Document:

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                                                                  Exhibit 10.1.3

 THIRD AMENDMENT TO SECOND AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT
 -------------------------------------------------------------------------------

         THIS THIRD AMENDMENT TO SECOND AMENDED AND RESTATED FINANCING AND
SECURITY AGREEMENT (this "Agreement") is made as of the 12th day of June, 2000,
by and among

         AAi.FOSTERGRANT, INC. (formerly known as Accessories Associates, Inc.),
a corporation organized and existing under the laws of the State of Rhode Island
(the "Borrower");

         FOSTER GRANT GROUP, L.P., a limited partnership organized under the
laws of the State of Delaware ("Foster Grant") and FANTASMA, LLC, a limited
liability company organized under the laws of the State of Delaware
("Fantasma");

         F.G.G. INVESTMENTS, INC., a corporation organized and existing under
the laws of the State of Delaware, THE BONNEAU COMPANY, a corporation organized
and existing under the laws of the State of Texas, BONNEAU HOLDINGS, INC., a
corporation organized and existing under the laws of the State of Delaware,
BONNEAU GENERAL, INC., a corporation organized and existing under the laws of
the State of Delaware, FOSTER GRANT HOLDINGS, INC., a corporation organized and
existing under the laws of the State of Delaware, and O-RAY HOLDINGS, INC., a
corporation organized and existing under the laws of the State of Delaware (the
"Corporate Guarantors"; the Corporate Guarantors together with Foster Grant and
Fantasma, the "Guarantors"; and the Guarantors together with the Borrower, the
"Obligors");

         BANK OF AMERICA, N.A., a national banking association ("Bank of
America"), formerly NationsBank, N.A., and each other financial institution
which is party to the Financing Agreement (as that term is defined below) from
time to time (collectively, the "Lenders" and individually, a "Lender"); and

         BANK OF AMERICA, N.A., a national banking association(the "Agent"),
formerly NationsBank, N.A., in its capacity as both collateral and
administrative agent for each of the Lenders.

                                    RECITALS
                                    --------

     A. The Borrower, the Guarantors, the Lenders and the Agent entered into a
Second Amended and Restated Financing and Security Agreement dated July 21, 1998
(as amended by that certain First Amendment to Second Amended and Restated
Financing and Security Agreement dated as of May 7, 1999, Second Amendment to
Second Amended and Restated Financing and Security Agreement dated as of March
24, 2000, and as further amended, restated, modified, substituted, extended, and
renewed from time to time, the "Financing Agreement"). The Financing Agreement
provides for some of the agreements among the Borrower, the Guarantors, the
Lenders and the Agent with respect to the "Loan" (as defined in the Financing
Agreement), including the Revolving Credit Facility (as that term is defined in
the Financing

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Agreement) in an amount not to exceed $60,000,000 and the Letter of Credit
Facility which is part of the Revolving Credit Facility.

         B. The Borrower has requested that the Agent and Lenders consent to the
redemption of a portion of the Senior Notes (as that term is defined in the
Financing Agreement) at a discount and that one or more of the Lenders provide a
credit subfacility for that purpose.

         C. The Agent and Lenders are willing to agree to the Borrower's request
on the condition, among others, that this Agreement be executed.

                                   AGREEMENTS
                                   ----------

       NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, receipt of which is hereby acknowledged, the Borrower,
the Guarantors, the Lenders and Agent agree as follows:

       1. The Obligors, the Lenders and the Agent agree that the Recitals
above are a part of this Agreement. Unless otherwise expressly defined in this
Agreement, terms defined in the Financing Agreement shall have the same meaning
under this Agreement.

       2. The Obligors, the Lenders and Agent agree that the aggregate
outstanding principal balance under the Revolving Credit Note (subject to change
for returned items and other adjustments made in the ordinary course of
business) as of the close of the business day of June 9, 2000 is $22,659,851.37.

       3. Each of the Borrower, Foster Grant and Fantasma represents and
warrants to the Lenders and Agent as follows:

         (a) The Borrower is a corporation duly organized, and validly existing
and in good standing under the laws of the state in which it was organized and
is duly qualified to do business as a foreign corporation in good standing in
every other state wherein the conduct of its business or the ownership of its
property requires such qualification.

         (b) Foster Grant is a limited partnership duly organized, validly
existing and in good standing under the laws of the state in which it was
organized and is duly qualified to do business as a foreign limited partnership
in every other state wherein the conduct of its business or the ownership of its
property requires such qualification.

         (c) Fantasma is a limited liability company duly organized, validly
existing and in good standing under the laws of the state in which it was
organized and is duly qualified to do business as a foreign limited partnership
in every other state wherein the conduct of its business or the ownership of its
property requires such qualification.

         (d) Each of the Borrower, Foster Grant and Fantasma has the power and
authority to execute and deliver this Agreement and perform its obligations
hereunder and has taken all necessary and appropriate corporate, partnership or
limited liability company action, as applicable, to authorize the execution,
delivery and performance of this Agreement.

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         (e) The Financing Agreement, as amended by this Agreement, and each of
the other Financing Documents remains in full force and effect, and each
constitutes the valid and legally binding obligation of the Borrower, Foster
Grant and Fantasma, enforceable in accordance with its terms.

         (f) All of the Borrower's, Foster Grant's and Fantasma's
representations and warranties contained in the Financing Agreement and the
other Financing Documents are true and correct on and as of the date of the
Borrower's, Foster Grant's and Fantasma's execution of this Agreement.

         (g) No Event of Default and no event which, with notice, lapse of time
or both would constitute an Event of Default, has occurred and is continuing
under the Financing Agreement or the other Financing Documents which has not
been waived in writing by the Lenders and Agent.

      4. The Financing Agreement is hereby amended as follows:

         (a) Section 1.1 of the Financing Agreement is hereby amended by
changing certain existing definitions in their entirety and adding certain new
definitions as follows:

                  "BASE RATE LOAN" MEANS ANY LOAN OR ANY SNR LOAN FOR WHICH
         INTEREST IS TO BE COMPUTED WITH REFERENCE TO THE BASE RATE.

                  "COMMITMENT" MEANS WITH RESPECT TO EACH LENDER, SUCH LENDER'S
         REVOLVING CREDIT COMMITMENT AND SNR COMMITMENT AS THE CASE MAY BE, AND
         "COMMITMENTS" MEANS THE COLLECTIVE REFERENCE TO THE REVOLVING CREDIT
         COMMITMENTS AND SNR COMMITMENTS OF ALL OF THE LENDERS.

                  "COMMITTED AMOUNT" MEANS WITH RESPECT TO EACH LENDER, SUCH
         LENDER'S REVOLVING LOAN COMMITTED AMOUNT OR SNR COMMITTED AMOUNT, IF
         ANY, AS THE CASE MAY BE, AND "COMMITTED AMOUNTS" MEANS COLLECTIVELY THE
         REVOLVING LOAN COMMITTED AMOUNT AND SNR COMMITTED AMOUNT OF EACH OF THE
         LENDERS.
                  "CREDIT FACILITY" MEANS WITH RESPECT TO EACH LENDER, SUCH
         LENDER'S PRO RATA SHARE OF THE REVOLVING CREDIT FACILITY OR THE LETTER
         OF CREDIT FACILITY OR SNR PRO RATA SHARE, IF ANY, OF THE SENIOR NOTE
         REDEMPTION SUBFACILITY AS THE CASE MAY BE, AND "CREDIT FACILITIES"
         MEANS COLLECTIVELY WITH RESPECT TO EACH LENDER, SUCH LENDER'S PRO RATA
         SHARE OF THE REVOLVING CREDIT FACILITY AND THE LETTER OF CREDIT
         FACILITY AND SNR PRO RATA SHARE, IF ANY, OF THE SENIOR NOTE REDEMPTION
         SUBFACILITY AND ANY AND ALL OTHER CREDIT FACILITIES NOW OR HEREAFTER
         EXTENDED UNDER OR SECURED BY THIS AGREEMENT.

                  "FEES" MEANS THE COLLECTIVE REFERENCE TO EACH FEE PAYABLE TO
         THE AGENT, FOR ITS OWN ACCOUNT OR FOR THE RATABLE BENEFIT OF THE
         LENDERS, UNDER THE TERMS OF THIS AGREEMENT OR UNDER THE TERMS OF ANY OF
         THE OTHER FINANCING DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE
         REVOLVING CREDIT UNUSED FACILITY FEES, THE

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         LETTER OF CREDIT FEES, THE EARLY TERMINATION FEE, THE ORIGINATION FEE,
         THE SNR ACTIVATION FEE, AND THE FIELD EXAMINATION FEES.

                   "LIBOR LOAN" MEANS ANY LOAN OR ANY SNR LOAN FOR WHICH
         INTEREST IS TO BE COMPUTED WITH REFERENCE TO THE LIBOR RATE.

                  "LOANS" MEANS THE COLLECTIVE REFERENCE TO THE LOAN AND TO THE
         SNR LOAN.

                  "MORTGAGE" MEANS THAT CERTAIN MORTGAGE, ASSIGNMENT AND
         SECURITY AGREEMENT DATED AS OF THE SNR CLOSING DATE, FROM THE BORROWER
         TO THE AGENT FOR ITSELF AND THE SNR LENDERS SECURING THE OBLIGATIONS
         WITH RESPECT TO THE SENIOR NOTE REDEMPTION SUBFACILITY.

                  "NOTE" MEANS ANY REVOLVING CREDIT NOTE OR ANY SNR NOTE AS THE
         CASE MAY BE, AND "NOTES" MEANS COLLECTIVELY EACH REVOLVING CREDIT NOTE,
         EACH SNR NOTE AND ANY OTHER PROMISSORY NOTE WHICH MAY FROM TIME TO TIME
         EVIDENCE ALL OR ANY PORTION OF THE OBLIGATIONS.

                  "PERMITTED SENIOR NOTE PURCHASES" MEANS THE COLLECTIVE
         REFERENCE TO EACH PURCHASE BY THE BORROWER OF SENIOR NOTES USING THE
         PROCEEDS OF AND IN CONFORMANCE WITH THE SENIOR NOTE REDEMPTION
         SUBFACILITY.

                  "OBLIGATIONS" MEANS ALL PRESENT AND FUTURE INDEBTEDNESS,
         DUTIES, OBLIGATIONS, AND LIABILITIES, WHETHER NOW EXISTING OR
         CONTEMPLATED OR HEREAFTER ARISING, OF ANY ONE OR MORE OF THE BORROWER,
         FOSTER GRANT OR FANTASMA TO THE LENDERS AND/OR THE AGENT UNDER, ARISING
         PURSUANT TO, IN CONNECTION WITH AND/OR ON ACCOUNT OF THE PROVISIONS OF
         THIS AGREEMENT, EACH NOTE, EACH SECURITY DOCUMENT, AND/OR ANY OF THE
         OTHER FINANCING DOCUMENTS, AND/OR THE LOAN AND/OR THE SENIOR NOTE
         REDEMPTION SUBFACILITY, INCLUDING, WITHOUT LIMITATION, THE PRINCIPAL
         OF, AND INTEREST ON, EACH NOTE, LATE CHARGES, THE FEES, ENFORCEMENT
         COSTS, AND PREPAYMENT FEES (IF ANY), LETTER OF CREDIT FEES OR FEES
         CHARGED WITH RESPECT TO ANY GUARANTY OF ANY LETTER OF CREDIT, ANY
         INTEREST RATE PROTECTION AGREEMENT WITH THE AGENT, ANY LENDER OR ANY
         AFFILIATE OF THE AGENT OR ANY OF THE LENDERS, AND ANY FOREIGN EXCHANGE
         PROTECTION AGREEMENT WITH THE AGENT, ANY LENDER OR ANY AFFILIATE OF THE
         AGENT OR ANY OF THE LENDERS; ALSO MEANS ALL OTHER PRESENT AND FUTURE
         INDEBTEDNESS, LIABILITIES AND OBLIGATIONS, WHETHER NOW EXISTING OR
         CONTEMPLATED OR HEREAFTER ARISING, OF ANY ONE OR MORE OF THE OBLIGORS
         TO THE AGENT AND/OR TO NATIONSBANK OR ITS AFFILIATES OF ANY NATURE
         WHATSOEVER REGARDLESS OF WHETHER SUCH DEBTS, OBLIGATIONS AND
         LIABILITIES BE DIRECT, INDIRECT, PRIMARY, SECONDARY, JOINT, SEVERAL,
         JOINT AND SEVERAL, FIXED OR CONTINGENT; AND ALSO MEANS ANY AND ALL
         RENEWALS, EXTENSIONS, SUBSTITUTIONS, AMENDMENTS, RESTATEMENTS AND
         REARRANGEMENTS OF ANY SUCH DEBTS, OBLIGATIONS AND LIABILITIES.

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                  "SENIOR NOTE REDEMPTION SUBFACILITY" AND "SNR" EACH MEAN
         SENIOR NOTE REDEMPTION CREDIT FACILITY PROVIDED BY THE SNR LENDERS AS
         DESCRIBED IN SECTION 2.6.1 (SENIOR NOTE REDEMPTION SUBFACILITY).

                  "SNR ACTIVATION FEE" HAS THE MEANING DESCRIBED IN SECTION
         2.6.5 (ACTIVATION FEE).

                  "SNR CLOSING DATE" MEANS JUNE 12, 2000.

                  "SNR COMMITMENT" AND "SNR COMMITMENTS" HAVE THE MEANINGS
         DESCRIBED IN SECTION 2.6.1 (SENIOR NOTE REDEMPTION SUBFACILITY).

                  "SNR COMMITMENT PERIOD" MEANS THE PERIOD OF TIME FROM THE SNR
         CLOSING DATE TO JULY 7, 2000.

                  "SNR COMMITTED AMOUNT" HAS THE MEANING DESCRIBED IN SECTION
         2.6.1 (SENIOR NOTE REDEMPTION SUBFACILITY).

                  "SNR EXPIRATION DATE" MEANS THE REVOLVING CREDIT EXPIRATION
         DATE.

                  "SNR GUARANTOR" MEANS WESTON PRESIDIO CAPITAL II, L.P., A
         DELAWARE LIMITED PARTNERSHIP AND ITS SUCCESSORS.

                  "SNR GUARANTY" MEANS THAT CERTAIN GUARANTY OF PAYMENT
         AGREEMENT DATED AS OF THE SNR CLOSING DATE FROM THE SNR GUARANTOR IN
         FAVOR OF THE AGENT AND THE SNR LENDERS WITH RESPECT TO THE SENIOR NOTE
         REDEMPTION SUBFACILITY.

                  "SNR INSTALLMENT PAYMENT SCHEDULE" HAS THE MEANING DESCRIBED
         IN SECTION 2.6.4 (PAYMENTS OF SENIOR NOTE REDEMPTION FACILITY).

                  "SNR LENDER" MEANS EACH LENDER THAT HAS A SNR PRO RATA SHARE,
         AS THE CASE MAY BE AND EACH OF THEIR RESPECTIVE SUCCESSORS AND ASSIGNS;
         AND "SNR LENDERS" MEANS THE COLLECTIVE REFERENCE TO ALL LENDERS THAT
         HAVE A SNR PRO RATA SHARE, AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.

                  "SNR LOAN" HAS THE MEANING SET FORTH IN SECTION 2.6.1 (SENIOR
         NOTE REDEMPTION SUBFACILITY).

                  "SNR LOAN OBLIGATIONS" MEANS THE OBLIGATION WITH RESPECT TO
         THE SNR LOAN.

                  "SNR LOAN OPTIONAL PREPAYMENT" HAS THE MEANING SET FORTH IN
         SECTION 2.6.6 (SNR LOAN OPTIONAL PREPAYMENT).

                  "SNR NOTE" AND "SNR NOTES" HAVE THE MEANING DESCRIBED IN
         SECTION 2.6.3 (SNR NOTES).

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                  "SNR NOTICE" HAS THE MEANING DESCRIBED IN SECTION 2.6.2
         (PROCEDURE FOR MAKING ADVANCES UNDER THE SNR).

         "SNR PARTICIPANT" MEANS WESTON PRESIDIO CAPITAL II, L.P., A DELAWARE
         LIMITED PARTNERSHIP AND ITS SUCCESSORS.

                  "SNR PARTICIPATION AGREEMENT" MEANS THAT CERTAIN NOTE
         PARTICIPATION AGREEMENT DATED AS OF THE SNR CLOSING DATE AMONG THE SNR
         LENDERS AND THE SNR PARTICIPANT, AS AMENDED, MODIFIED, RESTATED,
         SUBSTITUTED, EXTENDED AND RENEWED FROM TIME TO TIME.

                  "SNR PRO RATA SHARE" HAS THE MEANING DESCRIBED IN SECTION
         2.6.1 (SENIOR NOTE REDEMPTION SUBFACILITY).

                  "SNR TERMINATION DATE" MEANS THE EARLIER OF (a) THE SNR
         EXPIRATION DATE, OR (B) THE REVOLVING CREDIT TERMINATION DATE.

                  "TOTAL SNR COMMITTED AMOUNT" HAS THE MEANING DESCRIBED IN
        SECTION 2.6.1.

         (b) The definition of "Permitted Uses" is hereby amended to include the
payment of any and all regularly scheduled payments of principal of, or interest
on, the SNR Loan, as and when such payments are due and payable.

         (c) The table in Section 2.1.1 of the Financing Agreement is hereby
amended to read as follows:

                              REVOLVING CREDIT          REVOLVING CREDIT
LENDER                        COMMITTED AMOUNT           PRO RATA SHARE

BANK OF AMERICA                  $27,692,340               46.1539%

LASALLE                          $18,461,520               30.7692%

PNC                              $13,846,140               23.0769%

TOTAL REVOLVING CREDIT
COMMITTED AMOUNT                 $60,000,000                   100%

         (d) Clause (b) of the fifth paragraph of Section 2.1.1 of the Financing
Agreement is hereby amended in its entirety to read as follows:

                           (b) THE AGGREGATE OUTSTANDING PRINCIPAL BALANCE OF
         THE REVOLVING LOAN AND ALL LETTER OF CREDIT OBLIGATIONS WOULD NOT
         EXCEED THE LESSER OF (i) THE TOTAL REVOLVING CREDIT COMMITTED AMOUNT
         MINUS THE TOTAL

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         SNR COMMITTED AMOUNT OR (ii) THE THEN MOST CURRENT BORROWING BASE.

         (e) Section 2.3.1, 2.3.2, 2.3.3 and 2.3.5 of the Financing Agreement
are hereby amended in their entirety to read as follows:

                           2.3.1    APPLICABLE INTEREST RATES.

                                    (a)     EACH LOAN AND EACH SNR LOAN
         SHALL BEAR INTEREST UNTIL MATURITY (WHETHER BY ACCELERATION,
         DECLARATION, EXTENSION OR OTHERWISE) AT EITHER THE BASE RATE
         OR THE LIBOR RATE, AS SELECTED AND SPECIFIED BY THE BORROWER IN AN
         INTEREST RATE ELECTION NOTICE FURNISHED TO THE AGENT IN ACCORDANCE WITH
         THE PROVISIONS OF SECTION 2.3.2(E) (SELECTION OF INTEREST RATES), OR AS
         OTHERWISE DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION
         2.3 (INTEREST), AND AS MAY BE ADJUSTED FROM TIME TO TIME IN ACCORDANCE
         WITH THE PROVISIONS OF SECTION 2.3.3 (INABILITY TO DETERMINE LIBOR BASE
         RATE).

                                    (b)     NOTWITHSTANDING THE FOREGOING,
         FOLLOWING THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT
         OF DEFAULT, AT THE OPTION OF THE AGENT, THE LOAN, THE SNR LOAN AND
         OTHER OBLIGATIONS SHALL BEAR INTEREST AT THE POST-DEFAULT RATE.

                                    (c)     WITH RESECT TO THE REVOLVING LOANS,
         THE APPLICABLE MARGIN FOR (i) LIBOR LOANS SHALL BE TWO PERCENT
         (2%) PER ANNUM, AND (ii) BASE RATE LOANS SHALL BE ONE-QUARTER
         PERCENT (0.25%) PER ANNUM. WITH RESECT TO THE SNR LOANS, THE
         APPLICABLE MARGIN FOR (i) LIBOR LOANS SHALL BE TWO AND ONE-HALF
         PERCENT (2.5%) PER ANNUM, AND (ii) BASE RATE LOANS SHALL BE
         THREE-QUARTERS PERCENT (0.75%) PER ANNUM. THE APPLICABLE MARGINS ARE
         SUBJECT TO CHANGE AS PROVIDED IN SECTION 2.3.1(d).

                                    (d)     CHANGES IN THE APPLICABLE MARGIN
         SHALL BE MADE NOT MORE FREQUENTLY THAN QUARTERLY BASED ON THE
         BORROWER'S PRICING RATIO, DETERMINED BY THE AGENT IN THE EXERCISE
         OF ITS SOLE AND ABSOLUTE DISCRETION FROM THE MONTHLY REPORTS
         REQUIRED BY SECTION 6.1.1(c)) (MONTHLY STATEMENTS AND CERTIFICATES)
         COMMENCING WITH THE STATEMENTS FOR THE FISCAL MONTH ENDING JUNE, 2000.
         THE APPLICABLE MARGIN (EXPRESSED AS BASIS POINTS) SHALL VARY DEPENDING
         UPON THE BORROWER'S PRICING RATIO, AS FOLLOWS:
<TABLE>
<CAPTION>

----------------------------------- --------------- -------------- --------------- --------------

           PRICING RATIO            LIBOR REVOLVING    BASE RATE        LIBOR         BASE RATE
                                          LOAN      REVOLVING LOAN     SNR LOAN       SNR LOAN
----------------------------------  --------------- --------------  --------------  -------------
<S>                                      <C>              <C>            <C>             <C>
  GREATER THAN 1.0 TO 1.0 BUT LESS        275             100            325             150
    THAN OR EQUAL TO 1.05 TO 1.0
----------------------------------- --------------- -------------- --------------- --------------

  GREATER THAN 1.05 TO 1.0 BUT LESS       250              75            300             125
    THAN OR EQUAL TO 1.10 TO 1.0
----------------------------------- --------------- -------------- --------------- --------------
</TABLE>

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<TABLE>
<CAPTION>

<S>                                       <C>             <C>            <C>              <C>
  GREATER THAN 1.10 TO 1.0 BUT LESS       225             50             275              100
    THAN OR EQUAL TO 1.15 TO 1.0
----------------------------------- --------------- -------------- --------------- --------------

  GREATER THAN 1.15 TO 1.0 BUT LESS       200             25             250              75
    THAN OR EQUAL TO 1.60 TO 1.0
----------------------------------- --------------- -------------- --------------- --------------

      GREATER THAN 1.60 TO 1.0            175              0             225              50
----------------------------------- --------------- -------------- --------------- --------------
</TABLE>

                           2.3.2 SELECTION OF INTEREST RATES.

                                    (a)     THE  BORROWER MAY SELECT THE INITIAL
         APPLICABLE INTEREST RATE OR APPLICABLE INTEREST RATES TO BE CHARGED
         ON THE LOANS.

                                    (b)     FROM TIME TO TIME AFTER THE DATE OF
         THIS AGREEMENT AS PROVIDED IN THIS SECTION, BY A PROPER AND TIMELY
         INTEREST RATE ELECTION NOTICE FURNISHED TO THE AGENT IN ACCORDANCE WITH
         THE PROVISIONS OF SECTION 2.3.2(e), THE BORROWER MAY SELECT AN INITIAL
         APPLICABLE INTEREST RATE OR APPLICABLE INTEREST RATES FOR THE LOAN
         AND/OR THE SNR LOAN OR MAY CONVERT THE APPLICABLE INTEREST RATE AND,
         WHEN APPLICABLE, THE INTEREST PERIOD, FOR ANY EXISTING LOAN AND/OR SNR
         LOAN TO ANY OTHER APPLICABLE INTEREST RATE OR, WHEN APPLICABLE, ANY
         OTHER INTEREST PERIOD.

                                    (c)     THE BORROWER'S SELECTION OF AN
         APPLICABLE INTEREST RATE AND/OR AN INTEREST PERIOD, THE BORROWER'S
         ELECTION TO CONVERT AN APPLICABLE INTEREST RATE AND/OR AN INTEREST
         PERIOD TO ANOTHER APPLICABLE INTEREST RATE OR INTEREST PERIOD, AND ANY
         OTHER ADJUSTMENTS IN AN INTEREST RATE ARE SUBJECT TO THE FOLLOWING
         LIMITATIONS:

                                    (i)     THE BORROWER SHALL NOT AT ANY TIME
                  SELECT OR CHANGE TO AN INTEREST PERIOD THAT EXTENDS BEYOND THE
                  REVOLVING CREDIT EXPIRATION DATE,

                                    (ii) EXCEPT AS OTHERWISE PROVIDED IN SECTION
                  2.3.4 (INDEMNITY), NO CHANGE FROM THE LIBOR RATE TO THE BASE
                  RATE SHALL BECOME EFFECTIVE ON A DAY OTHER THAN A BUSINESS DAY
                  AND ON A DAY WHICH IS THE LAST DAY OF THE THEN CURRENT
                  INTEREST PERIOD, NO CHANGE OF AN INTEREST PERIOD SHALL BECOME
                  EFFECTIVE ON A DAY OTHER THAN THE LAST DAY OF THE THEN CURRENT
                  INTEREST PERIOD, AND NO CHANGE FROM THE BASE RATE TO THE LIBOR
                  RATE SHALL BECOME EFFECTIVE ON A DAY OTHER THAN A DAY WHICH IS
                  A EURODOLLAR BUSINESS DAY;

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                                    (iii) ANY APPLICABLE INTEREST RATE CHANGE
                  FOR ANY LOAN AND/OR SNR LOAN TO BE EFFECTIVE ON A DATE ON
                  WHICH ANY PRINCIPAL PAYMENT ON ACCOUNT OF SUCH LOAN AND/OR SNR
                  LOAN IS SCHEDULED TO BE PAID SHALL BE MADE ONLY AFTER SUCH
                  PAYMENT SHALL HAVE BEEN MADE,

                                    (iv)    NO MORE THAN EIGHT (8) DIFFERENT
                  LIBOR RATES MAY BE OUTSTANDING AT ANY TIME AND FROM TIME TO
                  TIME,

                                    (v)     THE FIRST DAY OF EACH INTEREST
                  PERIOD SHALL BE A EURODOLLAR BUSINESS DAY,

                                    (vi) UNLESS THE AGENT ELECTS OTHERWISE, AS
                  OF THE EFFECTIVE DATE OF A SELECTION, THERE SHALL NOT EXIST A
                  DEFAULT OR AN EVENT OF DEFAULT, AND

                                    (vii) THE MINIMUM PRINCIPAL AMOUNT OF A
                  LIBOR LOAN SHALL BE FIVE HUNDRED THOUSAND DOLLARS ($500,000).

                                    (d)     IF A REQUEST FOR AN ADVANCE UNDER
         THE LOAN OR UNDER THE SNR LOAN IS NOT ACCOMPANIED BY AN INTEREST RATE
         ELECTION NOTICE OR DOES NOT OTHERWISE INCLUDE A SELECTION OF AN
         APPLICABLE INTEREST RATE AND, IF APPLICABLE, AN INTEREST PERIOD, OR IF,
         AFTER HAVING MADE A SELECTION OF AN APPLICABLE INTEREST RATE AND, IF
         APPLICABLE, AN INTEREST PERIOD, THE BORROWER FAILS OR IS NOT OTHERWISE
         ENTITLED UNDER THE PROVISIONS OF THIS AGREEMENT TO CONTINUE SUCH
         APPLICABLE INTEREST RATE OR INTEREST PERIOD, THE BORROWER SHALL BE
         DEEMED TO HAVE SELECTED THE BASE RATE AS THE APPLICABLE INTEREST RATE
         UNTIL SUCH TIME AS THE BORROWER HAS SELECTED A DIFFERENT APPLICABLE
         INTEREST RATE AND SPECIFIED AN INTEREST PERIOD IN ACCORDANCE WITH, AND
         SUBJECT TO, THE PROVISIONS OF THIS SECTION.

                                    (e)     THE LENDERS WILL NOT BE OBLIGATED TO
         MAKE ADVANCES OF THE LOAN AND/OR THE SNR LOAN, TO CONVERT THE
         APPLICABLE INTEREST RATE ON ADVANCES OF THE LOAN AND/OR THE SNR LOAN TO
         ANOTHER APPLICABLE INTEREST RATE, OR TO CHANGE INTEREST PERIODS, UNLESS
         THE AGENT SHALL HAVE RECEIVED AN IRREVOCABLE WRITTEN OR TELEPHONIC
         NOTICE (AN "INTEREST RATE ELECTION NOTICE") FROM THE BORROWER
         SPECIFYING THE FOLLOWING INFORMATION:

                           (i)      THE AMOUNT TO BE BORROWED OR CONVERTED,

                           (ii)     A SELECTION OF THE BASE RATE OR THE LIBOR
                  RATE,

                           (iii)    THE LENGTH OF THE INTEREST PERIOD IF THE
                  APPLICABLE INTEREST RATE SELECTED IS THE LIBOR RATE, AND

                           (IV)     THE REQUESTED DATE ON WHICH SUCH ELECTION
                  IS TO BE EFFECTIVE.

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         ANY TELEPHONIC NOTICE MUST BE CONFIRMED IN WRITING WITHIN THREE (3)
         BUSINESS DAYS. EACH INTEREST RATE ELECTION NOTICE MUST BE RECEIVED BY
         THE AGENT NOT LATER THAN 1:30 P.M. (BALTIMORE CITY TIME) ON THE
         BUSINESS DAY OF ANY REQUESTED BORROWING OR CONVERSION IN THE CASE OF A
         SELECTION OF THE BASE RATE AND NOT LATER THAN 1:30 P.M. (BALTIMORE CITY
         TIME) ON THE THIRD BUSINESS DAY BEFORE THE EFFECTIVE DATE OF ANY
         REQUESTED BORROWING OR CONVERSION IN THE CASE OF A SELECTION OF THE
         LIBOR RATE.

                           2.3.3 INABILITY TO DETERMINE LIBOR BASE RATE.

                  IN THE EVENT THAT (a) THE AGENT SHALL HAVE DETERMINED THAT, BY
         REASON OF CIRCUMSTANCES AFFECTING THE LONDON INTERBANK EURODOLLAR
         MARKET, ADEQUATE AND REASONABLE MEANS DO NOT EXIST FOR ASCERTAINING THE
         LIBOR BASE RATE FOR ANY REQUESTED INTEREST PERIOD WITH RESPECT TO A
         LOAN OR AN SNR LOAN THE BORROWER HAS REQUESTED TO BE MADE AS OR TO BE
         CONVERTED TO A LIBOR LOAN OR (b) THE AGENT SHALL DETERMINE THAT THE
         LIBOR BASE RATE FOR ANY REQUESTED INTEREST PERIOD WITH RESPECT TO A
         LOAN OR AN SNR LOAN THE BORROWER HAS REQUESTED TO BE MADE AS OR TO BE
         CONVERTED TO A LIBOR LOAN DOES NOT ADEQUATELY AND FAIRLY REFLECT THE
         COST TO THE AGENT AND/OR ANY OF THE LENDERS OF FUNDING OR CONVERTING
         SUCH LOAN OR SNR LOAN, THE AGENT SHALL GIVE TELEPHONIC NOTICE, FOLLOWED
         BY PROMPT WRITTEN NOTICE, OR WRITTEN NOTICE OF SUCH DETERMINATION TO
         THE BORROWER AT LEAST ONE (1) BUSINESS DAY PRIOR TO THE PROPOSED DATE
         FOR FUNDING OR CONVERTING SUCH LOAN OR SNR LOAN. IF SUCH NOTICE IS
         GIVEN, ANY REQUEST FOR A LIBOR LOAN SHALL BE MADE AS OR CONVERTED TO A
         BASE RATE LOAN. UNTIL SUCH NOTICE HAS BEEN WITHDRAWN BY THE AGENT, THE
         BORROWER WILL NOT REQUEST THAT ANY LOAN BE MADE AS OR CONVERTED TO A
         LIBOR LOAN.

                           2.3.5    PAYMENT OF INTEREST.

                                    (a)     UNPAID AND ACCRUED  INTEREST ON ANY
         ADVANCE OF THE REVOLVING LOAN OR THE SNR LOAN WHICH CONSISTS OF A BASE
         RATE LOAN SHALL BE PAID MONTHLY, IN ARREARS, ON THE FIRST DAY OF EACH
         CALENDAR MONTH, COMMENCING ON THE FIRST SUCH DATE AFTER THE DATE OF
         THIS AGREEMENT, AND ON THE FIRST DAY OF EACH CALENDAR MONTH THEREAFTER,
         AND AT MATURITY (WHETHER BY ACCELERATION, DECLARATION, EXTENSION OR
         OTHERWISE).

                                    (b)     UNPAID AND ACCRUED INTEREST ON ANY
         LIBOR LOAN SHALL BE PAID ON THE LAST BUSINESS DAY OF EACH INTEREST
         PERIOD FOR SUCH LIBOR LOAN AND AT MATURITY (WHETHER BY ACCELERATION,
         DECLARATION, EXTENSION OR OTHERWISE); PROVIDED, HOWEVER THAT ANY AND
         ALL UNPAID AND ACCRUED INTEREST ON ANY LIBOR LOAN PREPAID PRIOR TO
         EXPIRATION OF THE THEN CURRENT INTEREST PERIOD FOR SUCH LIBOR LOAN
         SHALL BE PAID IMMEDIATELY UPON PREPAYMENT; AND PROVIDED FURTHER,
         FURTHER THAT WITH RESPECT TO ANY LIBOR LOAN FOR WHICH THE INTEREST
         PERIOD IS ONE HUNDRED AND EIGHTY (180) DAYS, UNPAID AND ACCRUED
         INTEREST SHALL BE PAID QUARTERLY OF THE FIRST DAY OF EACH QUARTERLY
         PERIOD DURING SUCH INTEREST PERIOD.

                                       10
<PAGE>   11

         5.  Section 2.5 (Settlement Among Lenders) is hereby amended by adding
the following new section as Section 2.5.5:

                           2.5.5    SENIOR NOTE REDEMPTION SUBFACILITY.

                           THE AGENT SHALL PAY TO EACH SNR LENDER ON EACH
         INTEREST PAYMENT DATE OR DATE PROVIDED IN THE SNR INSTALLMENT PAYMENT
         SCHEDULE, AS THE CASE MAY BE, SUCH SNR LENDER'S SNR PRO RATA SHARE OF
         ALL PAYMENTS RECEIVED BY THE AGENT IN IMMEDIATELY AVAILABLE FUNDS ON
         ACCOUNT OF THE SNR, NET OF ANY AMOUNTS PAYABLE BY SUCH SNR LENDER TO
         THE AGENT, BY WIRE TRANSFER OF SAME DAY FUNDS; THE AMOUNT PAYABLE TO
         EACH SNR LENDER SHALL BE BASED ON THE PRINCIPAL AMOUNT OF THE SNR OWING
         TO SUCH SNR LENDER.

         6.  Article II of the Financing Agreement is hereby amended by adding
the following as new Section 2.6:

         SECTION 2.6       THE SENIOR NOTE REDEMPTION SUBFACILITY.

                           2.6.1    SENIOR NOTE REDEMPTION SUBFACILITY.

                           SUBJECT TO AND UPON THE PROVISIONS OF THIS AGREEMENT,
         THE SNR LENDERS COLLECTIVELY, BUT SEVERALLY, ESTABLISH IN FAVOR OF THE
         BORROWER A CREDIT FACILITY FOR THE REPURCHASE OF SENIOR NOTES. ADVANCES
         UNDER THE SENIOR NOTE REDEMPTION SUBFACILITY ARE SOMETIMES REFERRED TO
         IN THIS AGREEMENT INDIVIDUALLY AND COLLECTIVELY AS THE "SNR LOAN."

                           THE AMOUNT SET FORTH IN THE FOLLOWING TABLE IS HEREIN
         CALLED SUCH SNR LENDER'S "SNR COMMITTED AMOUNT," THE AGGREGATE OF ALL
         SNR LENDER'S SNR COMMITTED AMOUNTS EQUAL ($2,750,000) AND IS HEREIN
         CALLED THE "TOTAL SNR COMMITTED AMOUNT," AND THE PROPORTIONATE SHARE
         SET FORTH IN THE FOLLOWING TABLE IS HEREIN CALLED SUCH SNR LENDER'S
         "SNR PRO RATA SHARE."

<TABLE>
<CAPTION>
   SNR LENDER                     SNR COMMITTED AMOUNT      SNR PRO RATA SHARE

<S>                               <C>                       <C>
BANK OF AMERICA                       $1,269,232                 46.1539%

LASALLE                               $  846,153                 30.7692%

PNC                                   $  634,615                 23.0769%

TOTAL SNR COMMITTED AMOUNT            $2,750,000                     100%
</TABLE>

                                       11
<PAGE>   12

                                    THE  OBLIGATION OF EACH SNR LENDER TO MAKE
         AN ADVANCE UNDER THE SNR LOAN IS SEVERAL AND IS LIMITED TO ITS SNR
         COMMITTED AMOUNT AND BY THE PROVISIONS OF CLAUSE (c) IN THE FOLLOWING
         PARAGRAPH AND SUCH OBLIGATION OF EACH SNR LENDER IS HEREIN CALLED ITS
         "SNR COMMITMENT". THE SNR COMMITMENT OF EACH OF THE SNR LENDERS IS
         HEREIN COLLECTIVELY REFERRED TO AS THE "SNR COMMITMENTS". THE AGENT
         SHALL NOT BE RESPONSIBLE FOR THE SNR COMMITMENT OF ANY SNR LENDER; AND
         SIMILARLY, NONE OF THE SNR LENDERS SHALL BE RESPONSIBLE FOR THE SNR
         COMMITMENT OF ANY OF THE OTHER SNR LENDERS; THE FAILURE, HOWEVER, OF
         ANY SNR LENDER TO PERFORM ITS SNR COMMITMENT SHALL NOT RELIEVE ANY OF
         THE OTHER SNR LENDERS FROM THE PERFORMANCE OF THEIR RESPECTIVE SNR
         COMMITMENTS.

                                    DURING THE SNR COMMITMENT PERIOD, THE
         BORROWER MAY REQUEST ADVANCES UNDER THE SENIOR NOTE REPURCHASE FACILITY
         IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT; PROVIDED THAT
         AFTER GIVING EFFECT TO ANY BORROWER'S REQUEST:

                                    (a) THE OUTSTANDING PRINCIPAL BALANCE OF
                  EACH SNR LENDER'S SNR PRO RATA SHARE OF THE SENIOR NOTE
                  REDEMPTION SUBFACILITY WOULD NOT EXCEED SUCH SNR LENDER'S SNR
                  PRO RATA SHARE; AND

                                    (b)     THE AGGREGATE OUTSTANDING PRINCIPAL
         BALANCE OF THE SNR WOULD NOT EXCEED THE TOTAL SNR COMMITTED AMOUNT; AND

                                    (c) THE OUTSTANDING PRINCIPAL BALANCE OF THE
                  AGGREGATE OF THE REVOLVING LOAN, ALL LETTER OF CREDIT
                  OBLIGATIONS AND THE SNR LOAN WOULD NOT EXCEED AN AMOUNT EQUAL
                  TO THE TOTAL REVOLVING CREDIT COMMITTED AMOUNT.

                AMOUNTS REPAID ON THE SNR MAY NOT BE REBORROWED.

               2.6.2 PROCEDURE FOR MAKING ADVANCES UNDER THE SNR.

                                    THE BORROWER MAY BORROW UNDER THE SENIOR
         NOTE REDEMPTION SUBFACILITY ON ANY BUSINESS DAY DURING THE SNR
         COMMITMENT PERIOD. THE BORROWER SHALL GIVE THE AGENT WRITTEN NOTICE (AN
         "SNR NOTICE") AT LEAST ONE (1) BUSINESS DAY PRIOR TO THE DATE ON WHICH
         SUCH BORROWER DESIRES AN ADVANCE UNDER THE SNR. EACH SNR NOTICE SHALL
         BE ACCOMPANIED BY A WRITTEN REQUEST FROM THE BORROWER THAT ACCURATELY
         AND COMPLETELY DESCRIBES A SENIOR NOTE TO BE PURCHASED, THE OUTSTANDING
         PRINCIPAL BALANCE OF THE SENIOR NOTE, THE AMOUNT TO BE PAID (WHICH
         AMOUNT SHALL BE NO GREATER THAN A PERCENTAGE OF SUCH OUTSTANDING
         PRINCIPAL BALANCE AS MAY BE AGREED UPON BY THE BORROWER AND THE SNR
         LENDERS) TO REDEEM THE SENIOR NOTE, AND THE DATE AND MANNER OF PAYMENT.
         EACH SNR NOTICE SHALL ALSO BE ACCOMPANIED BY SUCH OTHER INFORMATION,
         CERTIFICATES, CONFIRMATIONS, AND OTHER ITEMS AS THE AGENT MAY REQUIRE
         WITH RESPECT TO THE REPURCHASE OF THE

                                       12
<PAGE>   13

         SENIOR NOTE AND COMPLIANCE WITH THE OTHER TERMS OF THIS AGREEMENT. THE
         BORROWER SHALL USE THE PROCEEDS OF THE SNR LOAN PROMPTLY AND ONLY FOR
         THE REDEMPTION OF SENIOR NOTES IN ACCORDANCE WITH AN SNR NOTICE.

                                    NOT LATER THAN 2:00 P.M. (BALTIMORE CITY
         TIME) ON EACH REQUESTED BORROWING DATE FOR THE MAKING OF ADVANCES UNDER
         THE SNR, EACH SNR LENDER SHALL, IF IT HAS RECEIVED TIMELY NOTICE FROM
         THE AGENT OF THE BORROWER'S REQUEST FOR SUCH ADVANCES, MAKE AVAILABLE
         TO THE AGENT, IN FUNDS IMMEDIATELY AVAILABLE TO THE AGENT AT THE
         AGENT'S OFFICE SET FORTH IN SECTION 9.1, SUCH SNR LENDER'S SNR PRO RATA
         SHARE OF THE ADVANCES TO BE MADE ON SUCH DATE.

                                    2.6.3   SNR NOTES.

                                    THE OBLIGATION OF THE BORROWER TO PAY EACH
         SNR LENDER'S SNR PRO RATA SHARE OF THE SENIOR NOTE REDEMPTION
         SUBFACILITY, WITH INTEREST, SHALL BE EVIDENCED BY A SERIES OF
         PROMISSORY NOTES (AS FROM TIME TO TIME EXTENDED, AMENDED, RESTATED,
         SUPPLEMENTED OR OTHERWISE MODIFIED, COLLECTIVELY THE "SNR NOTES" AND
         INDIVIDUALLY A "SNR NOTE") SUBSTANTIALLY IN THE FORM OF EXHIBIT "A-2"
         ATTACHED HERETO AND MADE A PART HEREOF, WITH APPROPRIATE INSERTIONS.
         EACH SNR LENDER'S SNR NOTE SHALL BE PAYABLE TO THE ORDER OF SUCH SNR
         LENDER AT THE TIMES PROVIDED IN THE SNR NOTE, AND SHALL BE IN THE
         PRINCIPAL AMOUNT OF SUCH SNR LENDER'S SNR PRO RATA SHARE. THE BORROWER
         ACKNOWLEDGES AND AGREES THAT, IF THE OUTSTANDING PRINCIPAL BALANCE OF
         THE SENIOR NOTE REDEMPTION SUBFACILITY OUTSTANDING FROM TIME TO TIME
         EXCEEDS THE AGGREGATE FACE AMOUNT OF THE SNR NOTES, THE EXCESS SHALL
         BEAR INTEREST AT THE RATES PROVIDED FROM TIME TO TIME FOR THE SENIOR
         NOTE REDEMPTION SUBFACILITY EVIDENCED BY THE SNR NOTES AND SHALL BE
         PAYABLE, WITH ACCRUED INTEREST, ON DEMAND. THE SNR NOTES SHALL NOT
         OPERATE AS A NOVATION OF ANY OF THE OBLIGATIONS OR NULLIFY, DISCHARGE,
         OR RELEASE ANY SUCH OBLIGATIONS OR THE CONTINUING CONTRACTUAL
         RELATIONSHIP OF THE PARTIES HERETO IN ACCORDANCE WITH THE PROVISIONS OF
         THIS AGREEMENT.

                                    2.6.4 PAYMENTS OF SENIOR NOTE REDEMPTION
         SUBFACILITY.

                                    EACH ADVANCE UNDER THE SENIOR NOTE
         REDEMPTION SUBFACILITY SHALL BE REPAYABLE IN INSTALLMENT PAYMENTS OF
         PRINCIPAL MONTHLY (ON THE FIRST DAY OF EACH MONTH) COMMENCING APRIL 1,
         2001 IN AN AMOUNT EQUAL TO 1/60TH OF THE AMOUNT OUTSTANDING ON MARCH
         31, 2001. THE SNR INSTALLMENT PAYMENT SCHEDULES SHALL NOT OPERATE AS A
         NOVATION OF ANY OF THE OBLIGATIONS OR NULLIFY, DISCHARGE, OR RELEASE
         ANY SUCH OBLIGATIONS OR THE CONTINUING CONTRACTUAL RELATIONSHIP OF THE
         PARTIES HERETO IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT OR
         THE SNR NOTES.

                                    2.6.5   ACTIVATION FEE.

                                       13
<PAGE>   14

                                    THE BORROWER SHALL PAY TO THE AGENT FOR THE
         RATABLE (BASED UPON EACH SNR LENDER'S SNR PRO RATA SHARE) BENEFIT OF
         THE SNR LENDERS ON OR BEFORE THE DATE OF EACH ADVANCE UNDER THE SENIOR
         NOTE REDEMPTION SUBFACILITY A FEE (THE "SNR ACTIVATION FEE") IN THE
         AMOUNT OF ONE AND ONE-HALF PERCENT (1-1/2%) OF THE AMOUNT ADVANCED.

                                    2.6.6   OPTIONAL PREPAYMENTS OF SNR LOAN.

                                    THE SNR LOAN MAY NOT BE PREPAID IN WHOLE OR
         IN PART ON OR BEFORE JULY 31, 2001. SUBJECT TO THE PROVISIONS OF
         SECTION 2.6.7 (SNR EARLY TERMINATION FEE) AND SECTION 2.3.4
         (INDEMNITY), THE BORROWER SHALL HAVE THE OPTION AT ANY TIME THEREAFTER
         AND FROM TIME TO TIME PREPAY (EACH A "SNR LOAN OPTIONAL PREPAYMENT" AND
         COLLECTIVELY THE "SNR LOAN OPTIONAL PREPAYMENTS") THE SNR LOAN, IN
         WHOLE OR IN PART WITHOUT PREMIUM OR PENALTY; PROVIDED, HOWEVER, THAT
         THE BORROWER MAY NOT USE ANY PROCEEDS OF AN ADVANCE UNDER THE REVOLVING
         CREDIT FACILITY FOR AN SNR LOAN OPTIONAL PREPAYMENT UNLESS AT THE TIME
         OF THE REQUEST FOR, AT THE TIME OF THE FUNDING OF AND IMMEDIATELY AFTER
         THE TIME OF THE APPLICATION OF SUCH ADVANCE, THE OUTSTANDING PRINCIPAL
         AMOUNT OF THE REVOLVING LOAN PLUS THE OUTSTANDING LETTER OF CREDIT
         OBLIGATIONS DOES NOT EXCEED AN AMOUNT EQUAL TO THE LESSER OF (i) THE
         TOTAL REVOLVING CREDIT COMMITTED AMOUNT OR (ii) THE BORROWING BASE,
         MINUS TEN MILLION DOLLARS ($10,000,000) AND MINUS AN AMOUNT EQUAL TO
         ACCRUED AND AN UNPAID INTEREST ON THE SENIOR NOTES.

                                    2.6.7 SNR EARLY TERMINATION FEE.

                                    WITH EACH SNR LOAN OPTIONAL PREPAYMENT
         PRIOR TO THE REVOLVING CREDIT EXPIRATION DATE (AS EXTENDED FROM TIME TO
         TIME IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT), THE BORROWER
         SHALL PAY A FEE (THE "SNR EARLY TERMINATION FEE") EQUAL TO FOLLOWING
         AMOUNT AT THE FOLLOWING TIMES:

--------------------------------------------------------------------------------

           PERIOD                                    SNR EARLY TERMINATION FEE
--------------------------------------------------------------------------------

AUGUST 1, 2001 THROUGH AND INCLUDING JULY 31,       0.5% OF THE AMOUNT PREPAID
2002
--------------------------------------------------------------------------------

AUGUST 1, 2002 THROUGH AND INCLUDING JULY 31,      0.25% OF THE AMOUNT PREPAID
2003
--------------------------------------------------------------------------------

AUGUST 1, 2003 AND THEREAFTER                                NONE
--------------------------------------------------------------------------------

                                    PAYMENT OF THE SNR LOAN IN WHOLE OR IN PART
         BY OR ON BEHALF OF THE BORROWER, BY COURT ORDER OR OTHERWISE, FOLLOWING
         AND AS A RESULT OF THE INSTITUTION OF ANY BANKRUPTCY PROCEEDING BY OR
         AGAINST THE BORROWER,

                                       14
<PAGE>   15

         SHALL BE DEEMED TO BE A PREPAYMENT OF THE SNR LOAN SUBJECT TO THE SNR
         EARLY TERMINATION FEE PROVIDED IN THIS SUBSECTION.

                                    NOTWITHSTANDING THE FOREGOING, THE BORROWER
         SHALL NOT BE REQUIRED TO PAY THE SNR EARLY TERMINATION FEE IN
         CONNECTION WITH A TERMINATION OF THE REVOLVING CREDIT COMMITMENTS IF
         THE REPAYMENT OF ALL OBLIGATIONS IS FROM (a) THE PROCEEDS OF AN
         ISSUANCE OF COMMON STOCK BY THE BORROWER, (b) THE PROCEEDS OF AN
         ISSUANCE OF COMMON STOCK BY THE BORROWER, (c) A REPLACEMENT CREDIT
         FACILITY EXTENDED BY BANK OF AMERICA, OR ITS SUCCESSORS, TO THE
         BORROWER, WHICH GENERATES SUFFICIENT PROCEEDS AND IS IN FACT USED TO
         REPAY ALL OBLIGATIONS (INCLUDING ALL LETTER OF CREDIT OBLIGATIONS) IN
         FULL AND, IF, IN CONNECTION WITH SUCH REPAYMENT OF ALL OBLIGATIONS, ALL
         LETTERS OF CREDIT ARE TERMINATED, OR (d) A REPLACEMENT CREDIT FACILITY
         EXTENDED WHICH GENERATES SUFFICIENT PROCEEDS AND IS IN FACT USED TO
         REPAY ALL OBLIGATIONS BY ANOTHER LENDER TO THE BORROWER ON TERMS AND
         CONDITIONS THAT THE AGENT AND THE LENDERS DID NOT OFFER TO THE BORROWER
         AFTER HAVING BEEN PROVIDED A COPY OF SUCH OTHER LENDER'S COMMITMENT AND
         HAVING HAD NOT LESS THAN THIRTY (30) DAYS TO REVIEW, APPROVE AND COMMIT
         TO IN WRITING A COMPARABLE CREDIT FACILITY.

         7.  Section 7.2.5 of the Financing Agreement is hereby amended in its
entirety as follows:

                  7.2.5    APPLICATION OF PROCEEDS; SNR PARTICIPANT.

                           (a) ANY PROCEEDS OF SALE OR OTHER DISPOSITION OF THE
         COLLATERAL WILL BE APPLIED BY THE AGENT TO THE PAYMENT FIRST OF ANY AND
         ALL AGENT'S OBLIGATIONS, THEN TO ANY AND ALL ENFORCEMENT COSTS, AND
         THEREAFTER (i) PROCEEDS FROM THE COLLATERAL (OTHER THAN THE MORTGAGE)
         SHALL BE APPLIED FIRST TO THE OBLIGATIONS WITH RESPECT TO THE REVOLVING
         CREDIT FACILITY, SECOND TO OBLIGATIONS OTHER THAN THE THOSE WITH
         RESPECT TO THE SENIOR NOTE REDEMPTION SUBFACILITY, THEN TO ANY
         OBLIGATIONS WITH RESPECT TO THE SENIOR NOTE REDEMPTION SUBFACILITY, AND
         (ii) PROCEEDS FROM THE MORTGAGE SHALL BE APPLIED FIRST TO THE
         OBLIGATIONS WITH RESPECT TO THE SENIOR NOTE REDEMPTION SUBFACILITY AND
         THEN TO ANY OTHER OBLIGATIONS. IF THE SALE OR OTHER DISPOSITION (BY
         FORECLOSURE, LIQUIDATION OR OTHERWISE) OF THE COLLATERAL FAILS TO FULLY
         SATISFY THE OBLIGATIONS, THE BORROWER SHALL REMAIN LIABLE TO THE AGENT
         AND THE SNR LENDERS FOR ANY DEFICIENCY.

                           (b) NOTWITHSTANDING ANY OTHER PROVISION OF THIS
         AGREEMENT, THE THIRD AMENDMENT OR OTHERWISE, WITHOUT THE PRIOR WRITTEN
         CONSENT OF THE REQUISITE LENDERS, UNTIL THE OBLIGATIONS (OTHER THAN THE
         SNR LOAN OBLIGATIONS AND CONTINGENT INDEMNIFICATION OBLIGATIONS NOT
         THEN DUE AND PAYABLE), HAVE BEEN INDEFEASIBLY PAID IN FULL IN CASH (i)
         THE SNR LOAN SHALL NOT BE INCLUDED IN THE DETERMINATION OF PRO RATA
         SHARES AND REQUISITE LENDERS, (ii) THE AGENT AND THE LENDERS MAY TAKE
         ANY ACTION UNDER THIS AGREEMENT, UNDER THE FINANCING AGREEMENT, UNDER
         THE FINANCING

                                       15
<PAGE>   16

         DOCUMENTS, UNDER APPLICABLE LAWS (INCLUDING, WITHOUT LIMITATION, THOSE
         ACTIONS FOR WHICH THE CONSENT OF ALL LENDERS IS REQUIRED UNDER SECTION
         9.2.2 (CIRCUMSTANCES WHERE CONSENT OF ALL LENDERS IS REQUIRED) OF THE
         FINANCING AGREEMENT) OR OTHERWISE WITH RESPECT TO THE OBLIGATIONS
         AND/OR THE COLLATERAL (OTHER THAN THE MORTGAGE AND OTHER THAN TO MODIFY
         THE TERMS OF, OR TO RELEASE THE OBLIGORS WITH RESPECT TO, THE SNR LOAN
         OBLIGATIONS AS PROVIDED UNDER THE THIRD AMENDMENT) WITHOUT THE FURTHER
         AGREEMENT OR CONSENT OF THE HOLDER OF THE SNR LOAN OR ANY INTEREST
         THEREIN (INCLUDING, WITHOUT LIMITATION, THE SNR PARTICIPANT), (iii) ALL
         LIENS (OTHER THAN THE LIEN OF THE MORTGAGE) SECURING THE SNR LOAN
         OBLIGATIONS SHALL BE AND ARE HEREBY AGREED TO BE FULLY SUBORDINATE TO
         THE LIENS OF THE AGENT AND THE LENDERS IN THE COLLATERAL (OTHER THAN
         THE MORTGAGE), AND THE HOLDER OF THE SNR LOAN OR ANY INTEREST THEREIN
         (INCLUDING, WITHOUT LIMITATION, THE SNR PARTICIPANT) SHALL HAVE NO
         RIGHTS OF MARSHALLING OR OTHERWISE IN CONNECTION WITH THE DISPOSITION
         OF THE COLLATERAL, (iv) NO PROCEEDS OF SALE OR OTHER DISPOSITION OF THE
         COLLATERAL (OTHER THAN THE MORTGAGE) WILL BE APPLIED TO THE SNR LOAN,
         AND (v) THE AGENT, IN THE EXERCISE OF ITS SOLE AND ABSOLUTE DISCRETION,
         MAY AT ANY TIME RELEASE, TERMINATE, FAIL TO PERFECT OR OTHERWISE DEAL
         WITH OR FAIL TO DEAL WITH THE COLLATERAL (OTHER THAN THE MORTGAGE) AS
         LONG AS SUCH ACTION IS NOT TAKEN BY THE AGENT IN BAD FAITH OR BY
         WILLFUL MISCONDUCT, ALL AS IF THE SNR LOAN DID NOT EXIST, THE HOLDERS
         OF THE SNR LOAN AND OF ANY INTEREST THEREIN (INCLUDING, WITHOUT
         LIMITATION, THE SNR PARTICIPANT) WAIVING ANY CLAIM TO THE CONTRARY.

         8.       Article V of the Financing Agreement is hereby amended by
adding the following as new Sections 5.3 and 5.4:

                  SECTION 5.3       CONDITIONS TO THE INITIAL ADVANCE UNDER THE
                                    SENIOR NOTE REDEMPTION SUBFACILITY.

                  THE MAKING OF THE INITIAL ADVANCE UNDER THE SENIOR NOTE
         REDEMPTION SUBFACILITY IS SUBJECT TO THE FULFILLMENT ON OR BEFORE THE
         SNR CLOSING DATE OF THE FOLLOWING CONDITIONS PRECEDENT IN A MANNER
         SATISFACTORY IN FORM AND SUBSTANCE TO THE AGENT AND ITS COUNSEL:

                           5.3.1    ORGANIZATIONAL DOCUMENTS.- OBLIGORS

                           THE AGENT SHALL HAVE RECEIVED FOR EACH OF OBLIGORS
         CERTIFICATES OF GOOD STANDING, OFFICER'S CERTIFICATES, AND TRUE AND
         COMPLETE COPIES OF THE APPLICABLE CORPORATE CHARTER, BYLAWS,
         PARTNERSHIP AGREEMENTS, PARTNERSHIP CERTIFICATES, AND ALL AMENDMENTS
         THERETO, ALL IN FORM AND SUBSTANCE SATISFACTORY TO THE AGENT.

                           5.3.2    OPINION OF OBLIGORS' COUNSEL.

                           THE AGENT SHALL HAVE RECEIVED THE FAVORABLE OPINION
         OF COUNSEL FOR THE OBLIGORS ADDRESSED TO THE AGENT AND THE LENDERS IN
         FORM AND SUBSTANCE SATISFACTORY TO THE AGENT.

                                       16
<PAGE>   17

                           5.3.3    ORGANIZATIONAL DOCUMENTS.- SNR GUARANTOR

                           THE AGENT SHALL HAVE RECEIVED FOR THE SNR GUARANTOR
         CERTIFICATES OF GOOD STANDING, PARTNER'S CERTIFICATES, AND TRUE AND
         COMPLETE COPIES OF THE APPLICABLE PARTNERSHIP AGREEMENTS, PARTNERSHIP
         CERTIFICATES, AND ALL AMENDMENTS THERETO, ALL IN FORM AND SUBSTANCE
         SATISFACTORY TO THE AGENT.

                           5.3.4    OPINION OF SNR GUARANTOR'S COUNSEL.

                           THE AGENT SHALL HAVE RECEIVED THE FAVORABLE OPINION
         OF COUNSEL FOR THE SNR GUARANTOR ADDRESSED TO THE AGENT AND THE LENDERS
         IN FORM AND SUBSTANCE SATISFACTORY TO THE AGENT.

                           5.3.5    NOTES.

                           THE AGENT SHALL HAVE RECEIVED FOR DELIVERY TO EACH OF
         THE SNR LENDERS THE SNR NOTES, EACH CONFORMING TO THE REQUIREMENTS
         HEREOF AND EXECUTED BY A RESPONSIBLE OFFICER OF THE BORROWER AND
         ATTESTED BY A DULY AUTHORIZED REPRESENTATIVE OF THE BORROWER.

                           5.3.6    MORTGAGE.

                           THE BORROWER SHALL HAVE EXECUTED AND DELIVERED THE
         MORTGAGE CONFORMING TO THE REQUIREMENTS HEREOF AND EXECUTED BY A
         RESPONSIBLE OFFICER OF THE BORROWER AND ATTESTED BY A DULY AUTHORIZED
         REPRESENTATIVE OF THE BORROWER AND IN FORM AND SUBSTANCE SATISFACTORY
         TO THE AGENT.

                           5.3.7    SNR GUARANTY; SNR PARTICIPANT.

                           THE SNR GUARANTOR SHALL HAVE EXECUTED AND DELIVERED
         THE SNR GUARANTY IN FORM AND SUBSTANCE SATISFACTORY TO THE AGENT.

                           5.3.8    SNR PARTICIPATION.

                           THE SNR PARTICIPANT SHALL HAVE EXECUTED AND DELIVERED
         THE SNR PARTICIPATION WHICH SHALL BE IN FORM AND SUBSTANCE SATISFACTORY
         TO THE SNR LENDERS.

                           5.3.8    OTHER DOCUMENTS, ETC.

                           THE AGENT SHALL HAVE RECEIVED SUCH OTHER
         CERTIFICATES, OPINIONS, DOCUMENTS AND INSTRUMENTS CONFIRMATORY OF OR
         OTHERWISE RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY AS MAY HAVE
         BEEN REASONABLY REQUESTED BY THE AGENT.

                                       17

<PAGE>   18

                           5.3.9    PAYMENT OF FEES.

                           THE AGENT AND THE LENDERS SHALL HAVE RECEIVED PAYMENT
         OF ANY FEES DUE ON OR BEFORE THE SNR CLOSING DATE.

                  SECTION 5.4       CONDITIONS TO THE INITIAL ADVANCE UNDER THE
                                    SENIOR NOTE REDEMPTION SUBFACILITY.

                  THE MAKING OF ALL ADVANCES UNDER THE SNR LOAN IS SUBJECT TO
         THE FULFILLMENT OF THE REQUIREMENTS OF SECTION 2.6 (SENIOR NOTE
         REDEMPTION SUBFACILITY) AND TO THE FULFILLMENT AT THE TIME OF EACH SUCH
         ADVANCE OF THE CONDITIONS SET FORTH IN SECTION 5.2 (CONDITIONS TO ALL
         EXTENSIONS OF CREDIT) (EXCEPT THAT REFERENCES TO EACH ADVANCE UNDER THE
         LOAN SHALL BE DEEMED TO REFER TO EACH ADVANCE UNDER THE SNR LOAN).

         9. With respect to the SNR Guaranty:

         (a) After February 28, 2001 and before April 15, 2001, the SNR
Guarantor or the Borrower by notice to the Agent and the SNR Lenders may request
that the SNR Guaranty be released, which the Agent and the SNR Lenders shall do
if (a) the Borrower has delivered the annual financial statements, certificates
and opinions as and when required by Sections 6.1.1(a) and (b); (b) there shall
exist no Default or Event of Default as of the date of those financial
statements, the date of the notice and the date of the release; (c) the
outstanding principal amount of the Revolving Loan plus the Outstanding Letter
of Credit Obligations does not on the date of release exceed an amount equal to
the lesser of (i) the Total Revolving Credit Committed Amount or (ii) the
Borrowing Base, minus Ten Million Dollars ($10,000,000) and minus an amount
equal to accrued and an unpaid interest on the Senior Notes; and (d) the
conditions of the following subparagraph (c) have been met.

         (b) If the SNR Guarantor or the Borrower does not make a request
meeting the requirements of subsection (a) above, for a period of thirty (30)
days after the Borrower delivers the financial statements and certificates as
and when required by Sections 6.1.1(c) for a month that is also the end of a
fiscal quarter of the Borrower, the SNR Guarantor or the Borrower by notice to
the Agent and the SNR Lenders may request that the SNR Guaranty be released,
which the Agent and the SNR Lenders shall do if (a) the Borrower has delivered
the monthly financial statements and certificates as and when required by
Sections 6.1.1(c) for the fiscal quarter most recently ended; (b) there shall
exist no Default or Event of Default as of the date of those financial
statements, the date of the notice and the date of the release; (c) the
outstanding principal amount of the Revolving Loan plus the Outstanding Letter
of Credit Obligations does not on the date of release exceed an amount equal to
the lesser of (i) the Total Revolving Credit Committed Amount or (ii) the
Borrowing Base and minus an amount equal to accrued and an unpaid interest on
the Senior Notes, minus Ten Million Dollars ($10,000,000); and (d) the
conditions of the following subparagraph (c) have been met.

         (c) The SNR Lenders shall have no obligation to release the SNR
Guaranty unless the Mortgage at the time of the release shall grant a Lien
covering the real property described therein to the Agent, for the ratable
benefit of the SNR Lenders and the Agent to secure the SNR

                                       18
<PAGE>   19

Obligations (including, without limitation, the Agent's Obligations with
respect thereto), and shall:

                           (i)      be in form and substance satisfactory to
         the Agent;

                           (ii) create a first priority Lien in such real
         property in favor of the Agent, for the ratable benefit of the SNR
         Lenders and the Agent to secure the SNR Obligations (including, without
         limitation, the Agent's Obligations with respect thereto), subject only
         to Permitted Liens, zoning ordinances, existing leases related to a
         PILOT program (provided, however, that on or before July 31, 2000 such
         leases shall be subordinated to the Mortgage, in form and substance
         satisfactory to the Agent), and such other matters as the Agent may
         reasonably approve and subject to no preference claims or other claims
         under the Bankruptcy Codes or under other Laws affecting the rights of
         creditors generally;

                           (iii) be accompanied by a current appraisal of the
         fair market value of the subject real property prepared by appraisers
         reasonably satisfactory to the Agent, which appraisal shall show that
         the outstanding principal balance of the SNR Loan does not exceed 75%
         of such fair market value;

                           (iv) be accompanied by a current survey reasonably
         satisfactory in all respects to the Agent of the subject real property,
         prepared by a registered land surveyor or engineer satisfactory to the
         Agent;

                           (v) be accompanied by evidence (including, without
         limitation, a Phase I report ordered by and for the Agent and meeting
         ASTM standards and the Agent's then current standards) reasonably
         satisfactory to the Agent regarding the current and past pollution
         control practices at such real property in connection with the
         discharge, emission, handling, disposal or existence of Hazardous
         Materials, which may include, at the Agent's request, an environmental
         audit of such real property prepared by a person or firm acceptable to
         the Agent;

                           (vi) be accompanied by a mortgagee's title insurance
         policy or marked-up unconditional commitment or binder for such
         insurance in form and substance satisfactory to the Agent and issued by
         a title insurance company reasonably satisfactory to the Agent; and

                           (vii) upon request of the Agent, be accompanied by a
         signed opinion of counsel addressed to the Agent and each of the
         Lenders, in form and substance satisfactory to the Agent, and from
         counsel, satisfactory to the Agent, licensed to practice in the state
         where the subject real property is located.

         10. The Borrower covenants and agrees to provide on or before July 31,
2000, the items required by clauses (iv) and (vi) of Section 9(c) above.

         11. By letter dated May 15, 2000, the Borrower requested that the Agent
and the Lenders consent to a reorganization of the Obligors with the effect that
all of the assets of Foster Grant Holdings, Inc. and its direct and indirect
subsidiaries will be held by the Borrower. The Agent

                                       19

<PAGE>   20

and the Lenders agree that the reorganization so described shall be treated
as a transaction covered by Section 6.2.1(c) of the Financing Agreement
and that no further consent of the Agent or the Lenders shall be required if the
reorganization meets the requirements of Section 6.2.1(c), including, without
limitation, the requirement that all Collateral remain subject to the Liens in
favor of the Agent and the Lenders.

         12. The Obligors, as applicable, hereby issue, ratify and confirm the
representations, warranties and covenants contained in the Financing Agreement,
as amended hereby. The Obligors agree that this Agreement is not intended to and
shall not cause a novation with respect to any or all of the Obligations.

         11. The Obligors acknowledge and warrant that the Agent and Lenders
have acted in good faith and have conducted in a commercially reasonable manner
their relationships with the Obligors in connection with this Agreement and
generally in connection with the Financing Agreement and the Obligations, the
Obligors hereby waiving and releasing any claims to the contrary.

         12. The Obligors shall pay at the time this Agreement is executed and
delivered all fees, commissions, costs, charges, taxes and other expenses
incurred by the Agent and Lenders and their counsel in connection with this
Agreement, including, but not limited to, reasonable fees and expenses of the
Agent's counsel and all recording fees, taxes and charges.

         13. This Agreement may be executed in any number of duplicate originals
or counterparts, each of such duplicate originals or counterparts shall be
deemed to be an original and taken together shall constitute but one and the
same instrument. The parties agree that their respective signatures may be
delivered by facsimile. Any party who chooses to deliver its signature by
facsimile agrees to provide a counterpart of this Agreement with its inked
signature promptly to each other party.

         IN WITNESS WHEREOF, the Borrower, the Guarantors, the Lenders and Agent
have executed this Agreement under seal as of the date and year first written
above.

WITNESS                                    AAi.FOSTERGRANT, INC. (formerly known
                                           as Accessories, Associates, Inc.)

/s/ Paula Zampini                          By: /s/ Mark Kost            (SEAL)
----------------------------                  --------------------------
                                                Mark Kost
                                                Chief Financial Officer

                                       20
<PAGE>   21

WITNESS:                                    FOSTER GRANT GROUP, L.P.
                                            By:      Bonneau General, Inc.
                                                     General Partner

/s/ Paula Zampini                           By: /s/ Mark Kost            (SEAL)
-----------------------------                  --------------------------
                                               Mark Kost
                                               Chief Financial Officer

WITNESS:                                    FANTASMA, LLC

/s/ Paula Zampini                           By: /s/ Mark Kost            (SEAL)
-----------------------------                  --------------------------
                                               Mark Kost
                                               Chief Financial Officer

WITNESS:                                    F.G.G. INVESTMENTS, INC.

/s/ Paula Zampini                           By: /s/ Mark Kost            (SEAL)
-----------------------------                  --------------------------
                                               Mark Kost
                                               Chief Financial Officer

WITNESS:                                    THE BONNEAU COMPANY

/s/ Paula Zampini                           By: /s/ Mark Kost            (SEAL)
-----------------------------                  --------------------------
                                               Mark Kost
                                               Chief Financial Officer

WITNESS:                                    BONNEAU GENERAL, INC.

/s/ Paula Zampini                           By: /s/ Mark Kost            (SEAL)
-----------------------------                  --------------------------
                                               Mark Kost
                                               Chief Financial Officer

                                       21
<PAGE>   22

WITNESS:                                    BONNEAU HOLDINGS, INC.

/s/ Paula Zampini                           By:/s/ Mark Kost       (SEAL)
-----------------------------                  --------------------------
                                               Mark Kost
                                               Chief Financial Officer

WITNESS:                                    FOSTER GRANT HOLDINGS, INC.

/s/ Paula Zampini                           By:/s/ Mark Kost       (SEAL)
-----------------------------                  --------------------------
                                               Mark Kost
                                               Chief Financial Officer

WITNESS:                                    O-RAY HOLDINGS, INC.

/s/ Paula Zampini                           By:/s/ Mark Kost       (SEAL)
-----------------------------                  --------------------------
                                               Mark Kost
                                               Chief Financial Officer

                    SIGNATURES CONTINUED ON THE NEXT PAGE

                                       22
<PAGE>   23

WITNESS:                                    BANK OF AMERICA, N.A., Agent

/s/ Mary J. Kleinsmith                      By: /s/ Gary W. Bartlett     (SEAL)
-----------------------------                  --------------------------------
                                               Gary W. Bartlett
                                               Vice President

WITNESS:                                    BANK OF AMERICA, N.A.
                                            in its capacity as a Lender

/s/ Mary J. Kleinsmith                      By: /s/ Gary W. Bartlett     (SEAL)
-----------------------------                  --------------------------------
                                               Gary W. Bartlett
                                               Vice President

WITNESS:                                    LASALLE BUSINESS CREDIT, INC.

                                            By: /s/ Thomas A. Buckelew   (SEAL)
-----------------------------                  --------------------------------
                                               Thomas A. Buckelew
                                               Vice President

WITNESS:                                    PNC BANK, NATIONAL ASSOCIATION

                                            By: /s/ Rose Crump           (SEAL)
-----------------------------                  --------------------------------
                                               Rose Crump
                                               Vice President

                                       23
<PAGE>   24

                                                                     EXHIBIT A-2

                                    SNR NOTE
                                    --------

$__________                                                  Baltimore, Maryland

                                                                   June __, 2000

         FOR VALUE RECEIVED, AAi.FOSTERGRANT, INC. (formerly known as
Accessories Associates, Inc.), a corporation organized and existing under the
laws of the State of Rhode Island (the "Borrower"), promises to pay to the order
of ________________ (the "SNR Lender"), the principal sum of
__________________________ DOLLARS ($___________) (the "Principal Sum"), or so
much thereof as has been or may be advanced to or for the account of the
Borrower pursuant to the terms and conditions of the "Financing Agreement" (as
hereinafter defined) with respect to the SNR Lender's SNR Pro Rata Share of the
SNR Loan (as those terms are defined in the Financing Agreement), together with
interest thereon at the rate or rates provided in the Financing Agreement. All
capitalized terms used, but not specifically defined herein, shall have the
meanings given such terms in the Financing Agreement.

     1.  INTEREST.

         Commencing as of the date hereof and continuing until repayment in full
of all sums due hereunder, the unpaid Principal Sum shall bear interest at the
Applicable Interest Rate or, if applicable, the Post Default Rate. The rate of
interest charged under this Note shall change immediately and contemporaneously
with any change in the Applicable Interest Rate. All interest payable under the
terms of this Note shall be calculated on the basis of a 360-day year and the
actual number of days elapsed.

     2.  PAYMENTS AND MATURITY.

         The unpaid Principal Sum, together with interest thereon at the rate or
rates provided above, shall be payable as follows:

         (d) Interest shall be paid at the times for the payment of interest set
forth in Section 2.3 of the Financing Agreement; and

         (e) The Borrower shall make installment payments of principal at the
times and in the amounts provided in Section 2.6.4 (Payments of Senior Note
Redemption Subfacility) of the Financing Agreement; and

         (f) Unless sooner paid, the unpaid Principal Sum, together with
interest accrued and unpaid thereon, shall be due and payable in full on the
Revolving Credit Expiration Date (as that term is defined in the Financing
Agreement).

The fact that the balance hereunder may remain at or may be reduced to zero from
time to time pursuant to the Financing Agreement will not affect the continuing
validity of this Note or the

                                       24

<PAGE>   25

Financing Agreement, and the balance may be
increased to the Principal Sum after any such reduction to zero.

     3.  LATE CHARGES.

         If the Borrower shall fail to make any payment under the terms of this
Note within ten (10) days after the date such payment is due, the Borrower shall
pay to the SNR Lender on demand a late charge equal to five percent (5%) of such
payment.

     4.  APPLICATION AND PLACE OF PAYMENTS.

         All payments, made on account of this Note shall be applied first to
the payment of any late charge then due hereunder, second to the payment of
accrued and unpaid interest then due hereunder, then to any installments of
principal then due and payable hereunder, and, if the Borrower is permitted to
make a SNR Loan Optional Prepayment (as that term is defined in the Financing
Agreement), then to any applicable Early Termination Fee (as that term is
defined in the Financing Agreement), and the remainder, if any, shall be applied
to installments of principal in the inverse order of maturity. All payments on
account of this Note shall be paid in lawful money of the United States of
America in immediately available funds during regular business hours of Bank of
America, N. A. (the "Agent") at the office of Bank of America Business Credit in
Baltimore, Maryland or at such other times and places as the Agent (as that term
is defined in the Financing Agreement) may at any time and from time to time
designate in writing to the Borrower.

     5.  FINANCING AGREEMENT.

         This Note is an "SNR Note" described in a Second Amended and Restated
Financing and Security Agreement dated July 21, 1998 (as amended by that certain
First Amendment to Second Amended and Restated Financing and Security Agreement
dated as of May 7, 1999, Second Amendment to Second Amended and Restated
Financing and Security Agreement dated as of March 24, 2000, Third Amendment to
Financing and Security Agreement dated the same date as this Note (the "Third
Amendment"), and as further amended, restated, modified, substituted, extended,
and renewed from time to time, the "Financing Agreement") by and among the
Borrower, Bank of America, N.A., a national banking association, in its capacity
as Agent (the "Agent"), the SNR Lender, and others identified from time to time
therein as "Obligors," "SNR Lenders" and "Lenders" under the Financing
Agreement. The indebtedness evidenced by this Note is included within the
meaning of the term "Obligations" under the Financing Agreement.

     6.  SECURITY.

         This Note is secured by the Mortgage (as that term is defined in the
Financing Agreement) and as otherwise provided in the Financing Agreement.

     7.  EVENTS OF DEFAULT.

         The occurrence of any one or more of the following events shall
constitute an event of default (individually, an "Event of Default" and
collectively, the "Events of Default") under the terms of this Note:

                                       25
<PAGE>   26

         (g) The failure of the Borrower to pay to the SNR Lender when due any
and all amounts payable by the Borrower to the SNR Lender under the terms of
this Note; or

         (h) The occurrence of an "Event of Default" (as defined in the
Financing Agreement).

     8.  REMEDIES.

         Upon the occurrence of an Event of Default, at the option of the SNR
Lender, all amounts payable by the Borrower to the SNR Lender under the terms of
this Note shall immediately become due and payable by the Borrower to the SNR
Lender without notice to the Borrower or any other person, and the SNR Lender
shall have all of the rights, powers, and remedies available under the terms of
this Note, any of the other Financing Documents and all applicable laws. The
Borrower and all endorsers, guarantors, and other parties who may now or in the
future be primarily or secondarily liable for the payment of the indebtedness
evidenced by this Note hereby waives presentment, protest and demand, notice of
protest, notice of demand and of dishonor and non-payment of this Note and
expressly agrees that this Note or any payment hereunder may be extended from
time to time without in any way affecting the liability of the Borrower,
guarantors and endorsers.

         The SNR Lender agrees with the Agent and the other Lenders that the
decisions and determinations of the Required Lenders in enforcing this Note and
in guiding the Agent in this matter shall be binding upon the SNR Lender,
including, without limitation, authorizing the Agent at the pro rata expense of
the SNR Lenders (to the extent not reimbursed by the Borrower) to retain
attorneys to seek judgment on this Note. The SNR Lender similarly agrees with
the Agent and the other Lenders and covenants with the Borrower that it will not
seek to separately institute any legal action on this Note. All rights of action
under this Note may be enforced by the Agent only and any suit or proceeding
instituted by the Agent in furtherance of such enforcement may be brought in its
name as Agent without the necessity of joining as plaintiffs or defendants the
SNR Lender, and the recovery of any judgment shall be for the benefit of the
Agent and the SNR Lenders, subject to the expenses of the Agent.

     9.  ARBITRATION.

         ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING,
BUT NOT LIMITED TO THOSE ARISING OUT OF THIS NOTE, THE FINANCING AGREEMENT OR
THE OTHER FINANCING DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN
ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE
FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE ACT), THE
RULES OF PRACTICE AND PROCEDURE FOR ARBITRATION OF COMMERCIAL DISPUTES OF THE
JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC. (J.A.M.S.) AND THE "SPECIAL
RULES" SET FORTH BELOW. IN THE EVENT OF AN INCONSISTENCY, THE SPECIAL RULES
SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT
HAVING JURISDICTION. ANY PARTY TO THIS NOTE OR ANY OTHER FINANCING DOCUMENT MAY
BRING ANY ACTION, INCLUDING A SUMMARY OR EXPEDITED

                                       26
<PAGE>   27

PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH
THIS NOTE RELATES IN ANY COURTS HAVING JURISDICTION OVER SUCH ACTION.

         (A) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF
AGENT'S DOMICILE AT THE TIME OF EXECUTION OF THIS NOTE AND ADMINISTERED BY
J.A.M.S. WHO WILL APPOINT AN ARBITRATOR. IF J.A.M.S. IS UNABLE OR LEGALLY
PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION
ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90
DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A
SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCING OF SUCH HEARING FOR AN
ADDITIONAL 60 DAYS.

         (B) RESERVATION OF RIGHTS. NOTHING IN THIS NOTE OR OTHER FINANCING
DOCUMENTS SHALL BE DEEMED TO: (I) LIMIT OR EXPAND THE APPLICABILITY OF ANY
OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED
IN THIS INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE A WAIVER BY THE LENDER OF
THE PROTECTION AFFORDED TO IT BY 12 U.S.C. 91 OR ANY SUBSTANTIALLY EQUIVALENT
STATE LAW; OR (III) LIMIT OR EXPAND THE RIGHT OF THE LENDER. (A) TO EXERCISE
SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SET OFF, OR (B) TO FORECLOSE
AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT
PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE
RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE LENDER MAY
EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH
PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY
ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS NOTE OR ANOTHER LOAN DOCUMENT.
NEITHER THE EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF
ANY ACTION FOR FORECLOSURE OR FOR PROVISIONAL OR ANCILLARY REMEDIES SHALL
CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN SUCH
ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT
TO SUCH REMEDIES.

     10. NOTICES.

         Any notice, request, or demand to or upon the Borrower or the SNR
Lender shall be deemed to have been properly given or made when delivered in
accordance with Section 9.1 of the Financing Agreement.

     11. APPLICABLE LAW.

         The Borrower acknowledges and agrees that this Note shall be governed
by the laws of the State of Maryland, even though for the convenience and at the
request of the Borrower, this Note may be executed elsewhere.

                                       27
<PAGE>   28

         IN WITNESS WHEREOF, each of the Borrower has caused this Note to be
executed under seal by its duly authorized officers as of the date first written
above.

WITNESS:                                AAI.FOSTERGRANT, INC. (formerly known as
                                        Accessories Associates, Inc.)

/s/ Paula Zampini                        By: /s/ Mark Kost            (Seal)
-----------------------------               --------------------------------
                                            Mark Kost
                                            Chief Financial Officer

                                       28<PAGE>   1
                                                                   EXHIBIT 10.18

                                                                  March 24, 2000

Mr. Howard Collins
P.O. Box 413
Rye Beach, NH 03871

Dear Howard:

I am delighted to formally extend to you our offer to join the AAi.FosterGrant
team. As I am sure you heard from all of us, this is an exciting place to work
with lots of challenges and a great opportunity to contribute to the success of
the company!

This letter summarizes the offer of employment made to you by AAi.FosterGrant,
Inc. ("Company") and is valid until March 31, 2000.

1.       POSITION:   Executive Director - Products.

2.       REPORTING RELATIONSHIP: President & CEO.

3.       PRIMARY RESPONSIBILITIES: You have full responsibility for the
         Company's product development and sourcing functions on a global basis.

4.       BASE SALARY:  Your base annual salary will be $240,000 paid in 52
         weekly installments.

5.       BENEFITS: As a full time employee of the Company you will become
         eligible for our ERISA benefits programs as are in effect from time to
         time, including, but not limited to:

         -    Medical and Dental insurance

         -    Life insurance

         -    401(k) program after one year of service

         -    Paid vacation (3 weeks)

         -    Business class on international travel

         A summary of our current benefits is enclosed for your review.

6.       ANNUAL BONUS:  You will participate in the FY '00 performance bonus
         plan at the 30% base salary level based equally on your attainment of
         personal goals and the Company's performance against annual
         corporate business goals.

7.       STOCK OPTIONS: Attachment A shall apply.

8.       PERFORMANCE REVIEW:  In general, performance and salary reviews will
         be effective as of one year from the date of hire.

<PAGE>   2

9.       PROPRIETARY RIGHTS/NON-COMPETITION:  Attachment B shall apply.

10.      SPECIAL PROVISIONS/SEVERANCE:  Attachment C shall apply.

11.      ANTICIPATED START DATE:

If you are in agreement with the foregoing, please signify by signing below and
at Attachment B.

Howard, I believe that you have the skills, experience, intellect and energy
level that will make you a successful team player at AAi.FosterGrant. I look
forward to your participation in this process and to working with you.

Sincerely,

AAi.FosterGrant, Inc.                          Agreed and Accepted:

By /s/ John R. Ranelli                         /s/ Howard Collins
   ----------------------                      -------------------------
John R. Ranelli                                Howard Collins
President/CEO

Encl:  Benefits Summary//I-9 Form

* AAi.Foster Grant, Inc. verifies the identity and employment authorization of
all new hires, pursuant to the Immigration and Nationality Act. In order to
comply with this legal obligation, we must complete and Employment Eligibility
form for your review within three days of hire. Enclosed is an I-9 form for your
review. Please note that you will need to provide one document from "List A" OR
one document from "List B" AND one document from "List C" of the form. If you
anticipate having difficulty completing the I-9 form, please contact Lori
Gammino, AAi.FosterGrant, Inc.

<PAGE>   3

                                  ATTACHMENT A

                                  STOCK OPTIONS

         Pursuant to the provisions of the Company's Incentive Common Stock
Option Plan (a copy of which will be provided to you), the Company will grant to
you at the Board of Directors meeting following the commencement of your
employment, but in no event later than six (6) months following the commencement
of your employment, subject to the terms and conditions of the Plan and the
Company's form of Incentive Stock Option Agreement (copy of which will be
provided to you), the right and option to purchase from the Company all or any
part of an aggregate of 12,500 shares of the common stock ($.01 par value) of
the Company at a purchase price equal to $32.00 per share. The option shall vest
upon an initial public offering of the Company's common stock or the achievement
by Company of $20 million EBIT.

<PAGE>   4

                                  ATTACHMENT B

                  PROPRIETARY RIGHTS/NON-COMPETITION AGREEMENT

         For purposes of this Agreement, the following are collectively referred
to as "Company": AAi.FosterGrant, Inc. and any other corporation, entity or
person, now or hereafter controlled by, controlling or under common control with
Company. "I" shall mean Howard Collins.

         I acknowledge that (1) Company is in the business of providing jewelry,
small leather goods, reading glasses and sunglasses and other accessories sales
and services to numerous customers, and expends significant resources in
developing, marketing and selling its services and products, and in developing
information which is not generally known to others and which is entitled to
protection from improper disclosure and use; (2) I will occupy a position of
special value to Company and, in the discharge of duties customary to that
position, I will have access to Company's vital and unique business information
which allows Company to gain a competitive edge over competitors; and (3) I will
have close, regular contact and relationships with Company's other employees
and, because of the personal nature thereof, such employees will develop
identification with me, rather than the Company itself, could create the
potential for my appropriation of such relationships developed on Company's
behalf and expense.

         I further acknowledge that an essential element of maintaining
Company's relationships with its customers is the development and maintenance of
personal contacts with vendor and customer personnel who are responsible for
obtaining Company services and products and, towards that end, Company (1)
encourages employees, including me, to become personally acquainted with vendor
and customer personnel and (2) provides employees, including me, access to
information gathered by Company about vendors and customers. This policy
represents a significant, costly investment by Company, to the extent additional
manpower is necessary to develop such contacts and relationships and gather such
information. Because of the personal nature of such contacts and relationships,
Company's vendors and customers commonly develop identification with employees,
including me, rather than Company itself. Such identification creates potential
for my appropriation of the benefits of relationships developed with vendors and
customers on Company's behalf and expense.

        In this Agreement, Company's information, data and knowledge is known as
Proprietary Materials. It includes such information, data and knowledge
developed or obtained by or on behalf of Company relating to, used in connection
with or reasonably likely to be useful to any of Company's businesses, ventures,
research, investigations or activities, including but not limited to all of
Company's products, discoveries, ideas, inventions, methods, improvements,
concepts, developments, methods, designs, drawings, works, processes, know-how,
computer programs, internal policies and procedures, vendors, customers,
contacts, prospects, financial information, business records, marketing
practices and any papers labeled "secret," "confidential," or "proprietary," as
well as any confidential information of any of Company's customers provided to
Company. I understand that each of the foregoing constitutes Proprietary
Materials even if conceived, made, developed, created or first reduced to
practice by me during my term of employment with Company, and whether or not (1)
I did so at the request or suggestion of Company, (2) they resulted from or were
suggested by any work that I have performed or may perform for Company, (3) I
did the work alone or in conjunction with others, (4) I did the work during
regular hours of work or otherwise, or at Company's place of business or
elsewhere, and (5) the Proprietary Materials are patentable or copyrightable by
me or someone else. Notwithstanding the foregoing, Company and I agree that
Proprietary Materials will not include any information, data or knowledge that I
can establish by written evidence as having been conceived, made or reduced to
practice by me which was created or conceived without use of Company resources,
outside of regular Company business hours and that is unrelated to or reasonably
unlikely to be useful to Company.

         In order to provide greater comfort to Company that it can continue to
share its Proprietary Materials with me without fear of appropriation thereof,
and to clarify our common understanding concerning our mutual responsibilities,
I am entering into this Agreement. I have read it carefully so that I may
understand its importance.

<PAGE>   5

As a condition to my employment and continued employment, and in consideration
of the premises and the compensation that I accept in connection with
such employment, I agree as follows:

        1. During my employment and thereafter, I shall not, in any way,
directly or indirectly, disclose or appropriate to my own use, or to the use of
any party other than Company, the Proprietary Materials. I shall use my best
efforts to protect the Proprietary Materials from disclosure or misuse, and
inform an executive officer of Company immediately upon learning of any improper
disclosure or misuse of Proprietary Materials by me or by any other employee or
person. I shall not copy or remove from Company's premises any media, papers,
drawings or models relating to or containing any of the Proprietary Materials,
except to the extent necessary in the course of such employment.

         2. During the term of such employment and upon termination of my
employment, I shall promptly and fully disclose to an executive officer of
Company any Proprietary Materials of which I have knowledge.

        3. The Proprietary Materials shall at all times be the exclusive
property of Company, although I am aware that in the absence of this Agreement I
may have been entitled to rights in some of the Proprietary Materials.
Accordingly, I agree that all Proprietary Materials consisting of writings or
works (including but not limited to computer software program codes) shall be
considered works made for hire under the copyright laws, and therefore owned by
Company. So as to assure Company's exclusive rights in the Proprietary
Materials, I hereby assign, transfer and give to Company my entire right, title
and interest in and to the Proprietary Materials, including but not limited to
all rights throughout the world and any renewals and extensions associated
therewith. At the request of Company, during the term of my employment and
forever thereafter, I shall (a) sign, verify, acknowledge, deliver and file any
documents necessary or advisable for Company to obtain ownership of the
Proprietary Materials, including, at Company's expense, the issuance of patents
or copyrights to Company with respect to the Proprietary Materials, and (b)
otherwise assist Company in every reasonable manner in obtaining any of its
rights in the Proprietary Materials (including but not limited to providing
testimony at legal proceedings). I hereby irrevocably appoint Company as my
attorney-in-fact (which appointment shall be deemed a power coupled with an
interest) with full powers of substitution and delegation, to execute, verify,
acknowledge and deliver any such documents.

         4. Upon the termination of my employment for any reason, or if Company
shall request sooner, I shall promptly deliver to an executive officer of
Company all media, papers, drawings, models and other existing material in my
possession or control relating to or containing any of the Proprietary
Materials.

         5. I shall not disclose to Company any knowledge, data or information
which, to my knowledge, another company may consider to be its confidential
information, trade secrets or proprietary information. I am not subject to any
other agreements, whether in writing or verbally, with anyone else that would
prohibit, restrict or interfere with my employment or fulfilling my obligations
under this Agreement.

         6. Were I to leave the Company's employment and utilize my
administrative, financial, technological, marketing and sales skills in
competition with Company, the results would be materially adverse to Company.
Accordingly, during such employment and during the twelve (12) month period
following the termination of my employment with Company (the "non-competition
period"), I shall not engage in or carry on, in any way, directly or indirectly,
either for myself or as a member of a partnership or as a stockholder or
investor (except for ownership of securities, not exceeding 5% of any class, of
a corporation traded on a national securities exchange) or as an officer,
director, employee, agent, representative, advisor or consultant of any entity
(other than Company), any business similar to or competing with any business
carried on by Company or its successors at the time of the termination of my
employment, or directly or indirectly related to the Business and to which I
have been exposed at any time during such employment, in the United States or
any other country in which Company does business or engages in activities at the
time of the termination of such employment.

         7. I shall not, during the non-competition period, in any way, directly
or indirectly (except in the course of such employment), call upon, solicit,
advise or otherwise do or attempt to do, business with any clients, customers or
accounts of Company with whom I had any dealings at any time during the course
of such employment, or take away or interfere or attempt to interfere with any
custom, trade, business or patronage of

<PAGE>   6

Company, or interfere with or attempt to interfere with any officers,
employees, representatives, advisors, consultants or agents of Company, or
induce or attempt to induce any of them to leave the service of Company or
violate agreements with it. At the termination of my employment, Company shall
supply to me a written listing of clients, customers or accounts of Company.

         8. The foregoing shall be deemed to be a series of separate covenants,
one for each county of each state or territory of the United States and one for
each and every country in which Company does business or engages in activity. If
a court shall refuse to enforce all of such separate covenants, then such
unenforceable covenants shall be deemed eliminated for the purpose of such
proceedings to the extent necessary to permit the remaining separate covenants
to be enforced. If a court refuses to enforce any one or more of such separate
covenants because the time thereof is deemed to be excessive or unreasonable,
then such covenants, which would otherwise be unenforceable due to such
excessive or unreasonable period of time, shall be enforced for such lesser
period of time as deemed reasonable and not excessive by such court.

          9. I shall comply with this Agreement even after the termination of my
employment for any reason, and I shall perform each and every obligation set
forth in this Agreement without any further payment or compensation to me,
except for any reasonable out-of-pocket expenses incurred at the request of
Company.

           10. It is understood and agreed that any breach of this Agreement is
likely to result in irreparable injury to Company, and that the remedy at law
alone will be an inadequate remedy for such breach, in that in addition to any
other remedy Company may have, Company shall be entitled to enforce my specific
performance of this Agreement, and to seek both temporary and permanent
injunctive relief (to the extent permitted by law) without the necessity of
proving actual damages.

                                              -------------------------------
                                              Howard Collins

<PAGE>   7
                                  ATTACHMENT C

                          SPECIAL PROVISIONS/SEVERANCE

         1. This letter sets forth the terms of employment, and does not
constitute or promise employment for a specific term. Either you or we can
terminate employment for any reason. Notwithstanding the foregoing, if your
employment is terminated by Company for other than cause, then so long as you
are in compliance with the terms of this letter agreement, including all
attachments. Company shall pay to you a severance consisting of payments on the
first business day of each of the twelve (12) months immediately succeeding the
date of termination of your employment equal to 1/12th of your Base Salary in
effect on the date of termination. For purposes of the prior sentence, "cause"
shall mean: (a) your permanent disability under Company's long-term disability
insurance coverage; (b) failure to devote full time and best efforts to the
performance of your duties; (c) commission of an act of gross negligence,
dishonesty, fraud, gross insubordination, malfeasance, disloyalty, bad faith or
breach of trust in the performance of your duties; (d) failure to observe the
agreements set forth in the agreements attached as ATTACHMENT B; (e) commit a
felony or act which, in the judgment of the Board of Directors of Company,
subjects you or Company to public disrespect, scandal or ridicule so as to
materially and adversely affect the utility of your services to Company; or (f)
refuse to perform duties assigned to you in good faith or violate or fail to
observe any lawful business instruction or lawful business policy established by
Company with respect to the operation of its business and affairs or fail to, or
refuse to, substantially perform your duties; and with respect to items (b) and
(f), after a written notice is delivered by Company, which specifically
identifies the manner in which you have become subject to termination for cause,
if not cured (if such matter is susceptible of cure) within twenty (20) days
after such written notice.

         2. This Agreement shall be governed by and construed in accordance with
the laws of the State of Rhode Island, without regard to its Conflict of Laws
Rules. Employee agrees and consents to personal jurisdiction and service in
venue in any Federal or State Court within Rhode Island having subject matter
jurisdiction, for purposes of any action, suit or proceeding arising out of or
relating to this Agreement. Employee waives trial by jury in any such action,
suit or proceeding.

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