<PAGE>

                      SECOND AMENDMENT TO CREDIT AGREEMENT

      This Second Amendment to Credit Agreement ("Amendment") is executed and
entered into by and among CRESCENT JEWELERS, a California corporation (the
"Borrower"), Bank of America, N.A., in its capacity as administrative agent (the
"Administrative Agent"), the Lenders (as defined by the Credit Agreement,
defined below) party hereto the "Lenders" and the Guarantors (as defined by the
Credit Agreement, defined below) (the "Guarantors"), effective as of December
21, 2001 (the "Amendment Effective Date"), as follows:

                                    Recitals

      a. The Borrower, the Administrative Agent, the Lenders and the Guarantors
are party to the certain Credit Agreement dated as of September 15, 1999, as
amended by Amendment No. 1 dated March 7, 2001 among such parties (collectively,
the "Credit Agreement"). Terms defined by the Credit Agreement, where used in
this Amendment, shall have the same meanings as are prescribed by the Credit
Agreement.

      b Certain Events of Default (each a "Specified Event of Default" and
collectively the "Specified Events of Default") have occurred and continue in
existence, resulting from (i) the Borrower's and the Crescent Guarantors'
failure to comply with the requirements of Section 7.11(a) of the Credit
Agreement for the fiscal quarter ended June 30, 2001, (ii) the Borrower's and
the Crescent Guarantors' failure to deliver the financial information for the
fiscal year ended July 31, 2001 as required by Section 7.1(a) of the Credit
Agreement and the related compliance certificate required by Section 7.1(c) of
the Credit Agreement and (iii) the entry against the Borrower of the certain
Stipulated Final Judgment and Permanent Injunction filed on September 24, 2001
in the Superior Court in Santa Cruz, California (Case No. CV 141795).

      c. The Borrower, the Administrative Agent, the Lenders and the Guarantors
have agreed to enter into this agreement on the terms specified hereinbelow.

      NOW THEREFORE, FOR VALUE RECEIVED, the Borrower, the Administrative Agent,
the Lenders and the Guarantors each hereby agrees as follows:

                                    ARTICLE 1
                                   Amendments

      Section 1.1 Amendment to Certain Definitions. Effective as of the
Amendment Effective Date, each of the following definitions in Section 1.1 of
the Credit Agreement hereby is amended and restated to read as follows:

            "Applicable Percentage" means, at all times, (i) for Base Rate
      Loans, 2.75%, (ii) for the Letter of Credit Fee, 3.50% and (iii) for the
      Commitment Fee, 0.40%.


Second Amendment to Credit Agreement, Page 1
<PAGE>
            "Borrowing Base" means, as of any day, an amount equal to the sum of
      (i) the applicable Receivables Advance Rate of Eligible Receivables plus
      the lesser of (A) fifty percent (50%) of Eligible Inventory or (B) 85% of
      the Net Recovery Value of Eligible Inventory or (C) $25,000,000, plus
      (iii) $60,000,000 (representing a portion of the Borrowing Base reserve
      amount provided under the Friedman's Credit Agreement which reserve amount
      shall be subject to adjustment at the discretion of the Required Lenders
      based on financial information delivered to the Lenders pursuant to
      Section 7.1) or such greater or lesser amount agreed upon by Friedman's
      and the Borrower which is otherwise reasonably acceptable to the
      Administrative Agent, minus (iv) an amount equal to one month's rental
      expense for the Consolidated Group, minus (v) an amount determined by the
      Administrative Agent in its good faith discretion representing a reserve
      for obligations owing under Hedging Agreements (determined and adjusted
      monthly on a marked-to-market basis), in each case as set forth in the
      most recent Borrowing Base Certificate delivered to the Administrative
      Agent and the Lenders in accordance with Section 7.1(d) (subject to
      adjustments by the Administrative Agent made in good faith to better
      reflect the actual state and condition of the Borrowing Base); provided,
      however, that the foregoing advance rates against Eligible Receivables and
      Eligible Inventory may be adjusted downward by the Administrative Agent in
      its good faith discretion (and thereafter readjusted upward by the
      Administrative Agent in its good faith discretion to rates not in excess
      of the original advance rates). The Administrative Agent will give prompt
      notice to the Borrower and the Lenders of any such adjustment in the
      applicable advance rates.

            "Consolidated EBITDA" means, for any period for the Consolidated
      Group, the sum of (i) Consolidated Net Income plus (ii) to the extent
      deducted in determining Consolidated Net Income, (A) Consolidated Interest
      Expense, (B) taxes and (C) depreciation and amortization, in each case on
      a consolidated basis determined in accordance with GAAP. Except as
      otherwise expressly provided, the applicable period shall be for the
      fiscal month ending as of the date of determination.

            "Consolidated Interest Expense" means, for any period for the
      Consolidated Group, all interest expense, including the amortization of
      debt discount and premium, the interest component under Capital Leases and
      the implied interest component under Securitization Transactions, in each
      case on a consolidated basis determined in accordance with GAAP applied on
      a consolidated basis. Except as otherwise expressly provided, the
      applicable period shall be for the fiscal month ending as of the date of
      determination.

            "Consolidated Net Income" means, for any period for the Consolidated
      Group, net income determined on a consolidated basis in accordance with
      GAAP, but excluding for purposes hereof, extraordinary non-cash or
      non-recurring non-cash gains and losses or charges, and related tax
      effects thereon. Except as otherwise


Second Amendment to Credit Agreement, Page 2
<PAGE>
      expressly provided, the applicable period shall be for the fiscal month
      ending as of the date of determination.

            "Eligible Assignee" means (i) a Lender; (ii) an affiliate of a
      Lender; and (iii) any other Person approved by the Administrative Agent;
      provided, however, that neither the Borrower nor an Affiliate of the
      Borrower shall qualify as an Eligible Assignee.

            "Termination Date" means March 31, 2002 or such later date as to
      which the Administrative Agent and all of the Lenders may in their sole
      discretion by written consent agree.

      Section 1.2 Amendment to Add Certain Definitions. Effective as of the
Amendment Effective Date, of Section 1.1 of the Credit Agreement is amended to
add the following definitions, which shall be deemed to be inserted into their
respective alphabetical positions therein.

            "Net Recovery Value" means, with respect to any Eligible Inventory,
      the net recovery value thereof in an orderly liquidation, as determined by
      the Administrative Agent in its sole discretion.

            "Pro Forma Basis" means, for purposes of determining compliance with
      the financial covenants set forth in Section 7.11 on a Pro Forma Basis
      hereunder, that any transaction shall be deemed to have occurred as of the
      first day of the fiscal-month period ending as of the most recent fiscal
      month end preceding the date of such transaction with respect to which the
      Administrative Agent has received the Required Financial Information. As
      used herein, "transaction" shall mean any Asset Disposition as referred to
      in Section 8.5. In connection with any calculation of the financial
      covenants set forth in Section 7.11 upon giving effect to a transaction on
      a Pro Forma Basis (1) income statement items (whether positive or
      negative) attributable to the Property disposed of in such Asset
      Disposition shall be excluded and (2) any Indebtedness which is retired in
      connection with such Asset Disposition shall be excluded and deemed to
      have been retired as of the first day of the applicable period.

            "Pro Forma Compliance Certificate" means a certificate of an
      Executive Officer of the Borrower delivered to the Administrative Agent in
      connection with any Asset Disposition referred to in Section 8.5 and
      containing reasonably detailed calculations, upon giving effect to the
      applicable transaction on a Pro Forma Basis, of the Consolidated EBITDA as
      of the most recent fiscal month end preceding the date of the applicable
      transaction with respect to which the Administrative Agent shall have
      received the Required Financial Information.


Second Amendment to Credit Agreement, Page 3
<PAGE>
            "Receivables Advance Rate" means, on any date, the applicable
      percentage specified for the period during which such date occurs, as
      follows:

<TABLE>
<CAPTION>
            Period                                     Receivables Advance Rate
            ------                                     ------------------------
<S>                                                    <C>
            Amendment Effective Date
            through and including December 23, 2001    Fifty-seven percent (57%)

            December 24, 2001 and thereafter           Fifty-five percent (55%)
</TABLE>

            "Required Financial Information" means the annual and monthly
      compliance certificates and related financial statements and information
      required by the provisions of Sections 7.1(a), (b) and (c).

      Section 1.3 Amendment to Section 7.11. Effective as of the Amendment
Effective Date, Section 7.11 hereby is amended and restated to read in its
entirety as follows:

            7.11 Financial Covenants.

                  (a) Minimum Consolidated EBIDTA. As of the end of each fiscal
            month for the Crescent Consolidated Group, Consolidated EBITDA shall
            not be less than:

<TABLE>
<CAPTION>
                        Fiscal Month        Consolidated EBITDA
                        ------------        -------------------
<S>                                         <C>
                       November 2001           $   106,000

                       December 2001           $ 9,000,000

                       January 2002           ($   900,000)

                       February 2002           $ 2,200,000

                       March 2002              $   850,000
</TABLE>

                  (b) Capital Expenditures. Consolidated Capital Expenditures
            for the period November 1, 2001 through March 31, 2002 shall not
            exceed $1,000,000.

                                   ARTICLE II
                              Additional Agreements


Second Amendment to Credit Agreement, Page 4
<PAGE>
      Section 2.1 Waiver. Effective as of the Amendment Effective Date, the
Administrative Agent and the Required Lenders hereby waive each of the Specified
Events of Default, provided, that such waiver is expressly limited as provided
herein. Except as expressly provided in this Amendment, all covenants and
requirements of the Credit Agreement remain in full force and effect and the
Agent and the Lenders reserve all rights to require strict compliance with all
such covenants and requirements.

      Section 2.2 Termination of Eurodollar Loans. Notwithstanding anything to
the contrary contained in the Credit Agreement or in any other Credit Document,
effective as of the Amendment Effective Date each Eurodollar Loan outstanding as
of the date hereof shall be converted to a Base Rate Loan at the end of the
applicable Interest Period, and from and after the date hereof, the Borrower
shall have no right to request additional Eurodollar Loans, Continue Eurodollar
Loans or Convert Base Rate Loans to Eurodollar Loans.

      Section 2.3 Additional Agreements. The Borrower and the Crescent
Guarantors consent to the engagement by the Administrative Agent of, and agree
to pay all fees and expenses of (i) an independent consultant selected by the
Administrative Agent to review the account aging systems and software of the
Borrower and the Crescent Guarantors and (ii) an independent appraiser selected
by the Administrative Agent to review the installment contract portfolio of the
Borrower and the Crescent Guarantors. The Borrower agrees that the appraisal
referenced in clause (ii) preceding shall be completed on or prior to December
31, 2001.

                                   ARTICLE III
                                  Miscellaneous

      Section 3.1 Conditions Precedent. The effectiveness of this Amendment is
subject to the satisfaction of each of the following conditions precedent:

      (a) Agent shall have received all of the following, each dated the date of
this Amendment (unless otherwise indicated), in form and substance satisfactory
to Administrative Agent:

            (i) this Amendment, duly executed by the Borrower, the Guarantors,
      the Administrative Agent and Required Lenders;

            (ii) a legal opinion of counsel to the Borrower and the Crescent
      Guarantors, in form and substance satisfactory to the Administrative
      Agent; and

            (iii) a legal opinion of counsel to the Friedman's Guarantors, in
      form and substance satisfactory to the Administrative Agent;

      (b) Payment of the fee required by Section 3.3 of this Amendment;


Second Amendment to Credit Agreement, Page 5
<PAGE>
      (c) Payment to the Administrative Agent of all reasonable costs and
expenses incurred by the Administrative Agent in connection with the
preparation, execution and delivery of this Amendment, including the reasonable
fees and expenses of the Administrative Agent's legal counsel.

      (d) After giving effect to this Amendment, the representations and
warranties contained herein, in the Credit Agreement and in all other Credit
Documents, as amended hereby, shall be true and correct in all material respects
as of the date hereof as if made on the date hereof (except those, if any, which
by their terms specifically relate only to a different date);

      (e) All corporate proceedings taken in connection with the transactions
contemplated by this Amendment and all other agreements, documents and
instruments executed and/or delivered pursuant hereto, and all legal matters
incident thereto, shall be reasonably satisfactory to Administrative Agent; and

      (f) No Default or Event of Default, other than the Specified Events of
Default, shall have occurred and be continuing.

      Section 3.3 Amendment Fee. The Borrower agrees to pay to Administrative
Agent, for the benefit of the Lenders signing this Amendment, on the Amendment
Effective Date, an amendment fee in the amount of $600,000, to be allocated on a
pro rata basis among such Lenders based on their Revolving Commitment
Percentages, in consideration for the Administrative Agent's and such Lenders'
agreements under this Amendment. Upon the effectiveness of this Amendment, the
Borrower shall be deemed to have made a request for a Revolving Loan in the
amount of such amendment fee and the Administrative Agent and the Lenders are
authorized, but not obligated, to fund such Revolving Loan and apply the
proceeds thereof in payment of such fee.

      Section 3.4 Representations and Warranties. The Borrower and the
Guarantors each hereby represents and warrants to the Administrative Agent and
the Lenders that, as of the Amendment Effective Date (a) the execution, delivery
and performance of this Amendment and any and all agreements or documents
executed and/or delivered in connection herewith have been authorized by all
requisite corporate action on the part of the Borrower and the Guarantors and
will not violate the Borrower's or any such Guarantor's certificate of
incorporation or bylaws, (b) after giving effect to this Amendment, all
representations and warranties set forth in the Credit Agreement and in any
other Credit Document are true and correct in all material respects as if made
again on and as of such date (except those, if any, which by their terms
specifically relate only to a different date), (c) except for the Specified
Events of Default, no Default or Event of Default has occurred and is continuing
and (d) the Credit Agreement (as amended by this Amendment), and all other
Credit Documents are and remain legal, valid, binding and enforceable
obligations in accordance with the terms thereof except as enforceability may be
limited by applicable debtor relief laws and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or law).


Second Amendment to Credit Agreement, Page 6
<PAGE>
      Section 3.4 No Claims or Offsets; Release. Neither the Borrower nor any of
the Guarantors has any counterclaims, offsets, credits or defenses to the Credit
Documents and the performance of its obligations thereunder, or if such Person
has any such claims, counterclaims, offsets, credits or defenses to the Credit
Documents or any transaction related to the Credit Documents, the same are
hereby waived, relinquished and released in consideration of this Amendment. In
consideration of the agreements of the Administrative Agent and the Lenders
under this Amendment, the Borrower and the Guarantors each hereby releases and
discharges the Administrative Agent and the Lenders from any and all claims or
causes of action, if any, known or unknown, based upon any facts or
circumstances in connection with the Credit Agreement may have occurred at any
time on or prior to the Amendment Effective Date.

      Section 3.5 Survival of Representations and Warranties. All
representations and warranties made in this Amendment or any other Credit
Document shall survive the execution and delivery of this Amendment and the
other Credit Documents, and no investigation by Administrative Agent or any
Lender, or any closing, shall affect the representations and warranties or the
right of the Administrative Agent and the Lenders to rely upon them.

      Section 3.6 Reference to Agreement. Each of the Credit Documents is hereby
amended so that any reference in such Credit Documents to the Credit Agreement,
whether direct or indirect, shall mean a reference to the Credit Agreement as
amended by this Amendment.

      Section 3.7 Crescent Jewelers, Inc. Crescent Jewelers, Inc. joins in the
execution of this Amendment for the purpose of acknowledging and consenting to
the terms of this Amendment and reaffirming its guaranty obligations under the
Credit Agreement, as amended and modified hereby.

      Section 3.8 Friedman's Guarantors. The Friedman's Guarantors join in the
execution of this Amendment for the purpose of acknowledging and consenting to
the terms of this Amendment and reaffirming their guaranty obligations under the
Friedman's Guaranty Agreement.

      Section 3.9 General. Except as expressly provided by this Amendment, all
of the terms and provisions of the Credit Agreement and the other Credit
Documents remain in full force and effect. This Amendment, when signed by the
Borrower, each Guarantor and the requisite Lenders as provided required by
Section 11.6 of the Credit Agreement (i) shall be deemed effective prospectively
as of the Amendment Effective Date, (ii) contains the entire agreement among the
parties and may not be amended or modified except in writing signed by all
parties, (iii) may be executed in any number of counterparts, each of which
shall be valid as an original and all of which shall be one and the same
agreement, and (iv) shall constitute a Credit Document. It shall not be
necessary in making proof of this Amendment to produce or account for more than
one such counterpart. A telecopy or other electronic transmission of any
executed counterpart shall be deemed valid as an original.

      THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
      AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
      SUBSEQUENT ORAL


Second Amendment to Credit Agreement, Page 7
<PAGE>
      AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE
      PARTIES.


Second Amendment to Credit Agreement, Page 8
<PAGE>
         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers in several counterparts effective as
of the Amendment Effective Date specified in the preamble hereof.

                                  BORROWER:

                                  CRESCENT JEWELERS,
                                  a California corporation

                                  By: /s/ Bradley J. Stinn
                                     -------------------------------------------
                                          Bradley J. Stinn
                                          Chief Executive Officer


                                  GUARANTORS:


                                  CRESCENT JEWELERS, INC.,
                                  a Delaware corporation

                                  By: /s/ Bradley J. Stinn
                                     -------------------------------------------
                                          Bradley J. Stinn
                                          Chief Executive Officer


                                  FRIEDMAN'S INC.,
                                  a Delaware corporation


                                  By: /s/ Victor M. Suglia
                                     -------------------------------------------
                                          Victor M. Suglia
                                          Senior Vice President,
                                           Chief Financial Officer



Second Amendment to Credit Agreement, Page 9
<PAGE>
                                  FRIEDMAN'S MANAGEMENT CORP.,
                                  a Delaware corporation


                                  By: /s/ Victor M. Suglia
                                     -------------------------------------------
                                          Victor M. Suglia
                                          President


                                  FRIEDMAN'S HOLDING CORP.,
                                  a Delaware corporation


                                  By: /s/ Bradley J. Stinn
                                     -------------------------------------------
                                          Bradley J. Stinn
                                          President

                                  FI STORES LIMITED PARTNERSHIP,
                                  a Georgia limited partnership

                                  By:  Friedman's Inc., its sole
                                        general partner

                                       By: /s/ Victor M. Suglia
                                          --------------------------------------
                                               Victor M. Suglia
                                               Senior Vice President, Chief
                                                Financial Officer

                                  FRIEDMAN'S FLORIDA PARTNERSHIP,
                                  a Florida general partnership

                                  By:  Friedman's Management Corp.,
                                        its managing partner

                                       By: /s/ Victor M. Suglia
                                          --------------------------------------
                                               Victor M. Suglia
                                               President

                                  FCJV HOLDING CORP.
                                  a Delaware corporation

                                  By: /s/ Victor M. Suglia
                                     -------------------------------------------
                                          Victor M. Suglia
                                          President


                                  FCJV, L.P., a Delaware limited partnership

                                  By:  FCJV Holding Corp., its general partner

                                       By: /s/ Victor M. Suglia
                                          --------------------------------------
                                               Victor M. Suglia
                                               President



Second Amendment to Credit Agreement, Page 10
<PAGE>
ADMINISTRATIVE

AGENT:                            BANK OF AMERICA, N.A.,
                                  in its capacity as Administrative Agent


                                  By: /s/
                                     -----------------------------------------
                                  Name:
                                       ---------------------------------------
                                  Title:
                                        --------------------------------------


LENDERS:                          BANK OF AMERICA, N.A.,
                                  individually in its capacity as a Lender

                                  By: /s/
                                     -----------------------------------------
                                  Name:
                                       ---------------------------------------
                                  Title:
                                        --------------------------------------


                                  GENERAL ELECTRIC CAPITAL CORPORATION,
                                  individually in its capacity as a Lender
                                  and in its capacity as Documentation Agent

                                  By: /s/
                                     -----------------------------------------
                                  Name:
                                       ---------------------------------------
                                  Title:
                                        --------------------------------------


                                  FLEET RETAIL FINANCE INC.

                                  By: /s/
                                     -----------------------------------------
                                  Name:
                                       ---------------------------------------
                                  Title:
                                        --------------------------------------


                                  FLEET CAPITAL CORPORATION

                                  By: /s/
                                     -----------------------------------------
                                  Name:
                                       ---------------------------------------
                                  Title:
                                        --------------------------------------


                                  SUNROCK CAPITAL CORP.

                                  By: /s/
                                     -----------------------------------------
                                  Name:
                                       ---------------------------------------
                                  Title:
                                        --------------------------------------



Second Amendment to Credit Agreement, Page 11
<PAGE>
                                  LASALLE BANK, N.A.

                                  By:   /s/
                                     -----------------------------------------
                                  Name:
                                       ---------------------------------------
                                  Title:
                                        --------------------------------------


                                  THE PROVIDENT BANK

                                  By:   /s/
                                     -----------------------------------------
                                  Name:
                                       ---------------------------------------
                                  Title:
                                        --------------------------------------


                                  CONGRESS FINANCIAL CORPORATION

                                  By:    /s/
                                     -----------------------------------------
                                  Name:
                                       ---------------------------------------
                                  Title:
                                        --------------------------------------



Second Amendment to Credit Agreement, Page 12