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                                                                   Exhibit 10.39

                       SECOND ADDENDUM TO LEASE AGREEMENT


        This Second Addendum to Lease Agreement (the "Amendment") is made and 
entered into as of the 31 day of December, 1997 by and among UPPER MILL, L.P.,
a Pennsylvania limited partnership, and BLUE FISH CLOTHING, INC.

                                  WITNESSETH:

        WHEREAS, the parties hereto entered into a Lease Agreement dated October
15, 1996, as amended by a First Addendum to Lease Agreement dated as of May 19,
1997 and assigned by Assignment of Lease and Assumption of Obligations dated
October 21, 1997 (collectively the "Lease Agreement"); and

        WHEREAS, the parties hereto desire to further amend the Lease Agreement
as hereinafter set forth.

        NOW, THEREFORE, in consideration of the premises contained herein, and
intending to be legally bound hereby, the parties hereto agree as follows:

        1.      Section 2.1 is amended to change all references to Landlord
and Tenant to Lessor and Lessee and to change the Commencement Date to 
June 1, 1998.

        2.      The second sentence of Section 3.1 is amended to read in its 
entirety as follows:


                Each minimum annual amount shall be payable in twelve (12)
                equal monthly installments in advance, without demand, on or  
                before the last day of each calendar month during the Term with
                each such installment being the rent payable for the following
                calendar month.          

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3.   The first sentence of Section 3.2 is amended to read as follows:

     Beginning with the Commencement Date and during the Term of this Lease
     Agreement, Lessee shall pay to Lessor:

     (a)  With respect to the Property of which the Demised Premises is a part,
          one hundred percent (100%) of the following:

          (i)    All garbage and/or trash collection charges assessed or 
                 imposed on the Property during the term of this Lease
                 Agreement; and

          (ii)   Any and all other costs reasonably incurred by Lessor in
                 the operation and maintenance of the Property, including
                 but not limited to water and sewer rentals, repairs,
                 management fees, cleaning, maintenance or mechanical
                 systems and service contracts, the costs of heat, light,
                 power, steam, fuel, labor, supplies, tools, equipment and
                 insurance, and all items properly constituting direct
                 operating costs, which items are or may be deducted (and
                 not capitalized) for Federal income tax purposes,
                 according to standard accounting practices as determined
                 by the Lessor's accountant.

          (iii)  Notwithstanding the foregoing, should the use of that portion
                 of the Property leased by Binney & Smith, Inc. change from use
                 as a warehouse to a use that would increase the foregoing
                 expenses, Lessor will negotiate in good faith with Lessee for
                 a reduction in the percentage of said costs paid by Lessee.

     (b)  A common area maintenance charge of Fifteen Thousand Dollars
          ($15,000) or five percent (5%) of the Basic Rent, whichever is
          greater.

4.   The first sentence of Section 3.5 is amended to read in its entirety as
     follows:

     All payments due from Lessee to Lessor shall be paid to Lessor, absolutely
     net, without deduction or offset whatsoever, and without demand, in lawful
     money of the United States of America at the Lessor's offices, or to such
     other person or at such other place as Lessor may from time to time
     designate in writing to Lessee.

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5.      Section 4.1 is amended to read in its entirety as follows:

        Lessee shall pay as additional rent for the Demised Premises, 
        sixty percent (60%) of all taxes and assessments, general and
        special, including, without limitation, real estate taxes, and all
        other impositions (herein "Impositions"), ordinary and extraordinary, 
        of every kind and nature whatsoever, which may be levied, assessed 
        or imposed upon the Property of which the Demised Premises is a 
        part by a municipality, governmental agency, or other governmental
        authority, accruing or becoming due and payable during the term
        hereof.

6.      Section 6.1 is hereby amended to read in its entirety as follows:

        6.1     Kinds of Insurance. The following policies of insurance shall 
        be maintained:

                (a)     Lessor shall insure the improvements situated upon the 
        Demised Premises against loss or damage by fire, lightning, wind storm, 
        hail storm, aircraft, vehicles, smoke, explosion, riot, or civil
        commotion as provided by the standard fire and extended coverage 
        policy and all other risks of direct physical loss as insured against
        under special extended coverage endorsement, which insurance coverage
        shall be for not less than one hundred percent (100%) of the full
        replacement cost of such improvements with all proceeds of insurance
        payable to Lessor. Lessee shall be responsible for the payment, as
        additional rent, of sixty percent (60%) of the premiums attributable
        to such insurance coverage with said additional rent to be paid 
        according to the provisions of Section 4.3 hereof.

                (b)     Lessee, at Lessee's own cost and expense, shall provide
        insurance insuring Lessor and Lessee from all claims, demands, or
        actions for injury to or death of any person in an amount of not less
        than One Million Dollars ($1,000,000) for injury to or death of more
        than one person in any one occurrence to the limit of Three Million
        Dollars ($3,000,000), and for damage to property in amount of not less
        than One Million Dollars ($1,000,000) made by or on behalf of, any 
        person or persons, firm, or corporation arising from, related to or 
        connected with the Demised Premises, including any period during which
        Lessee is engaged in making any repairs or alterations to the premises
        and including all damage to or from signs, glass, awnings, fixtures, or
        other appurtenances now or thereafter erected by, on or




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        about the Property during the term hereof. Such insurance shall 
        comprehend full coverage of the indemnity set forth in Article 17
        hereof;

                (c)     Lessee, at Lessee's own cost and expense, shall
        provide insurance insuring Lessee from all workers' compensation
        claims;

                (d)     Lessee, at Lessee's own cost and expense, shall 
        provide insurance insuring Lessor and Lessee against breakage of all
        plate glass utilized in the improvements on the Demised Premises; and

                (e)     Lessor shall provide insurance insuring Lessor from
        loss of rents during the period while the Demised Premises are 
        untenantable due to fire or other casualty (for the maximum period for 
        which such insurance is available), but the purchase of such rent 
        insurance shall not relieve Lessee from the primary obligation to pay
        rent during any such period of untenantability. Lessee shall pay sixty
        percent (60%) of the cost of said loss of rents insurance.

7.      Sections 9.1 and 9.2 are amended to read in their entirety as follows:

        9.1.  Termination. If, during the term of this Lease Agreement, or any
        renewal or extension thereof, any building is so damaged by fire or
        other casualty that the Demised Premises cannot be used for the purposes
        for which the premises were leased, as described in Article 5 (whether
        or not the Demised Premises are damaged), the Lease Agreement shall,
        subject to the provisions of Section 9.2 hereof concerning suspension of
        rent, remain in full force and effect and Lessor shall restore the part
        of the Property so damaged as provided in Section 9.2 hereof; provided,
        however, that if the Property is totally destroyed and cannot be
        restored on or before the last date provided for Lessee to purchase the
        Property pursuant to Section 24.1 hereof, Lessee shall nevertheless
        purchase the Property as provided in Article 24 with rent to be
        suspended, and provided further that under said circumstances the
        purchase price will be the purchase price set forth in Section 24.1
        hereof less the cost to repair the Property (as determined by agreement
        of Lessor and Lessee based upon estimates obtained from a contractor or
        contractors acceptable to Lessor and Lessee), but not less than (i) the
        amount of Lessor's outstanding indebtedness to Core States Bank, N.A.
        ("Bank") incurred in connection with the renovation  




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   of the Property and under a Construction Loan Agreement dated October 21,
   1997 between Lessor and Bank (after application of any insurance proceeds
   paid as a result of said casualty) plus (ii) Eight Hundred Thousand Dollars
   ($800,000).

   9.2. Suspension of Rent. If Lessee does not purchase the Property under the
   circumstances described in Section 9.1 hereof, Lessor shall repair the
   damaged building and Lessor may enter and possess the Demised Premises for
   that purpose. Rent shall be apportioned and suspended if and when Lessee is
   deprived of the Demised Premises; provided, however, that if Lessee is only
   deprived of a portion of the Demised Premises only an equitable portion of
   the rent shall be suspended.

8. Section 27.1 is hereby amended to read in its entirety as follows:

   27.1. Zoning. Anything herein contained to the contrary notwithstanding, this
   Lease Agreement and all the terms, covenants and conditions hereof are in all
   respects subject and subordinate to all zoning laws and ordinances affecting
   the Demised Premises and/or the Property and Lessee agrees to be bound by the
   same. Further, Lessor does not agree or represent that any licenses or
   permits which may be required for the business to be carried on by Lessee in
   the Demised Premises will be granted, or if granted will be continued in
   effect or renewed. Any failure to obtain such licenses or permits, or any
   revocation thereof, or failure to continue or renew the same, shall not
   release Lessee from any obligations of this Agreement or reduce the same and
   nothing shall obligate Lessor to assist in obtaining any such permit or
   license. 

9. Section 27.4 is amended to change the notice to be provided to the Lessor to:

     Upper Mill, L.P.
     99 South Cameron Street
     Harrisburg, PA 17101
     Attn: William I. Roberts



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        10.     Except as expressly amended by, or necessarily affected by
reason of, this Amendment, all other provisions of the Lease Agreement shall
remain in full force and effect.

        11.     Any invalidity, in whole or in part, of any provision of his
Amendment shall not affect the validity or enforceability of any other 
provisions of this Amendment or the Lease Agreement.

        12.     The Lease Agreement and this Amendment constitute the entire
agreement between the parties and supersede all prior written and oral and all
contemporaneous oral agreements or understandings between the parties with
respect to the subject matter hereof. No variation of the terms and conditions
of this Amendment shall be effective unless in writing signed by both parties
hereto.

        13.     This Amendment shall be governed by, construed and interpreted
in accordance with, the laws of the Commonwealth of Pennsylvania.

        14.     This Amendment may be executed in more than one (1) 
counterpart, and each fully executed counterpart shall be deemed an original,
with all such counterparts, taken together, constituting one and the same 
instrument.




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     IN WITNESS WHEREOF, this Amendment is made as of the day and year first
above written.



WITNESS/ATTEST:                              UPPER MILL, L.P.
                                             BY: I.B.S. Development Corporation,
                                                 its General Partner


Robbin Tolan                                 By: /s/ William I. Roberts
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                                             William I. Roberts, President




WITNESS/ATTEST:                              BLUE FISH CLOTHING, INC.


                                             By: /s/ Jennifer P. Barclay
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                                             Its: Chairman
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