolving
Eurodollar Office                        Commitment

                                          Amount                     %

General Electric                        $75,000,000                42.85%
Capital
Corporation
201 High Ridge Road
Stamford, CT  06927

Fleet Precious Metals, Inc.             $50,000,000                28.57%
111 Westminster Street
Providence, Rhode Island 02903

Goldman Sachs Credit Partners, L.P.     $25,000,000                14.29%
85 Broad Street
New York, New York 10004

The Chase Manhattan Bank                $25,000,000                14.29%
111 West 40th Street, 10th Floor
New York, New York 10018

                                        Revolving
                                        Sublimit
                                        Commitment                 %

General Electric                        $10,712,500                42.85%
Capital
Corporation
201 High Ridge Road
Stamford, CT  06927

Fleet Precious Metals, Inc.             $7,142,500                 28.57%
111 Westminster Street
Providence, Rhode Island 02903

Goldman Sachs Credit Partners, L.P.     $3,572,500                 14.29%
85 Broad Street
New York, New York 10004

The Chase Manhattan Bank                $3,572,500                 14.29%
111 West 40th Street
New York, New York 10018
--------
1. As such amount may vary pursuant to the definition of Parent Revolving Credit
Facility Sublimit Commitment.


                                      159