THIRD AMENDMENT TO THIRD AMENDED
                           AND RESTATED LOAN AGREEMENT

     This  Third   Amendment  to  Third  Amended  and  Restated  Loan  Agreement
("Amendment")  is made this 5th day of September,  1996 by and between  Piercing
Pagoda,  Inc.  ("Borrower"),  a Delaware  corporation having its chief executive
office at 3910 Adler  Place,  Bethlehem,  Pennsylvania  18017,  and Summit Bank,
successor-in-interest  to First Valley Bank ("Bank"), a Pennsylvania bank having
offices at One Bethlehem Plaza, Bethlehem, Pennsylvania 18018.

BACKGROUND

     A.  Pursuant to the terms and subject to the  conditions  set forth in that
certain Third Amended and Restated Loan Agreement dated February 13, 1995 by and
between  Borrower  and Bank (under its former  name),  as amended  pursuant to a
letter  agreement  dated April 21,  1995  between  Borrower  and Bank (under its
former  name),  that  certain  Amendment  to Third  Amended  and  Restated  Loan
Agreement  dated  August 4, 1995  between  Borrower  and Bank  (under its former
name),  and as amended by that certain  Second  Amendment  to Third  Amended and
Restated Loan Agreement dated November 21, 1995 between Borrower and Bank (under
its former name) (as amended,  the "Loan  Agreement")  and related  instruments,
agreements  and  documents  (collectively,  along with the Loan  Agreement,  the
"Financing Agreements"), Borrower is currently indebted to Bank for repayment of
various loans,  advances and extensions of credit made by Bank from time to time
to or for the benefit of Borrower under a certain  revolving  credit facility in
the sum of up to Forty Million  ($40,000,000.00) Dollars (the "Revolving Loan"),
which indebtedness is evidenced by that certain Tenth Replacement Revolving Loan
Note  dated  November  21,  1995 in the  principal  sum of  Forty-Three  Million
($43,000,000.00)  Dollars  executed and delivered by Borrower to Bank (under its
former name) (the "Tenth Replacement Revolving Loan Note").

     B.  Borrower  has  requested  that  Bank (a)  increase  the  amount  of the
Revolving  Loan,  (b) extend the  maturity  date of the  Revolving  Loan and (c)
otherwise  amend and modify  certain of the other terms and conditions set forth
in the Loan Agreement and the other Financing Agreements, and Bank is willing to
do so under the terms and subject to the  conditions set forth in this Amendment
and in the instruments, agreements and documents to be executed and/or delivered
pursuant to this Third Amendment.

     NOW,   THEREFORE,   with  the  foregoing   Background  deemed  incorporated
hereinafter by this reference and hereby made a part hereof, the parties hereto,
intending to be legally bound, hereby further covenant and agree as follows:

SECTION 1.     DEFINITIONS.

     1.01 Capitalized Terms. All capitalized terms not otherwise defined in this
Amendment shall have the meanings ascribed to such terms in the Loan Agreement.

SECTION 2.     CONFIRMATION OF EXISTING INDEBTEDNESS AND RATIFICATION OF 
               FINANCING AGREEMENTS.

     2.01 Confirmation of Existing Indebtedness. Borrower hereby unconditionally
acknowledges and confirms that: the outstanding principal balance of Borrower to
Bank evidenced by the Tenth  Replacement  Revolving Loan Note is, as of the date
hereof,  Fourteen  Million  Two-Hundred  Fifty-Four  Thousand  Eight Hundred and
Thirty-Three and 36/100  ($14,254,833.36)  Dollars; the aggregate face amount of
Letters of Credit issued by Bank or CoreStates Bank, N.A., successor-in-interest
to Meridian Bank for the account of Borrower  under the Revolving Loan is, as of
the  date  hereof,   Twenty-Two   Million   One-hundred   Sixty-

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Three Thousand Three-hundred and 00/100  ($22,163,300.00)  Dollars;  interest on
the  Obligations  has been paid  through  August  15,  1996;  and the  foregoing
indebtedness,  together with  continually  accruing  interest and related costs,
fees and expenses is, as of the date hereof, owing without claim,  counterclaim,
right of recoupment, defense or set-off of any kind or of any nature whatsoever.

     2.02 Ratification of Financing Agreements.

          (A)  Borrower  hereby   unconditionally   ratifies  and  confirms  and
reaffirms in all respects and without condition, all of the terms, covenants and
conditions  set forth in the  Financing  Agreements,  and agrees that it remains
unconditionally  liable  to  Bank  in  accordance  with  the  respective  terms,
covenants and conditions of such instruments, agreements and documents.

          (B) Without  limiting  the  generality  of the  immediately  preceding
Subparagraph 2.02(A), the Borrower hereby unconditionally  ratifies and confirms
and  reaffirms in all  respects and without  condition,  the  provisions  of the
Financing Agreements permitting Bank to Confess Judgment against the Borrower.

SECTION 3.     AMENDMENTS TO FINANCING AGREEMENTS.

          (A) The text of  Paragraph  1.2.1 of the Loan  Agreement is deleted in
its entirety and replaced with the following:

          "Revolving Loan Termination  Date" means October 31, 1996, unless such
          date is extended by Bank and evidenced by a confirming  written notice
          to Borrower.

     3.01 The Revolving Loan.

          (A) For the  period  from the  date of this  Third  Amendment  through
Revolving  Loan  Termination  Date,  the  Line  Limit  shall  be  Fifty  Million
($50,000,000.00)  Dollars and the Cash Advance  Sublimit shall be Thirty Million
($30,000,000.00) Dollars.

     3.02  The  Eleventh  Replacement  Revolving  Loan  Note.  Contemporaneously
herewith,  Borrower  shall execute and deliver to Bank its note in the principal
sum  of  Fifty  Million  ($50,000,000.00)  Dollars  (the  "Eleventh  Replacement
Revolving Loan Note") to evidence  Borrower's  Obligations to repay Bank, on the
Revolving Loan Termination  Date, with interest at the applicable Rate set forth
at Paragraph 2.08 of the Loan Agreement,  for all loans, advances and extensions
of credit made or to be made by Bank to or for the benefit of Borrower under the
Revolving  Loan,  all  as  more  fully  described  in the  Eleventh  Replacement
Revolving  Loan Note,  the terms,  covenants and  conditions of which are hereby
deemed  incorporated  herein by this reference and made a part hereof.  The term
"Note" is hereby amended to mean and include the Eleventh Replacement  Revolving
Loan Note.

SECTION 4.     WARRANTIES AND REPRESENTATIONS.

     4.01  Reaffirmation of Warranties and  Representations.  All warranties and
representations  set  forth  in the  Loan  Agreement  and  the  other  Financing
Agreements are hereby  reasserted and restated by Borrower as of the date hereof
as if set forth at length herein,  except as modified by information  previously
provided,  in writing,  to Bank or acknowledged,  in writing,  by Bank. Borrower
hereby acknowledges that such warranties and representations, and the warranties
and  representations set forth below, are being specifically relied upon by Bank
as a material inducement to Bank to enter into this Third Amendment and increase
the amount of the Revolving Loan.

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<PAGE>

     4.02  Additional  Warranties and  Representations.  To induce Bank to enter
into this Third Amendment, Borrower represents and warrants to Bank that:

          (A) Borrower has the power,  authority  and capacity to enter into and
perform this Third Amendment,  the Eleventh Replacement  Revolving Loan Note and
all related instruments,  agreements and documents, and to incur the Obligations
herein and therein provided for, and Borrower has taken all proper and necessary
corporate  action to authorize the execution,  delivery and  performance of this
Third  Amendment,  the  Eleventh  Replacement  Revolving  Loan Note and  related
instruments, agreements and documents;

          (B) This Third  Amendment is, and the Eleventh  Replacement  Revolving
Loan Note  when  delivered  will be,  valid,  binding  and  enforceable  against
Borrower in accordance with their respective terms; and

          (C) No consent, approval or authorization of, or filing,  registration
or  qualification  with,  any Person is  required  to be obtained by Borrower in
connection with the execution and delivery of this Third Amendment, the Eleventh
Replacement  Revolving  Loan  Note  or  any  related  instrument,  agreement  or
document,   or  undertaking  or  performance  of  any  Obligation  hereunder  or
thereunder.


SECTION 5.     CONDITIONS PRECEDENT.

     This Third Amendment is subject to the following  conditions precedent (all
instruments,  agreements and documents to be in form and substance  satisfactory
to Bank and its counsel):

     5.01  Documents  Required for Closing.  Borrower  shall have duly  executed
and/or  delivered (or caused to be duly executed  and/or  delivered) to Bank the
following:

          (A) The  Eleventh  Replacement  Revolving  Loan  Note and  each  other
instrument,  agreement and document to be executed and/or delivered  pursuant to
this Amendment and/or the instruments,  agreements and documents  referred to in
this Amendment;

          (B) A  certified  (as of the  date of this  Third  Amendment)  copy of
resolutions of Borrower's Board of Directors authorizing the execution, delivery
and performance of this Third Amendment, the Eleventh Replacement Revolving Loan
Note and each other document to be executed and/or delivered pursuant hereto and
any other instrument, agreement or document referred to herein;

          (C) A certification  that Borrower's  certificate of incorporation and
by-laws remain unchanged from Closing;

          (D) A  certificate  (dated  the  date  of  this  Third  Amendment)  of
Borrower's  corporate  secretary as to the incumbency and specimen signatures of
the  officers  of  Borrower   executing  this  Third  Amendment,   the  Eleventh
Replacement  Revolving Loan Note and each other  document to be executed  and/or
delivered pursuant hereto or thereto; and

          (E)  Such  other  instruments,  agreements  and  documents  as  may be
required by Bank and/or its counsel.

SECTION 6.     MISCELLANEOUS.

     6.01 Integrated Agreement. This Third Amendment and all of the instruments,
agreements and documents  executed  and/or  delivered in  conjunction  with this
Third Amendment shall be effective upon the date of execution hereof and thereof
by all parties  hereto and thereto,  

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<PAGE>

and shall be deemed  incorporated into and made a part of the Loan Agreement and
the other Financing Agreements. All such instruments,  agreements and documents,
and this Third Amendment,  shall be construed as integrated and complementary of
each other,  and as augmenting  and not  restricting  Bank's  rights,  remedies,
benefits and security. If, after applying the foregoing,  an inconsistency still
exists,  the provisions of this Third  Amendment  shall  constitute an amendment
thereto and shall govern and control.

     6.02  Expenses  of Bank.  Borrower  will pay,  on  demand,  all  reasonable
out-of-pocket  expenses,  including  the  reasonable  fees and expenses of legal
counsel  for Bank,  incurred in  connection  with this Third  Amendment  and all
instruments,  agreements and documents  executed and/or  delivered in connection
with this Third Amendment. Subject to Paragraph 2.07 of the Loan Agreement, Bank
may charge any  deposit  account of Borrower  maintained  at Bank for all or any
part of any amount due hereunder.

     IN WITNESS WHEREOF,  the parties hereto have caused this Third Amendment to
Third Amended and Restated  Loan  Agreement to be duly executed and exchanged as
of the day and year first above written.

                                             PIERCING PAGODA, INC.,
                                             a Delaware corporation



                                             By:/s/ John F. Eureyecko
                                             -----------------------------------
                                             Name: John F. Eureyecko
                                             Title: President,


                                             Attest: /s/ Brandon R. Lehman
                                             -----------------------------------
                                             Name: Brandon R. Lehman
                                             Title: Treasurer


                                             (Corporate Seal)



                                             SUMMIT BANK


                                             By: /s/ Ammon J. Baus
                                             -----------------------------------
                                             Name: Ammon J. Baus
                                             Title:   Vice President


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