Document:

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                                                                    Exhibit 4.33

                       [FORM OF EXCHANGE AGENT AGREEMENT]

                             _________________, 2000

Harris Trust and Savings Bank
12th Floor
311 West Monroe Street
Chicago, Illinois 60690

Ladies and Gentlemen:

          Focal Communications Corporation, a Delaware corporation (the
"Company"), hereby appoints Harris Trust and Savings Bank ("Harris Trust") to
act as exchange agent (the "Exchange Agent") in connection with an exchange
offer by the Company to exchange an aggregate principal amount of up to
$275,000,000 of its 11-7/8% Senior Notes due 2010, Series B (the "New Notes"),
which have been registered under the Securities Act of 1933, as amended, for a
like principal amount of its outstanding 11-7/8% Senior Notes due 2010, Series A
(the "Old Notes"). The terms and conditions of the exchange offer are set forth
in a Prospectus, dated __________________, 2000 (as the same may be amended or
supplemented from time to time, the "Prospectus"), and in the related Letter of
Transmittal, which together constitute the "Exchange Offer."  Capitalized terms
used herein and not defined shall have the respective meanings ascribed thereto
in the Prospectus.

          On the basis of the representations, warranties and agreements of the
Company and Harris Trust contained herein and subject to the terms and
conditions hereof, the following sets forth the agreement between the Company
and Harris Trust as Exchange Agent for the Exchange Offer:

          1.   Appointment and Duties as Exchange Agent.

          (a) The Company hereby authorizes Harris Trust to act as Exchange
Agent in connection with the Exchange Offer and Harris Trust agrees to act as
Exchange Agent in connection with the Exchange Offer.  As Exchange Agent, Harris
Trust will perform those services as are outlined herein or which are
customarily performed by an exchange agent in connection with an exchange offer
of like nature, including, but not limited to, accepting tenders of the Old
Notes, assisting the Company in the preparation of the documentation necessary
to effect the transactions herein contemplated (without assuming responsibility
for such documentation, unless such information has been furnished to the
Company in writing by Harris Trust).

          (b) The Company acknowledges and agrees that Harris Trust has been
retained pursuant to this Agreement to act solely as Exchange Agent in
connection with the Exchange Offer, and in such capacity, Harris Trust shall
perform such duties as are outlined herein and which are specifically set forth
in the section of the Prospectus captioned "The Exchange Offer" and in the
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Letter of Transmittal; provided, however, that in no way will Harris Trust's
general duty to act in good faith and without gross negligence or willful
misconduct be discharged by the foregoing.

          (c) Harris Trust will examine each of the Letters of Transmittal (or
electronic instructions transmitted by The Depository Trust Company (the "DTC
Transmissions") and certificates for the Old Notes and any other documents
delivered or mailed to Harris Trust by or for holders of the Old Notes (or any
Book-Entry Confirmations (as set forth in the Prospectus) received by Harris
Trust with respect to the Old Notes), to ascertain whether: (i) the Letters of
Transmittal and any such other documents are duly executed and properly
completed in accordance with the instructions set forth therein (or that the DTC
Transmission contains the proper information required to be set forth therein)
and (ii) the Old Notes have otherwise been properly tendered (or that the Book-
Entry Confirmations are in due and proper form and contain the information
required to be set forth therein).  In each case where the Letters of
Transmittal or any other documents have been improperly completed or executed
(or the DTC Transmissions are not in due and proper form or omit certain
information) or certificates for the Old Notes are not in proper form for
transfer (or the Book-Entry Confirmations are not in due and proper form or omit
certain information) or some other irregularity in connection with the tender or
acceptance of the Old Notes exists, Harris Trust will endeavor, subject to the
terms and conditions of the Exchange Offer, to advise the tendering holders of
Old Notes of the irregularity and to take any other action as may be necessary
or advisable to cause such irregularity to be corrected.  Notwithstanding the
above, Harris Trust shall not be under any duty to give any notification of any
irregularities in tenders or incur any liability for failure to give any such
notification.

          (d) With the approval of the President, any Senior Vice President, any
Executive Vice President, any Vice President or the Treasurer or any Assistant
Treasurer of the Company (such approval, if given orally, to be confirmed in
writing) or any other party designated by any such officer, Harris Trust is
authorized to waive any irregularities in connection with any tender of the Old
Notes pursuant to the Exchange Offer.

          (e) Tenders of the Old Notes may be made only as set forth in the
Letter of Transmittal and in the section of the Prospectus captioned "The
Exchange Offer" and the Old Notes shall be considered properly tendered only
when tendered in accordance with such procedures set forth therein.
Notwithstanding the provisions of this paragraph, the Old Notes which the
President, any Senior Vice President, any Executive Vice President, any Vice
President or the Treasurer, any Assistant Treasurer or any other designated
officer of the Company, shall approve (such approval, if given orally, to be
confirmed in writing) as having been properly tendered shall be considered to be
properly tendered.

          (f) Harris Trust shall advise the Company with respect to any Old
Notes received as soon as possible after 5:00 p.m., New York City time, on the
Expiration Date and accept its instructions with respect to disposition of the
Old Notes.

          (g) Harris Trust shall (i) ensure that each Letter of Transmittal and,
if required pursuant to the terms of the Exchange Offer, the related Old Notes
or a bond power are duly executed (with signatures guaranteed where required) by
the appropriate parties in accordance with the terms of the Exchange Offer; (ii)
in those instances where the person executing the Letter of Transmittal (as
indicated on the Letter of Transmittal) is acting in a fiduciary or
representative capacity, ensure that proper evidence of his or her authority so
as to act is submitted; (iii) in those

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instances where the Old Notes are tendered by persons other than the registered
holder of such Old Notes, ensure that the customary transfer requirements,
including any applicable transfer taxes, and the requirements imposed by the
transfer restrictions on the Old Notes (including any applicable requirements
for certification, legal opinions or other information) are fulfilled; (iv)
ensure that the Old Notes tendered in part are tendered in principal amounts of
$1,000 and integral multiples thereof; and (v) deliver certificates for the Old
Notes tendered in part to the transfer agent for split-up and shall return any
untendered Old Notes or Old Notes which have not been accepted by the Company to
the holders of such Old Notes (or in the case of Old Notes tendered by book-
entry transfer, such non-exchanged Old Notes will be credited to an account
maintained with the Book-Entry Transfer Facility) promptly after the expiration
or termination of the Exchange Offer.

          (h) Upon acceptance by the Company of any Old Notes duly tendered
pursuant to the Exchange Offer (such acceptance if given orally, to be confirmed
in writing), Harris Trust will cause the New Notes in exchange therefor to be
issued as promptly as possible (subject to receipt from the Company of
appropriate certificates under the related Indenture) and Harris Trust will
deliver such New Notes on behalf of the Company at the rate of $1,000 principal
amount of New Notes for each $1,000 principal amount of the Old Notes tendered
as promptly as possible after acceptance by the Company of the Old Notes in
exchange and notice (such notice if given orally, to be confirmed in writing) of
such acceptance by the Company; provided, however, that in all cases, the Old
Notes tendered pursuant to the Exchange Offer will be exchanged only after
timely receipt by Harris Trust of certificates for such Old Notes (or a Book-
Entry Confirmation), a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees and
any other required documents (or a properly completed DTC Transmission).  Unless
otherwise instructed by the Company, Harris Trust shall issue the New Notes only
in denominations of $1,000 or any integral multiple thereof.

          (i) Tendered pursuant to the Exchange Offer are irrevocable, except
that, subject to the terms and the conditions set forth in the Prospectus and
the Letter of Transmittal, the Old Notes tendered pursuant to the Exchange Offer
may be withdrawn at any time on or prior to the Expiration Date in accordance
with the terms of the Exchange Offer.

          (j) Notice of any decision by the Company not to exchange any Old
Notes tendered shall be given by the Company either orally (if given orally, to
be confirmed in writing) or in a written notice to Harris Trust.

          (k) If, pursuant to the Exchange Offer, the Company does not accept
for exchange all or part of the Old Notes tendered because of an invalid tender,
the occurrence of certain other events set forth in the Prospectus under the
caption "The Exchange Offer--Conditions to the Exchange Offer" or otherwise,
Harris Trust shall, upon notice from the Company (such notice if given orally,
to be confirmed in writing), promptly after the expiration or termination of the
Exchange Offer return such certificates for unaccepted Old Notes (or effect
appropriate Book-Entry Confirmation), together with any related required
documents and the Letters of Transmittal (or DTC Transmissions) relating thereto
that are in Harris Trust's possession, to the persons who deposited such
certificates.

          (l) Certificates for reissued Old Notes, unaccepted Old Notes or New
Notes shall be forwarded by (a) first-class certified mail, return receipt
requested under a blanket surety bond obtained by Harris Trust protecting Harris
Trust and the Company from loss or liability arising out

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of the non-receipt or non-delivery of such certificates or (b) by registered
mail insured by Harris Trust separately for the replacement value of each such
certificate.

          (m) Harris Trust is not authorized to pay or offer to pay any
concessions, commissions or solicitation fees to any broker, dealer, commercial
bank, trust company or other nominee or to engage or use any person to solicit
tenders.

          (n) As Exchange Agent, Harris Trust:

               (i) shall have no duties or obligations other than those
          specifically set forth in the Prospectus, the Letter of Transmittal or
          herein or as may be subsequently agreed to in writing;

               (ii) will make no representations and will have no
          responsibilities as to the validity, value or genuineness of any of
          the certificates for the Old Notes deposited pursuant to the Exchange
          Offer, and will not be required to and will make no representation as
          to the validity, value or genuineness of the Exchange Offer; provided,
          however, that in no way will Harris Trust's general duty to act in
          good faith and without gross negligence or willful misconduct be
          limited by the foregoing;

               (iii) shall not be obligated to take any legal action hereunder
          which might in Harris Trust's reasonable judgment involve any expense
          or liability, unless Harris Trust shall have been furnished with
          reasonable indemnity;

               (iv) may reasonably rely on and shall be protected in acting in
          reliance upon any certificate, instrument, opinion, notice, letter,
          telegram or other document or security delivered to Harris Trust and
          reasonably believed by Harris Trust to be genuine and to have been
          signed by the proper party or parties;

               (v) may reasonably act upon any tender, statement, request,
          comment, agreement or other instrument whatsoever not only as to its
          due execution and validity and effectiveness of its provisions, but
          also as to the truth and accuracy of any information contained
          therein, which Harris Trust believes in good faith to be genuine and
          to have been signed or represented by a proper person or persons
          acting in a fiduciary or representative capacity (so long as proper
          evidence of such fiduciary's or representative's authority so to act
          is submitted to Harris Trust) and Harris Trust examines and reasonably
          concludes that such evidence properly establishes such authority;

               (vi) may rely on and shall be protected in acting upon written or
          oral instructions from the President, any Senior Vice President, any
          Executive Vice President, any Vice President, the Treasurer, any
          Assistant Treasurer or any other designated officer of the Company;

               (vii) may consult with its own counsel with respect to any
          questions relating to Harris Trust's duties and responsibilities and
          the written opinion of such counsel shall be full and complete
          authorization and protection in respect of any

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          action taken, suffered or omitted to be taken by Harris Trust
          hereunder in good faith and in accordance with the written opinion of
          such counsel; and

               (viii) shall not advise any person tendering Old Notes pursuant
          to the Exchange Offer as to whether to tender or refrain from
          tendering all or any portion of its Old Notes or as to the market
          value, decline or appreciation in market value of any Old Notes that
          may or may not occur as a result of the Exchange Offer or as to the
          market value of the New Notes.

          (o) Harris Trust shall take such action as may from time to time be
requested by the Company (and such other action as Harris Trust may reasonably
deem appropriate) to furnish copies of the Prospectus, Letter of Transmittal and
the Notice of Guaranteed Delivery or such other forms as may be approved from
time to time by the Company, to all persons requesting such documents and to
accept and comply with telephone requests for information relating to the
Exchange Offer, provided that such information shall relate only to the
procedures for tendering into (or withdrawing from) the Exchange Offer. The
Company will furnish you with copies of such documents at your request.

          (p) Harris Trust shall advise orally and promptly thereafter confirm
in writing to the Company and such other person or persons as the Company may
request, daily (and more frequently during the week immediately preceding the
Expiration Date and if otherwise reasonably requested) up to and including the
Expiration Date, the aggregate principal amount of the Old Notes which have been
duly tendered pursuant to and in compliance with the terms of the Exchange Offer
and the terms received by Harris Trust pursuant to the Exchange Offer and this
Agreement, separately reporting and giving cumulative totals as to items
properly received and items improperly received. In addition, Harris Trust will
also provide, and cooperate in making available to the Company, or any such
other person or persons upon request (such request if made orally, to be
confirmed in writing) made from time to time, such other information as the
Company may reasonably request. Such cooperation shall include, without
limitation, the granting by Harris Trust to the Company, and such person or
persons as the Company may request, access to those persons on Harris Trust's
staff who are responsible for receiving tenders, in order to ensure that
immediately prior to the Expiration Date the Company shall have received
adequate information in sufficient detail to enable the Company to decide
whether to extend the Exchange Offer. Harris Trust shall prepare a final list of
all persons whose tenders were accepted, the aggregate principal amount of the
Old Notes tendered, the aggregate principal amount of the Old Notes accepted and
deliver said list to the Company.

          (q) Letters of Transmittal, Book-Entry Confirmations, DTC
Transmissions and Notices of Guaranteed Delivery shall be stamped by Harris
Trust as to the date and the time of receipt thereof and shall be preserved by
Harris Trust for a period of time at least equal to the period of time Harris
Trust preserves other records pertaining to the transfer of securities, or one
year, whichever is longer, and thereafter shall be delivered by Harris Trust to
the Company. Harris Trust shall dispose of unused Letters of Transmittal and
other surplus materials by returning them to the Company.

          (r) Harris Trust hereby expressly waives any lien, encumbrance or
right of set-off whatsoever that Harris Trust may have with respect to funds
deposited with it for the payment of transfer taxes by reasons of amounts, if
any, borrowed by the Company, or any of its subsidiaries

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or affiliates pursuant to any loan or credit agreement with Harris Trust or for
compensation owed to Harris Trust hereunder or for any other matter.

          2.   Compensation.

          In consideration of Harris Trust's acceptance of the appointment set
forth in Paragraph 1 above, the Company agrees to (i) pay Harris Trust a fee for
all services rendered under the foregoing appointment of $3500.00 and (ii)
reimburse Harris Trust for any reasonable out-of-pocket expenses incurred as
Exchange Agent in performing the services described herein; provided, however,
that Harris Trust shall not be entitled to reimbursement for the fees or
disbursements of its legal counsel without the prior written consent of the
Company.

          3.   Indemnification.

          (a) The Company hereby agrees to protect, defend, indemnify and hold
harmless Harris Trust against and from any and all costs, losses, liabilities,
expenses (including reasonable counsel fees and disbursements) and claims
imposed upon or asserted against Harris Trust on account of any action taken or
omitted to be taken by Harris Trust in connection with its acceptance of or
performance of its duties under this Agreement and the documents related thereto
as well as the reasonable costs and expenses of defending itself against any
claim or liability arising out of or relating to this Agreement and the
documents related thereto. This indemnification shall survive the release,
discharge, termination, and/or satisfaction of this Agreement. Anything in this
Agreement to the contrary notwithstanding, the Company shall not be liable for
indemnification or otherwise for any loss, liability, cost or expense to the
extent arising out of Harris Trust's bad faith, gross negligence or willful
misconduct. In no case shall the Company be liable under this indemnification
agreement with respect to any claim against Harris Trust unless the Company
shall be notified by Harris Trust, by letter, of the written assertion of a
claim against Harris Trust or of any other action commenced against Harris
Trust, reasonably promptly after Harris Trust shall have received any such
written assertion or shall have been served with a summons in connection
therewith. The Company shall be entitled to participate at its own expense in
the defense of any such claim or other action, and, if the Company so elects,
the Company may assume the defense of any pending or threatened action against
Harris Trust in respect of which indemnification may be sought hereunder, in
which case the Company shall not thereafter be responsible for the fees and
disbursements of legal counsel for Harris Trust under this paragraph; provided
that the Company shall not be entitled to assume the defense of any such action
if the named parties to such action include both the Company and Harris Trust
and representation of both parties by the same legal counsel would, in the
written opinion of counsel for Harris Trust, be inappropriate due to actual or
potential conflicting interests between them. It is understood that the Company
shall not be liable under this paragraph for the fees and disbursements of more
than one legal counsel for Harris Trust. In the event that the Company shall
assume the defense of any such suit, the Company shall not therewith be liable
for the fees and expenses of any counsel retained by Harris Trust.

          (b) Harris Trust agrees that, without the prior written consent of the
Company (which consent shall not be unreasonably withheld), it will not settle,
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding in respect of which indemnification could be sought
in accordance with the indemnification provision of this Agreement (whether or
not Harris Trust or the Company or any of its directors, officers and
controlling persons is an actual or potential party to such claim, action or
proceeding).

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          4.   Tax Information.

          (a) Harris Trust shall arrange to comply with all requirements under
the tax laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Company understands that Harris Trust is required, in
certain instances, to deduct 31% with respect to interest paid on the New Notes
and proceeds from the sale, exchange, redemption or retirement of the New Notes
from holders of the New Notes who have not supplied their correct Taxpayer
Identification Number or required certification. Such funds will be turned over
by Harris Trust to the Internal Revenue Service.

          (b) Harris Trust shall notify the Company of the amount of any
transfer taxes payable in respect of the exchange of the Old Notes and, upon
receipt of written approval from the Company shall deliver or cause to be
delivered, in a timely manner, to each governmental authority to which any
transfer taxes are payable in respect of the exchange of the Old Notes, a check
in the amount of all transfer taxes so payable, and the Company shall reimburse
Harris Trust for the amount of any and all transfer taxes payable in respect of
the exchange of the Old Notes; provided, however, that Harris Trust shall
reimburse the Company for amounts refunded to it in respect of its payment of
any such transfer taxes, at such time as such refund is received by Harris
Trust.

          5.   Governing Law.

          This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of New York but without giving effect to
applicable principles of conflicts of law to the extent that the application of
the laws of another jurisdiction would be required thereby.

          6.   Notices.

          Any communications or notice provided for hereunder shall be in
writing and shall be given (and shall be deemed to have been given upon receipt)
by delivery in person, telecopy, or overnight delivery or by registered or
certified mail (postage prepaid, return receipt requested) to the applicable
party at the addresses indicated below:

                         If to Harris Trust:

                         311 West Monroe Street
                         12th Floor
                         Chicago, Illinois 60690
                         Telephone: (312) 461-2531
                         Telecopier No.: (312) 461-3525
                         Attention: Carolyn Potter

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                         If to the Company:

                         200 North LaSalle Street
                         Suite 1100
                         Chicago, Illinois 60601
                         Telephone: (312) 895-8400
                         Telecopier No.: (312)
                         Attention Renee M. Martin
                                   Senior Vice President, General
                                   Counsel and Secretary

or, as to each party, at such other address as shall be designated by such party
in a written notice complying as to delivery with the terms of this Section.

          7.   Parties in Interest.

          This Agreement shall be binding upon and inure solely to the benefit
of each party hereto and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement. Without
limitation to the foregoing, the parties hereto expressly agree that no holder
of the Old Notes or the New Notes shall have any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.

          8.   Counterparts; Severability.

          This Agreement may be executed in one or more counterparts, and by
different parties hereto on separate counterparts, each of which when so
executed shall be deemed an original, and all of such counterparts shall
together constitute one and the same agreement. If any term or other provision
of this Agreement or the application thereof is invalid, illegal or incapable of
being enforced by any rule of law, or public policy, all other provisions of
this Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the agreements contained herein is not affected
in any manner adverse to any party. Upon such determination that any term or
provision or the application thereof is invalid, illegal or unenforceable, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the agreements contained herein may be performed
as originally contemplated to the fullest extent possible.

          9.   Headings.

          The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.

          10.  Entire Agreement.

          This Agreement constitutes the entire understanding of the parties
hereto with respect to the subject matter hereof. This Agreement may not be
amended or modified nor may any provision hereof be waived except in writing
signed by each party to be bound thereby.

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          11.  Termination.

          This Agreement shall terminate upon the earlier of (a) the 90th day
following the expiration, withdrawal, or termination of the Exchange Offer, (b)
the close of business on the date of actual receipt of written notice by Harris
Trust from the Company stating that this Agreement is terminated, (c) one year
following the date of this Agreement, or (d) the time and date on which this
Agreement shall be terminated by mutual consent of the parties hereto.

          12.  Miscellaneous.

          Harris Trust hereby acknowledges receipt of the Prospectus and the
Letter of Transmittal and the Notice of Guaranteed Delivery and further
acknowledges that it has examined each of them. Any inconsistency between this
Agreement, on the one hand, and the Prospectus and the Letter of Transmittal and
the Notice of Guaranteed Delivery (as they may be amended or supplemented from
time to time), on the other hand, shall be resolved in favor of the latter three
documents, except with respect to the duties, liabilities and indemnification of
Harris Trust as Exchange Agent shall be controlled by this Agreement.

          Kindly indicate your willingness to act as Exchange Agent and Harris
Trust's acceptance of the foregoing provisions by signing in the space provided
below for that purpose and returning to the Company a copy of this Agreement so
signed, whereupon this Agreement and Harris Trust's acceptance shall constitute
a binding agreement between Harris Trust and the Company.

                              Very truly yours,

                              FOCAL COMMUNICATIONS CORPORATION

                              By: Name: ________________________
                                  Title: _______________________

Accepted and Agreed to as of the date first written above:

HARRIS TRUST AND SAVINGS BANK

By: Name: _______________________
    Title: ______________________

                                       9<PAGE>   1
                                                                    EXHIBIT 10.1

              AMENDMENT NUMBER FOUR TO LOAN AND SECURITY AGREEMENT

         This Amendment Number Four to Loan and Security Agreement ("Amendment")
is entered into as of January 25, 2000, among SAMUELS JEWELERS, INC., a Delaware
corporation (the "Borrower"), on the one hand, and 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 FOOTHILL
CAPITAL CORPORATION, as Agent ("Agent"), on the other hand.

                                    RECITALS

         A. Borrower, Lenders and Agent have previously entered into that
certain Loan and Security Agreement, dated as of October 2, 1998, as amended as
of April 15, 1999, August 30, 1999, and November 24, 1999 (the "Agreement").

         B. Borrower has entered into that certain Assets Purchase Agreement,
dated December 15, 1999 (the "Musselman Purchase Agreement") , with Wilkerson &
Associates (the "Seller") pursuant to which Borrower is acquiring certain of the
real and personal property assets of Seller used in connection with Seller's
Musselman Jewelers stores (the "Musselman Assets").

         C. Borrower, Lenders and Agent desire to consent to Borrower's purchase
of the Musselman Assets and to further amend the Agreement as provided for and
on the conditions herein.

         NOW, THEREFORE, Borrower, Lenders and Agent hereby amend certain
provisions of the Agreement as follows:

         1. DEFINITIONS. All initially capitalized terms used in this Amendment
shall have the meanings given to them in the Agreement unless specifically
defined herein.

         2. AMENDMENTS.

            2.1 Section 1.1 of the Agreement is hereby amended by adding the
following new definitions thereto:

                  "Musselman Purchase Agreement" means that certain Assets
            Purchase Agreement dated as of December 15, 1999, between Wilkerson
            & Associates and Borrower.

                  "Musselman Put" means that certain obligation of Borrower to
            make a payment to Wilkerson & Associates ("Wilkerson") or any
            successor or assign in consideration of the "put" rights of
            Wilkerson set forth in Section 2.3 (a) of the Musselman Purchase
            Agreement.

                                       1

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                  "Permitted Put Payment" means a payment by Borrower on account
            of the Musselman Put in accordance with the terms set forth in the
            Musselman Purchase Agreement, so long as at the time of such payment
            (a) no Event of Default is currently in existence, and (b) after
            taking such payment into account Borrower would have (and would have
            had at all times during the 30 days preceding such payment) Excess
            Availability of not less than $5,000,000.

            2.2 Section 7.20 (b) of the Agreement is amended to read as follows:

                  "(b) Tangible Net Worth. A Tangible Net Worth of at least the
            following amounts as of the last day of the fiscal quarters of
            Borrower ending on or about the last day of the following months:

<TABLE>
<CAPTION>

            Month                              Minimum Tangible Net Worth
            -----                              --------------------------
<S>                                            <C>
            November 1999                              $14,500,000
            February 2000                              $24,500,000
            May 2000                                   $23,900,000
            August 2000                                $21,500,000
            November 2000                              $20,300,000
            February 2001                              $32,900,000
            May 2001                                   $33,300,000
            August 2001                                $31,300,000
</TABLE>

            2.3 Section 8.11 of the Agreement is hereby amended to read as
follows:

                  "If Borrower makes any payment on the Rauch Notes other than a
            Permitted Rauch Notes Payment, if Borrower makes any payment in
            respect of the Musselman Put other than a Permitted Put Payment, or
            if Borrower makes any payment on account of Indebtedness that has
            been contractually subordinated in right of payment to the payment
            of the Obligations, except to the extent such payment is permitted
            by the terms of the subordination provisions applicable to such
            Indebtedness;"

            2.4 Schedule E-1 of the Agreement is amended in its entirety as set
forth on Schedule E-1 to this Amendment.

            2.5 Agent and Lenders hereby consent to Borrower's purchase of the
Musselman Assets in accordance with the terms of the Musselman Purchase
Agreement.

         3. REPRESENTATIONS AND WARRANTIES. Borrower hereby affirms to Lenders
and Agent that all of Borrower's representations and warranties set forth in the
Agreement

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<PAGE>   3

are true, complete and accurate in all respects as of the date hereof (except to
the extent such representations and warranties relate solely to an earlier
date).

         4. DEFAULTS; WAIVER. Borrower hereby affirms to Lenders and Agent that
no Default or Event of Default exists as of the date hereof.

         5. CONDITIONS PRECEDENT. The effectiveness of this Amendment is
expressly conditioned upon the following:

            (a) Receipt by Agent of fully executed copies of this Amendment;

            (b) Receipt by Agent of UCC-1 financing statements respecting any
new locations acquired in connection with the Musselman Purchase Agreement; and

            (c) Payment of a fee to Agent, for the pro rata account of Lenders,
in the amount of $15,000.

         6. COSTS AND EXPENSES. Borrower shall pay to Agent all of Agent's
out-of-pocket costs and expenses (including, without limitation, the reasonable
fees and expenses of its counsel, which counsel may include any local counsel
reasonably deemed necessary, search fees, filing and recording fees,
documentation fees, appraisal fees, travel expenses, and other fees) arising in
connection with the preparation, execution, and delivery of this Amendment and
any related documents.

         7. LIMITED EFFECT. In the event of a conflict between the terms and
provisions of this Amendment and the terms and provisions of the Agreement, the
terms and provisions of this Amendment shall govern. In all other respects, the
Agreement, as amended, modified, and supplemented hereby, shall remain in full
force and effect.

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         8. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which when so executed and delivered shall be deemed to be an original. All
such counterparts, taken together, shall constitute but one and the same
Amendment. This Amendment shall become effective upon the execution of a
counterpart of this Amendment by each of the parties hereto.

         IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first set forth above.

                             SAMUELS JEWELERS, INC.,
                             a Delaware corporation

                             By /s/ DOUG BULLOCK
                               -------------------------------------------------
                             Title: Vice President
                                   ---------------------------------------------

                             FOOTHILL CAPITAL CORPORATION,
                             a California corporation, as Agent and as a Lender

                             By /s/ ROBERT CASTINE
                               -------------------------------------------------
                             Title: Vice President
                                   ---------------------------------------------

                             LASALLE BUSINESS CREDIT, INC.,
                             a Delaware corporation

                             By /s/
                               -------------------------------------------------
                             Title: Senior Vice President
                                   ---------------------------------------------

                             SUNROCK CAPITAL CORP.,
                             a Delaware corporation

                             By /s/
                               -------------------------------------------------
                             Title: Senior Vice President
                                   ---------------------------------------------

                                       4

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