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                                                                    Exhibit 10.5

         AMENDMENT No. 2, dated as of August 21, 2002 (this "Amendment"), to the
Loan and Security Agreement, dated as of October 29, 2001 (as heretofore or
hereafter amended, supplemented and otherwise modified, the "Agreement"), among
Woodworkers Warehouse, Inc. (the "Borrower"), the financial institutions listed
on the signature pages hereof (such financial institutions, together with their
respective successors and assigns, are referred to hereinafter each individually
as a "Lender" and collectively as the "Lenders") and Bank of America, N.A. as
agent for the Lenders (in its capacity as agent, the "Agent").


                              W I T N E S S E T H :

         WHEREAS, the Borrower, the Agent and the Lenders are parties to the
Agreement;

         WHEREAS, the Borrower has requested that the Lenders modify certain
provisions of the Agreement and the Lenders are willing to do so on the terms
and conditions as hereinafter set forth.

         NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto hereby agree as follows:

         1. Defined Terms. Unless otherwise defined herein, capitalized terms
used herein have the respective meanings ascribed thereto in the Agreement.

         2. Amendments to the Agreement. The Agreement is hereby amended as
follows:

                           (a) Section 1 of the Agreement is hereby amended by
                           deleting the definition of "Additional Availability
                           Amount" and replacing it with the following
                           definition:

                           "Additional Availability Amount" means, for the
                           Availability Increase Period specified, (a)
                           $3,000,000 from the Effective Date through and
                           including the date which is the 60th day after the
                           Effective Date, (b) $2,500,000 during the period from
                           the date which is the 61st day after the Effective
                           Date through and including the date which is the 90th
                           day after the Effective Date, (c) $2,000,000 from the
                           91st day after the Effective Date through and
                           including July 31, 2002; provided, however, that the
                           Additional Availability Amount shall be reduced by
                           $166,667 each month end commencing February 28, 2002
                           through and including July 31, 2002 and (d)
                           $1,167,000 from August 1, 2002 through and including
                           the Stated Termination Date; provided however, that
                           the Additional Availability Amount shall be reduced
                           by $233,000 each month end commencing on October 31,
                           2002 until the Additional Availability Amount is
                           zero.
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                           (b) Section 1 of the Agreement is hereby amended by
                           deleting clause (ii) of the definition of "Applicable
                           Margin" and replacing it with the following clause:

                           "(ii) with respect to Additional Availability
                           Reference Rate Loans, four percent (4.00%) and"

                           (c) Section 1 of the Agreement is hereby amended by
                           deleting the definition of "Availability Increase
                           Period" and replacing it with the following
                           definition:

                           "Availability Increase Period" means each of the
                           following periods (a) the Effective Date through and
                           including the date which is the 60th day after the
                           Effective Date, (b) the date which is the 61st day
                           after the Effective Date through and including the
                           date which is the 90th day after the Effective Date,
                           (c) the date which is the 91st day after the
                           Effective Date through and including July 31, 2002,
                           and (d) August 1, 2002 through and including the
                           Stated Termination Date. The foregoing periods may be
                           respectively referred to herein as the first, second,
                           third and final Availability Increase Periods.


                           (d) Section 1 of the Agreement is hereby amended by
                           deleting clause (ii) in the definition of "Borrowing
                           Base" and replacing it with the following clause:

                           "(ii) from April 1, 2002 through and including the
                           Stated Termination Date, the sum of (a) the lesser of
                           (x) sixty-five percent (65%) of the value, at the
                           lower of cost (on a weighted average cost basis) or
                           market, of all Eligible Inventory or (y) eighty-five
                           percent (85%) of the Net Recovery Percentage for
                           Inventory multiplied by the Value of Eligible
                           Inventory, plus (b) eighty-five percent (85%) of the
                           Net Amount of Eligible Accounts, plus (c) until
                           December 31, 2002 and so long as the Borrower is the
                           fee owner of the Seabrook Premises, the sum equal to
                           the lesser of (x) $600,000 through October 31, 2002,
                           and $500,000 from November 1, 2002 through December
                           31, 2002 or (y) the amount equal to 75% of the fair
                           market value of such property as determined in such
                           appraisal, plus (d) without duplication, 50% of the
                           undrawn face amount of Letters of Credit issued or
                           caused to be issued by the Agent for the account of
                           the Borrower for the purchase of goods which will
                           become Eligible Inventory.


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                           (e) Section 4.3 of the Agreement is hereby deleted
                           and replaced with the following:

                           "4.3 Mandatory Prepayments. Upon the date of sale of
                           the Seabrook Premises, Borrower shall prepay any
                           outstanding Loans against the Seabrook Premises.

                           (f) Section 10.26 of the Agreement is hereby deleted
                           and replaced with the following:

                           "10.26 Seabrook Proceeds. Borrower shall be permitted
                           to, upon the date of sale of the Seabrook Premises,
                           retain any excess proceeds from such sale for working
                           capital purposes only."

         3. Representations and Warranties. To induce the Lenders to enter into
this Amendment, the Borrower hereby represents and warrants as follows, with the
same effect as if such representations and warranties were set forth in the
Agreement:

                  (1)      The Borrower has the power and authority to enter
                           into this Amendment and has taken all corporate
                           action required to authorize the Borrower's
                           execution, delivery and performance of this
                           Amendment. This Amendment has been duly executed and
                           delivered by the Borrower, and the Agreement, as
                           amended hereby, constitutes the valid and binding
                           obligation of the Borrower, enforceable against the
                           Borrower in accordance with its terms. The execution,
                           delivery, and performance of this Amendment and the
                           Agreement, as amended hereby, by the Borrower will
                           not violate its certificate of incorporation or
                           by-laws or any material agreement or legal
                           requirement binding on the Borrower.

                  (ii)     On the date hereof and after giving effect to the
                           terms of this Amendment, (A) the Agreement and the
                           other Loan Documents are in full force and effect and
                           constitute binding obligations, enforceable against
                           the Borrower in accordance with their respective
                           terms; (B) no Default or Event of Default has
                           occurred and is continuing; and (C) the Borrower has
                           no defense to or setoff, counterclaim or claim
                           against payment of the Obligations and enforcement of
                           the Loan Documents based upon a fact or circumstance
                           existing or occurring on or prior to the date hereof.


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         4. Limited Effect. Except as expressly amended hereby, all of the
covenants, representations and warranties (including, without limitation, those
found in Section 9.1), and provisions of the Agreement are and shall continue to
be in full force and effect. Upon the effectiveness of this Amendment, each
reference in the Agreement to "this Agreement", "hereunder", "hereof", "herein"
or words of like import and each reference in the other Loan Documents to the
Agreement shall mean and be a reference to the Agreement as amended hereby.

         5. Conditions of Effectiveness. This Amendment shall become effective
when and only when this Amendment shall be executed and delivered by the
Borrower and each Lender.

         6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO THE
CONFLICT OF LAWS PROVISIONS) OF THE STATE OF NEW YORK.

         7. Counterparts. This Amendment may be executed by the parties hereto
in any number of separate counterparts, each of which shall be an original, and
all of which taken together shall be deemed to constitute one and the same
instrument.

         8. Amendment. No modification or waiver of any provision of this
Amendment, or any consent to any departure by the Borrower therefrom, shall in
any event be effective unless the same shall be in writing, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.

         9. Additional Availability Amount Request. Upon execution of this
Amendment, Borrower requests that Lender fully funds the Additional Availability
Amount to Borrower in accordance with this Amendment and the Agreement.


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         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.

                          "BORROWER"

                          Woodworkers Warehouse, Inc.

                          By:/s/ Rick C. Welker
                             ---------------------
                              Name: Rick Welker
                              Title: Vice President and Chief Financial Officer

                          "AGENT"

                          Bank of America, N.A.
                            as the Agent

                          By:/s/ William J. Wilson
                             ---------------------
                              Name: William J. Wilson
                              Title: Vice President

                          "LENDERS"

                          Bank of America, N.A.
                            as a Lender

                          By:/s/ William J. Wilson
                             ---------------------
                              Name: William J. Wilson
                              Title: Vice President

                          Foothill Capital Corporation

                          By:/s/ Juan Barrera
                             ---------------------
                              Name: Juan Barrera
                              Title: Assistant Vice President

                          Transamerica Business Capital Corporation

                          By:/s/ Perry Vavoules
                             ---------------------
                              Name: Perry Vavoules
                              Title: Executive Vice President


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