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                                                                    EXHIBIT 10.1

                             PARTICIPATION AGREEMENT

         This Participation Agreement (this "Agreement") is made as of the 27th
day of March, 1998, between LaSalle National Bank, a national banking
association ("LaSalle") and Friedman's Inc., a Delaware corporation (the
"Participant"). LaSalle and certain other Lenders have made or have agreed to
make loans and other extensions of credit to Crescent Jewelers, a California
corporation (the "Borrower") pursuant to that certain Loan and Security
Agreement by and among Borrower, certain parties thereto ("Lenders") and LaSalle
as agent for the Lenders ("Agent") dated October 15, 1996, as it has been or may
be amended from time to time (the "Loan Agreement. Capitalized terms used herein
and not otherwise defined herein shall have the meanings ascribed to such terms
in the Loan Agreement.

In consideration of the mutual promises set forth herein, LaSalle hereby sells
to the Participant, and the Participant hereby purchases from LaSalle, without
recourse to LaSalle, on the terms-is and conditions hereinafter set forth,
28.571 % undivided participation interest in (i) all Loans made by LaSalle, in
its individual capacity, to Borrower and any letters of credit issued by
LaSalle, in its individual capacity on behalf of Borrower (collectively, the
"Loans"), (ii) the interest of LaSalle, in its individual capacity, in the Loan
Agreement and the Other Agreements (collectively, the "Loan Documents") and
(iii) the interest of LaSalle, in its individual capacity, in all collateral for
and guarantees of the Loans (such interest being herein called the
"Participation Interest"), provided that the maximum aggregate principal amount
of the Participant's Participation Interest shall not exceed $10,000,000 (the
"Maximum Participation Interest").

         1.       On the date hereof, the Participant shall pay to LaSalle an
amount equal to the Participant's Participation Interest in respect of the
principal amount outstanding under the Loans. LaSalle shall deliver to the
Participant a Statement of Participation evidencing the Participant's
Participation Interest in the Loans in the form of Exhibit A attached hereto.

         2.       On Thursday of each week (the "Settlement Date"), the
Participant shall pay to LaSalle the amount, if any, by which the principal
amount of the Participant's Participation Interest outstanding is less than the
Participant's Participation Interest in respect of the then outstanding
aggregate principal amount of the Loans and any other amount due to LaSalle
hereunder. All remittances due hereunder shall be in immediately available funds
without set-off or counterclaim, and shall be sent to LaSalle's office at 135
South LaSalle Street, Chicago, Illinois 60603, Attention: Carolyn Sanford. The
obligation of the Participant to remit the amount specified hereunder shall be
unconditional and irrevocable, notwithstanding any change of circumstances,
including (a) any modification or amendment of, or any consent, waiver, release
or forbearance with respect to, any of the terms of the Loan Agreement or any of
the Loan Documents; (b) any other act or omission to act on the part of LaSalle
(provided that the Participant shall retain any cause of action against LaSalle
based on LaSalle's gross negligence or willful misconduct) or on the part of the
Borrower or any other person; (c) the existence of any Event of Default under
the Loan Agreement or any default under any of the other Loan Documents; or (d)
any change of any kind In the financial position or creditworthiness of the
Borrower or any other Person. If any payment which is due to LaSalle is not paid
by the Participant oil the applicable Settlement Date, then the Participant
shall pay interest to LaSalle on 


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the amount due to LaSalle from the applicable Settlement Date to the date such
payment is made by the Participant to LaSalle, at the highest interest rate
applicable to the Loans under the Loan Agreement after the occurrence of an
Event of Default, and all such interest shall be payable on demand.

         3.       Provided that the Participant has made all payments required
by this Agreement to be made to LaSalle, if and as LaSalle receives good funds
from the Borrower in payment of amounts due under the Loan Agreement, LaSalle
shall: (a) on each Settlement Date distribute to the Participant in immediately
available funds, by wire transfer at NationsBank, N.A., Atlanta, Georgia, ABA
Number 061000052, Account Number 102243608, Reference: Friedman's Inc. (or at
such other location as the Participant shall give notice of as herein provided),
an amount equal to the amount, if any, by which the net outstanding principal
amount owing to Participant at such time exceeds the Participant's Participation
Interest in the then outstanding aggregate principal balance of the Loans at
such time; (b) monthly, within five (5) business days of receipt by LaSalle,
distribute to the Participant at its address set forth herein (or at such other
address as the Participant shall give notice of as herein provided), in like
funds, an amount equal to the Participant's Participation Interest in any
interest and fees received by LaSalle in connection with the Loans (with the
exception of the monthly agency fee payable only to Agent); and (c) monthly,
within five (5) business days of receipt by LaSalle, distribute to the
Participant at its address set forth herein (or as such other address as the
Participant shall give notice of as herein provided), in like funds, an amount
equal to the Participant's Participation Interest in any other amount.

         4.       If either the Participant or LaSalle shall at any time receive
payment on account of its interest in the Loans, whether received by voluntary
payment, by sale, disposition, or other realization upon or from any collateral
security, by the exercise of the right of set-off or banker's lien, by
counterclaim, cross action or by the enforcement of any agreement of the
Borrower relating to the Loans, or by proceedings in bankruptcy, reorganization,
liquidation, receivership or similar proceedings, or otherwise, in an amount in
excess of the amount such party is entitled to receive hereunder, equitable
adjustment will be made between LaSalle and the Participant so that all such
payments shall be shared ratably by LaSalle and the Participant in accordance
with their respective interests in the Loans. The Participant acknowledges and
agrees that LaSalle, in its sole discretion, has all rights (i) to make and
present all claims (including filing of proofs of claim) in respect of the
Participation Interest in any liquidation, bankruptcy, arrangement,
receivership, assignment, reorganization or dissolution proceedings or otherwise
and (ii) to vote all claims In respect of the Participation Interest In any such
proceedings. The Participant shall have no right to exercise any remedies
against the Borrower in respect of the Participation Interest.

         5.       If any payment received by LaSalle and forwarded to the
Participant pursuant to this Agreement or any amount recovered by either party
and shared with the other party pursuant to Section 4 hereof, or any portion of
the foregoing is rescinded or must otherwise be returned for any reason, the
party who received such payment or amount shall return or pay over its
proportionate share of the payment or amount which must be returned, together
with any interest that the party who is obligated to return Such payment or
amount is required to pay on the payment or amount returned by Such party.



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         6.       If LaSalle (a) makes any payment pursuant to any provision of
the Loan Agreement or any other Loan Document (other than a principal advance on
a Loan), or (b) incurs any expense which it deems necessary or desirable to
protect the rights of LaSalle, the Participant and any other participants in the
Loans or which otherwise arises in connection with the performance or
enforcement of the Loans, then, to the extent LaSalle is not reimbursed by the
Borrower for such payment or expense, the Participant will pay to LaSalle on
receipt of notice thereof an amount equal to its Participation Interest in each
payment made or expense incurred by LaSalle.

         7.       This Agreement shall be in full force and effect until all of
the Liabilities under the Loan Agreement have been indefeasibly paid in full and
the Loan Agreement has been terminated.

         8.       LaSalle will exercise the same care and attention with respect
to the administration of the Loans as LaSalle gives to its other credit
transactions in which no participations are sold. LaSalle may use its sole
discretion with respect to exercising or refraining from exercising its rights
or taking or refraining from taking any actions which may be vested in LaSalle
or which LaSalle may be entitled to take or assert under or with respect to the
Loans, the Loan Agreement or any other Loan Document, and LaSalle shall not be
liable to the Participant with respect to anything that LaSalle may do or
refrain from doing in the exercise of its business judgment, in the absence of
its own gross negligence or willful misconduct. LaSalle shall have no obligation
to make any claim or assert any lien upon, or assert any right of setoff with
respect to, any property held by LaSalle, whether or not such property
constitutes Collateral for the Loans. LaSalle may, in its sole discretion,
without prior notice to the Participant and without any consent or other action
by the Participant, grant any waiver or consent under or with respect to the
Loan Agreement, any other Loan Document and/or the Loans, or agree to any
amendment of the Loan Agreement or any other Loan Document. The Participant
acknowledges and agrees that it shall not have any voting rights under or with
respect to the Loan Agreement, any other Loan Document and/or the Loans. LaSalle
may rely upon the advice of counsel concerning legal matters and upon any
written communication or any telephone conversation which LaSalle believes to be
genuine and correct or to have been signed, sent or made by the proper person
and LaSalle shall not be required to make any inquiry concerning the performance
by the Borrower or any other person of any of their respective obligations and
liabilities under or in respect of the Loan Agreement or any other Loan
Document. LaSalle shall not be deemed a trustee for the Participant in
connection with the Participation and shall have no duties to the Participant
except as expressly set forth in this Agreement.

         9.       LaSalle may accept deposits from, make loans or otherwise
extend credit to, take deposits from and generally engage in any kind of banking
or trust business with the Borrower or any other person, receive security for
such loans or extensions of credit, and receive payment on such loans or
extensions of credit and otherwise act with respect thereto freely and without
accountability, as if this Agreement were not in effect. The Participant shall
have no interest in any property taken as collateral for any loans or extensions
of credit made by LaSalle other than the Loans or in any property in LaSalle's
possession or control or in any deposit held or other indebtedness owing by
LaSalle which may be or become collateral for or otherwise available for payment
of the Loans by reason of the general description of secured obligations
contained in any 



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security agreement or other agreement or instrument held by LaSalle, or by
reason of the right of setoff, counterclaim or otherwise, except that if such
property, deposit or indebtedness or the proceeds thereof shall be applied in
reduction of the Loans, the Participant shall be entitled to its share of such
application, as set forth in Section 3 above. LaSalle shall maintain records
with respect to the Participation Interest and this Agreement. All sums received
and payments made by LaSalle in connection with the Loans or the Participation
Interest will be clearly and fully accounted for on LaSalle's records in a
manner which reflects the Participant's interest therein. If the Participant
shall at any time request an accounting, LaSalle shall furnish a written
accounting to the Participant.

         10.      The Participant acknowledges and agrees that:

                  (a) The Participant has performed and will continue to perform
         its own analysis of the Borrower and any other entity which may have
         liability for the Loans, and its own investigation of the risks
         involved in the transactions contemplated by the Loan Agreement and in
         entering into this Agreement and purchasing an interest in the Loans
         hereunder, and it is not and will not rely on LaSalle with respect
         thereto;

                  (b) The Participant has reviewed and approved the form and
         substance of each of the Loan Documents to the extent deemed necessary
         or advisable by the Participant;

                  (c) LaSalle has not made and shall not at any time be deemed
         to make any representation or warranty, express or implied, with
         respect to (i) the due execution, authenticity, legality, accuracy,
         completeness, validity or enforceability of any of the Loan Documents,
         (ii) the financial condition, solvency or creditworthiness of the
         Borrower or any other entity which may have liability for the Loans, or
         the collectibility of the Loans, (iii) the validity, perfection,
         enforceability, value or sufficiency of, or title to any security for
         the Loans, or the filing, or recording or taking of any other actions
         with respect to the Loan Documents, or the security for the Loans, or
         (iv) any other matter having, any relation to this participation, the
         Loans or the Loan Documents, and

                  (d) LaSalle will furnish to the Participant such information
         in its possession relating to the Borrower and/or the Loans as may
         reasonably be requested by the Participant from time to time and will
         forward to the Participant copies of the Borrower's financial
         statements as and when received.

         11.      In the event the Participant shall fall to perform any
obligation to be performed by It under this Agreement, LaSalle may terminate
this Agreement and thereafter acquire, or place with one or more other
entities, all or any part of the Participation Interest of the Participant in
the Loans without, however, relieving the Participant from any liability
hereunder or for damages, costs and expenses suffered by LaSalle as a result of
such failure by the Participant.

         12.      The Participant agrees that it will not sell or otherwise
dispose of any portion of its Participation Interest or grant any
sub-participation therein without the prior written consent of LaSalle. In the
event of a sub-participation, the Participant shall not be relieved of any of
its



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obligations to LaSalle hereunder. The Participant represents that it is
acquiring the Participation Interest for its own account in the ordinary course
of its commercial banking business and not with a view to, or for sale in
connection with, any distribution thereof.

         13.      By its confirmation and acceptance of this Agreement, the
Participant represents that it is entitled to receive any payments to be made to
it hereunder without the withholding of any tax and that, upon LaSalle's
request, the Participant will furnish to LaSalle such certifications, statements
and other documents deemed necessary or appropriate by LaSalle to evidence the
Participant's exemption from the withholding of any tax imposed by any
applicable jurisdiction or to enable LaSalle to comply with any applicable laws
or regulations relating thereto.

         14.      All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been given (a) if sent
by facsimile, upon confirmation of receipt (b) if sent by overnight courier
service, the next day, and (c) if sent by mail, the third day after being
mailed by certified mail, postage prepaid, return receipt requested, in any such
case addressed to either party at its address as follows or at such other
address as may hereafter be designated by notice as herein provided:

If to LaSalle:                          LaSalle National Bank
                                        135 South LaSalle Street
                                        Suite 425
                                        Chicago, Illinois  60603
                                        Attention:  Steven Fenton, Esq.
                                        Facsimile:  312-904-6109

If to the Participant:                  Friedman's Inc.
                                        4 West State Street
                                        Savannah, Georgia  31401
                                        Attention:  Victor M. Suglia
                                        Facsimile:  912-234-1031

         15.      THIS AGREEMENT MAY NOT BE AMENDED EXCEPT IN WRITING SIGNED BY
BOTH PARTIES HERETO AND-THE RESPECTIVE RIGHTS AND OBLIGATIONS OF THE PARTIES
HERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF ILLINOIS. WITH RESPECT TO ANY DISPUTES ARISING HEREUNDER, EACH PARTY
HERETO HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE
COURTS LOCATED IN THE STATE OF ILLINOIS AND WAIVES ANY OBJECTION IT MAY HAVE IN
RESPECT OF SUCH DISPUTE ON THE GROUND OF VENUE OR THAT ANY PROCEEDING HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.

         16.      This Agreement may be executed in any number of counterparts
and all of such counterparts shall together constitute one and the same
instrument.



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         If the foregoing correctly sets forth the understanding between us,
please indicate your confirmation thereof, and your acceptance of this Agreement
by signing and returning to us the enclosed copy of this Agreement.

                                     Very truly yours,

                                     LASALLE NATIONAL BANK



                                     By: /s/
                                         --------------------------------------
                                     Its:  Sr. Vice President
                                         --------------------------------------

Confirmed and accepted as of the
date first above written

FRIEDMAN'S INC.

By: /s/ Victor M. Suglia
    --------------------------------------
Its: Senior Vice President and 
     Chief Financial Officer
    --------------------------------------















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