FOURTH AMENDMENT TO THIRD AMENDED
                           AND RESTATED LOAN AGREEMENT

     This Fourth Amendment to Third Amended and Restated Loan Agreement ("Fourth
Amendment")  is made  this 18th day of  October,  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), 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),  and as amended by that certain  Third  Amendment to Third Amended
and Restated Loan Agreement  dated  September 5, 1996 between  Borrower and Bank
(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 Fifty Million  ($50,000,000.00)  Dollars (the "Revolving Loan"),  which
indebtedness is evidenced by that certain  Eleventh  Replacement  Revolving Loan
Note  dated   September  5,  1996  in  the   principal   sum  of  Fifty  Million
($50,000,000.00)  Dollars  executed and delivered by Borrower to Bank (under its
former name) (the "Eleventh 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 Fourth 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 Eleventh  Replacement  Revolving  Loan Note is, as of the
date hereof, Twenty-Two Million Three Hundred Twenty-Four Thousand Seven Hundred
Seven and 42/100 ($22,324,707.42)  Dollars; the aggregate face amount of Letters
of Credit  issued by Bank or 

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<PAGE>

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-Five Million
Two Hundred  Sixty-Two  Thousand  Four Hundred  Four and  43/100($25,262,404.43)
Dollars; interest on the Obligations has been paid through October 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 December 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  Fourth  Amendment  through
Revolving  Loan  Termination  Date,  the  Line  Limit  shall  be  Sixty  Million
($60,000,000.00)  Dollars  and the Cash  Advance  Sublimit  shall be  Thirty-Six
Million ($36,000,000.00) Dollars.

     3.02  The  Twelfth  Replacement  Revolving  Loan  Note.   Contemporaneously
herewith,  Borrower  shall execute and deliver to Bank its note in the principal
sum  of  Sixty  Million   ($60,000,000.00)  Dollars  (the  "Twelfth  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 Twelfth 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 Twelfth 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  Fourth  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 Fourth Amendment, Borrower represents and warrants to Bank that:

          (A) Borrower has the power,  authority  and capacity to enter into and
perform this Fourth Amendment,  the Twelfth 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
Fourth  Amendment,  the  Twelfth  Replacement  Revolving  Loan Note and  related
instruments, agreements and documents;

          (B) This Fourth  Amendment is, and the Twelfth  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 Fourth Amendment, the Twelfth
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 Fourth 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  Twelfth  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  Fourth  Amendment)  copy of
resolutions of Borrower's Board of Directors authorizing the execution, delivery
and performance of this Fourth Amendment, the Twelfth 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  Fourth  Amendment)  of
Borrower's  corporate  secretary as to the incumbency and specimen signatures of
the  officers  of  Borrower   executing  this  Fourth  Amendment,   the  Twelfth
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  Fourth   Amendment  and  all  of  the
instruments,  agreements and documents  executed and/or delivered in conjunction
with this Fourth  Amendment 

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<PAGE>

shall be effective upon the date of execution  hereof and thereof by all parties
hereto and thereto, 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 Fourth  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 Fourth
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 Fourth  Amendment  and all
instruments,  agreements and documents  executed and/or  delivered in connection
with this Fourth  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 Fourth 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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