REPUBLIC BUSINESS CREDIT
Republic Business Credit Corporation
452 Fifth Avenue
New York, New York 10018

FACTORING AGREEMENT

Re:     Allstate Financial Corporation
        2700 S. Quincy Street, Arlington, Virginia 22206

Ladies and Gentlemen:


     We  hereby  request  that you act as the  sole  re-factor  of our  Allstate
Factors Division  effective as of the date of your acceptance  hereof,  upon the
terms and  conditions  set forth  below.  All  capitalized  terms shall have the
meaning given such terms in Section 15 of this Agreement  ("Definitions") unless
defined elsewhere in this Agreement.

    1. PURCHASE OF RECEIVABLES:

     A. We agree that our Allstate Factors Division will do all of its factoring
business  through you as its sole re-factor and we hereby assign and sell to you
as absolute owner all Receivables that our Allstate  Factors  Division  acquires
from its Clients. We represent and warrant that each and every Receivable now or
hereafter  assigned  to you will be a bona  fide and  existing  obligation  of a
customer  of a  Client,  owned by and owing to us,  arising  out of the sale and
delivery of goods by a Client or the rendition of services by a Client, free and
clear  of any  and all  deductions,  Disputes,  liens,  security  interests  and
encumbrances other than Permitted Liens.

     B. You agree to and do hereby  purchase  without  recourse to us, except as
set forth  hereinafter,  all  Receivables  approved  by you in  accordance  with
Section IE below.  You agree to and do hereby assume the risk of  non-payment on
such Receivables,  if nonpayment is due solely to the financial inability of the
customer  to make  payment  at the  due  date of the  Receivable,  provided  the
customer has, at such due date, and  thereafter,  received and finally  accepted
the merchandise or services giving rise to such Receivables without any Dispute.

     C.  Receivables not approved by you in accordance with Section IE below are
assigned to and  purchased by you with full  recourse to us in the event of non-
payment thereof for any reason.

     D. In addition, we hereby sell, assign and transfer to you all right, title
and interest in and to the  merchandise,  the sale of which resulted in creation
of Receivables,  and in all such  merchandise  that may be returned by customers
and all causes of action and rights in connection therewith, which may now exist
or which may hereafter arise, including all rights of reclamation,
<PAGE>



     replevin  and  stoppage  in transit  and all rights of an unpaid  vendor of
merchandise  or services as a lienor.  We hereby agree upon your  instruction to
promptly  take any and all action  necessary  for you to enforce  your rights of
reclamation, replevin and stoppage in transit and in the event of our failure to
do so, you shall be authorized to exercise any such right in our or the Client's
name or in any manner you deem  appropriate.  Any merchandise so recovered shall
be treated as  returned  merchandise,  and shall be set aside,  marked with your
name and held for your account as owner.  You shall be promptly  notified of all
such returned merchandise.

     E. No purchase of any Receivable by you shall be deemed to be made pursuant
to Section IB above  unless the sale of  merchandise  or  rendition  of services
resulting  in such  Receivable  shall  have been made  with your  prior  written
approval of the amount and terms of such sale or  rendition  of services and the
credit  standing of the customer,  and you shall have the right to withdraw such
approval at any time before actual delivery of such  merchandise or rendition of
such  services.  Each credit  approval shall be  automatically  withdrawn in the
event the terms of sale are  changed  without  your  written  approval or in the
event  the  shipment  of goods or  rendition  of  services  shall not be made or
performed  within  thirty (30) days from the  completion  date  specified in the
credit approval or within thirty (30) days from the date of the credit approval,
if no completion  date is specified.  When a credit approval  specifies  special
terms  and  conditions,  the  credit  approval  shall  be  deemed  automatically
withdrawn  when such special terms and  conditions  are not complied  with.  You
shall not be liable in any manner or respect  for  refusing to accept or approve
any  Receivable or the credit  standing of any customer or for  withdrawing  any
approval as provided in this Section IE.

     F. On billing  terms of "10 E.O.M."  such terms shall mean with  respect to
invoices  dated  from the Ist day  through  the 19th day of a month that the due
date of such invoice is "10 days after the end of such month"; and, with respect
to invoices  dated on or after the 20th day of the month,  the due date shall be
"10 days after the end of the next following month."

     G. Net Sales relating to each  Receivable net of any  deductions,  shall be
paid to us on the  Settlement  Date of such  Receivable  (less any  commissions,
interest,  Advances  and other  amounts or  expenses  then  payable by us to you
pursuant to the terms  hereof,  and, if an Event of Default  has  occurred,  all
other Obligations of ours) and such payment shall constitute  payment in full of
all amounts due to us from you for such Receivable. We understand that Net Sales
will not be  remitted  to us on a  Settlement  Date if the  customer  remittance
constitutes  an  on-account  or  installment  payment on a Receivable  or if the
Receivable to which the customer  remittance  applies  cannot be identified  for
such  Receivables.  You may deduct from Net Sales  available  for payment on any
Settlement Date chargebacks,  interest,  fees and factoring  commissions and any
other sums which are due and unpaid.

     H. On the face of all bills and  invoices for all  Receivables  assigned to
and  purchased by you  hereunder  shall be placed the  following  legend:  "This
Receivable  has been sold and  assigned  to  Allstate  Factors,  a  division  of
Allstate Financial Corporation and has been further assigned to and purchased by
Republic  Business Credit  Corporation and is owned and payable only to REPUBLIC
BUSINESS CREDIT CORPORATION AT P.O. BOX 7777, W8720, PHILADELPHIA, PA 19175-8720
OR DEPT.  49941, LOS ANGELES,  CA 90088,  whichever is nearer.  Any objection to
this invoice must be reported to Republic  Business  Credit  Corporation  at 452
Fifth Avenue, New York, N.Y. 10018-2706."

     2. ADVANCES:  It is not anticipated that any advances or loans will be made
by you to or for us.  If any  advances  or loans  are at any time made by you in
your sole  discretion,  such loan or advance shall be due and payable on demand.
You may, in your sole  discretion,  hold a reserve  against  Receivables in such
amount as you  determine  to hold,  and you may revise such reserve from time to
time.

     3. SECURITY INTEREST: As security for any and all Obligations, you shall be
entitled  to hold and we hereby  grant to you a  continuing  general  lien upon,
security  interest  in and to, and right of set off on or against  any or all of
the  following,  whether now or  hereafter  existing or  acquired,  and wherever
located (collectively, the
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<PAGE>


"Collateral"): Receivables and merchandise that may be returned by customers and
all causes of action and rights in  connection  which may now exist or which may
hereafter arise, including all rights of reclamation,  replevin, and stoppage in
transit  and all rights of an unpaid  vendor of  merchandise  or  services  as a
lienor,   and  all  proceeds  of  the  foregoing  together  with  all  accounts,
instruments,  documents,  notes, bills and chattel paper, proceeds of insurance,
bank and other deposit accounts, general intangibles,  all balances and sums and
any other property at any time to the credit of the Allstate Factors Division of
Allstate Financial Corporation with Republic Business Credit Corporation,  books
and records,  all the  foregoing as they relate to any and all  Receivables.  No
other interest in any other assets of the Allstate  Factors Division of Allstate
Financial  Corporation or of Allstate  Financial  Corporation  shall  constitute
Collateral  except as specifically  set forth above.  We represent,  warrant and
covenant to you that we now have, and shall at all times continue to have,  good
and  marketable  title to all of the  Collateral,  free and clear of any and all
liens, security interests and encumbrances other than Permitted Liens. You shall
have the right and are hereby irrevocably authorized at any time to charge to us
the  amounts  of any and all  Obligations,  whether  or not then  due.  We shall
execute and deliver to you all  financing  statements  and other  documents  and
instruments that you may request to perfect,  protect or establish your security
interest  hereunder  and we  authorize  you to  execute  and file any  financing
statements  covering such security  interest without our signature or, if you so
elect,  signed in our name by you, and you are hereby irrevocably  appointed our
attorney-in-fact  to do so and you  shall  provide  us  with a copy of any  such
filings.  We shall  reimburse  you for,  and you shall be  entitled to charge us
with,  all  costs  and  expenses   incurred  by  you  in  connection   with  the
administration  and  enforcement  of this  Agreement,  or to enforce  any of the
Obligations,  or in the  prosecution or defense of any action,  involving you or
us,  concerning  any matter  growing  out of or in any manner  relating  to this
Agreement,  the  Receivables or other  Collateral or any  Obligation  whatsoever
other than the costs of  collection of  Receivables  acquired by you pursuant to
Section I B of this Agreement,  including,  without  limitation,  all reasonable
fees and expenses of your attorneys  (including  inhouse  counsel),  incurred in
connection with the foregoing,  including, without limitation, those incurred in
connection  with any  state  court  insolvency  case or  proceeding  or  federal
bankruptcy case or proceeding,  and all fees and costs in connection with public
record  searches  and  filings,  and all other costs and  expenses  with respect
thereto,  whether or not a legal  action is  commenced  by or against us, and if
such action is  commenced,  whether or not  judgment is obtained  other than the
initial  filing fees and expenses  incurred in connection  with the execution of
this Agreement.  Recourse to security or any Collateral shall not at any time be
required and we shall at all times remain  liable for the repayment on demand to
you of all Obligations.


     4.  DISBURSEMENT  OF  FUNDS:  We may  from  time to  time  give  you  oral,
telephonic,  telefax and/or written  instructions to disburse monies to us. Such
disbursement  shall be made only to the  following  account IBJ SCHRODER  BANK &
TRUST CO., NEW YOUK,  NEW YORK, ABA # 026 00 7825, FOR THE ACCOUNT OF AFC, ACCT.
# 43589603, REF: ALLSTATE FACTORS. Such disbursement requests may be made by any
of our officers,  employees or agents and you shall have no obligation to verify
that any  request  is  authorized  or  proper.  You  shall  charge  us $15.00 in
connection with each such disbursement made electronically.


     5. INTEREST: A. Interest charges to our account shall be at a rate per aMum
equal to the Republic  Reference  Rate,  computed on the basis of a 360-day year
for the actual  number of days in the  interest  period.  The  interest  rate in
effect  during  each  calendar  month  shall be  determined  using the  Republic
Reference  Rate in effect on the last  Business  Day of the  preceding  calendar
month. We recognize that the actual yield to you under this Agreement may exceed
the rate of interest specified in this Section 5A.

     B. Interest,  at the respective  rates set forth in this Section 5 shall be
computed  daily on the  unpaid  amount due to you  hereunder,  but only shall be
charged or credited to our account in accordance with Section 5E below.

     C. In the  event  any sums are paid to us or  credited  to our  account  in
error, or you are required to turn over or return to the customer an

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<PAGE>

amount which was paid to us and whose risk of non-payment  you did not assume in
accordance with Section IBabove,  you may in your discretion  charge said sum to
our account.  Any such sums shall bear  interest,  payable by us at the rate set
forth  in  Section  5A  above,  from  the  Settlement  Date  of such  sum,  if a
Receivable,  or  otherwise  from the date such sum was paid to us or credited to
our account (which date shall constitute the "Settlement Date" for such sum), up
to the date a correction is made on your records.

     D. In the event Net Sales are not paid to us on the date  payable  pursuant
to Section IG hereof,  whether by error, or because the customer  remittance was
an on-account or installment  payment (which payments are not credited until the
full invoice  amount is paid),  or because the  Receivable to which the customer
remittance  applied could not be  identified,  then the payment  received by you
shall bear  interest,  payable by you as a credit to our account at the rate set
forth in Section 5A above,  from the Settlement Date of such payment,  which, if
such payment is a partial payment of a full invoice,  shall be calculated  based
upon the Deposit  Date of such partial  payment,  up to the date such payment is
remitted to us.

     E.  Interest  shall be charged or credited to our account,  as the case may
be, as of the last day of the month in which the interest is accrued,  and shall
be deducted from or added to the Net Sales relating to  Receivables  having such
Settlement  Date in the following  month as you shall  select.  If the Net Sales
payable on such  Settlement  Date are less than the interest  payable to you, we
shall pay such interest to you on demand.

     F. You shall pay us interest on Matured Funds, at a rate per annum equal to
3% below the  Republic  Reference  Rate in effect  during each day in which such
Matured Funds are retained by you. The applicable  Republic Reference Rate is to
be  determined  in  accordance  with Section 5A above.  You reserve the right to
remit such Matured Funds to us at any time in accordance  with the provisions of
Section 4.

     6. MONTHLY  STATEMENTS:  You will send us a monthly statement after the end
of each month prior to the end of the  following  month.  UNLESS YOU RECEIVE OUR
WRITTEN EXCEPTIONS TO ANY STATEMENT RENDERED BY YOU WITHIN THIRTY FIVE (35) DAYS
AFTER SUCH  STATEMENT IS SENT BY U.S.  MAIL OR HAND  DELIVERED,  SUCH  STATEMENT
SHALL  CONSTITUTE  AN ACCOUNT  STATED AND BE DEEMED  ACCEPTED BY US AND SHALL BE
CONCLUSIVE AND BINDING UPON US.

      7. COMMISSIONS:

     A.  We  agree  to pay  to  you a  factoring  commission  at  the  following
percentages  of the gross face  amount  for each  Receivable  we acquire  from a
Client,  whether  or not  specifically  assigned  to you:  .70%  for  the  first
$15,000,000;  .65% in excess of $15,000,000 but less than  $30,000,000;  .60% in
excess  of  $30,000,000  but  less  than  $50,000,000  and  .50%  in  excess  of
$50,000,000.  Your factoring  commission as so calculated shall be charged to us
as of the  last  day  of  the  month  in  which  the  Receivable  was  assigned.
Commissions  payable  under this Section  shall be deducted  from Net Sales.  If
sufficient  funds are not available on a Settlement  Date to pay commissions for
any month in full, then the unpaid balance shall bear interest from the due date
of such  Commissions to the date paid, at the rate set forth in Section 5 above,
and such unpaid  balance plus  interest  shall be deducted from Net Sales on the
next Settlement Date.

     B.  Commissions  payable to you hereunder are based upon terms which do not
exceed  ninety  (90) days.  On any  Receivable  on which the terms are more than
ninety (90) days, your commissions thereon shall be increased at the rate of one
quarter of one percent  (.25%) of the gross face amount of such  Receivable  for
each additional  thirty (30) days or fraction  thereof by which the terms exceed
ninety (90) days. A minimum factoring commission on each invoice shall be $3.50.

     C. We may from time to time request that you credit  approve  sales made to
Debtors-in-Possession  operating  under Chapter 11 of the Bankruptcy  Code ("DIP
Sales").  We agree that any such  credit  approval  by you of DIP Sales shall be
subject to a supplemental  factoring commission of 1% in addition to the regular
factoring commission charged by you except as to sales to Petrie Retail,

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<PAGE>

Inc. and its  affiliates in which case the DIP Surcharge  shall be 2%.

     D. Each month you shall charge us with the greater of (i) $2,500.00 or (ii)
the amount of the factoring commission provided for herein.  Further, you agree,
notwithstanding the foregoing,  in the event that in any Contract Year our total
commissions  payable  pursuant  to Section  7A, 7B, and 7C hereof  shall  exceed
$30,000.00 and in any month you have charged us with the amount set forth in (i)
above, you agree to rebate to us any amounts paid by us pursuant to (i) above.

     8. ASSIGNMENT SCHEDULES, INVOICING AND CREDITS: We will provide you with an
assignment  and  schedule  of  Receivables  sold  and  assigned  to you in  form
satisfactory  to you. All bills or invoices shall be mailed by us or our Clients
to customers at our or our Clients' sole expense. We will give you copies of all
bills or invoices,  together  with such proof of shipment or delivery as you may
from time to time  require.  The issuance of or any billing by us or a Client of
such bills or invoices,  shall  constitute an assignment  thereof to you for the
Receivables  represented  thereby,  whether or not we execute any other specific
instrument of assignment. Notwithstanding the foregoing, you shall be deemed not
to have  assumed  the credit  risk as  provided in Section IB above if we do not
supply you with a schedule and assignment of Receivables within thirty (30) days
of the creation of the Receivables involved and the risk of loss with respect to
such  Receivables  shall be deemed to have  reverted  to and been  assumed by us
without any act upon your part to effect the same.


     9.  DISPUTES AND  CHARGEBACKS:  We hereby  further  warrant to you that the
customer in each instance has received and will accept the  merchandise  sold or
the services rendered and the bill or invoice therefor, and will pay the same as
and when due without any  Dispute.  We will notify you  promptly of, and, at our
own cost and expense,  including attorneys' fees and expenses,  shall settle all
Disputes  and will pay you  promptly  the  amount  of the  Receivables  affected
thereby  for  which you have  paid us.  Any  Dispute  not  settled  by us by the
sixtieth (60th) day next following the due date of the bill or invoice  affected
thereby may, if you so elect, be settled, compromised,  adjusted or litigated by
you directly with the customer or other  complainant  for us and at our risk and
upon such terms and conditions as you in your sole  discretion  deem  advisable.
You may also in your discretion take possession of and sell or cause the sale of
any returned or recovered  merchandise,  at such prices,  upon such terms and to
such purchasers as you deem proper (including,  in the event of any public sale,
yourself) and in any event to charge the deficiency costs and expenses  thereof,
including  attorneys' fees and expenses,  to us. In addition to all other rights
to which you are entitled  hereunder,  whenever there is any Dispute,  or if any
Receivable not approved in accordance  with Section IB is unpaid on its due date
for which you have paid us,  you may  charge  the  amount of the  Receivable  so
affected or unpaid to us at any time. In addition, you shall also be entitled to
charge to us the amounts you receive in payment of any  Receivable  not approved
in accordance with Section IB and which thereafter you are required to turn over
or return to a Client or a customer  or any legal  representative  thereof.  The
provisions  of the foregoing  sentence  shall  survive the  termination  of this
Agreement,  and we hereby  indemnify  you and hold you harmless from any loss or
expense  arising  out of the  assertion  of such a  claim  with  respect  to any
Receivable not approved in accordance with Section IB, including attorneys' fees
and  expenses,  and the amount of such loss or expense may be charged to us. You
will  automatically  charge  back  to us  deductions  taken  by  customers.  Any
chargeback  of a  Receivable  shall not be  deemed  nor  shall it  constitute  a
reassignment to us of the Receivable affected thereby,  and title thereto and to
the  merchandise  represented  thereby  shall  remain in you until you are fully
reimbursed.  Regardless  of the date or dates  upon  which you  charge  back the
amount of any  Receivable  with  respect to which there is any  Dispute,  or the
amount  owing  from a  customer  which has  raised  any  Dispute,  we agree that
immediately  upon the  occurrence of any such Dispute,  any  obligation  you may
otherwise  have had  hereunder  to bear the risk of loss  with  respect  to such
Receivable  shall cease and such obligation shall be deemed to have reverted to,
and to have been  assumed  by, us  without  any act upon your part to effect the
same.

     10.  REMITTANCES OF FUNDS:  If any  remittances are made directly to us, we
shall hold
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<PAGE>

the same in trust for you as your  property and  immediately  deliver to you the
identical checks, monies or other forms of payment received,  and you shall have
the  right  to  endorse  our  name on any and  all  checks  or  other  forms  of
remittances received if such endorsement is necessary to effect collection.

     11. MAINTENANCE OF RECORDS:

     A. We agree that we will hold at our of flees and be fully  responsible  to
you for any and all shipping receipts  evidencing delivery of goods or rendition
of services regarding Receivables purchased by you. Such shipping evidences held
by us shall be  available  for your  inspection  and for delivery to you at your
request at any time.

     B. We  further  agree to make our  records,  files  and  books of  account,
including,  but not  limited  to,  any  and all  bills,  invoices,  shipping  or
transport documents, ledgers, journals, checkbooks,  correspondence,  memoranda,
microfilm,  microfiche,  computer programs and records, source materials,  tapes
and discs (collectively  "Documents"),  available to you on request and that you
may visit our premises  during normal  business  hours to examine such Documents
and to make copies or extracts  thereof and to conduct such  examinations as you
deem necessary.

    12. CERTAIN COSTS AND EXPENSES:

     A. If you, at our request and on our behalf, in your sole discretion,  file
a claim (a OR Claim"),  with respect to a Receivable which is not at your credit
risk  or  forward  such a DR  Claim  to a  collection  agency  or  attorney  for
collection, you shall charge us with an amount equal to ten (10%) percent of the
amount  collected on the DR Claim and in addition one hundred (100~o) percent of
the  actual  expenses  or  charges  incurred  by you shall be charged to us when
incurred.

     B. We shall be entitled  to receive at no cost to us one (1) Client  Detail
Aged Trial Balance for each month. For each additional  Client Detail Aged Trial
Balance requested by us in that month, you shall charge us $100.00.

     C. In addition to the costs and expenses  provided in this  Agreement,  you
shall be  entitled  to charge our account  with a one time fee of  $5,000.00  to
establish   this   Agreement   with  you  and  to  cover  legal  fees  for  such
establishment.

     D. We  shall  pay you and we  authorize  you to  charge  us a set up fee of
$250.00 for each Client we establish with you.

     E. You may modify the charges  set forth in  Sections  4, 7C, 12A,  and 12B
above, from time to time, on not less than 180 days prior written notice.

     13. TAXES: Any state, city, local or federal sales or excise taxes on sales
of  Receivables  hereunder and any payroll  taxes,  state  disability  premiums,
premiums for workman's  compensation  insurance and unemployment taxes, shall be
timely paid by us.

     14.   WARRANTIES AND AGREEMENTS:


     A. We hereby  warrant our  solvency  (which  warranty  shall be  continuing
throughout the term of this Agreement) and hereby agree that we are not entitled
to and shall not pledge  your credit for any  purpose  whatsoever  except as you
shall agree to in writing.  We further agree that we shall not encumber or grant
a lien on or security interest (other than Permitted Liens) in present or future
Receivables,  or our other  Collateral,  other  than to you  without  your prior
written consent.

     B. We agree to furnish you with balance  sheets,  statements  of profit and
loss,  financial  statements and such other  information  regarding our business
affairs  and  financial  condition  as filed with the  Securities  and  Exchange
Commission,  and in any event,  a statement of our  financial  position for each
fiscal year  prepared and certified by our regularly  engaged  Certified  Public
Accountant.  All such statements shall fairly present our financial condition as
of the dates,  and the results of our operations for the periods,  for which the
same are furnished.

     C. This Agreement is the complete  agreement  between the parties hereto as
to the subject matter hereof, all prior commitments,

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<PAGE>

 proposals,  negotiations  concerning  the subject  matter  hereof  being merged
 herein.  This Agreement is entered into for the benefit of said parties,  their
 successors  and  assigns,  except that we shall not assign or  hypothecate  our
 rights under this  Agreement to any other person,  firm,  corporation or entity
 without your prior written consent. This Agreement cannot be amended,  changed,
 modified or terminated  orally.  We hereby  consent to the assignment by you of
 this  Agreement and your rights  hereunder,  including the  Collateral,  to any
 Affiliate  or any  other  third-party.  No delay  or  failure  on your  part in
 exercising any right,  privilege or option  hereunder shall operate as a waiver
 of such or of any other  right,  privilege  or option,  and no waiver  whatever
 shall be valid  unless in  writing  signed by you and then only to the extent a
 waiver is therein set forth.


     15.  DEFINITIONS:  For purposes of this Agreement the following terms shall
have the respective meanings given to them below:

          (a)  "Advance"  shall  mean  payment  of the Net Sales  relating  to a
Receivable prior to its Settlement Date.

          (b) "Affiliates" shall mean any person,  firm or corporation  directly
or indirectly  controlling,  controlled by or in common control with you and any
corporation the stock of which is owned or controlled directly or indirectly by,
or is under common control with, Republic New York Corporation.

          (c)  "Agreement"  shall mean this  Factoring  Agreement,  as  amended,
modified or supplemented.

          (d)  "Business   Day"  shall  mean  any  week  day  on  which  banking
institutions  in New York,  New York are open for the  transaction  of  ordinary
banking business.  If any payment or credit by you to us under this Agreement is
due on a day other than a Business  Day,  then such  payment or credit  shall be
made on the next Business Day.

          (e) Client"  means a seller of goods or services from whom we purchase
Receivables through our Allstate Factors Division.

          (f)  "Contract  Year" means the twelve month period  commencing on the
first day of the month after the effective date to the day immediately preceding
the anniversary of such date.

          (g)  "Deposit  Date"  shall  mean  with  respect  to  a  payment  on a
Receivable  from or on  behalf of a  customer  made to the  banking  institution
receiving on your behalf such payment,  the date such banking  institution notes
on the item  evidencing  such payment or otherwise on its records as the date it
deems such payment as having been received by it.

          (h)  "Dispute"  shall  mean  any  dispute,   claim,  offset,  defense,
counterclaim  or any  other  reason  for  nonpayment  other  than  a  customer's
financial  inability  to pay,  regardless  of  whether  the same is in an amount
greater than, equal to or less than the Receivable concerned,  whether bona fide
or not, and  regardless of whether the same, in part or in whole,  relates to an
unpaid Receivable or any other Receivable and whether or not such Dispute arises
by  reason  of an Act of  God,  civil  strife,  war,  currency  restrictions  or
fluctuations, foreign political restrictions or regulations or the like.

          (i) "Matured  Funds" means the aggregate  amounts of Net Sales that we
have elected, by notice to you, to have you retain beyond their Settlement Date,
less the amount of any unpaid Advances, interest,  commissions and other amounts
or expenses  then due you from us pursuant  to the terms  hereof and,  after the
occurrence of an Event of Default, any other Obligations of ours.

          (j) "Net Sales" shall mean the gross face amount of  Receivables  less
discounts  taken by  customers,  and any  credits  received  by or  allowed  to,
customers.

          (k)  "Obligations"  shall  mean  all  loans,  advances,  indebtedness,
liabilities,  debit balances,  covenants and duties and all other obligations of
whatever  kind or  nature  at any  time or from  time to time  owed by us to you
whether fixed or contingent, due or to become due, no matter how or when arising
and whether under this or any other Agreement or otherwise.

                                       7
<PAGE>


          (1) "Permitted Liens" shall mean any lien or security interest granted
to any financial  institution  which has entered into an  intercreditoragreement
with  you  (including,   without  limitation,   a  Subordination  Agreement  and
Assignment of Monies Due).

          (m)  "Receivables"  (or  "Receivable"  in the singular) shall mean and
include all accounts,  and all other  obligations of customers of Clients of our
Allstate  Factors  Division arising out of the sale and delivery of goods or the
rendition  of  services by such  Clients,  whether  now  existing  or  hereafter
created.

          (n) "Republic  Reference Rate" shall mean the lending rate established
by  Republic  National  Bank of New  York  from  time  to time at its  principal
domestic office as its reference lending rate for domestic commercial loans.

          (o)  "Retail  Receivables"  shall mean  Receivables  payable by retail
stores.

          (p) "Settlement Date" shall mean for Receivables having a Deposit Date
of  payment  on Monday and  Tuesday  in any week,  Friday of such week;  and for
Receivables  having a Deposit  Date of  payment  on  Wednesday  through  Friday,
Tuesday of the following  week.  For the purposes of the preceding  sentence,  a
Receivable  on which you have assumed the risk of  nonpayment  under  Section IB
above which remains  unpaid and has not been the subject of any Dispute 120 days
with  regard  to  Retail  Receivables  and 90  days  with  regard  to  Wholesale
Receivables after its due date (the "Deems Paid Date"),  shall be deemed to have
a Deposit Date of payment on the Deems Paid Date.

          (q)  "Wholesale  Receivables"  shall  mean any  Receivable  other than
Retail Receivables.

     16. TERM AND EVENTS OF DEFAULT:


     A.  This  Agreement  shall  continue  in full  force and  effect  until the
anniversary  of the first  Contract Year and from Contract Year to Contract Year
thereafter  unless  terminated  by you or unless we notify  you of our desire to
terminate this Agreement  effective on the anniversary date of any Contract Year
by giving you at least sixty (60) days' prior  written  notice.  Notwithstanding
the  foregoing,  we shall have the right to terminate  the Agreement at any time
during the first  Contract Year provided we shall have paid you  commissions  in
such  Contract  Year of not less  than  $30,000.00.  We shall  have the right to
terminate this  Agreement in any subsequent  Contract Year provided we have paid
you  commissions  in such Contract Year of not less that  $30,000.00.  You shall
have the right to  terminate  this  Agreement at any time upon thirty (30) days'
prior written notice. Termination shall be effective by the mailing by certified
mail,  return receipt  requested of a letter of notice addressed by either of us
to the other specifying the date of termination.  Notwithstanding the foregoing,
you may terminate this Agreement without notice upon the occurrence of any Event
of Default.  On termination for any reason, all Obligations shall, unless and to
the extent that you otherwise elect,  become immediately due and payable without
notice  or  demand.  Any of  the  following  events  with  respect  to us of any
Obligations  shall  constitute an "Event of Default"  hereunder:  default in the
payment  or  performance  of any  Obligation  owing to you when  due,  including
without limitation the failure to pay to you the amount of any net debit balance
in our account and any unpaid  interest  thereon after demand  therefor has been
made;  we commit any breach of or default  in the  performance  of any  material
covenant or agreement  contained in this Agreement or in any other instrument or
agreement with or in favor of you; any  representation or warranty made by us in
this  Agreement or in any other  instrument or agreement with or in favor of you
shall prove to be materially  inaccurate or untrue;  our  dissolution;  we shall
commence  any  case,  proceeding  or other  action  under  any law  relating  to
bankruptcy, insolvency,  reorganization or relief of debtors, seeking to have an
order for relief  entered  with  respect to us, or  seeking to  adjudicate  us a
bankrupt  or  insolvent,  or seeking  reorganization,  arrangement,  adjustment,
winding-up, liquidation,  dissolution,  composition or other relief with respect
to us, or seeking appointment of a receiver, trustee, custodian or other similar
official
                                       8

<PAGE>

 
for us or for all or any substantial  part of the assets of us, or we shall make
a  general  assignment  for the  benefit  of its  creditors,  or there  shall be
commenced  against us any case,  proceeding or other action of a nature referred
to in this clause;  there shall be commenced against us any case,  proceeding or
other action seeking issuance of a warrant of attachment,  execution,  distraint
or similar process against all or any substantial part of the assets of us which
results  in the  entry of an order  for any such  relief,  or we shall  take any
action  in  furtherance  of, or  indicating  its  consent  to,  approval  of, or
acquiescence  in, any of the acts set forth in this clause;  we shall  generally
not, or shall be unable to, or shall admit in writing its  inability to, pay its
debts  as  they  become  due;  entry  of a  judgment  against  us in  excess  of
$50,000.00;  failure to pay or remit any material amount of tax when assessed or
due;  making a bulk transfer or sending notice of intent to do so;  granting any
security  interest  (other than to you or to  Permitted  Liens);  suspension  or
liquidation  of the  usual  business  of us;  failing  to  furnish  you with any
requested  financial  information  or failing to permit  inspection  of books or
records  in  accordance  with the  terms  hereof  by you or any of your  agents,
attorneys or accountants; we shall become a party to any merger or consolidation
without your prior written consent.

     B.   Notwithstanding   any   termination   hereof,   this  Agreement  shall
nevertheless  continue  in full force and effect as to, and be binding  upon us,
after any termination,  until we have fully paid, performed and satisfied all of
the  Obligations,  no matter how or when  arising and whether  under this or any
other agreement.

     C. You agree that during the term of this  Agreement  you will not,  except
with our prior written  consent,  solicit any business from any Client for which
we are the sole factor whose Receivables you acquired from us.

     17. REMEDIES:  Upon the occurrence and continuance of any Event of Default,
you shall have all of the  rights  and  remedies  of a secured  party  under the
Uniform   Commercial  Code  and  other  applicable  laws  with  respect  to  all
Collateral,  such  rights and  remedies  being in  addition to all of your other
rights and remedies  provided for herein or in any other  agreement  between us,
and further,  you may, at any time or times,  after the  occurrence  of any such
Event of Default,  sell and deliver any and all other  Collateral held by you or
for you at public or  private  sale,  in one or more sales or  parcels,  at such
prices and upon such  terms as you may deem  best,  and for cash or on credit or
for future  delivery,  without your assumption of any credit risk, and at public
or private sales, as you may deem appropriate.  If reasonable notice of the time
and place of such sale is required under applicable law, such requirement  shall
be met if any such notice is mailed,  postage  prepaid,  to our address shown on
the cover page hereof,  or the last shown address in your records,  at least ten
(10) days  before the time of the sale or  disposition  thereof.  You may be the
purchaser  at any sale,  if it is  public,  free  from any right of  redemption,
which,  to the extent  permitted  by law, we also hereby  expressly  waive.  The
proceeds  of sale  shall be  applied  first to all costs and  expenses  of sale,
including  attorneys' fees and  disbursements,  and then to the payment (in such
order as you may elect) of all Obligations. You will return any excess to us and
we shall remain liable to you for any deficiency. Your rights and remedies under
this  Agreement  will be  cumulative  and not  exclusive  of any other rights or
remedies  which you may otherwise  have. The provisions of this Section 17 shall
survive any termination of this Agreement.


     18.  APPLICABLE  LAW,  ARBITRATION,  JURISDICTION,  STATUTE OF LIMITATIONS,
WAIVER OF JURY TRIAL:

     A. This Agreement is made in the State of New York and shall be governed by
and  construed  in  accordance  with the laws of said State,  without  regard to
conflict of laws principles.

     B. We agree that any Claim or cause of action by us against  you, or any of
your Affiliates, assigns, shareholders,  directors, officers, employees, agents,
accountants or attorneys,  based on, arising from or relating in any way to this
Agreement, or any supplement or amendment hereto, or any other present or future
agreement between us, or any other transaction contemplated hereby or thereby or
relating  hereto or  thereto,  or any other  matter  whatsoever  shall be barred
unless asserted by us by the  commencement of an action or proceeding in a court
of competent  jurisdiction  by the filing of a complaint  within  eighteen  (18)
months after the first

                                        9

<PAGE>



act,  occurrence  or omission  upon which such Claim or cause of action,  or any
part thereof,  is based,  and the service of a summons and complaint upon one of
your  officers,  within  thirty (30) days after such filing.  We agree that said
eighteen  (18)  month  period  is a  reasonable  and  sufficient  time for us to
investigate  and act upon such Claim or cause of  action.  Said  eighteen  month
period  shall not be  waived,  tolled or  extended  except by  specific  written
consent by you.


     C. In performing your obligations under this Agreement, you shall be liable
to us for only your gross negligence or willful  misconduct.  No Client or other
person or entity  shall be a third  party  beneficiary  of any of our  rights or
claims under this Agreement and in particular, but not by way of limitation, you
shall not be liable to any third  party or for any act or omission by you or any
third party including, without limitation, the inability or failure of any third
party  to  effect  a  transfer  in  accordance  with  our  instructions  due  to
mechanical,  computer or electrical failures or for any other reason beyond your
control.  You shall have no obligation to pursue, or assist us in pursuing,  any
claim we may have against any third party. In no event,  shall you be liable for
special,  punitive,  indirect or consequential  damages, nor shall any action or
inaction  on your  part,  constitute  a waiver  by you of any cause of action or
defense.

     D. As a  material  part of the  consideration  to you to  enter  into  this
Agreement,  we (1) agree that, at your option, all actions and proceedings based
upon,  arising  out of or relating in any way  directly  or  indirectly  to this
Agreement  shall be litigated  exclusively  in the Supreme Court of the State of
New York,  County of New York, (2) consent to the jurisdiction of such court and
consent to the service of process in any such action or  proceeding  by personal
delivery,  first-class mail, or any other method permitted by law, and (3) waive
any and all  rights  to  transfer  or  change  the  venue of any such  action or
proceeding to any other court.

     E. The headings of various  Sections of this Agreement are for  convenience
of reference only and shall not modify, define, expand or limit any of the terms
or provisions of this Agreement.

     F.  This  Agreement  and the  other  written  documents  previously  or now
executed in connection  herewith are the entire and only  agreements  between us
with  respect  to the  subject  matter  hereof,  and all  oral  representations,
agreements and undertakings, previously or contemporaneously made, which are not
set forth herein or therein,  are superseded hereby and thereby.  The provisions
of this Section 18 shall survive any termination of this Agreement.

     G. YOU AND WE EACH  HEREBY  WAIVE THE RIGHT TO TRIAL BY JURY IN ANY  ACTION
BASED UPON, ARISING FROM, OR IN ANY WAY RELATING TO: (1) THIS AGREEMENT,  OR ANY
SUPPLEMENT OR AMENDMENT  HERETO;  OR (11) ANY OTHER PRESENT OR FUTURE INSTRUMENT
OR AGREEMENT BETWEEN YOU AND US; OR (111) ANY CONDUCT,  ACTS OR OMISSIONS BY YOU
OR US OR ANY OF YOUR OR OUR RESPECTIVE DIRECTORS,  OFFICERS,  EMPLOYEES, AGENTS,
ATTORNEYS  OR ANY  OTHER  PERSONS  AFFILIATED  WITH  YOU OR US;  IN  EACH OF THE
FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

Very truly yours,

ALLSTATE FINANCIAL CORPORATION


By:    /s/ Craig Fishman
       -----------------

Title: President
       -----------------

ACCEPTED AT NEW YORK, NEW YORK
ON July 1, 1997

REPUBLIC BUSINESS CREDIT CORPORATION

By:     Marc Forscheimer
        ----------------

Title:  Sr. VP
        ----------------
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