Document:

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                                                                   EXHIBIT 10.17

                           LOAN AND SECURITY AGREEMENT

                                     BETWEEN

                               PARAGON CAPITAL LLC

                                       AND

                           IPARTY RETAIL STORES CORP.

                                TABLE OF CONTENTS

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ARTICLE 1 - THE REVOLVING CREDIT..........................................................................-1-

     1-1.   ESTABLISHMENT OF REVOLVING CREDIT.............................................................-1-

     1-2.   AVAILABILITY..................................................................................-1-

     1-3.   RISKS OF VALUE OF INVENTORY...................................................................-2-

     1-4.   PROCEDURES UNDER REVOLVING CREDIT.............................................................-2-

     1-5.   THE LOAN ACCOUNT..............................................................................-5-

     1-6.   THE MASTER NOTE...............................................................................-6-

     1-7.   PAYMENT OF LOAN ACCOUNT.......................................................................-6-

     1-8.   INTEREST......................................................................................-6-

     1-9.   FEES..........................................................................................-7-

     1-10.  LENDER'S DISCRETION...........................................................................-8-

     1-11.  FEES FOR L/C'S................................................................................-9-

     1-12.  CONCERNING L/C'S.............................................................................-10-

ARTICLE 2 - GRANT OF SECURITY INTEREST...................................................................-12-

     2-1.   GRANT OF SECURITY INTEREST...................................................................-12-
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     2-2.   EXTENT AND DURATION OF SECURITY INTEREST.....................................................-13-

ARTICLE 3 - DEFINITIONS..................................................................................-13-

ARTICLE 4 - CONDITIONS PRECEDENT.........................................................................-13-

     4-1.   CORPORATE DUE DILIGENCE......................................................................-13-

     4-2.   OPINION......................................................................................-13-

     4-3.   CASH MANAGEMENT AND ADDITIONAL DOCUMENTS.....................................................-13-

     4-4.   KEY LIFE POLICIES............................................................................-14-

     4-5.   OFFICERS' CERTIFICATES.......................................................................-14-

     4-6.   REPRESENTATIONS AND WARRANTIES...............................................................-14-

     4-7.   INITIAL MINIMUM EXCESS AVAILABILITY..........................................................-14-

     4-8.   NO EVENT OF DEFAULT..........................................................................-14-

     4-9.   NO MATERIAL ADVERSE CHANGE...................................................................-14-

     4-10.  DELIVERY OF DOCUMENTS........................................................................-14-

     4-11.  THE BIG PARTY CHAPTER 11.....................................................................-14-

ARTICLE 5 - GENERAL REPRESENTATIONS. WARRANTIES AND COVENANTS............................................-15-

     5-1.   PAYMENT AND PERFORMANCE OF LIABILITIES.......................................................-15-

     5-2.   DUE ORGANIZATION - AUTHORIZATION - NO CONFLICTS..............................................-15-

     5-3.   TRADE NAMES..................................................................................-16-

     5-4.   LOCATIONS. LANDLORD'S CONSENTS, WAIVERS......................................................-17-

     5-5.   TITLE TO ASSETS..............................................................................-18-

     5-6.   INDEBTEDNESS. ...............................................................................-19-

     5-7.   INSURANCE POLICIES...........................................................................-19-
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     5-8.   LICENSES.....................................................................................-20-

     5-9.   LEASES.......................................................................................-20-

     5-10.  REQUIREMENTS OF LAW..........................................................................-20-

     5-11.  MAINTAIN PROPERTIES..........................................................................-20-

     5-12.  PAY TAXES....................................................................................-21-

     5-13.  NO MARGIN STOCK..............................................................................-22-

     5-14.  ERISA........................................................................................-22-

     5-15.  HAZARDOUS MATERIALS..........................................................................-23-

     5-16.  LITIGATION...................................................................................-23-

     5-17.  DIVIDENDS OR INVESTMENTS.....................................................................-23-

     5-18.  LOANS........................................................................................-24-

     5-19.  PROTECTION OF ASSETS.........................................................................-24-

     5-20.  LINE OF BUSINESS.............................................................................-25-

     5-21.  AFFILIATE TRANSACTIONS.......................................................................-25-

     5-22.  EXECUTIVE PAY................................................................................-25-

     5-23.  ADDITIONAL ASSURANCES........................................................................-26-

     5-24.  ADEQUACY OF DISCLOSURE.......................................................................-26-

     5-25.  NO MATERIAL ADVERSE CHANGE...................................................................-27-

     5-26.  OTHER COVENANTS..............................................................................-27-

ARTICLE 6 - USE AND COLLECTION OF COLLATERAL.............................................................-27-

     6-1.   USE OF INVENTORY COLLATERAL..................................................................-27-

     6-2.   INVENTORY QUALITY............................................................................-27-

     6-3.   ADJUSTMENTS AND ALLOWANCES...................................................................-27-
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     6-4.   VALIDITY OF ACCOUNTS.........................................................................-27-

     6-5.   NOTIFICATION TO ACCOUNT DEBTORS..............................................................-28-

ARTICLE 7 - CASH MANAGEMENT..............................................................................-28-

     7-1.   DEPOSITORY ACCOUNTS..........................................................................-28-

     7-2.   CREDIT CARD RECEIPTS.........................................................................-29-

     7-3.   THE CONCENTRATION ACCOUNT, THE BLOCKED ACCOUNT AND THE FUNDING ACCOUNTS......................-29-

     7-4.   PROCEEDS AND COLLECTION OF ACCOUNTS..........................................................-30-

     7-5.   PAYMENT OF LIABILITIES.......................................................................-31-

     7-6.   THE FUNDING ACCOUNT..........................................................................-31-

ARTICLE 8 - LENDER AS BORROWER'S ATTORNEY-IN-FACT........................................................-32-

     8-1.   APPOINTMENT AS ATTORNEY-IN-FACT..............................................................-32-

     8-2.   NO OBLIGATION TO ACT.........................................................................-32-

ARTICLE 9 - FINANCIAL AND OTHER REPORTING
            REQUIREMENTS/FINANCIAL COVENANTS ............................................................-33-

     9-1.   MAINTAIN RECORDS.............................................................................-33-

     9-2.   ACCESS TO RECORDS............................................................................-33-

     9-3.   IMMEDIATE NOTICE TO LENDER...................................................................-34-

     9-4.   BORROWING BASE CERTIFICATE...................................................................-36-

     9-5.   WEEKLY REPORTS...............................................................................-36-

     9-6.   MONTHLY REPORTS..............................................................................-36-

     9-7.   ANNUAL REPORTS...............................................................................-37-

     9-8.   OFFICERS' CERTIFICATES.......................................................................-37-

     9-9.   INVENTORIES. APPRAISALS. AND AUDITS..........................................................-38-
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     9-10.  ADDITIONAL FINANCIAL INFORMATION.............................................................-39-

     9-11.  FINANCIAL PERFORMANCE AND INVENTORY COVENANTS................................................-39-

     9-12.  ELECTRONIC REPORTING.........................................................................-39-

ARTICLE 10 - EVENTS OF DEFAULT...........................................................................-39-

     10-1.  FAILURE TO PAY REVOLVING CREDIT..............................................................-40-

     10-2.  FAILURE TO MAKE OTHER PAYMENTS...............................................................-40-

     10-3.  FAILURE TO PERFORM COVENANT OR LIABILITY (NO GRACE PERIOD)...................................-40-

     10-4.  FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD)......................................-40-

     10-5.  MISREPRESENTATION............................................................................-40-

     10-6.  ACCELERATION OF OTHER DEBT. BREACH OF LEASE..................................................-41-

     10-7.  DEFAULT UNDER OTHER AGREEMENTS...............................................................-41-

     10-8.  CASUALTY LOSS. NON-ORDINARY COURSE SALES.....................................................-41-

     10-9.  JUDGMENT. RESTRAINT OF BUSINESS..............................................................-41-

     10-10. BUSINESS FAILURE.............................................................................-41-

     10-11. BANKRUPTCY...................................................................................-41-

     10-12. DEFAULT BY GUARANTOR. .......................................................................-42-

     10-13. INDICTMENT - FORFEITURE......................................................................-42-

     10-14. TERMINATION OF GUARANTY......................................................................-42-

     10-15. CHALLENGE TO LOAN DOCUMENTS..................................................................-42-

     10-16. EXECUTIVE MANAGEMENT.........................................................................-42-

     10-17. CHANGE IN CONTROL............................................................................-42-

     10-18. MATERIAL ADVERSE CHANGE......................................................................-43-
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ARTICLE 11 - RIGHTS AND REMEDIES UPON DEFAULT............................................................-43-

     11-1.  RIGHTS OF ENFORCEMENT........................................................................-43-

     11-2.  SALE OF COLLATERAL...........................................................................-43-

     11-3.  OCCUPATION OF BUSINESS LOCATION..............................................................-44-

     11-4.  GRANT OF NONEXCLUSIVE LICENSE................................................................-44-

     11-5.  ASSEMBLY OF COLLATERAL.......................................................................-45-

     11-6.  RIGHTS AND REMEDIES..........................................................................-45-

ARTICLE 12 - NOTICES.....................................................................................-45-

     12-1.  NOTICE ADDRESSES.............................................................................-45-

     12-2.  NOTICE GIVEN.................................................................................-46-

ARTICLE 13 - TERM........................................................................................-47-

     13-1.  TERMINATION OF REVOLVING CREDIT..............................................................-47-

     13-2.  EFFECT OF TERMINATION........................................................................-47-

     13-3.  PREPAYMENT PREMIUM...........................................................................-47-

ARTICLE 14 - GENERAL.....................................................................................-48-

     14-1.  PROTECTION OF COLLATERAL.....................................................................-48-

     14-2.  SUCCESSORS AND ASSIGNS.......................................................................-48-

     14-3.  SEVERABILITY.................................................................................-48-

     14-4.  AMENDMENTS. COURSE OF DEALING................................................................-48-

     14-5.  POWER OF ATTORNEY............................................................................-49-

     14-6.  APPLICATION OF PROCEEDS......................................................................-49-

     14-7.  LENDER'S COSTS AND EXPENSES..................................................................-49-

     14-8.  COPIES AND FACSIMILES........................................................................-50-
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     14-9.  MASSACHUSETTS LAW............................................................................-50-

     14-10. CONSENT TO JURISDICTION......................................................................-50-

     14-11. INDEMNIFICATION..............................................................................-50-

     14-12. RIGHT OF SET-OFF.............................................................................-51-

     14-13. USURY SAVINGS CLAUSE.........................................................................-51-

     14-14. WAIVERS......................................................................................-52-

     14-15. CONFIDENTIALITY..............................................................................-52-

     14-16. RIGHT TO PUBLISH NOTICE......................................................................-53-

     14-17. ENTITIES RELATED TO LENDER...................................................................-53-

     14-18. CREDIT INQUIRIES.............................................................................-53-
</Table>

                                     -viii-
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                                      -ix-
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                                       -x-
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                                    EXHIBITS

1-6         Master Note
3           Definitions
4-12        Additional Conditions Precedent
5-2         Related Entities
5-3         Trade Names
5-4         Locations
5-5         Encumbrances
5-6         Indebtedness
5-7         Insurance Policies
5-12        Taxes
7-1         DDA's
7-2         Credit Card Arrangements
9-4         Borrowing Base Certificate
9-12(b)     Business Plan
9-12(a) Financial Performance Covenants

                                      -xi-
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          THIS AGREEMENT is made between Paragon Capital LLC (hereinafter,
"PARAGON" OR "LENDER"), a Delaware limited liability company with its principal
executive offices at Hillsite Office Building, 75 Second Avenue, Suite 400,
Needham, Massachusetts 02494, and iParty Retail Stores Corp. (hereinafter, the
"BORROWER"), a Delaware corporation with its principal executive offices at 1457
VFW Parkway, West Roxbury, Massachusetts 02132, in consideration of the mutual
covenants contained herein and benefits to be derived herefrom,

                                   WITNESSETH:

ARTICLE 1 - THE REVOLVING CREDIT

          1-1.    ESTABLISHMENT OF REVOLVING CREDIT.

                  (a)  The Lender establishes a revolving line of credit (the
"REVOLVING CREDIT") in the Borrower's favor pursuant to which the Lender,
subject to, and in accordance with, this Agreement, shall make loans and
advances and otherwise provide financial accommodations to and for the account
of the Borrower as provided herein. The amount of the Revolving Credit shall be
determined by the Lender by reference to Availability, as calculated from time
to time hereafter in accordance with the provisions of this Agreement. All loans
made by the Lender under this Agreement, and all of the Borrower's other
Liabilities to the Lender under or pursuant to this Agreement, are payable as
provided herein.

                  (b)  The Lender agrees, subject to the terms and conditions of
this Agreement, to make loans to the Borrower in an amount outstanding not to
exceed Availability at any one time.

                  (c)  Availability shall be based upon Borrowing Base
Certificates furnished as provided in Section 9-4, below.

                  (d)  Anything to the contrary in Section 1-1(b) above
notwithstanding, Lender, in the exercise of its discretion, may reduce Advance
Rates or create Reserves without declaring an Event of Default if it determines
that (i) there has occurred a Material Adverse Change; or (ii) Borrower is not
in compliance with covenants set forth in EXHIBIT 9-12(a).

                  (e)  The proceeds of loans and advances under the Revolving
Credit shall be used solely in accordance with the Business Plan for working
capital purposes of the Borrower and for its Capital Expenditures, all solely to
the extent permitted by this Agreement.

          1-2.    AVAILABILITY. The Lender does not have any obligation to make
any loan or advance, or otherwise to provide any credit for the benefit of the
Borrower such that the outstanding principal balance of the Loan Account exceeds
Availability. The making of loans, advances, and credits and the providing of
financial accommodations in excess of Availability is for the benefit of the
Borrower and does not affect the obligations of the Borrower hereunder; such
loans, advances, credits, and financial accommodations constitute Liabilities.
The making of any such loans,

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advances, and credits and the providing of financial accommodations, on any one
occasion such that Availability is exceeded shall not obligate the Lender to
make any such loans, credits, or advances or to provide any financial
accommodation on any other occasion nor to permit such loans, credits, or
advances to remain outstanding.

          1-3.    RISKS OF VALUE OF INVENTORY. The Lender's reference to a given
asset in connection with the making of loans and advances and the providing of
financial accommodations under the Revolving Credit and/or the monitoring of
compliance with the provisions hereof shall not be deemed a determination by the
Lender relative to the actual value of the asset in question. All risks
concerning the saleability of the Inventory are and remain upon the Borrower.
All Collateral secures the prompt, punctual, and faithful performance of the
Liabilities whether or not relied upon by the Lender in connection with the
making of loans, credits, and advances and the providing of financial
accommodations under the Revolving Credit.

          1-4.    PROCEDURES UNDER REVOLVING CREDIT.

                  (a)  The Borrower may request loans and advances under the
Revolving Credit, each in an amount of not less than Ten Thousand ($10,000)
Dollars. Each such request shall be in such manner as may from time to time be
acceptable to the Lender.

                  (b)  The Lender, subject to the terms and conditions of this
Agreement, will provide the Borrower with the loan or advance so requested, if
such request is received by 11:30 A.M., Boston time on a Banking Day, by the end
of business on that Banking Day; otherwise, by the end of the then next Banking
Day. The Lender may revise such schedule, from time to time, by giving notice to
Borrower at least one day in advance.

                  (c)  Provided that Availability will not be exceeded (but
subject, however, to Subsection 1-4(i), below (which deals with the effect of a
Suspension Event)), a loan or advance under the Revolving Credit so requested by
the Borrower shall be made by the transfer of the proceeds of such loan or
advance to the Funding Account.

                  (d)  A loan or advance shall be deemed to have been made under
the Revolving Credit upon:

                       (i)    The Lender's initiation of the transfer of the
proceeds of such loan or advance in accordance with the Borrower's instructions
(if such loan or advance is of funds requested by the Borrower).

                       (ii) The charging of the amount of such loan or advance
to the Loan Account (in all other circumstances).

                  (e)  In the absence of willful neglect or bad faith on the
part of the Lender, there shall not be any recourse to, nor liability of, the
Lender on account of:

                                       -2-
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                       (i)    Any delay in the making of any loan or advance
requested under the Revolving Credit.

                       (ii)   Any delay in the proceeds of any such loan or
advance constituting collected funds.

                       (iii)  Any delay in the receipt, and/or any loss, of
funds which constitute a loan or advance under the Revolving Credit, the wire
transfer of which was initiated by the Lender in accordance with wire
instructions provided to the Lender by the Borrower.

                  (f)  The Lender may rely on any request for a loan or advance
or financial accommodation which the Lender, in good faith, believes to have
been made by a person duly authorized to act on behalf of the Borrower and may
decline to make any such requested loan or advance or to provide any such
financial accommodation until the Lender is furnished with such documentation
concerning that Person's authority to act as may be satisfactory to the Lender.

                  (g)  A request by the Borrower for any loan or advance or
financial accommodation under the Revolving Credit or of the issuance of an L/C
shall be irrevocable and shall constitute certification by the Borrower that as
of the date of such request, each of the following is true and correct:

                       (i)    There has been no Material Adverse Change.

                       (ii)   The Borrower is in compliance with, and has not
breached any of, its covenants contained in this Agreement.

                       (iii)  Each representation which is made herein or in
any of the Loan Documents is then true and complete as of and as if made on the
date of such request, except for any representation which refers to a specific
date, which representation shall be true and correct as of such date.

                       (iv)   No Suspension Event is then in existence.

                  (h)  The Borrower shall immediately become indebted to the
Lender for the amount of each loan or advance under or pursuant to this
Agreement when such loan or advance is deemed to have been made.

                  (i)  Upon the occurrence from time to time of any Suspension
Event, the Lender may suspend the Revolving Credit immediately and shall not be
obligated, during such suspension, to make any loan or advance or to provide any
financial accommodation hereunder.

                  (j)  The  Borrower  may request  that the Lender  cause the
issuance of L/C's for the account of the Borrower.

                                       -3-
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                       (i)    Each such request shall be in such manner as may
from time to time be reasonably acceptable to the Lender.

                       (ii)   The Lender will endeavor to cause the issuance
of any L/C so requested by the Borrower, provided that the requested L/C is in
form reasonably satisfactory to the Lender and if so issued:

                              (A)  The aggregate Stated Amount of all L/C's then
                                   outstanding, does not exceed Two Million
                                   ($2,000,000.00) Dollars.

                              (B)  The expiry of the L/C is not later than the
                                   earlier of thirty (30) days prior to the
                                   Maturity Date or the following:

                                   (I)    L/C's other than Documentary L/C's:
                                          One (1) year from initial issuance.

                                   (II)   Documentary L/C's: forty five (45)
                                          days from issuance; and

                              (C)  Availability would not be exceeded.

                       (iii)  The Borrower shall execute such documentation to
apply for and support the issuance of an L/C as may be required by the Issuer.

                       (iv)   There shall not be any recourse to, nor
liability of, the Lender on account of:

                              (A)  Any delay or refusal by an Issuer to issue an
                                   L/C.

                              (B)  Any action or inaction of an Issuer on
                                   account of or in respect to, any L/C.

                       (v)    The Borrower shall reimburse the Issuer,
immediately upon the drawing under any L/C, for the amount of such drawing. In
the event that the Borrower fails to so reimburse the Issuer, the Borrower
immediately shall reimburse the Lender for the amount of such drawing. To the
extent which the Borrower fails to so reimburse the Issuer or the Lender, the
Lender, without the request of the Borrower, may advance under the Revolving
Credit any amount which the Borrower is so obligated to pay to the Lender or the
Issuer, or for which the Borrower, the Issuer, or the Lender becomes obligated
on account of, or in respect to, any L/C. Such advance shall be made whether or
not a Suspension Event is then in existence or such advance would result in
Availability being exceeded. Such action shall not constitute a waiver of the
Lender's rights under Section 1-7(b), below.

                                       -4-
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          1-5.    THE LOAN ACCOUNT.

                  (a)  An account ("LOAN ACCOUNT") shall be opened on the books
of the Lender in which Loan Account a record may be kept of all loans made under
or pursuant to this Agreement and of all payments thereon.

                  (b)  The Lender may also keep a record (either in the Loan
Account or elsewhere, as the Lender may from time to time elect) of all
interest, fees, service charges, costs, expenses, and other debits owed the
Lender on account of the Liabilities and of all credits against such amounts so
owed.

                  (c)  All credits against the Liabilities shall be conditional
upon final payment to the Lender of the items giving rise to such credits. The
amount of any item credited against the Liabilities which is charged back
against the Lender for any reason or is not so paid shall be a Liability and
shall be added to the Loan Account, whether or not the item so charged back or
not so paid is returned.

                  (d)  Except as otherwise provided herein, all fees, service
charges, costs, and expenses for which the Borrower is obligated hereunder are
payable on demand. In the determination of Availability, the Lender may deem
fees, service charges, accrued interest, and other payments or deposits as
having been advanced under the Revolving Credit if such amounts are then due and
payable inclusive of deposits for fees whether incurred at the time of deposit
or as duly accounted for in accordance with the terms set forth herein
(provided, however, that fees which are earned hereunder but not yet due and
payable shall not be deemed as having been advanced under the Revolving Credit).

                  (e)  The Lender, without the request of the Borrower, may
advance under the Revolving Credit any interest, fee, service charge, or other
payment to which the Lender is entitled from the Borrower pursuant hereto and
may charge the same to the Loan Account notwithstanding that such amount so
advanced may result in an Overadvance. Such action on the part of the Lender
shall not constitute a waiver of the Lender's rights under Section 1-7(b),
below. Any amount which is added to the principal balance of the Loan Account as
provided in this Section shall bear interest at the interest rate applicable
from time to time to the unpaid principal balance of the Loan Account.

                  (f)  Any statement rendered by the Lender to the Borrower
concerning the Liabilities shall be considered correct and accepted by the
Borrower and shall be conclusively binding upon the Borrower unless the Borrower
provides the Lender with written objection thereto within twenty (20) days from
the mailing of such statement, which written objection shall indicate, with
particularity, the reason for such objection. The Loan Account and the Lender's
books and records concerning the loan arrangement contemplated herein and the
Liabilities shall be prima facie evidence and proof of the items described
therein.

                                       -5-
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          1-6.    THE MASTER NOTE. The obligation to repay loans and advances
under the Revolving Credit, with interest as provided herein, may be evidenced
by a note (the "MASTER NOTE") in the form of EXHIBIT 1-6, annexed hereto,
executed by the Borrower. Neither the original nor a copy of the Master Note
shall be required, however, to establish or prove any Liability. In the event
that the Master Note is ever lost, mutilated, or destroyed, the Borrower shall
execute a replacement thereof and deliver such replacement to the Lender.

          1-7.    PAYMENT OF LOAN ACCOUNT.

                  (a)  The Borrower may repay all or any portion of the
principal balance of the Loan Account from time to time until the Termination
Date.

                  (b)  The Borrower, without notice or demand from the Lender,
shall pay the Lender that amount, from time to time, which is necessary so that
the balance of the Loan Account does not exceed Availability.

                  (c)  The Borrower shall pay the then entire unpaid balance of
the Loan Account and all other Liabilities on the Termination Date.

          1-8.    INTEREST.

                  (a)  The unpaid principal balance of the Loan Account which is
attributable to the Standard Line shall bear interest, until repaid (calculated
based upon a 360-day year and actual days elapsed), at the aggregate of Base
plus one (1%) percent per annum but in no event less than eight (8%) percent per
annum or in excess of the maximum rate permitted by applicable law and the
unpaid principal balance of the Loan Account which is attributable to the
Special Subline shall bear interest, until repaid (calculated based upon a
360-day year and actual days elapsed), at the aggregate of Base plus two (2%)
percent per annum but in no event less than eight (8%) percent per annum or in
excess of the maximum rate permitted by applicable law.

                  (b)  Following the occurrence of any Event of Default (and
whether or not the Lender exercises any of the Lender's rights on account of
such Event of Default), all loans and advances made under the Revolving Credit
shall bear interest, through the End Date, at a rate which is the aggregate of
that provided for in Section 1-8(a), above, plus four (4%) percent per annum.

                  (c)  Accrued interest shall be payable:

                       (i)    Monthly in arrears on the first day of the month
next following that during which such interest accrued.

                       (ii)   On the Termination Date.

                       (iii)  On the End Date.

                                       -6-
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          1-9.    FEES. Borrower shall pay to the Lender the following fees:

                  (a)  Annual Facility Fee. On the first anniversary date of
this Agreement and for each anniversary date thereafter, an annual facility fee
in an amount equal to one-half of one (.50%) percent per annum of the maximum
amount of the Special Subline, in effect from time to time, (each of which shall
be fully earned on each anniversary date hereof), shall be due and payable.

                  (b)  Collateral Monitoring Fees. On the execution date hereof
and on the first day of each month thereafter, a collateral monitoring fee in
the amount of Three Thousand Five Hundred ($3,500) Dollars for loans under the
Standard Line, and shall also pay to Lender on the first day of each month an
additional fee of Five Thousand ($5,000) Dollars if there were any outstanding
loans under the Special Subline for the previous month; provided, however, that
the first collateral monitoring fee payable hereunder shall be prorated in
accordance with the number of days remaining in such month. In any instance
where reporting as outlined in Article 9 is received by Lender beyond the period
set forth therein, Borrower shall pay, in addition to the then payable portion
of the collateral monitoring fee for the then subject month, an additional fee
equal to the usual amount payable. In the event of two (2) consecutive months of
late or incomplete reporting, the collateral monitoring fee shall increase
permanently thereafter by Five Thousand ($5,000) Dollars per month plus twice
the usual amount payable until such time as the Borrower demonstrates two (2)
consecutive months of timely and complete reporting.

                  (c)  Unused Line Fee. This section has been intentionally
omitted.

                  (d)  Commitment Fee. On the date of execution hereof, a
commitment fee of one (1%) percent of the Credit Limit or Seventy-Five Thousand
($75,000) Dollars.

                  (e)  Financial Examination, Legal Investigation,
Documentation, and Appraisal Fees. Subject to the provisions of Article 9-9,
Lender's actual charges paid or incurred for each financial analysis and
examination (i.e., audits) of Borrower performed by personnel employed by
Lender; Lender's actual charges paid or incurred for each appraisal of the
Collateral performed by personnel employed by Lender; and, the actual charges
paid or incurred by Lender if it elects to employ the services of one or more
third Persons to perform legal investigation, documentation financial analysis
and examinations (i.e., audits) of Borrower or to appraise the Collateral.

                  (f)  In addition to any other right to which the Lender is
then entitled on account thereof, the Lender may assess an additional fee
payable by the Borrower on account of the accommodation of Lender to the
Borrower's request that the Lender depart or dispense with one or more of the
administrative provisions of this Agreement and/or the Borrower's failure to
comply with any of such provisions.

                       (i)    By way of non-exclusive example, the Lender may
assess a fee on account of any of the following:

                                       -7-
<Page>

                              (A)  The Borrower's failure to pay that amount
                                   which is necessary so that the principal
                                   balance of the Loan Account does not exceed
                                   Availability (as required under Section
                                   1-7(b), above).

                              (B)  The providing of a loan or advance under the
                                   Revolving Credit such that Availability would
                                   be exceeded.

                              (C)  The providing of a same Banking Day loan
                                   requested after the time set forth in Section
                                   1-4(b)(i), above.

                              (D)  The Borrower's failure to provide a financial
                                   statement or report within the applicable
                                   time-frame provided for such report under
                                   Article 9, below.

                       (ii)   The inclusion of the foregoing right on the part
of the Lender to assess a fee does not constitute an obligation, on the part of
the Lender, to waive any provision of this Agreement under any circumstances.
The assessment of any such fee in any particular circumstance shall not
constitute the Lender's waiver of any breach of this Agreement on account of
which such fee was assessed nor a course of action on which the Borrower may
rely.

                  (g)  The Borrower shall not be entitled to any credit, rebate
or repayment of any Annual Facility Fee, Collateral Maintenance Fee, Commitment
Fee or other fee previously earned by the Lender pursuant to this Section
notwithstanding any termination of this Agreement or suspension or termination
of the Lender's obligation to make loans and advances hereunder.

          1-10.   LENDER'S DISCRETION.

                  (a)  Each reference in the Loan Documents to the exercise of
discretion or the like by the Lender shall be to the Lender's exercise of its
judgment, in good faith, based upon the Lender's consideration of any such
factor as the Lender, taking into account information of which the Lender then
has actual knowledge, believes:

                       (i)    Will or reasonably could be expected to affect
the value of the Collateral, the enforceability of the Lender's security and
collateral interests therein, or the amount which the Lender would likely
realize therefrom (taking into account delays which may possibly be encountered
in the Lender's realizing upon the Collateral and likely Costs of Collection).

                       (ii)   Indicates that any report or financial
information delivered to the Lender by or on behalf of the Borrower is
incomplete, inaccurate, or misleading in any material manner or was not prepared
in accordance with the requirements of this Agreement.

                       (iii)  Suggests the likelihood that the Borrower will
become the subject of a bankruptcy or insolvency proceeding.

                       (iv)   Constitutes a Suspension Event.

                                       -8-
<Page>

                  (b)  In the exercise of such judgment, the Lender also may
take into account any of the following factors:

                       (i)    Those included in, or tested by, the definitions
of "ACCEPTABLE INVENTORY", "RETAIL", and "COST".

                       (ii)   The current financial and business climate of
the industry in which the Borrower competes (having regard for the Borrower's
position in that industry).

                       (iii)  Material changes in or to the mix of the
Borrower's Inventory.

                       (iv)   Seasonality with respect to the Borrower's
Inventory and pattern of the Borrower's retail sales versus that which was
projected.

                       (v)    Material changes in Availability versus that
which was projected.

                       (vi)   Such other factors relating to the Borrower as the
Lender determines as having a material bearing on credit risks associated with
the providing of loans and financial accommodations to the Borrower.

                  (c)  The burden of establishing the failure of the Lender to
have acted in a reasonable manner in such Lender's exercise of discretion shall
be the Borrower's.

          1-11.   FEES FOR L/C'S.

                  (a)  Prior to the issuance of any L/C, the Borrower shall
pay to the Lender a fee for each L/C equal to the greater of (i) Five Hundred
($500) Dollars, or (ii) ten (10) Basis Points times the Stated Amount of that
L/C times the initial term of that L/C.

                  (b)  In addition to the fee to be paid as provided in
Subsection 1-11(a), above, the Borrower shall pay to the Lender (or to the
Issuer, if so requested by the Lender), on demand, all customary and
commercially reasonable issuance, processing, negotiation, amendment, and
administrative fees and other amounts charged by the Issuer on account of, or in
respect to, any L/C.

                                       -9-
<Page>

          1-12.   CONCERNING L/C'S.

                  (a)  None of the Issuer, the Issuer's correspondents, or
any advising, negotiating, or paying bank with respect to any L/C shall be
responsible in any way for:

                       (i)    The performance by any beneficiary under any L/C
of that beneficiary's obligations to the Borrower.

                       (ii)   The form, sufficiency, correctness, genuineness,
authority of any person signing; falsification; or the legal effect of; any
documents called for under any L/C if such documents on their face appear to be
in order.

                  (b)  The Issuer may honor, as complying with the terms of
any L/C and of any drawing thereunder, any drafts or other documents otherwise
in order, but signed or issued by an administrator, executor, conservator,
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, liquidator, receiver, or other legal representative of the party
authorized under such L/C to draw or issue such drafts or other documents.

                  (c)  Unless otherwise agreed to, in the particular instance,
the Borrower hereby authorizes any Issuer to:

                       (i)    Select an advising bank, if any.

                       (ii)   Select a paying bank, if any.

                       (iii)  Select a negotiating bank.

                  (d)  All directions, correspondence, and funds transfers
relating to any L/C are at the risk of the Borrower. The Issuer shall have
discharged the Issuer's obligations under any L/C which, or the drawing under
which, includes payment instructions, by the initiation of the method of payment
called for in, and in accordance with, such instructions (or by any other
commercially reasonable and comparable method). Neither the Lender nor the
Issuer shall have any responsibility for any inaccuracy, interruption, error, or
delay in transmission or delivery by post, telegraph or cable, or for any
inaccuracy of translation.

                  (e)  The Lender's and the Issuer's rights, powers,
privileges and immunities specified in or arising under this Agreement are in
addition to any heretofore or at any time hereafter otherwise created or
arising, whether by statute or rule of law or contract.

                  (f)  Except to the extent otherwise expressly provided
hereunder or agreed to in writing by the Issuer and the Borrower, the L/C will
be governed by the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce, Publication No.500, and any
subsequent revisions thereof.

                                      -10-
<Page>

                  (g)  If any change in any law, executive order or
regulation, or any directive of any administrative or governmental authority
(whether or not having the force of law), or in the interpretation thereof by
any court or administrative or governmental authority charged with the
administration thereof, shall either:

                       (i)    Impose, modify or deem applicable any reserve,
special deposit or similar requirements against letters of credit heretofore or
hereafter issued by any Issuer or with respect to which the Lender or any Issuer
has an obligation to lend to fund drawings under any L/C.

                       (ii)   Impose on any Issuer any other condition or
requirements relating to any such letters of credit; and the result of any event
referred to in Section 1-12(g)(i) or 1-12(g)(ii), above, shall be to increase
the cost to any Issuer of issuing or maintaining any L/C (which increase in cost
shall be the result of such Issuer's reasonable allocation among that Issuer's
letter of credit customers of the aggregate of such cost increases resulting
from such events), then, upon demand by the Lender and delivery by the Lender to
the Borrower of a certificate of an officer of the subject Issuer describing
such change in law, executive order, regulation, directive, or interpretation
thereof, its effect on such Issuer, and the basis for determining such increased
costs and their allocation, the Borrower shall immediately pay to the Lender,
from time to time as specified by the Lender, such amounts as shall be
sufficient to compensate such Issuer for such increased cost. Any Issuer's
determination of costs incurred under Section 1-12(g)(i) or 1-12(g)(ii), above,
and the allocation, if any, of such costs among the Borrower and other letter of
credit customers of such Issuer, if done in good faith and made on an equitable
basis and in accordance with the officer's certificate, shall be conclusive and
binding on the Borrower.

                  (h)  The obligations of the Borrower under this Agreement
with respect to L/C's are absolute, unconditional, and irrevocable and shall be
performed strictly in accordance with the terms hereof under all circumstances
whatsoever including, without limitation, the following:

                       (i)    Any lack of validity or enforceability or
restriction, restraint, or stay in the enforcement of this Agreement, any L/C,
or any other agreement or instrument relating thereto.

                       (ii)   Any amendment or waiver of, or consent to the
departure from, any L/C.

                       (iii)  The existence of any claim, set-off, defense, or
other right which the Borrower may have at any time against the beneficiary of
any L/C.

                       (iv)   Any honoring of a drawing under any L/C, which
drawing possibly could have been dishonored based upon a strict construction of
the terms of the L/C.

                       (v)    The Borrower shall not present to Lender or
cause the amendment of an L/C without satisfactory evidence of one or more of
the following: (a) change in delivery date; (b) Borrower's receipt of partial
shipment; or (c) change to original order reflected in OTB (open to Buy) or
other information which may be so reasonably requested by the Lender.

                                      -11-
<Page>

                  (i)  In no event, shall Lender or Issuer have any obligation
to honor any L/C presented for payment after its expiration. In the event no
payment has been made, the Stated Amount of such L/C shall continue to be
deducted from Availability for thirty (30) business days beyond expiration of
said L/C.

ARTICLE 2 - GRANT OF SECURITY INTEREST

          2-1.    GRANT OF SECURITY INTEREST. To secure the Borrower's prompt,
punctual, and faithful performance of all and each of the Liabilities, the
Borrower hereby grants to the Lender a continuing security interest in and to,
and assigns to the Lender, the following, and each item thereof, whether now
owned or now due, or in which the Borrower has an interest, or hereafter
acquired, arising, or to become due, or in which the Borrower obtains an
interest (all of which, together with any other property in which the Lender may
in the future be granted a security interest, is referred to herein as the
"COLLATERAL"):

                  (a)  All Inventory.

                  (b)  All Accounts, accounts receivable, contracts, contract
rights, notes, bills, drafts, acceptances, General Intangibles, Instruments,
Documents, Document of Title, Chattel Paper, securities, Security Entitlements,
Security Accounts, Investment Property, choses in action, and all other debts,
obligations and liabilities in whatever form, owing to Borrower from any Person,
firm or corporation or any other legal entity, whether now existing or hereafter
arising, now or hereafter received by or belonging or owing to Borrower, for
goods sold by it or for services rendered by it, or however otherwise same may
have been established or created, all guarantees and securities therefor, all
right, title and interest of Borrower in the merchandise or services which gave
rise thereto, including the rights of reclamation and stoppage in transit, all
rights to replevy goods, and all rights of an unpaid seller of merchandise or
services.

                  (c)  All machinery, Equipment, Fixtures and other Goods
(excluding motor vehicles) whether now owned or hereafter acquired by the
Borrower and wherever located, all replacements and substitutions therefor or
accessions thereto and all proceeds thereof.

                  (d)  Leasehold Interests and rights of occupancy.

                  (e)  Real Estate.

                  (f)  All proceeds, products, substitutions and accessions of
or to any of the foregoing in any form, including, without limitation, all
proceeds, refunds and premium rebates of credit, fire or other insurance, and
also including, without limitation, rents and profits resulting from the
temporary use of any of the foregoing.

          2-2.    EXTENT AND DURATION OF SECURITY INTEREST. This grant of a
security interest is in addition to, and supplemental of, any security interest
previously granted by the Borrower to the Lender and

                                      -12-
<Page>

shall continue in full force and effect applicable to all Liabilities until all
Liabilities have been paid and/or satisfied in full and the security interest
granted herein is specifically terminated in writing by a duly authorized
officer of the Lender.

ARTICLE 3 - DEFINITIONS

          All capitalized terms used in this agreement which are not otherwise
defined herein or in the UCC shall have the meanings assigned to them in EXHIBIT
3, annexed hereto.

ARTICLE 4 - CONDITIONS PRECEDENT

          The effectiveness of this Agreement, the establishment of the
Revolving Credit, and the making of the first loan under the Revolving Credit,
is conditioned upon the delivery to Lender of the documents described below,
each in form and substance satisfactory to the Lender, and the satisfaction of
the conditions described below:

          4-1.    CORPORATE DUE DILIGENCE.

                  (a)  A Certificate of legal existence and good standing issued
by the Secretary of State or other governing authority of the State of
Borrower's legal formation.

                  (b)  Certificates of due qualification and good standing,
issued by the Secretary(ies) of State or other governing authority of each state
in which the nature of the Borrower's business conducted or assets owned could
require such qualification.

                  (c)  A Certificate of the Borrower's secretary, clerk or
otherwise authorized officer or other Person attesting to the due adoption,
continued effectiveness, and setting forth the texts of, each resolution or
authorization adopted in connection with the establishment of the loan
arrangement contemplated by the Loan Documents and attesting to the true
signatures of each Person authorized as a signatory to any of the Loan
Documents.

          4-2.    OPINION. An opinion of counsel to the Borrower in form and
substance satisfactory to Lender and Lender's counsel.

          4-3.    CASH MANAGEMENT AND ADDITIONAL DOCUMENTS. Such additional
instruments and documents including, without limitation, an agreement for the
Blocked Account executed by the Borrower, Lender and the applicable bank,
agreements with Borrower's credit card processors and/or other credit service
providers executed by the Borrower, Lender and each such processor or service
provider, and any other notices or agreements required under Article 7 hereof,
as the Lender or its counsel reasonably may require or request, in each case in
form and substance satisfactory to Lender and its counsel.

          4-4.    KEY LIFE POLICIES. This section has been intentionally
omitted.

                                      -13-
<Page>

          4-5.    OFFICERS' CERTIFICATES. Certificates executed by the president
or chief executive officer and the chief financial officer of the Borrower and
stating that the representations and warranties made by the Borrower to the
Lender in the Loan Documents are true and complete as of the date of such
Certificate, and that no event has occurred which is or which, solely with the
giving of notice or passage of time (or both) would be an Event of Default.

          4-6.    REPRESENTATIONS AND WARRANTIES. Each of the representations
made by or on behalf of the Borrower in this Agreement or in any of the other
Loan Documents or in any other report, statement, document, or paper provided by
and or on behalf of the Borrower shall be true and complete in all material
respects as of the date as of which such representation or warranty was made.

          4-7.    INITIAL MINIMUM EXCESS AVAILABILITY. Availability, after
giving effect to the first loans and advances to be made under the Revolving
Credit; any charges to the Loan Account made in connection with the
establishment of the credit facility contemplated hereby; and L/C's to be issued
at, or immediately subsequent to, the establishment of such Revolving Credit, is
not less than One Million Four Hundred Thousand ($1,400,000.00) Dollars.

          4-8.    NO EVENT OF DEFAULT. No event shall have occurred, or failed
to occur, which occurrence or which failure constitutes, or which, solely with
the passage of time or the giving of notice (or both) would constitute, an Event
of Default.

          4-9.    NO MATERIAL ADVERSE CHANGE. No Material Adverse Change has
occurred.

          4-10.   DELIVERY OF DOCUMENTS. No document shall be deemed delivered
to the Lender until received and accepted by the Lender at its head offices in
Needham, Massachusetts. Under no circumstances will this Agreement take effect
until executed and accepted by the Lender at said head office. In the event that
Lender agrees to make the initial advance or any subsequent advance hereunder,
prior to Borrower's delivery of any documents required under this Article 4 or
otherwise by this Agreement, an additional fee, equal to the greater of one-half
of one (0.5%) percent of the then outstanding amount of the Loan Account or Five
Hundred ($500) Dollars shall be payable weekly on Thursday commencing thirty
(30) days after the date of execution hereof until such time as all such
documents are provided.

          4-11.   THE BIG PARTY CHAPTER 11. All necessary and appropriate court
orders and approval of Borrower's acquisition of certain Big Party stores shall
have been entered by the United States Bankruptcy Court for the District of
Delaware having jurisdiction over the pending Chapter 11 Case of The Big Party,
which order or orders must be final, non-appealable, not subject to any stay
and/or provides for a finding that the Borrower is a good faith purchaser within
the meaning of Section 363(m) of the United States Bankruptcy Code, not subject
to any stay or pending appeal, and acceptable to Lender in its sole discretion.

          4-12.   ADDITIONAL CONDITIONS PRECEDENT. The effectiveness of this
Agreement, the establishment of the Revolving Credit and the making of the first
loan under the Revolving Credit is

                                      -14-
<Page>

further conditioned upon the satisfaction of each of the conditions set forth on
EXHIBIT 4-12, each in form and substance satisfactory to Lender.

ARTICLE 5 - GENERAL REPRESENTATIONS. WARRANTIES AND COVENANTS

          To induce the Lender to establish the loan arrangement contemplated
herein and to make loans and advances and to provide financial accommodations
under the Revolving Credit (each of which loans shall be deemed to have been
made in reliance thereupon) the Borrower, in addition to all other
representations, warranties, and covenants made by the Borrower in any other
Loan Document, makes those representations, warranties, and covenants included
in this Agreement.

          5-1.    PAYMENT AND PERFORMANCE OF LIABILITIES. The Borrower shall pay
each Liability due Lender when due (or when demanded if payable on demand) and
shall promptly, punctually, and faithfully perform each other Liability due
Lender and pay each obligation due to others in accordance with its current
custom and practice. If Borrower has any dispute with respect to any other
obligation due to others, Borrower shall give Lender notice of said dispute,
except with regard to amounts due to others and disputed by the Borrower in good
faith, provided, however, that no liens shall arise on the Collateral in
connection with such disputed amounts.

          5-2.    DUE ORGANIZATION - AUTHORIZATION - NO CONFLICTS.

                  (a)  The Borrower presently is and shall hereafter remain in
good standing as a legal entity in the state in which it is legally formed and
is and shall hereafter remain duly qualified and in good standing in every other
state in which, by reason of the nature or location of the Borrower's assets or
operation of the Borrower's business, such qualification may be necessary,
except where such failure to qualify will not have a Material Adverse Change on
the Borrower or its business or assets, or the Collateral.

                  (b)  Each Related Entity is listed on EXHIBIT 5-2, annexed
hereto. iParty Corp. is and shall hereafter remain in good standing in the state
in which it is legally formed and is and shall hereafter remain duly qualified
in every other state in which, by reason of the nature and location of that
entity's assets or the operation of such entity's business, such qualification
may be necessary, except where failure to so qualify will not have a Material
Adverse Change on such entity or its business or assets. The Borrower shall
provide the Lender with prior written notice of any entity's becoming or ceasing
to be a subsidiary of Borrower or iParty Corp.

                  (c)  The Borrower has all legal corporate power and authority
to execute and deliver all and singular the Loan Documents to which the Borrower
is a party and has and will hereafter retain all requisite legal power and
authority to perform any and all of the Liabilities.

                  (d)  The execution and delivery by the Borrower of each Loan
Document to which it is a party; the Borrower's consummation of the transactions
contemplated by such Loan Documents (including, without limitation, the creation
of security interests by the Borrower as

                                      -15-
<Page>

contemplated hereby); the Borrower's performance under those of the Loan
Documents to which it is a party; the borrowings hereunder; and the use of the
proceeds thereof:

                       (i)    Have been duly authorized by all necessary legal
action.

                       (ii)   Do not, and will not, contravene in any material
respect any provision of any Requirement of Law or obligation of the Borrower.

                       (iii)  Will not result in the creation or imposition
of, or the obligation to create or impose, any Encumbrance upon any assets of
the Borrower pursuant to any Requirement of Law or obligation, except pursuant
to the Loan Documents.

                  (e)  The Loan Documents have been duly executed and delivered
by Borrower and are the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms,
except to the extent such enforceability may be limited by bankruptcy and other
similar laws of general application relating to or affecting the enforcement of
creditors' rights generally.

          5-3.    TRADE NAMES.

                  (a)  EXHIBIT 5-3, annexed hereto, is a listing of:

                       (i)    All names under which the Borrower ever
conducted its business.

                       (ii)   All entities and/or Persons with whom the
Borrower ever consolidated or merged, or from whom the Borrower ever acquired in
a single transaction or in a series of related transactions substantially all of
Person's assets.

                  (b)  Except (i) upon not less than twenty-one (21) days prior
written notice given the Lender, and (ii) in compliance with all other
provisions of this Agreement, the Borrower will not undertake or commit to
undertake any action such that the results of that action, if undertaken prior
to the date of this Agreement, would have been reflected on EXHIBIT 5-3.

                  (c)  The Borrower owns and possesses, or has the right to use
all patents, industrial designs, trademarks, trade names, trade styles, brand
names, service marks, logos, copyrights, trade secrets, know-how, confidential
information, and other intellectual or proprietary property of any third Person
necessary for the Borrower's conduct of the Borrower's business.

                  (d)  The conduct by the Borrower of the Borrower's business
does not to the Borrower's knowledge infringe on the patents, industrial
designs, trademarks, trade names, trade styles, brand names, service marks,
logos, copyrights, trade secrets, know-how, confidential information, or other
intellectual or proprietary property of any third Person.

          5-4.    LOCATIONS. LANDLORD'S CONSENTS, WAIVERS.

                                      -16-
<Page>

                  (a)  The Collateral, and the books, records, and papers of
Borrower pertaining thereto, are kept and maintained solely at the Borrower's
chief executive offices as set forth at the beginning of this Agreement and at
those locations which are listed on EXHIBIT 5-4, annexed hereto, which exhibit
includes all service bureaus with which any such records are maintained and the
names and addresses of each of the Borrower's landlords. Except (i) to
accomplish sales of Inventory in the ordinary course of business or (ii) the
sale of obsolete equipment or fixtures (replaced by equipment or fixtures of
equal or greater value) or (iii) to utilize such of the Collateral as is removed
from such locations in the ordinary course of business (such as motor vehicles),
the Borrower shall not remove any Collateral from said chief executive offices
or those locations listed on EXHIBIT 5-4.

                  (b)  The Borrower shall use commercially reasonable efforts to
obtain and deliver to the Lender a consent, waiver and subordination (reasonably
satisfactory to the Lender) by the landlord for:

                       (i)    All of Borrower's warehouse and distribution
center locations and store locations which in the aggregate account for
one-third (_) of the sales volume, prior to the execution hereof. Borrower
represents that after the removal of certain Inventory from a warehouse used by
The Big Party Corporation, Borrower will not have a warehouse or distribution
center. If in the future Borrower establishes a warehouse or distribution
center, all future loans and advances under the Revolving Credit will be
conditioned upon the execution and delivery to Lender of a consent, waiver and
subordination (reasonably satisfactory to Lender) by the landlord for such
location.

                       (ii)   All of Borrower's store locations located in the
State of Florida within ninety (90) days of the date of execution hereof during
which period Lender shall establish an availability reserve for up to thirty
(30) days rent for each of Borrower's locations in the State of Florida.

                       (iii)  For the balance of store locations, Borrower
will use commercially reasonable efforts to obtain a landlord's consent and
waiver.

                  (c)  Upon expiration of the ninety (90) day period referred to
in Section 5-4(b)(iii) above, Lender may establish an Availability Reserve for
up to ninety (90) days rent for each of the Borrower's locations in a Landlord
Lien State or in a One Turn State. Such Availability Reserve may be reduced or
eliminated but only if no Suspension Event is then in existence or has not
theretofore occurred, upon the furnishing to the Lender of a consent, waiver and
subordination (in form reasonably satisfactory to the Lender) by the landlord
for the subject location.

                  (d)  Without duplication of any Availability Reserve described
above, the Lender may establish an Availability Reserve for unpaid rent.

                  (e)  The Borrower will not:

                                      -17-
<Page>

                       (i)    Execute, alter, modify, or amend any Lease, except
for Borrower's benefit and with at least ten (10) days prior written notice to
Lender.

                       (ii)   Commit to, or open or close any location at which
the Borrower maintains, offers for sale, or stores any of the Collateral, except
those set forth in the Business Plan.

                  (f)  Except as otherwise disclosed on EXHIBIT 5-4, no tangible
personal property of the Borrower is in the care or custody of any third party
or stored or entrusted with a bailee or other third party and none shall
hereafter be placed under such care, custody, storage, or entrustment. Borrower
shall obtain and deliver a consent, waiver and subordination (in form reasonably
satisfactory to the Lender) from each bailee disclosed on EXHIBIT 5-4 on or
prior to the date of execution hereof.

          5-5.    TITLE TO ASSETS.

                  (a)  The Borrower is, and shall hereafter remain, the owner of
the Collateral free and clear of all Encumbrances with the exceptions of the
following:

                       (i)    The security interest created herein.

                       (ii)   Those Encumbrances (if any) listed on EXHIBIT 5-5,
annexed hereto.

                       (iii)  Purchase money security interests for purchase of
equipment not to exceed Fifty Thousand ($50,000) Dollars.

                       (iv)   Equipment leases, and subsequent replacements of
and/or additions to such equipment leases permitted under Section 5.6.

                  (b)  The Borrower does not and shall not have possession of
any property on consignment to the Borrower.

          5-6.    INDEBTEDNESS. The Borrower does not and shall not hereafter
have any Indebtedness with the exceptions of:

                  (a)  Any Indebtedness to the Lender.

                  (b)  The Indebtedness (if any) listed on EXHIBIT 5-6, annexed
hereto.

                  (c)  Substitutions or replacements for the Capital Leases
described in Sections 5.5 and 5.6, and any additional Capital Leases not to
exceed One Hundred Fifty Thousand ($150,000) Dollars per year, provided Lender
is given prompt written notice of any Capital Lease and no lien on the
Collateral arises as a result thereof.

                                      -18-
<Page>

          5-7.    INSURANCE POLICIES.

                  (a)  EXHIBIT 5-7, annexed hereto, is a schedule of all
insurance policies owned by the Borrower or under which the Borrower is the
named insured. Each of such policies is in full force and effect. Neither the
issuer of any such policy nor the Borrower is in default or violation of any
such policy.

                  (b)  The Borrower shall have and maintain at all times
insurance covering such risks, in such amounts, containing such terms, in such
form, for such periods, and written by such companies as may be reasonably
satisfactory to the Lender. The coverage reflected on EXHIBIT 5-7 presently
satisfies the foregoing requirements, it being recognized by the Borrower,
however, that such requirements may change hereafter to reflect changing
circumstances. All insurance carried by the Borrower shall provide for a minimum
of twenty (20) days' written notice of cancellation to the Lender and all such
insurance which covers the Collateral shall include an endorsement in favor of
the Lender, which endorsement shall provide that the insurance, to the extent of
the Lender's interest therein, shall not be impaired or invalidated, in whole or
in part, by reason of any act or neglect of the Borrower or by the failure of
the Borrower to comply with any warranty or condition of the policy. In the
event of the failure by the Borrower to maintain insurance as required herein,
the Lender, at its option, may obtain such insurance, provided, however, the
Lender's obtaining of such insurance shall not constitute a cure or waiver of
any Event of Default occasioned by the Borrower's failure to have maintained
such insurance. The Borrower shall furnish to the Lender certificates or other
evidence reasonably satisfactory to the Lender regarding compliance by the
Borrower with the foregoing insurance provisions.

                  (c)  The Borrower shall advise the Lender of each claim in
excess of Twenty-Five Thousand ($25,000) Dollars made by the Borrower under any
policy of insurance which covers the Collateral and will permit the Lender
following the occurrence of any Suspension Event, at the Lender's option in each
instance, to the exclusion of the Borrower, to conduct the adjustment of each
such claim. The Borrower hereby appoints the Lender as the Borrower's attorney
in fact to obtain, adjust, settle, and cancel any insurance described in this
section and to endorse in favor of the Lender any and all drafts and other
instruments with respect to such insurance. This appointment, being coupled with
an interest, is irrevocable until this Agreement is terminated by a written
instrument executed by a duly authorized officer of the Lender. The Lender shall
not be liable on account of any exercise pursuant to said power except for any
exercise in actual willful misconduct and bad faith. The Lender may apply any
proceeds of such insurance against the Liabilities, whether or not such have
matured, in such order of application as the Lender may determine.

                  (d)  The Borrower shall maintain at all times those policies
of insurance obtained by the Borrower and assigned to the Lender as required by
Section 4-4, above.

          5-8.    LICENSES. Each material license, distributorship, franchise,
and similar agreement issued to, or to which the Borrower is a party is in full
force and effect. To the Borrower's knowledge, no party to any such license or
agreement is in default or violation thereof. The Borrower has not received any
notice or threat of cancellation of any such license or agreement.

                                      -19-
<Page>

          5-9.    LEASES. EXHIBIT 5-9, annexed hereto, is a schedule of all
presently effective Leases and Capital Leases. Each of such Leases and Capital
Leases is in full force and effect. The Borrower is not, and to the best of the
Borrower's knowledge no other party to any such Lease or Capital Lease is in
default or violation of any such Lease or Capital Lease which would cause the
termination of the same and except as set forth on EXHIBIT 5-9, the Borrower has
not received any notice of default or threat of cancellation of any such Lease
or Capital Lease. The Borrower hereby authorizes the Lender at any time and from
time to time to contact any of the Borrower's landlords in order to confirm the
Borrower's continued compliance with the terms and conditions of the Lease(s)
between the Borrower and that landlord and to discuss such issues, concerning
the Borrower's occupancy under such Lease(s), as the Lender may determine.

          5-10.   REQUIREMENTS OF LAW. The Borrower is in compliance with, and
shall hereafter comply with and use its assets in compliance with, all
Requirements of Law. The Borrower has not received any notice of any violation
of any Requirement of Law, which violation has not been cured or otherwise
remedied, and would result in a Material Adverse Change of the Borrower's
business and its assets.

          5-11.   MAINTAIN PROPERTIES. The Borrower shall:

                  (a)  Keep the Collateral in good order and repair (ordinary
reasonable wear and tear and casualty excepted).

                  (b)  Not suffer or cause the waste or destruction of any
material part of the Collateral.

                  (c)  Not use any of the Collateral in violation of any policy
of insurance thereon.

                  (d)  Except for those sales permitted under Section
5.4(e)(ii) herein, not sell, lease, or otherwise dispose of any of the
Collateral, other than the following, in each case, subject to the turning over
to the Lender of all Receipts with respect to the same as provided herein:

                       (i)    The sale of Inventory in compliance with this
Agreement.

                       (ii)   The disposal of Equipment which is obsolete, worn
out, or damaged beyond repair, which Equipment is replaced to the extent
necessary to preserve or improve the operating efficiency of the Borrower.

          5-12.   PAY TAXES.

                  (a)  The federal income tax returns of the Borrower have been
audited by the Internal Revenue Service (or closed by applicable statutes) for
all fiscal years through and including the Borrower's taxable year referenced on
EXHIBIT 5-12, annexed hereto, and all deficiencies, assessments, and other
amounts asserted as a result of such examinations have been fully paid or

                                      -20-
<Page>

settled. No agreement is in existence which waives or extends any statute of
limitations applicable to the right of the Internal Revenue Service to assert a
deficiency or make any other claim for or in respect to federal income taxes. No
issue has been raised in any such examination which reasonably could be expected
to result in the assertion of a deficiency for any fiscal year open for
examination, assessment, or claim by the Internal Revenue Service.

                  (b)  All returns of the Borrower for state and local income,
excise, sales, and other taxes have been audited (or closed by applicable
statutes) for all fiscal years through and including the Borrower's taxable year
referenced on EXHIBIT 5-12, annexed hereto, and all deficiencies, assessments,
and other amounts asserted as a result of such examinations have been fully paid
or settled. No agreement is in existence which waives or extends any statute of
limitations applicable to the right of any state taxing authority to assert a
deficiency or make any other claim for or in respect to any such state taxes. No
issue has been raised in any such examination which reasonably could be expected
to result in the assertion of a deficiency for any fiscal year open for
examination, assessment, or claim by any state or local taxing authority.

                  (c)  Except as disclosed on said EXHIBIT 5-12, there are no
examinations of or with respect to the Borrower presently being conducted by the
Internal Revenue Service or any state taxing authority.

                  (d)  The Borrower has, and hereafter shall: pay, as they
become due and payable, all taxes and unemployment contributions and other
charges of any kind or nature levied, assessed or claimed against the Borrower
or the Collateral by any Person or entity whose claim could result in an
Encumbrance upon any asset of the Borrower or by any governmental authority
(provided, however, that the Borrower shall have the right to contest the
payment of such taxes or other charges as long as no encumbrance is placed upon
the Collateral); properly exercise any trust responsibilities imposed upon the
Borrower by reason of withholding from employees' pay; timely make all
contributions and other payments as may be required pursuant to any Employee
Benefit Plan now or hereafter established by the Borrower; and timely file all
tax and other returns and other reports with each governmental authority to whom
the Borrower is obligated to so file.

                  (e)  At its option, the Lender may, after notice to the
Borrower and only after an Event of Default has occurred, but shall not be
obligated to, pay any taxes, unemployment contributions, and any and all other
charges levied or assessed upon the Borrower or the Collateral by any Person or
entity or governmental authority, and make any contributions or other payments
on account of the Borrower's Employee Benefit Plan as the Lender, in the
Lender's discretion, may deem necessary or desirable, to protect, maintain,
preserve, collect, or realize upon any or all of the Collateral or the value
thereof or any right or remedy pertaining thereto, provided, however, the
Lender's making of any such payment shall not constitute a cure or waiver of any
Event of Default occasioned by the Borrower's failure to have made such payment.

          5-13.   NO MARGIN STOCK. The Borrower is not engaged in the business
of extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulations G, U, T, and X, of the Board of Governors of
the Federal Reserve System of the United States). No part of

                                      -21-
<Page>

the proceeds of any borrowing hereunder will be used at any time to purchase or
carry any such margin stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock.

          5-14.   ERISA. Neither the Borrower nor any ERISA Affiliate ever has
or hereafter shall in any case where the failure results in a lien on the
Collateral:

                  (a)  Violate or fail to be in full compliance with the
Borrower's Employee Benefit Plan, except where such failure to be in full
compliance will not have a Material Adverse Change on the Borrower or its
business or assets, or the Collateral.

                  (b)  Fail timely to file all reports and filings required by
ERISA to be filed by the Borrower.

                  (c)  Engage in any "prohibited transactions" or "reportable
events" (respectively as described in ERISA).

                  (d)  Engage in, or commit, any act such that a tax or penalty
could be imposed on account thereof pursuant to ERISA.

                  (e)  Accumulate any material funding deficiency within the
meaning of ERISA.

                  (f)  Terminate any Employee Benefit Plan such that a lien
could be asserted of the Borrower on account thereof pursuant to ERISA.

                  (g)  Be a member of, contribute to, or have any obligation
under any Employee Benefit Plan which is a multiemployer plan within the meaning
of Section 4001(a) of ERISA.

          5-15.   HAZARDOUS MATERIALS.

                  (a)  The Borrower has never:

                       (i)    Been legally responsible for any release or threat
of release of any Hazardous Material.

                       (ii)   Received notification of any release or threat of
release of any Hazardous Material from any site or vessel occupied or operated
by the Borrower and/or of the incurrence of any expense or loss in connection
with the assessment, containment, or removal of any release or threat of release
of any Hazardous Material from any such site or vessel.

                  (b)  The Borrower shall:

                       (i)    Dispose of any Hazardous Material only in
compliance with all Environmental Laws and except as set forth on EXHIBIT
5-15(b)(ii) hereof.

                                      -22-
<Page>

                       (ii)   Not store on any site or vessel occupied or
operated by the Borrower and not transport or arrange for the transport of any
Hazardous Material, except if such storage or transport is in the ordinary
course of the Borrower's business and is in compliance with all Environmental
Laws.

                  (c)  The Borrower shall provide the Lender with written
notice upon the Borrower's obtaining knowledge of any incurrence of any expense
or loss by any governmental authority or other Person in connection with the
assessment, containment, or removal of any Hazardous Material, for which expense
or loss the Borrower may be liable.

          5-16.   LITIGATION. There is not presently pending or threatened by or
against the Borrower any suit, action, proceeding, or investigation which, if
determined adversely to the Borrower, would have a material adverse effect upon
the Borrower's financial condition or ability to conduct its business as such
business is presently conducted or is contemplated to be conducted in the
foreseeable future.

          5-17.   DIVIDENDS OR INVESTMENTS. Except as otherwise provided in the
Business Plan, the Borrower shall not:

                  (a)  Pay any cash dividend or make any other distribution in
respect of any class of the Borrower's capital stock.

                  (b)  Own, redeem, retire, purchase, or acquire any of the
Borrower's capital stock.

                  (c)  Invest in or purchase any stock or securities or rights
to purchase any stock or securities of any corporation or other entity.

                  (d)  Merge or consolidate or be merged or consolidated with or
into any other corporation or other entity without the prior written consent of
the Lender, which consent shall not be unreasonably withheld or delayed if the
proposed merger is with iParty Corp.

                  (e)  Consolidate any of the Borrower's operations with those
of any other corporation or other entity.

                  (f)  Organize or create any Related Entity that is a
subsidiary.

                  (g)  Subordinate any debts or obligations owed to the Borrower
by any third party to any other debts owed by such third party to any other
Person.

                  The foregoing notwithstanding, in the event that all
Indebtedness has been paid in full and Borrower submits to Lender a new Business
Plan which sets forth any proposed dividends and such Business Plan is
reasonably satisfactory to Lender and such dividends will not have a material
adverse effect on Borrower's remaining working capital, Borrower may pay the
dividends as set forth in the new Business Plan.

                                      -23-
<Page>

                  Lender acknowledges that iParty Corp. has advanced working
capital to Borrower from the date Borrower acquired the store locations of The
Big Party Corporation (Debtor-in-Possession under Chapter 11 Case No. 00-2852
(GMS)) and agrees that repayment of the advances made by iParty Corp. to
Borrower for working capital purposes shall not constitute a distribution in
respect to Borrower's capital stock and will not otherwise be in violation of
this Agreement.

          5-18.   LOANS. The Borrower shall not make any loans or advances to,
nor acquire the Indebtedness of, any Person, provided, however, the foregoing
does not prohibit any of the following:

                  (a)  Advance payments made to the Borrower's suppliers in the
ordinary course.

                  (b)  Advances to the Borrower's officers, employees, and
salespersons with respect to reasonable expenses to be incurred by such
officers, employees, and salespersons for the benefit of the Borrower, which
expenses are properly substantiated by the Person seeking such advance and
properly reimbursable by the Borrower.

          5-19.   PROTECTION OF ASSETS. The Lender, in the Lender's discretion,
and from time to time, (after notice to the Borrower provided no Event of
Default has occurred) may discharge any tax or Encumbrance on any of the
Collateral, or take any other action that the Lender may deem necessary or
desirable to repair, insure, maintain, preserve, collect, or realize upon any of
the Collateral. The Lender shall not have any obligation to undertake any of the
foregoing and shall have no liability on account of any action so undertaken
except where there is a specific finding in a judicial proceeding (in which the
Lender has had an opportunity to be heard), from which finding no further appeal
is available, that the Lender had acted in actual bad faith or in a grossly
negligent manner. The Borrower shall pay to the Lender, on demand, or the
Lender, in its discretion, may add to the Loan Account, all amounts paid or
incurred by the Lender pursuant to this section. The obligation of the Borrower
to pay such amounts is a Liability.

          5-20.   LINE OF BUSINESS. The Borrower shall not engage in any
business other than the business in which it is currently engaged or a business
reasonably related thereto.

          5-21.   AFFILIATE TRANSACTIONS. The Borrower shall not make any
payment, nor give any value to any Related Entity except for (a) goods and
services actually purchased by the Borrower from, or sold by the Borrower to,
such Related Entity, and (b) upstream payments to iParty Corp. for (i) taxes
payable based on taxable income of Borrower on a stand-alone basis, (ii)
reimbursements for executive personnel and any other such shared personnel as
provided in the Business Plan, and (iii) any other service provided by iParty
Corp. to the Borrower as provided in the Business Plan, for a price which shall:

                  (a)  Be competitive and fully deductible as an "ordinary and
necessary business expense" and/or fully depreciable under the Internal Revenue
Code of 1986 and the Treasury Regulations, each as amended; and

                  (b)  Not differ from that which would have been charged in an
arms length transaction.

                                      -24-
<Page>

          5-22.   EXECUTIVE PAY.

                  (a)  The only Executive Officers of the Borrower, at the
execution of this Agreement, are those individuals referenced in the definition
of "Executive Officers".

                  (b)  Prior to the execution of this Agreement, the Borrower
furnished the Lender with copies of all written Executive Agreements and
outlines of the salient features of all unwritten Executive Agreements (as
amended to date) then in existence. There are no unwritten agreements or
understandings between the Borrower and any Executive Officer which relate to
Executive Pay, written disclosure of which has not been made to the Lender.

                  (c)  Except for the hiring of a president and/or a general
manager, the Borrower will not:

                       (i)    Enter into any Executive Agreement not existing at
the execution of this Agreement.

                       (ii)   Alter, amend, supplement, or otherwise change any
Executive Agreement.

                       (iii)  Pay, provide, or facilitate any Executive Pay
other than as provided in an Executive Agreement or, if not covered by an
Executive Agreement, as permitted pursuant to Section 5-21, above.

          5-23.   ADDITIONAL ASSURANCES.

                  (a)  The Borrower is not the owner of, nor has it any interest
in, any property or asset which, immediately upon the satisfaction of the
conditions precedent to the effectiveness of the credit facility contemplated
hereby (Article 4) will not be subject to a perfected security interest in favor
of the Lender (subject only to those Encumbrances (if any) described on EXHIBIT
5-5, annexed hereto) to secure the Liabilities.

                  (b)  The Borrower will not hereafter acquire any asset or any
interest in property which is not, immediately upon such acquisition, subject to
such a perfected security interest in favor of the Lender to secure the
Liabilities (subject only to Encumbrances (if any) permitted pursuant to Section
5-5, above).

                  (c)  The Borrower shall execute and deliver to the Lender such
instruments, documents, and papers, and shall do all such things from time to
time hereafter as the Lender may reasonably request to carry into effect the
provisions and intent of this Agreement; to protect and perfect the Lender's
security interests in the Collateral; and to comply with all applicable statutes
and laws, and facilitate the collection of any Receivables Collateral. The
Borrower shall execute all such instruments as may be reasonably required by the
Lender with respect to the recordation and/or perfection of the security
interests created herein.

                                      -25-
<Page>

                  (d)  A carbon, photographic, or other reproduction of this
Agreement or of any financing statement or other instrument executed pursuant to
this Section 5-23 shall be sufficient for filing to perfect the security
interests granted herein.

          5-24.   ADEQUACY OF DISCLOSURE.

                  (a)  All financial statements of the Borrower furnished to the
Lender by the Borrower have been prepared in accordance with GAAP consistently
applied and present fairly the condition of the Borrower at the date(s) thereof
and the results of operations and cash flows for the period(s) covered. There
has been no change in the financial condition, results of operations, or cash
flows of the Borrower since the date(s) of such financial statements, other than
changes in the ordinary course of business, which changes have not been
materially adverse, either singularly or in the aggregate.

                  (b)  The Borrower does not have any contingent obligations or
obligation under any Lease or Capital lease which is not noted in the Borrower's
financial statements furnished to the Lender prior to the execution of this
Agreement.

                  (c)  No document, instrument, agreement, or paper now or
hereafter given the Lender by or on behalf of the Borrower or any guarantor of
the Liabilities in connection with the execution of this Agreement by the Lender
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
therein not misleading. There is no fact known to the Borrower which has, or
which, in the foreseeable future could have, a material adverse effect on the
financial condition of the Borrower or any such guarantor which has not been
disclosed in writing to the Lender.

          5-25.   NO MATERIAL ADVERSE CHANGE. There has not been a Material
Adverse Change.

          5-26.   OTHER COVENANTS. The Borrower shall not indirectly do or cause
to be done any act which, if done directly by the Borrower, would breach any
covenant contained in this Agreement.

ARTICLE 6 - USE AND COLLECTION OF COLLATERAL

          6-1.    USE OF INVENTORY COLLATERAL.

                  (a)  Except as otherwise provided in Section 5-4(f) herein,
the Borrower shall not engage in any sale of the Inventory other than for fair
consideration in the conduct of the Borrower's business in the ordinary course
and shall not engage in sales or other dispositions to creditors; sales or other
dispositions in bulk; and any use of any of the Inventory in breach of any
provision of this Agreement.

                  (b)  No sale of Inventory shall be on consignment, approval,
or under any other circumstances such that, with the exception of the Borrower's
customary return policy applicable to

                                      -26-
<Page>

the return of Inventory purchased by the Borrower's retail customers in the
ordinary course, such Inventory may be returned to the Borrower without the
consent of the Lender.

          6-2.    INVENTORY QUALITY. All Inventory now owned or hereafter
acquired by the Borrower is and will be of good and merchantable quality and
free from defects (other than defects within customary trade tolerances).

          6-3.    ADJUSTMENTS AND ALLOWANCES. The Borrower may grant such
allowances or other adjustments to the Borrower's Account Debtors (exclusive of
extending the time for payment of any Account or Account Receivable, which shall
not be done without first obtaining the Lender's prior written consent in each
instance) as the Borrower may reasonably deem to accord with sound business
practice, provided, however, the authority granted the Borrower pursuant to this
Section 6-3 may be limited or terminated by the Lender at any time in the
Lender's discretion after and during an Event of Default.

          6-4.    VALIDITY OF ACCOUNTS.

                  (a)  The amount of each Account shown on the books, records,
and invoices of the Borrower represented as owing by each Account Debtor is and
will be the correct amount actually owing by such Account Debtor and shall have
been fully earned by performance by the Borrower.

                  (b)  The Borrower has no knowledge of any impairment of the
validity or collectibility of any of the Accounts and shall notify the Lender of
any such fact immediately after Borrower becomes aware of any such impairment.

                  (c)  Except for any security deposit under any of the
Borrower's lease arrangements, the Borrower shall not post any bond to secure
the Borrower's performance under any agreement to which the Borrower is a party
nor cause any surety, guarantor, or other third party obligee to become liable
to perform any obligation of the Borrower (other than to the Lender) in the
event of the Borrower's failure so to perform.

          6-5.    NOTIFICATION TO ACCOUNT DEBTORS. The Lender shall have the
right at any time after the occurrence of an Event of Default to notify any of
the Borrower's Account Debtors to make payment directly to the Lender and to
collect all amounts due on account of the Collateral.

ARTICLE 7 - CASH MANAGEMENT

          7-1.    DEPOSITORY ACCOUNTS.

                  (a)  Annexed hereto as EXHIBIT 7-1 is a Schedule of all
present DDA's, which Schedule includes, with respect to each depository (i) the
name and address of that depository; (ii) the account number(s) of the
account(s) maintained with such depository; (iii) a contact Person at such
depository; and (iv) the telephone number of the contact Person.

                                      -27-
<Page>

                  (b)  The Borrower shall, as a condition to the effectiveness
of this Agreement:

                       (i)    Establish an account for the benefit of and under
the control of, Lender into which all Receipts shall be deposited (the "Blocked
Account")

                       (ii)   Deliver to Lender proof of the mailing, to each
depository institution with which any DDA is maintained (other than the Funding
Account or any Local DDA) of notification (in form satisfactory to the Lender)
of the Lender's interest in such DDA. In the event that the Borrower shall
receive notice that any depository at which a DDA is maintained, refuses to
accept and comply with the notifications delivered by the Borrower to such
depository institution of the Lender's interest in such DDA, Borrower will
immediately close all DDAs maintained with such depository institution and
establish new DDAs with depository institutions which accept and agree to such
notifications.

                       (iii)  Deliver to Lender an agreement (in form
satisfactory to the Lender ) with any depository institution at which a Blocked
Account is maintained.

                  (c)  The Borrower will not establish any DDA hereafter (other
than a Local DDA) unless Borrower, contemporaneous with such establishment, the
Borrower delivers to the Lender proof of mailing to any such institution, a
notification (in form satisfactory to the Lender) of the Lender's interest in
such DDA.

                  (d)  The Borrower will establish and maintain separate
accounts exclusively for purposes of payroll and payroll tax deposits and
payments.

          7-2.    CREDIT CARD RECEIPTS.

                  (a)  Annexed hereto as EXHIBIT 7-2, is a Schedule which
describes all Credit Card Processors, which term shall include any "instant
credit" providers and any other arrangements to which the Borrower is a party
with respect to the payment to the Borrower of the proceeds of all credit card
charges for sales by the Borrower.

                  (b)  The Borrower shall deliver to the Lender, as a condition
to the effectiveness of this Agreement, proof of the mailing to each of the
Credit Card Processors of a notice in form satisfactory to the Lender, which
notice provides that payment of all credit card charges submitted by the
Borrower to that Credit Card Processor payable to the Borrower by such Credit
Card Processor shall be directed to the Blocked Account. Borrower shall obtain
and deliver to Lender the acknowledgment and consent of any Credit Card
Processor to the terms of such notice. The Borrower shall not change such
direction or designation except upon and with the prior written consent of the
Lender.

                                      -28-
<Page>

          7-3.    THE CONCENTRATION ACCOUNT, THE BLOCKED ACCOUNT AND THE FUNDING
ACCOUNTS.

                  (a)  The following accounts have been or will be established
(and are so referred to herein):

                       (i)    The Concentration Account: Established by the
Lender with The Chase Manhattan Bank, N.A.

                       (ii)   The Funding Account: Shall be established by
Borrower with a financial institution reasonably acceptable to Lender prior to
the establishment of the Revolving Credit and the making of the first loan under
the Revolving Credit.

                       (iii)  The Blocked Account: Shall be established by
Borrower with a financial institution reasonably acceptable to Lender prior to
the establishment of the Revolving Credit and the making of the first loan under
the Revolving Credit.

                  (b)  The contents of all DDA's and the Blocked Account
constitute Collateral and Proceeds of Collateral.

                  (c)  The Borrower shall pay all fees and charges of, and
maintain such impressed balances as may be required by the Lender or by any bank
in which any account is opened as required hereby (even if such account is
opened by the Lender).

          7-4.    PROCEEDS AND COLLECTION OF ACCOUNTS.

                  (a)  All Receipts constitute Collateral and proceeds of
Collateral and shall be held in trust by the Borrower for the Lender; shall not
be commingled with any of the Borrower's other funds; and shall be deposited
and/or transferred only to the Blocked Account.

                  (b)  The Borrower shall cause the ACH or wire transfer to the
Blocked Account, no less frequently than daily (and whether or not there is then
an outstanding balance in the Loan Account) of:

                       (i)    The then contents of each DDA (other than (A) any
Local DDA and (B) the Funding Account), each such transfer to be net of any
minimum balance, not to exceed Seven Hundred Fifty ($750) Dollars, as may be
required to be maintained in the subject DDA by the bank at which such DDA is
maintained.

                       (ii)   The proceeds of all credit card charges not
otherwise provided for pursuant hereto.

                  Telephone advice (confirmed by written notice) shall be
provided to the Lender on each Banking Day on which any such transfer is made.

                                      -29-
<Page>

                  (c)  Whether or not any Liabilities are then outstanding, the
Borrower shall cause the ACH or wire transfer to the Concentration Account, no
less frequently than daily, of the entire previous day's closing collected
balance of the Blocked Account.

                  The foregoing notwithstanding, if there are no Liabilities
outstanding and Borrower does not anticipate requesting loans or advances under
the Revolving Credit for a substantial period of time, Borrower may request that
the requirement that all collected balances in the Blocked Account be ACH or
wire transferred to the Concentration Account be waived. In the event that
Lender consents to the foregoing request, then, provided that no Suspension
Event for Event of Default is then is existence, Lender shall direct the Blocked
Account to the Funding Account (such arrangements to be hereinafter referred to
as "Alternative Sweep Arrangements"). Lender's obligation to notify the Blocked
Account Bank to engage the Alternative Sweep Arrangements is further subject to
and condition upon Lender's receipt of written authorization of the Borrower,
certified to the Lender by the President or other authorized signatory of the
Borrower. Lender shall not be responsible for any failure of the Blocked Account
Bank to implement its instructions under this Alternative Sweep Arrangement. As
further conditions to any advance by the Lender at any time after the
Alternative Sweep Arrangements have been engaged hereunder, the Borrower shall
provide to Lender written notice of its intent to borrower at least thirty (30)
days in advance of any borrowing request, and Lender shall have received from
the Blocked Account, written acknowledgment of and agreement to the Lender's
instructions to transfer all funds in the Blocked Account to the Concentration
Account in accordance with the agreement described in Section 7-1(b)(ii) hereof.

                  (d)  In the event that, notwithstanding the provisions of this
Section 7-4, the Borrower receives or otherwise has dominion and control of any
Receipts, or any proceeds or collections of any Collateral, such Receipts,
proceeds, and collections shall be held in trust by the Borrower for the Lender
and shall not be commingled with any of the Borrower's other funds or deposited
in any account of the Borrower other than as instructed by the Lender. The
foregoing notwithstanding, nothing herein shall prevent the Borrower from
maintaining a "bank" in its store registers.

          7-5.    PAYMENT OF LIABILITIES.

                  (a)  On each Banking Day, upon receipt by Lender, the Lender
may apply towards the Liabilities, the then collected balance of the
Concentration Account (net of fees charged, and of such impressed balances as
may be required by the bank at which the Concentration Account is maintained),
PROVIDED, HOWEVER, for purposes of the calculation of interest on the unpaid
principal balance of the Loan Account, such payment shall be deemed to have been
made two (2) Banking Days after such transfer, provided, however, if no
Liabilities are outstanding, then any amounts contained in the Concentration
Account shall then be transferred immediately to the Funding Account.

                  (b)  The Lender shall transfer to the Funding Account any
surplus in excess of the Liabilities in the Concentration Account (attributable
to Borrower) remaining after the application

                                      -30-
<Page>

towards the Liabilities referred to in Section 7-5(a), above (less those amounts
which are to be netted out, as provided therein) PROVIDED, HOWEVER, in the event
that both (i) a Suspension Event has occurred and (ii) one or more L/C's are
then outstanding, the Lender may establish a funded reserve of up to one hundred
ten (110%) percent of the aggregate Stated Amounts of such L/C's.

          7-6.    THE FUNDING ACCOUNT. All checks shall be drawn by the Borrower
upon, and other disbursements made by the Borrower solely from, the Funding
Account.

          7-7.    CAPITAL INFUSIONS, ETC. The proceeds of any investment in the
Borrower from any source, including without limitation, proceeds of the issuance
or sale of any capital stock or debt instruments, shall be deposited by the
purchaser thereof directly into the Blocked Account. In addition, any funds
received by Borrower other than from ordinary business operations, including
without limitation, tax refunds, insurance or condemnation proceeds or damage
awards, shall be deposited directly into the Blocked Account.

ARTICLE 8 - LENDER AS BORROWER'S ATTORNEY-IN-FACT

          8-1.    APPOINTMENT AS ATTORNEY-IN-FACT. The Borrower hereby
irrevocably constitutes and appoints the Lender as the Borrower's true and
lawful attorney, with full power of substitution, to convert the Collateral into
cash at the sole risk, cost, and expense of the Borrower, but for the sole
benefit of the Lender. The rights and powers granted the Lender by this
appointment shall be exercisable by the Lender only after the occurrence of an
Event of Default and include but are not limited to the right and power to:

                  (a)  Prosecute, defend, compromise, or release any action
relating to the Collateral.

                  (b)  Sign change of address forms to change the address to
which the Borrower's mail is to be sent to such address as the Lender shall
designate; receive and open the Borrower's mail; remove any Receivables
Collateral and Proceeds of Collateral therefrom and turn over the balance of
such mail either to the Borrower or to any trustee in bankruptcy, receiver,
assignee for the benefit of creditors of the Borrower, or other legal
representative of the Borrower whom the Lender determines to be the appropriate
Person to whom to so turn over such mail.

                  (c)  Endorse the name of the Borrower in favor of the Lender
upon any and all checks, drafts, notes, acceptances, or other items or
instruments; sign and endorse the name of the Borrower on, and receive as
secured party, any of the Collateral, any invoices, schedules of Collateral,
freight or express receipts, or bills of lading, storage receipts, warehouse
receipts, or other documents of title respectively relating to the Collateral.

                  (d)  Sign the name of the Borrower on any notice to the
Borrower's Account Debtors or verification of the Receivables Collateral; sign
the Borrower's name on any Proof of Claim in Bankruptcy against Account Debtors,
and on notices of lien, claims of mechanic's liens, or assignments or releases
of mechanic's liens securing the Accounts.

                                      -31-
<Page>

                  (e)  Take all such action as may be necessary to obtain the
payment of any letter of credit and/or banker's acceptance of which the Borrower
is a beneficiary.

                  (f)  Repair, manufacture, assemble, complete, package,
deliver, alter or supply goods, if any, necessary to fulfill in whole or in part
the purchase order of any customer of the Borrower.

                  (g)  Use, license or transfer any or all General Intangibles
of the Borrower.

                  (h)  Sign and file or record any financing or other statements
in order to perfect or protect the Lender's security interest in the Collateral.

          8-2.    NO OBLIGATION TO ACT. The Lender shall not be obligated to do
any of the acts or to exercise any of the powers authorized by Section 8-1
herein, but if the Lender elects to do any such act or to exercise any of such
powers, it shall not be accountable for more than it actually receives as a
result of such exercise of power, and shall not be responsible to the Borrower
for any act or omission to act except for any act or omission to act as to which
there is a final determination made in a judicial proceeding (in which
proceeding the Lender has had an opportunity to be heard) which determination
includes a specific finding that the subject act or omission to act had been
grossly negligent or in actual bad faith.

ARTICLE 9 - FINANCIAL AND OTHER REPORTING REQUIREMENTS/FINANCIAL COVENANTS

          9-1.    MAINTAIN RECORDS. The Borrower shall:

                  (a)  At all times, keep proper books of account, in which
full, true, and accurate entries shall be made of all of the Borrower's
transactions, all in accordance with GAAP applied consistently with prior
periods to fairly reflect the financial condition of the Borrower at the close
of, and its results of operations for, the periods in question.

                  (b)  Timely provide the Lender with those financial reports,
statements, and schedules required by this Article 9 or otherwise, each of which
reports, statements and schedules shall be prepared, to the extent applicable,
in accordance with GAAP applied consistently with prior periods to fairly
reflect the financial condition of the Borrower at the close of, and its results
of operations for, the period(s) covered therein.

                  (c)  At all times, keep accurate current records of the
Collateral including, without limitation, accurate current stock, cost, and
sales records of its Inventory, accurately and sufficiently itemizing and
describing the kinds, types, and quantities of Inventory and the cost and
selling prices thereof.

                  (d)  At all times, retain independent certified public
accountants who are reasonably satisfactory to the Lender and instruct such
accountants to fully cooperate with, and be

                                      -32-
<Page>

available to, the Lender to discuss the Borrower's financial performance,
financial condition, operating results, controls, and such other matters, within
the scope of the retention of such accountants, as may be raised by the Lender.
The Lender acknowledges that Arthur Anderson & Co., CPA's, are acceptable
independent certified public accountants.

                  (e)  Not change the Borrower's fiscal year.

                  (f)  Not change the Borrower's taxpayer identification number.

          9-2.    ACCESS TO RECORDS.

                  (a)  The Borrower shall accord the Lender and the Lender's
representatives with access from time to time as the Lender and such
representatives may reasonably require to all properties owned by or over which
the Borrower has control, upon reasonable notice and in a manner which does not
unreasonably interfere with the use and conduct of the Borrower's business
(provided no notice shall be required upon the occurrence of an Event of
Default). The Lender and the Lender's representatives shall have the right, and
the Borrower will permit the Lender and such representatives from time to time
as the Lender and such representatives may reasonably request, upon reasonable
notice and in a manner which does not unreasonably interfere with the use and
conduct of the Borrower's business (provided no notice shall be required after
the occurrence of an Event of Default) request, to examine, inspect, copy, and
make extracts from any and all of the Borrower's books, records, electronically
stored data, papers, and files. The Borrower shall make all of the Borrower's
copying facilities available to the Lender.

                  (b)  The Borrower hereby authorizes the Lender and the
Lender's representatives to:

                       (i)    Inspect, copy, duplicate, review, cause to be
reduced to hard copy, run off, draw off, and otherwise use any and all computer
or electronically stored information or data which relates to the Borrower, or
any service bureau, contractor, accountant, or other Person, and directs any
such service bureau, contractor, accountant, or other Person fully to cooperate
with the Lender and the Lender's representatives with respect thereto.

                       (ii)   Verify at any time the Collateral or any portion
thereof, including verification with Account Debtors, and/or with the Borrower's
computer billing companies, collection agencies, and accountants and to sign the
name of the Borrower on any notice to the Borrower's Account Debtors or
verification of the Collateral.

                  (c)  The Lender shall treat all such information as
confidential, except to the extent necessary for the Lender to enforce its
rights under this Agreement and any agreements executed in connection herewith.

          9-3.    IMMEDIATE NOTICE TO LENDER.

                                      -33-
<Page>

                  (a)  The Borrower shall provide the Lender with written notice
immediately upon the occurrence of any of the following events, which written
notice shall be with reasonable particularity as to the facts and circumstances
in respect of which such notice is being given:

                       (i)    Within five (5) days after any change in the
Borrower's Executive Officers, officers, directors, controllers or key
employees.

                       (ii)   Within five (5) days after the completion of any
physical count of the Borrower's Inventory (together with a copy of the
certified or such other results as may then be available thereof).

                       (iii)  Any ceasing of the Borrower's making of payment,
in the ordinary course, to any of its creditors (excluding the ceasing of the
making of such payments on account of a bona fide dispute with a creditor not in
excess of Fifty Thousand ($50,000) Dollars).

                       (iv)   Any failure by the Borrower to pay rent at any of
the Borrower's locations, which failure continues for more than three (3) days
following the day on which such rent first came due. If Borrower has any dispute
with any Landlord with respect to rent payable or other matters, Borrower shall
give Lender written notice of said dispute.

                       (v)    Any failure by Borrower to pay trade liabilities
or other expense liabilities in accordance with their past business practices.

                       (vi)   Any Material Adverse Change in the business,
operations, or financial affairs of the Borrower.

                       (vii)  The occurrence of any Suspension Event.

                       (viii) Any decision on the part of the Borrower to
discharge the Borrower's present independent accountants or any withdrawal or
resignation by such independent accountants from their acting in such capacity
(as to which, see Subsection 9-1(d)).

                       (ix)   Within five (5) days of learning of any litigation
which, if determined adversely to the Borrower, might have a material adverse
effect on the financial condition of the Borrower.

                       (x)    Within five (5) days of the reduction by any of
Borrower's material vendors in the amount of trade credit or terms provided by
such vendor to Borrower on the date of execution hereof.

                       (xi)   The engagement or employment by the Borrower of
any bankruptcy, restructuring or "turn-around" professionals.

                  (b)  The Borrower shall:

                                      -34-
<Page>

                       (i)    Provide the Lender, when so distributed, with
copies of any materials distributed to the shareholders of the Borrower (qua
such shareholders).

                       (ii)   Add the Lender as an addressee on all mailing
lists maintained by or for the Borrower.

                       (iii)  At the request of the Lender, from time to time,
provide the Lender with copies of all advertising (including copies of all print
advertising and duplicate tapes of all video and radio such advertising).

                       (iv)   Provide the Lender, within five (5) days of
receipt by the Borrower, with a copy of any management letter or similar
communications from any accountant of the Borrower.

          9-4.    BORROWING BASE CERTIFICATE. The Borrower shall provide the
Lender, daily, with a Borrowing Base Certificate (in the form of EXHIBIT 9-4
annexed hereto, as such form may be revised from time to time by the Lender).
Such Certificate may be sent to the Lender by facsimile transmission, provided
that the original thereof is forwarded to the Lender on the date of such
transmission at its request. No adjustments to the Borrowing Base Certificate
may be made without support documentation and such other documentation as may be
requested by Lender from time to time.

          9-5.    WEEKLY REPORTS. Weekly, not later than Wednesday for the
immediately preceding fiscal week:

                  See EXHIBIT 9-R.

In the event that Availability equals Two Hundred Fifty Thousand ($250,000)
Dollars or less for seven (7) consecutive days, then Borrower shall provide
Lender with weekly cash flow reports in form and content satisfactory to Lender.

          9-6.    MONTHLY REPORTS.

                  (a)  Monthly, the Borrower shall provide the Lender with
original counterparts of (each in such form as the Lender from time to time may
specify):

                       (i)    Within fifteen (15) days of the end of the
                              previous month:

                              See EXHIBIT 9-R

                       (ii)   Within thirty (30) days of the end of the previous
                              month: Statement of Gross Margin (Paragon format)

                              See EXHIBIT 9-R

                                      -35-
<Page>

                  (b)  For purposes of Section 9-6(a)(i), above, the first
"previous month" in respect of which the items required by that Section shall be
provided shall be August, 2000 and for purposes of Section 9-6(a)(ii), above,
the first "previous month" in respect of which the items required by that
Section shall be provided shall be August, 2000.

          9-7.    ANNUAL REPORTS.

                  (a)  In addition to the monthly reports required under
Article 9-6, annually, within ninety (90) days following the end of the
Borrower's fiscal year, the Borrower shall furnish the Lender with an original
signed counterpart of the Borrower's annual financial statement, which statement
shall have been prepared by, and bearing the unqualified opinion of, the
Borrower's independent certified public accountants (i.e. said statement shall
be "certified" by such accountants). Such annual statement shall include, at a
minimum (with comparative information for the then prior fiscal year) a balance
sheet, income statement, statement of changes in shareholders' equity, and cash
flows.

                  (b)  Each annual statement shall be accompanied by such
accountant's certificate indicating that to the best knowledge of such
accountant, no event has occurred which is or which, solely with the passage of
time or the giving of notice (or both) would be, an Event of Default.

                  (c)  Borrower shall provide interim draft (subject to year end
audit and similar adjustments) annual financial statements (inclusive of
subsequent periods, until year end statements are delivered) within forty-five
(45) days of each year end.

          9-8.    OFFICERS' CERTIFICATES. The Borrower shall cause the
Borrower's President and Chief Financial Officer respectively to provide such
Person's Certificate with those monthly, quarterly, and annual statements to be
furnished pursuant to this Agreement, which Certificate shall:

                  (a)  Indicate that the subject statement was prepared in
accordance with GAAP consistently applied, and presents fairly the financial
condition of the Borrower at the close of, and the results of the Borrower's
operations and cash flows for, the period(s) covered, subject, however (with the
exception of the Certificate which accompanies such annual statement) to usual
year end adjustments.

                  (b)  Indicate either that (i) no Suspension Event has occurred
or (ii) if such an event has occurred, its nature (in reasonable detail) and the
steps (if any) being taken or contemplated by the Borrower to be taken on
account thereof.

                  (c)  Include calculations concerning the Borrower's compliance
(or failure to comply) at the date of the subject statement with each of the
financial performance covenants included in Section 9-12, below.

                                      -36-
<Page>

                  (d)  Indicate that all taxes (broken down by type and taxing
authority) have or have not been paid.

                  (e)  Indicate that all rent and additional rent (broken down
by store location) due pursuant to any store lease have or have not been paid.

          9-9.    INVENTORIES. APPRAISALS. AND AUDITS.

                  (a)  The Lender, at the expense of the Borrower, may
participate in and/or observe each physical count and/or inventory of so much of
the Collateral as consists of Inventory which is undertaken on behalf of the
Borrower.

                  (b)  Upon the Lender's request from time to time after
reasonable notice (except after the occurrence of an Event of Default), the
Borrower shall obtain, or shall permit the Lender to obtain (in all events, at
the Borrower's expense) financial or SKU based physical counts and/or
inventories of the Collateral, conducted by such inventory takers as are
satisfactory to the Lender and following such methodology as may be required by
the Lender, each of which physical counts and/or financial or SKU based
inventories shall be observed by the Borrower's accountants. The Lender will
require the Borrower to conduct one (1) such count and/or inventory during each
twelve (12) month period during which this Agreement is in effect, but in its
discretion, may undertake additional such counts or inventories during such
period. Additionally, Lender shall require that Borrower conduct a physical
count/inventory of at least one-third of the stores (the selection of which
stores to be included subject to Lender's approval) by the end of each fiscal
June of each year (the "Mid-Year Count"). Lender can require that the balance of
the stores be counted at Borrower's expense in the event that the resultant
shrink reflected in the Mid-Year Count exceeds the shrinkage accrual in
Borrower's General Ledger. The draft or unaudited results of all inventories or
counts shall be furnished to Lender immediately thereafter and final, reconciled
results within ten (10) days of the taking of such inventories or counts. The
Lender reserves the right to seek directly unaudited or draft results from such
inventory takers.

                  The foregoing notwithstanding, during the fiscal year 2000,
Borrower shall obtain an SKU based fiscal count in connection with the initial
funding of the loan and shall also conduct a count and/or inventory as of the
end of the current fiscal year.

                  (c)  Upon the Lender's request from time to time, the Borrower
shall permit the Lender to obtain appraisals (in all events, at the Borrower's
expense) conducted by such appraisers as are satisfactory to the Lender.

                  (d)  The Lender contemplates conducting three (3) commercial
finance audits (in each event, at the Borrower's expense) of the Borrower's
books and records during any twelve (12) month period during which this
Agreement is in effect, but in its discretion, may undertake additional such
audits during such period (provided, however, absent an Event of Default, such
additional audits in excess of three (3) audits, shall be at Lender's expense).
The current audit fees for a field examination conducted by the Lender are Eight
Hundred ($800) Dollars per man, per day,

                                      -37-
<Page>

plus expenses. The Borrower acknowledges that the Lender will conduct its first
field examination within ninety (90) days of the date hereof.

                  (e)  In the event that Borrower does not undertake "mystery
shopping" (so-called) and share the results of the same with Lender, Lender from
time to time (in all events, at the Borrower's expense) may undertake "mystery
shopping" (so-called) visits to all or any of the Borrower's business premises.
The Lender shall provide the Borrower with a copy of any non-company
confidential results of such mystery shopping upon Borrower's written request.

          9-10.   ADDITIONAL FINANCIAL INFORMATION.

                  (a)  In addition to all other information required to be
provided pursuant to this Article 9, the Borrower promptly shall provide the
Lender with such other and additional information concerning the Borrower and
any guarantor of the Liabilities, the Collateral, the operation of the
Borrower's business, and the Borrower's financial condition, including original
counterparts of financial reports and statements, as the Lender may from time to
time reasonably request from the Borrower.

                  (b)  The Borrower has provided the Lender with its current
Business Plan, a copy of which is annexed hereto as EXHIBIT 9-10. The Borrower
may provide the Lender, from time to time hereafter, with updated Business
Plans. In all events, the Borrower, not later than sixty (60) days prior to the
end of each of the Borrower's fiscal years, shall furnish the Lender with an
updated and extended Business Plan which shall go out at least through the end
of the then next fiscal year and the final Business Plan within fifteen (15)
days prior to the end of Borrower's fiscal year. In each event, such updated and
extended Business Plans shall be prepared pursuant to a methodology and shall
include such assumptions as are satisfactory to the Lender. Routinely throughout
the year, the Lender, following the receipt of any of such revised forecast
which reflects material adverse business performance, may, but shall not be
under any obligation to, revise the financial performance covenants included on
EXHIBIT 9-11, annexed hereto.

          9-11.   FINANCIAL PERFORMANCE AND INVENTORY COVENANTS. The Borrower
shall observe and comply with those financial performance and inventory
covenants set forth on EXHIBIT 9-11 annexed hereto.

          9-12.   ELECTRONIC REPORTING. At Lender's option all information and
reports required to be supplied to Lender by Borrower shall be transmitted
electronically pursuant to an electronic transmitting reporting system and shall
be in a record layout format designated by Lender from time to time.

ARTICLE 10 - EVENTS OF DEFAULT

          The occurrence of any event described in this Article 10 respectively
shall constitute an "EVENT OF DEFAULT" herein. Upon the occurrence of any Event
of Default described in Section 10-11, any and all Liabilities shall become due
and payable without any further act on the part of the

                                      -38-
<Page>

Lender. Upon the occurrence of any other Event of Default, any and all
Liabilities shall become immediately due and payable, at the option of the
Lender and without notice or demand. The occurrence of any Event of Default
shall also constitute, without notice or demand, a default under all other
agreements between the Lender and the Borrower and instruments and papers given
the Lender by the Borrower, whether such agreements, instruments, or papers now
exist or hereafter arise.

          10-1.   FAILURE TO PAY REVOLVING CREDIT. The failure by the Borrower
to pay any amount when due under the Revolving Credit.

          10-2.   FAILURE TO MAKE OTHER PAYMENTS. The failure by the Borrower to
pay when due (or upon demand, if payable on demand) any payment Liability other
than under the Revolving Credit which failure is not cured within one (1) day
after the Borrower is given notice thereof.

          10-3.   FAILURE TO PERFORM COVENANT OR LIABILITY (NO GRACE PERIOD).
The failure by the Borrower to promptly, punctually, faithfully and timely
perform, discharge, or comply with any covenant or Liability not otherwise
described in section 10-1 or section 10-2, above, and included in any of the
following provisions hereof:

<Table>
<Caption>
                        Section          Relates to:
                        -------          ----------
                        <S>              <C>
                        5-4              Location of Collateral
                        5-5              Title to Assets
                        5-6              Indebtedness
                        5-7              Insurance Policies
                        5-12             Pay Taxes
                        5-21             Affiliate Transactions
                        5-23             Additional Assurances
                        Article 7        Cash Management
                        Article 9        Financial Reporting Requirements and Financial Covenants
</Table>

          The foregoing notwithstanding, in the event an involuntary lien is
placed on the Collateral, the Borrower shall have a thirty (30) day period
within which to obtain the release thereof (provided such lien is not prior to
the Lender's lien on such Collateral).

          10-4.   FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD). The
failure by the Borrower to promptly, punctually and faithfully perform, or
observe any term, covenant or agreement on its part to be performed or observed
pursuant to any of the provisions of this Agreement, other than those described
in Sections 10-1, 10-2 or 10-3, or in any other agreement with Lender which is
not remedied within the earlier of ten (10) days after (i) notice thereof by
Lender to Borrower, or (ii) the date Borrower was required to give notice to
Lender pursuant to Section 9-3(a)(vi) hereof.

          10-5.   MISREPRESENTATION. The good faith determination by the Lender
that any representation or warranty at any time made by the Borrower to the
Lender was not true or complete in all material respects when given.

                                      -39-
<Page>

          10-6.   ACCELERATION OF OTHER DEBT. BREACH OF LEASE. The occurrence of
any event such that any Indebtedness of the Borrower to any creditor other than
the Lender is accelerated or, without the consent of the Borrower, any Lease is
breached and terminated.

          10-7.   DEFAULT UNDER OTHER AGREEMENTS. The occurrence of any breach
or default under any agreement between the Lender and the Borrower or instrument
or paper given the Lender by the Borrower, whether such agreement, instrument,
or paper now exists or hereafter arises, continuing beyond any applicable cure
or grace period thereunder, (notwithstanding that the Lender may not have
exercised its rights upon default under any such other agreement, instrument or
paper).

          10-8.   CASUALTY LOSS. NON-ORDINARY COURSE SALES. The occurrence of
any (a) uninsured loss, theft, damage, or destruction of or to any material
portion of the Collateral, or (b) sale (other than sales in the ordinary course
of business or otherwise permitted hereunder) of any material portion of the
Collateral.

          10-9.   JUDGMENT. RESTRAINT OF BUSINESS.

                  (a)  The service of process upon the Lender or any Participant
seeking to attach, by trustee, mesne, or other process, any of the Borrower's
funds on deposit with, or assets of the Borrower in the possession of, the
Lender or such Participant.

                  (b)  The entry of any judgment against the Borrower, which
judgment is not satisfied (if a money judgment) or appealed from (with execution
or similar process stayed) within fifteen (15) days of its entry.

                  (c)  The entry of any order or the imposition of any other
process having the force of law, the effect of which is to restrain in any
material way the conduct by the Borrower of its business in the ordinary course.

          10-10.  BUSINESS FAILURE. Any act by, against, or relating to the
Borrower, or its property or assets, which act constitutes the application for,
consent to, or sufferance of the appointment of a receiver, trustee, or other
Person, pursuant to court action or otherwise, over all, or any part of the
Borrower's property; the granting of any trust mortgage or execution of an
assignment for the benefit of the creditors of the Borrower, or the occurrence
of any other voluntary or involuntary liquidation or extension of debt agreement
for the Borrower; or the offering by or entering into by the Borrower of any
composition, extension, or any other arrangement seeking relief from or
extension of the debts of the Borrower, or the initiation of any other judicial
or non-judicial proceeding or agreement by, against, or including the Borrower
which seeks or intends to accomplish a reorganization or arrangement with
creditors.

          10-11.  BANKRUPTCY. The failure by the Borrower to generally pay the
debts of the Borrower as they mature; the filing of any complaint, application,
or petition by or against the Borrower initiating

                                      -40-
<Page>

any matter in which the Borrower is or may be granted any relief from the debts
of the Borrower pursuant to the Bankruptcy Code or any other insolvency statute
or procedure.

          10-12.  DEFAULT BY GUARANTOR. The occurrence of any of the foregoing
Events of Default with respect to any guarantor of the Liabilities, as if such
guarantor were the "Borrower" described therein.

          10-13.  INDICTMENT - FORFEITURE. The indictment of, or institution of
any legal process or proceeding against, the Borrower, any Executive Officer or
any guarantor of the Liabilities under any federal, state, municipal, and other
civil or criminal statute, rule, regulation, order, or other requirement having
the force of law where the relief, penalties, or remedies sought or available
include the forfeiture of any property of the Borrower and/or the imposition of
any stay or other order, the effect of which could be to restrain in any
material way the conduct by the Borrower of its business in the ordinary course.

          10-14.  TERMINATION OF GUARANTY. The termination or attempted
termination of any guaranty by any guarantor of the Liabilities.

          10-15.  CHALLENGE TO LOAN DOCUMENTS.

                  (a)  Any challenge by or on behalf of the Borrower or any
guarantor of the Liabilities to the validity of any Loan Document or the
applicability or enforceability of any Loan Document strictly in accordance with
the subject Loan Document's terms or which seeks to void, avoid, limit, or
otherwise adversely affect any security interest created by or in any Loan
Document or any payment made pursuant thereto.

                  (b)  Any determination by any court or any other judicial or
government authority that any Loan Document is not enforceable strictly in
accordance with the subject Loan Document's terms or which voids, avoids,
limits, or otherwise adversely affects any security interest created by any Loan
Document or any payment made pursuant thereto.

          10-16.  EXECUTIVE MANAGEMENT. The death, disability, or failure of
Salvatore Perisano (unless replaced by an individual or individuals reasonably
satisfactory to Lender) at any time to exercise that authority and discharge
those management responsibilities with respect to the Borrower as are exercised
and discharged by Salvatore Perisano at the execution of this Agreement.

                  The death, disability, or failure of Patrick Farrell (unless
replaced by an individual or individuals reasonably satisfactory to Lender) at
any time to exercise that authority and discharge those management
responsibilities with respect to the Borrower as are exercised and discharged by
Patrick Farrell at the execution of this Agreement.

          10-17.  CHANGE IN CONTROL. Any change in the ownership of the capital
stock of the Borrower such that iParty Corp. does not Control the Borrower or if
Salvatore Perisano (unless replaced by an

                                      -41-
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individual or individuals reasonably satisfactory to Lender) fails to remain as
Chairman of the Board of Directors and Chief Executive Officer of iParty Corp.

          10-18.  MATERIAL ADVERSE CHANGE. If there is a Material Adverse
Change.

ARTICLE 11 - RIGHTS AND REMEDIES UPON DEFAULT

          In addition to all of the rights, remedies, powers, privileges, and
discretions which the Lender is provided prior to the occurrence of an Event of
Default, the Lender shall have the following rights and remedies upon the
occurrence of any Event of Default and at any time thereafter. No stay which
otherwise might be imposed pursuant to the Bankruptcy Code or otherwise shall
stay, limit, prevent, hinder, delay, restrict, or otherwise prevent the Lender's
exercise of any of such rights and remedies.

          11-1.   RIGHTS OF ENFORCEMENT. The Lender shall have all of the rights
and remedies of a secured party upon default under the UCC, in addition to which
the Lender shall have all and each of the following rights and remedies:

                  (a)  To collect the Receivables Collateral with or without the
taking of possession of any of the Collateral.

                  (b)  To take possession of all or any portion of the
Collateral.

                  (c)  To sell, lease, or otherwise dispose of any or all of the
Collateral, in its then condition or following such preparation or processing as
the Lender deems advisable and with or without the taking of possession of any
of the Collateral.

                  (d)  To conduct one or more going out of business sales,
strategic sales or other sales which include the sale or other disposition of
the Collateral.

                  (e)  To apply the Receivables Collateral or the proceeds of
the Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities.

                  (f)  To exercise all or any of the rights, remedies, powers,
privileges, and discretions under all or any of the Loan Documents.

          11-2.   SALE OF COLLATERAL.

                  (a)  Any sale or other disposition of the Collateral may be at
public or private sale upon such terms and in such manner as the Lender deems
advisable, having due regard to compliance with any statute or regulation which
might affect, limit, or apply to the Lender's disposition of the Collateral.

                  (b)  The Lender, in the exercise of the Lender's rights and
remedies upon default, may conduct one or more going out of business sales, in
the Lender's own right or by one or more

                                      -42-
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agents and contractors. Such sale(s) may be conducted upon any premises owned,
leased, or occupied by the Borrower. The Lender and any such agent or
contractor, in conjunction with any such sale, may augment the Inventory with
other goods (all of which other goods shall remain the sole property of the
Lender or such agent or contractor). Any amounts realized from the sale of such
goods which constitute augmentations to the Inventory (net of an allocable share
of the costs and expenses incurred in their disposition) shall be the sole
property of the Lender or such agent or contractor and neither the Borrower nor
any Person claiming under or in right of the Borrower shall have any interest
therein.

                  (c)  Unless the Collateral is perishable or threatens to
decline speedily in value, or is of a type customarily sold on a recognized
market (in which event the Lender shall provide the Borrower with such notice as
may be practicable under the circumstances), the Lender shall give the Borrower
at least five (5) days prior written notice of the date, time, and place of any
proposed public sale, and of the date after which any private sale or other
disposition of the Collateral may be made. The Borrower agrees that such written
notice shall satisfy all requirements for notice to the Borrower which are
imposed under the UCC or other applicable law with respect to the exercise of
the Lender's rights and remedies upon default.

                  (d)  The Lender may purchase the Collateral, or any portion of
it at any sale held under this Article.

                  (e)  The Lender shall apply the proceeds of any exercise of
the Lender's Rights and Remedies under this Article 11 towards the Liabilities
in such manner as the Lender determines.

          11-3.   OCCUPATION OF BUSINESS LOCATION. In connection with the
Lender's exercise of the Lender's rights under this Article 11, the Lender may
enter upon, occupy, and use any premises owned or occupied by the Borrower, and
may exclude the Borrower from such premises or portion thereof as may have been
so entered upon, occupied, or used by the Lender . The Lender shall not be
required to remove any of the Collateral from any such premises upon the
Lender's taking possession thereof, and may render any Collateral unusable to
the Borrower. In no event shall the Lender be liable to the Borrower for use or
occupancy by the Lender of any premises pursuant to this Article 11, nor for any
charge (such as wages for the Borrower's employees and utilities) incurred in
connection with the Lender's exercise of the Lender's Rights and Remedies.

          11-4.   GRANT OF NONEXCLUSIVE LICENSE. The Borrower hereby grants to
the Lender a royalty free nonexclusive irrevocable license to use, apply, and
affix any trademark, tradename, logo, or the like in which the Borrower now or
hereafter has rights, such license being with respect to the Lender's exercise
of the rights hereunder including, without limitation, in connection with any
completion of the manufacture of Inventory or sale or other disposition of
Inventory.

          11-5.   ASSEMBLY OF COLLATERAL. The Lender may require the Borrower to
assemble the Collateral and make it available to the Lender at the Borrower's
sole risk and expense at a place or places which are reasonably convenient to
both the Lender and Borrower.

                                      -43-
<Page>

          11-6.   RIGHTS AND REMEDIES. The rights, remedies, powers, privileges,
and discretions of the Lender hereunder (herein, the "LENDER'S RIGHTS AND
REMEDIES") shall be cumulative and not exclusive of any rights or remedies which
it would otherwise have. No delay or omission by the Lender in exercising or
enforcing any of the Lender's Rights and Remedies shall operate as, or
constitute, a waiver thereof. No waiver by the Lender of any Event of Default or
of any default under any other agreement shall operate as a waiver of any other
default hereunder or under any other agreement. No single or partial exercise of
any of the Lender's Rights or Remedies, and no express or implied agreement or
transaction of whatever nature entered into between the Lender and any Person,
at any time, shall preclude the other or further exercise of the Lender's Rights
and Remedies. No waiver by the Lender of any of the Lender's Rights and Remedies
on any one occasion shall be deemed a waiver on any subsequent occasion, nor
shall it be deemed a continuing waiver. All of the Lender's Rights and Remedies
and all of the Lender's rights, remedies, powers, privileges, and discretions
under any other agreement or transaction are cumulative, and not alternative or
exclusive, and may be exercised by the Lender at such time or times and in such
order of preference as the Lender in its sole discretion may determine. The
Lender's Rights and Remedies may be exercised without resort or regard to any
other source of satisfaction of the Liabilities.

ARTICLE 12 - NOTICES

          12-1.   NOTICE ADDRESSES. All notices, demands, and other
communications made in respect of this Agreement (other than a request for a
loan or advance or other financial accommodation under the Revolving Credit)
shall be made to the following addresses, each of which may be changed upon
seven (7) days written notice to all others given by certified mail, return
receipt requested:

          If to the Lender:             Paragon Capital LLC
                                        Hillsite Office Building
                                        75 Second Avenue, Suite 400
                                        Needham, Massachusetts 02494
                                        Attention: Andrew H. Moser, President
                                        Phone: (781) 707-2100
                                   Fax: (781) 707-2107

          With a copy to:               Michael J. Ruberto, Esq.
                                        Shapiro, Israel & Weiner, P.C.
                                        100 North Washington Street
                                        Boston, Massachusetts 02114
                                        Phone: (617) 742-4200
                                   Fax: (617) 742-2355

          If to the Borrower:           iParty Retail Stores Corp.
                                        1457 VFW Parkway
                                        West Roxbury, Massachusetts 02132
                                        Attention: Mr. Donald Rinaldi
                                                   Chief Financial Officer

                                      -44-
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                                        Phone: (617) 323-0822
                                   Fax: (617) 323-5073

          With a copy to:               iParty Retail Store Corp.
                                        130 West 30th Street
                                        New York, New York 10001
                                        Attention: Mr. Salvatore Perisano or
                                                   Mr. Patrick Farrell
                                        Phone: (212) 609-4300
                                        Fax:   (212) 609-4333

          With a copy to:               Donald H. Siegel, Esq.
                                        Posternak, Blankstein & Lund, LLP
                                        100 Charles River Plaza
                                        Boston, Massachusetts 02114
                                        Phone: (617) 973-6147
                                   Fax: (617) 367-2315

          12-2.   NOTICE GIVEN.

                  (a)  Except as otherwise specifically provided herein, notices
shall be deemed made and correspondence received, as follows (all times being
local to the place of delivery or receipt):

                       (i)    By mail: the sooner of when actually received or
three (3) days following deposit in the United States mail, postage prepaid.

                       (ii)   By recognized overnight express delivery: the
Banking Day following the day when sent.

                       (iii)  By hand: If delivered on a Banking Day after 9:00
A.M. and no later than three (3) hours prior to the close of customary business
hours of the recipient, when delivered. Otherwise, at the opening of the then
next Banking Day.

                       (iv)   By facsimile transmission (which must include a
header indicating the party sending such transmission): If sent on a Banking Day
after 9:00 A.M. and no later than Three (3) hours prior to the close of
customary business hours of the recipient, one (1) hour after being sent.
Otherwise, at the opening of the then next Banking Day.

                  (b)  Rejection or refusal to accept delivery and inability to
deliver because of a changed address or facsimile number for which no due notice
was given shall each be deemed receipt of the notice sent.

ARTICLE 13 - TERM

                                      -45-
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          13-1.   TERMINATION OF REVOLVING CREDIT. This Agreement is, and is
intended to be, a continuing agreement and shall remain in full force and effect
for an initial term ending on the Maturity Date, and thereafter for successive
twelve-month periods, each beginning on the 1st day of August (commencing 2003)
of each year and ending on July 31st of the following year (each such
twelve-month period is hereinafter referred to as a "RENEWAL TERM"); provided,
however, that either party may terminate this Agreement as of the end of the
initial term or any subsequent renewal term by giving the other party notice to
terminate in writing at least forty-five (45) days prior to the end of any such
period whereupon at the end of such period all Liabilities shall be due and
payable in full without presentation, demand, or further notice of any kind,
whether or not all or any part of the Liabilities is otherwise due and payable
pursuant to the agreement or instrument evidencing same. Lender may terminate
this Agreement immediately and without notice upon the occurrence of an Event of
Default. Notwithstanding the foregoing or anything in this Agreement or
elsewhere to the contrary, the security interest, Lender's rights and remedies
hereunder and Borrower's obligations and liabilities hereunder shall survive any
termination of this Agreement and shall remain in full force and effect until
all of the Liabilities outstanding, or contracted or committed for (whether or
not outstanding), before the receipt of such notice by Lender, and any
extensions or renewals thereof (whether made before or after receipt of such
notice), together with interest accruing thereon after such notice, shall be
finally and irrevocably paid in full. No Collateral shall be released or
financing statement terminated until such final and irrevocable payment in full
of the Liabilities, as described in the preceding sentence.

          13-2.   EFFECT OF TERMINATION. Upon the termination of Revolving
Credit, the Borrower shall pay the Lender (whether or not then due), in
immediately available funds, all then Liabilities including, without limitation:
the entire balance of the Loan Account; any then remaining installments of the
Commitment Fee; any then remaining balances of the Annual Facility Fee and
Collateral Monitoring Fee; any Prepayment Premium and all unreimbursed costs and
expenses of the Lender for which the Borrower is responsible, and shall make
such arrangements concerning any L/C's then outstanding are reasonably
satisfactory to the Lender. Until such payment, all provisions of this
Agreement, other than those contained in Article 1 which place an obligation on
the Lender to make any loans or advances or to provide financial accommodations
under the Revolving Credit or otherwise, shall remain in full force and effect
until all Liabilities shall have been paid in full. The release by the Lender of
the security interests granted the Lender by the Borrower hereunder may be upon
such conditions and indemnifications as the Lender may require.

          13-3.   PREPAYMENT PREMIUM. If Borrower pays in full all or
substantially all of the Liabilities prior to the end of the initial term of
this Agreement (or any renewal term), other than temporarily from funds
internally generated in the ordinary course of business or through an infusion
of capital of iParty Corp. (provided this Agreement is not terminated), at the
time of such payment Borrower shall also pay to Lender a prepayment premium in
an amount equal to: (i) three (3%) percent of the Credit Limit, if prepaid
during the first year after the date of this Agreement, (ii) two (2%) percent of
the Credit Limit, if prepaid during the second year after the date of this
Agreement, and (iii) one (1%) percent of the Credit Limit, if prepaid after the
second anniversary of this Agreement. Any tender of payment in full of the
Liabilities following an acceleration by Lender of the Liabilities pursuant to

                                      -46-
<Page>

ARTICLE 10 hereof, shall be for purposes of this section deemed to be a
prepayment requiring Borrower to pay the aforementioned prepayment premium.

                  Such prepayment premium shall be paid to Lender as liquidated
damages for the loss of the bargain by Lender and not as a penalty.

ARTICLE 14 - GENERAL

          14-1.   PROTECTION OF COLLATERAL. The Lender has no duty as to the
collection or protection of the Collateral beyond the safe custody of such of
the Collateral as may come into the possession of the Lender and shall have no
duty as to the preservation of rights against prior parties or any other rights
pertaining thereto. The Lender may include reference to the Borrower (and may
utilize any logo or other distinctive symbol associated with the Borrower) in
connection with any advertising, promotion, or marketing undertaken by the
Lender.

          14-2.   SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the Borrower and the Borrower's representatives, successors, and assigns and
shall enure to the benefit of the Lender and the Lender's successors and assigns
provided, however, no trustee or other fiduciary appointed with respect to the
Borrower shall have any rights hereunder. In the event that the Lender assigns
or transfers its rights under this Agreement, the assignee shall thereupon
succeed to and become vested with all rights, powers, privileges, and duties of
the Lender hereunder and the Lender shall thereupon be discharged and relieved
from its duties and obligations hereunder.

         14-3.    SEVERABILITY. Any determination that any provision of this
Agreement or any application thereof is invalid, illegal, or unenforceable in
any respect in any instance shall not affect the validity, legality, or
enforceability of such provision in any other instance, or the validity,
legality, or enforceability of any other provision of this Agreement.

          14-4.   AMENDMENTS. COURSE OF DEALING.

                  (a)  This Agreement and the other Loan Documents incorporate
all discussions and negotiations between the Borrower and the Lender, either
express or implied, concerning the matters included herein and in such other
instruments, any custom, usage, or course of dealings to the contrary
notwithstanding. No such discussions, negotiations, custom, usage, or course of
dealings shall limit, modify, or otherwise affect the provisions thereof. No
failure by the Lender to give notice to the Borrower of the Borrower's having
failed to observe and comply with any warranty or covenant included in any Loan
Document shall constitute a waiver of such warranty or covenant or the amendment
of the subject Loan Document. No change made by the Lender in the manner by
which Availability is determined shall obligate the Lender to continue to
determine Availability in that manner.

                  (b)  The Borrower may undertake any action otherwise
prohibited hereby, and may omit to take any action otherwise required hereby,
upon and with the express prior written consent of the Lender. No consent,
modification, amendment, or waiver of any provision of any Loan

                                      -47-
<Page>

Document shall be effective unless executed in writing by or on behalf of the
party to be charged with such modification, amendment, or waiver (and if such
party is the Lender, then by a duly authorized officer thereof). Any
modification, amendment, or waiver provided by the Lender shall be in reliance
upon all representations and warranties theretofore made to the Lender by or on
behalf of the Borrower (and any guarantor, endorser, or surety of the
Liabilities) and consequently may be rescinded in the event that any of such
representations or warranties was not true and complete in all material respects
when given.

          14-5.   POWER OF ATTORNEY. In connection with all powers of attorney
included in this Agreement, the Borrower hereby grants unto the Lender full
power to do any and all things necessary or appropriate in connection with the
exercise of such powers as fully and effectually as the Borrower might or could
do, hereby ratifying all that said attorney shall do or cause to be done by
virtue of this Agreement. No power of attorney set forth in this Agreement shall
be affected by any disability or incapacity suffered by the Borrower and each
shall survive the same. All powers conferred upon the Lender by this Agreement,
being coupled with an interest, shall be irrevocable until this Agreement is
terminated by a written instrument executed by a duly authorized officer of the
Lender.

          14-6.   APPLICATION OF PROCEEDS. The proceeds of any collection, sale,
or disposition of the Collateral, or of any other payments received hereunder,
shall be applied towards the Liabilities in such order and manner as the Lender
determines in its sole discretion. The Borrower shall remain liable for any
deficiency remaining following such application.

          14-7.   LENDER'S COSTS AND EXPENSES. The Borrower shall pay on demand
all Costs of Collection and all reasonable expenses of the Lender in connection
with the preparation, execution, and delivery of this Agreement and of any other
Loan Documents, whether now existing or hereafter arising, and all other
reasonable expenses which may be incurred by the Lender in monitoring compliance
with this Agreement and in preparing or amending this Agreement and all other
agreements, instruments, and documents related thereto, or otherwise incurred
with respect to the Liabilities, including, without limiting the generality of
the foregoing, any counsel fees or expenses incurred in any bankruptcy or
insolvency proceedings. The Borrower specifically authorizes the Lender to pay
all such fees and expenses and in the Lender's discretion, to add such fees and
expenses to the Loan Account. Borrower shall be obligated, from time to time, to
pay Lender's fees, including reasonable attorneys' fees and expenses for the
preparation, negotiation, amendment and interpretation of this Agreement and
related documents.

          14-8.   COPIES AND FACSIMILES. This Agreement and all documents which
relate thereto, which have been or may be hereinafter furnished the Lender may
be reproduced by the Lender by any photographic, microfilm, xerographic, digital
imaging, or other process, and the Lender may destroy any document so
reproduced. Any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made in the
regular course of business). Any facsimile which bears proof of transmission
shall be binding on the party which or on whose behalf such transmission

                                      -48-
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was initiated and likewise shall be so admissible in evidence as if the original
of such facsimile had been delivered to the party which or on whose behalf such
transmission was received.

          14-9.   MASSACHUSETTS LAW. This Agreement and all rights and
obligations hereunder, including matters of construction, validity, and
performance, shall be governed by the laws of The Commonwealth of Massachusetts.

          14-10.  CONSENT TO JURISDICTION.

                  (a)  The Borrower agrees that any legal action, proceeding,
case, or controversy against the Borrower with respect to any Loan Document may
be brought in the Superior Court of Middlesex County, Massachusetts or in the
United States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, as the Lender may elect in the Lender's sole discretion. By
execution and delivery of this Agreement, the Borrower, for itself and in
respect of its property, accepts, submits, and consents generally and
unconditionally, to the jurisdiction of the aforesaid courts.

                  (b)  Nothing herein shall affect the right of the Lender to
bring legal actions or proceedings in any other competent jurisdiction.

                  (c)  The Borrower agrees that any action commenced by the
Borrower asserting any claim or counterclaim arising under or in connection with
this Agreement or any other Loan Document shall be brought solely in the
Superior Court of Middlesex County, Massachusetts or in the United States
District Court, District of Massachusetts, sitting in Boston, Massachusetts, and
that such Courts shall have exclusive jurisdiction with respect to any such
action.

          14-11.  INDEMNIFICATION. The Borrower shall indemnify, defend, and
hold the Lender and any employee, officer, or agent of the Lender (each, an
"INDEMNIFIED PERSON") harmless of and from any damages, losses, obligations,
liabilities, claims, actions or causes of action, including without limitation,
with respect to taxes and interest and penalties with respect thereto, brought
or threatened against any Indemnified Person by the Borrower, any guarantor or
endorser of the Liabilities, or any other Person (as well as from attorneys'
reasonable fees and expenses in connection therewith) on account of the
relationship of the Borrower or of any guarantor or endorser of the Liabilities
with the Lender or any other Indemnified Person(each of which claims may be
defended, compromised, settled, or pursued by the Indemnified Person with
counsel of the Lender's selection, but at the expense of the Borrower) other
than any claim as to which a final determination is made in a judicial
proceeding (in which the Lender and any other Indemnified Person has had an
opportunity to be heard), which determination includes a specific finding that
the Indemnified Person seeking indemnification had acted in a grossly negligent
manner or in actual bad faith. This indemnification shall survive payment of the
Liabilities and/or any termination, release, or discharge executed by the Lender
in favor of the Borrower.

          14-12.  RIGHT OF SET-OFF. Any and all deposits or other sums at any
time credited by or due to the undersigned from the Lender or from any
participant (a "PARTICIPANT") with the Lender in the

                                      -49-
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credit facility contemplated hereby and any cash, securities, instruments or
other property of the undersigned in the possession of the Lender or any
Participant, whether for safekeeping or otherwise (regardless of the reason such
Person had received the same) shall at all times constitute security for all
Liabilities and for any and all obligations of the undersigned to the Lender and
any Participant, and may be applied or set off against the Liabilities and
against such obligations at any time, whether or not such are then due and
whether or not other collateral is then available to the Lender or any
Participant.

          14-13.  USURY SAVINGS CLAUSE. It is the intention of the parties
hereto to comply strictly with applicable usury laws, if any; accordingly,
notwithstanding any provisions to the contrary in this Agreement or any other
Loan Documents, in no event shall this Agreement or such Loan Document require
or permit the payment, taking, reserving, receiving, collecting or charging of
any sums constituting interest under applicable laws which exceed the maximum
amount permitted by such laws. If any such excess interest is called for,
contracted for, charged, paid, taken, reserved, collected or received in
connection with the Liabilities or in any communication by Lender or any other
Person to the Borrower or any other Person, or in the event all or part of the
principal of the Liabilities or interest thereon shall be prepaid or
accelerated, so that under any of such circumstances or under any other
circumstance whatsoever the amount of interest contracted for, charged, taken,
collected, reserved, or received on the amount of principal actually outstanding
from time to time under this Agreement shall exceed the maximum amount of
interest permitted by applicable usury laws, if any, then in any such event it
is agreed as follows: (i) the provisions of this paragraph shall govern and
control, (ii) neither the Borrower nor any other Person or entity now or
hereafter liable for the payment of the Liabilities shall be obligated to pay
the amount of such interest to the extent such interest is in excess of the
maximum amount of interest permitted by applicable usury laws, if any, (iii) any
such excess which is or has been received notwithstanding this paragraph shall
be credited against the then unpaid principal balance hereof or, if the
Liabilities have been or would be paid in full by such credit, refunded to the
Borrower, and (iv) the provisions of this Agreement and the other Loan
Documents, and any communication to the Borrower, shall immediately be deemed
reformed and such excess interest reduced, without the necessity of executing
any other document, to the maximum lawful rate allowed under applicable laws as
now or hereafter construed by courts having jurisdiction hereof or thereof.
Without limiting the foregoing, all calculations of the rate of interest
contracted for, charged, taken, collected, reserved, or received in connection
herewith which are made for the purpose of determining whether such rate exceeds
the maximum lawful rate shall be made to the extent permitted by applicable laws
by amortizing, prorating, allocating and spreading during the period of the full
term of the Liabilities, including all prior and subsequent renewals and
extensions, all interest at any time contracted for, charged, taken, collected,
reserved or received. The terms of this paragraph shall be deemed to be
incorporated in every Loan Document and communication relating to the
Liabilities.

          14-14.  WAIVERS.

                  (a)  The Borrower and each and every guarantor, endorser, and
surety of the Liabilities) makes each of the waivers included in Section
14-14(b), below, knowingly, voluntarily, and intentionally, and understands that
the Lender, in entering into the financial arrangements

                                      -50-
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contemplated hereby and in providing loans and other financial accommodations to
or for the account of the Borrower as provided herein, whether not or in the
future, is relying on such waivers.

                  (b)  THE BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND
SURETY RESPECTIVELY WAIVES THE FOLLOWING.

                       (i)    Except as otherwise specifically required in this
Agreement, notice of non-payment, demand, presentment, protest and all forms of
demand and notice, both with respect to the Liabilities and the Collateral.

                       (ii)   Except as otherwise specifically required in this
Agreement, the right to notice and/or hearing prior to the Lender's exercising
of the Lender's rights upon default.

                       (iii)  THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR
CONTROVERSY IN WHICH THE LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR
CONTROVERSY IS INITIATED BY OR AGAINST THE LENDER OR IN WHICH THE LENDER IS
JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN
RESPECT OF, ANY RELATIONSHIP AMONGST OR BETWEEN THE BORROWER OR ANY OTHER PERSON
AND THE LENDER (AND THE LENDER LIKEWISE WAIVES THE RIGHT TO A JURY IN ANY TRIAL
OF ANY SUCH CASE OR CONTROVERSY).

                       (iv)   Any defense, counterclaim, set-off, recoupment, or
other basis on which the amount of any Liability, as stated on the books and
records of the Lender, could be reduced or claimed to be paid otherwise than in
accordance with the tenor of and written terms of such Liability.

                       (v)    Any claim to consequential, special, or punitive
damages.

          14-15.  CONFIDENTIALITY. This Agreement and the terms hereof are
confidential, and neither the contents of this Agreement or the details of this
Agreement may be shown or disclosed by the Borrower to any bank, finance company
or other lender without the prior written consent of the Lender; provided
however that the confidentiality provisions herein remain subject to any
governmental authority, court order or court proceeding, including any court
proceeding relating to Big Party.

          14-16.  RIGHT TO PUBLISH NOTICE. Lender may, at Lender's discretion
and expense, publicize or otherwise advertise by so-called "tombstone"
advertising or otherwise Lender's and any Participant's financing transaction
with the Borrower.

          14-17.  ENTITIES RELATED TO LENDER. Borrower acknowledges notice that
Lender is affiliated with The Ozer Group, LLC ("OZER"), Ozer Valuation Services,
Inc. ("OZER VALUATION"), Ozer Wholesale Services, Inc. ("OWS") and Ozer Retail
Services LLC ("ORS"). Ozer, Ozer Valuation, OWS, ORS and other entities related
to Lender may, from time to time act as a merchant consultant

                                      -51-
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or provide merchant services, appraisal services or other services (including
without limitation, observation of physical inventories conducted in the
ordinary course or in connection with store closings) to Lender with respect to
Borrower. Borrower agrees that none of Lender, Ozer, Ozer Valuation, OWS, ORS
nor any other related entities shall have any liability to Borrower, and
Borrower agrees that Borrower shall have no claim against any of such entities,
based on the existence of such relationship.

          14-18.  CREDIT INQUIRIES. Borrower authorizes Lender to (provided,
however, Lender shall incur no liability for the failure to) respond to credit
inquiries concerning Borrower in accordance with Lender's normal and customary
practices. Borrower hereby indemnifies and holds Lender harmless for any action
taken by Lender in reliance upon the foregoing authorization.

          Executed as a sealed instrument this 23rd day of August, 2000.

                                   IPARTY RETAIL STORES CORP.
                                   (BORROWER)

                                   By: /s/ SAL PERISANO
                                       ----------------

                                   Print Name:  Salvatore Perisano
                                   Title:       Chief Executive Officer

                                   PARAGON CAPITAL LLC
                                   (LENDER)

                                   By: /s/ ROBERT J. SHUSTERMAN
                                       -------------------------

                                   Print Name:  Robert J. Shusterman
                                   Title:       Executive Vice President

                                      -52-
<Page>

                   EXHIBIT 1-6 TO LOAN AND SECURITY AGREEMENT

                                   MASTER NOTE
                                   (REVOLVING)

$7,500,000.00                                             Needham, Massachusetts
                                                                August ___, 2000

          For value received, the undersigned, iParty Retail Stores Corp., a
Delaware corporation (the "Borrower"), hereby promises to pay on July 31, 2003,
to the order of Paragon Capital LLC, a Delaware limited liability company (the
"LENDER"), at its main office in Needham, Massachusetts, or at any other place
designated at any time by the holder hereof, in lawful money of the United
States of America and in immediately available funds, the principal sum of Seven
Million Five Hundred Thousand ($7,500,000.00) Dollars or, if less, the aggregate
unpaid principal amount of all advances made by the Lender to the Borrower
hereunder, together with interest on the principal amount hereunder remaining
unpaid from time to time, computed on the basis of the actual number of days
elapsed and a 360-day year, from the date hereof until this Note is fully paid
at the rate from time to time in effect under the Loan and Security Agreement of
even date herewith (the "LOAN AGREEMENT") by and between the Lender and the
Borrower. The principal hereof and interest accruing thereon shall be due and
payable as provided in the Loan Agreement. This Note may be prepaid only in
accordance with the Loan Agreement.

          This Note is issued pursuant, and is subject, to the Loan Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Master Note referred to in the Loan Agreement.

          This Note is secured, among other things, pursuant to the Loan
Agreement and may now or hereafter be secured by one or more other security
agreements, mortgages, deeds of trust, assignments or other instruments or
agreements.

          The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when due,
whether or not legal proceedings are commenced.

          Presentment or other demand for payment, notice of dishonor and
protest are expressly waived.

          This Note shall be deemed to be under seal.

                                              IPARTY RETAIL STORES CORP.

                                              By:
                                                 -------------------------------<Page>

                                                                   EXHIBIT 10.27

                                                                   EXECUTED COPY

                                      LEASE

                           E & D REALTY TRUST, LESSOR
                           THE BIG PARTY, INC., LESSEE
                   PREMISES: A PORTION OF PREMISES SITUATED AT
                     1455-1457 VFW PARKWAY, WEST ROXBURY, MA

<Page>

                                TABLE OF CONTENTS

<Table>
<S>                                                                      <C>
LEASE DATA EXHIBIT ................................................       1

ARTICLE 1 .........................................................       4
     Term of Lease

ARTICLE 2 .........................................................       5
     Rent

ARTICLE 3 .........................................................       6
     Appurtenant Rights and Reservations

ARTICLE 4 .........................................................       6
     Use of Premises

ARTICLE 5 .........................................................       8
     Rules and Regulations

ARTICLE 6 .........................................................       8
     Assignment, Subletting and Encumbrances

ARTICLE 7 .........................................................       9
     Maintenance, Repair and Alterations

ARTICLE 8 .........................................................      10
     Utilities

ARTICLE 9 .........................................................      11
     Real Estate Taxes

ARTICLE 10 ........................................................      12
     Indemnification of Lessor and Public Liability Insurance

ARTICLE 11 ........................................................      14
     Casualty Insurance; Destruction

ARTICLE 12 ........................................................      17
     Lessor's Access to Premises

ARTICLE 13 ........................................................      17
     Exhibition of Space to Prospective Tenants

ARTICLE 14 ........................................................      17
     Eminent Domain

ARTICLE 15 ........................................................      19
     Non-Subrogation

ARTICLE 16 ........................................................      19
     Sign Use
</Table>

                                       -i-
<Page>

<Table>
<S>                                                                      <C>
ARTICLE 17 ........................................................      20
     Lessee's Default

ARTICLE 18 ........................................................      21
     Default by Lessor

ARTICLE 19 ........................................................      21
     Waiver

ARTICLE 20 ........................................................      21
     Subordination

ARTICLE 21 ........................................................      22
     Mechanics' and Other Liens

ARTICLE 22 ........................................................      22
     Quiet Enjoyment

ARTICLE 23 ........................................................      22
     Invalidity of Particular Provisions

ARTICLE 24 ........................................................      23
     Provisions Binding, Etc.

ARTICLE 25 ........................................................      23
     Recording

ARTICLE 26 ........................................................      23
     Notices

ARTICLE 27 ........................................................      24
     Paragraph Headings

ARTICLE 28 ........................................................      24
     Surrender of Premises

ARTICLE 29 ........................................................      24
     Self Help

ARTICLE 30 ........................................................      25
     Holding Over

ARTICLE 31 ........................................................      25
     Governing law

ARTICLE 32 ........................................................      25
     Miscellaneous Lessor Obligations
</Table>

                                      -ii-
<Page>

                               LEASE DATA EXHIBIT

EXECUTION DATE:                       October 9, 1992

LESSOR:                               E & D Realty Trust
and Original                          c/o Ernest L. Fisher
Address                               23 Rainbow Pond Drive
                                      Walpole, MA 02081

LESSEE:                               The Big Party, Inc.
and Original                          c/o Sal V. Perisano
Address                               288 Huron Avenue
                                      Cambridge, MA 02138 (prior to the
                                      Commencement Date)

                                      1457 VFW Parkway
                                      West Roxbury, MA (after the Commencement
                                      Date)

PREMISES:                             Approximately twenty thousand (20,000)
                                      square feet in Buildings 2 and 3 located
                                      at 1457 VFW Parkway, West Roxbury, MA as
                                      shown on the plan annexed hereto as
                                      Exhibit A together with the right to use
                                      in common with others entitled thereto
                                      the parking and other common areas shown
                                      on Exhibit A.

TERM:                                 The period commencing October 16, 1992
                                      (the "Commencement Date") and ending on
                                      December 31, 2002.

EXTENSION TERM:                       One (1) five (5) year option to extend
                                      the Lease to be exercised by notice from
                                      Lessee to Lessor no later than eight (8)
                                      months prior to the expiration of the
                                      Term.

RENT COMMENCEMENT DATE:               November 15, 1992.

RENT:

Lease Year 1 & 2                      $100,000.00 per annum; payable in equal
                                      monthly installments of $8,333.00 on the
                                      first day of each month, and pro rata at
                                      such rate for any fraction of a month at
                                      the Rent Commencement Date.

Lease Year 3                          $105,000.00 per annum; payable in equal
                                      monthly installments of $8,750.00 on the
                                      first day of each month.

<Page>

Lease Year 4                          $110,250.00 per annum; payable in equal
                                      monthly installments of $9,188.00 on the
                                      first day of each month.

Lease Year 5                          $115,762.00 per annum; payable in equal
                                      monthly installments of $9,647.00 on the
                                      first day of each month.

Lease Year 6                          $121,550.00 per annum; payable in equal
                                      monthly installments of $10,129.00 on
                                      the first day of each month.

Lease Year 7                          $127,628.00 per annum; payable in equal
                                      monthly installments of $10,635.00 on
                                      the first day of each month.

Lease Year 8                          $134,000.00 per annum; payable in equal
                                      monthly installments of $11,725.00 on
                                      the first day of each month.

Lease Year 9                          $140,700.00 per annum; payable in equal
                                      monthly installments of $11,725.00 on the
                                      first day of each month.

Lease Year 10                         $147,735.00 per annum; payable in equal
(which Lease Year                     monthly installments of $12,311.00 on
shall include the                     the the first day of each month and pro
additional period,                    rata at such rate for any fraction of a
if any, ending                        month.
December 31, 2002)
                                      the execution of this Lease, Lessee
                                      shall pay to Lessor (a) the sum of
                                      $8,333.00 which shall be credited toward
                                      the first month's Rent due hereunder,
                                      and (b) the sum of $5,000.00 which shall
                                      be credited toward the last month's Rent
                                      due hereunder. Lessee shall also deliver
                                      to Lessor upon the execution of this
                                      Lease, a personal guaranty from Sal V.
                                      Perisano of Lessee's obligations under
                                      this Lease.

EXTENSION TERM RENT:                  Rent for the Extension Term shall be
                                      determined by market conditions at such
                                      time for comparable premises but in no
                                      event shall Rent be less than $147,735.00
                                      per annum payable in equal monthly
                                      installments on the first day of each
                                      month. In the event Lessor and Lessee are
                                      unable to agree on Rent for the Premises,
                                      the matter shall be referred for binding
                                      arbitration to the American Arbitration
                                      Association or some other agreed upon
                                      agency or company.

                                       -2-
<Page>

USE:                                  Lessee agrees that the Premises shall be
                                      used for the purpose of a party goods and
                                      paper goods store, other retail uses, and
                                      uses related thereto, including offices
                                      and storage.

LESSOR:                                 LESSEE:
E & D REALTY TRUST                      THE BIG PARTY, INC.

By: /s/ Ernest L. Fisher                By: /s/ Sal V. Perisano
    ------------------------------          ------------------------------
    Ernest L. Fisher, Trustee               Sal V. Perisano, its President
    and not individually

                                       -3-
<Page>

                               INDENTURE OF LEASE

     This Indenture of Lease made on the 9th day of October, 1992 by and between
ERNEST L. FISHER, Trustee of E & D Realty Trust, under a Declaration of Trust
filed with the Suffolk County Registry District of the Land Court as Instrument
No. 387181, whose address is 23 Rainbow Pond Drive, Walpole, MA (hereinafter
referred to as "Lessor"), and THE BIG PARTY, INC., a Massachusetts corporation,
whose address until the Commencement Date is c/o Sal V. Perisano, 288 Huron
Avenue, Cambridge, MA and whose address after the Commencement Date will be 1457
VFW Parkway, West Roxbury, MA (hereinafter referred to as "Lessee").

                              W I T N E S S E T H:

     BY THIS LEASE, Lessor hereby leases to Lessee, and Lessee hereby accepts
this Lease of the Premises, all upon the terms, covenants and conditions set
forth in this Lease and the Lease Data Exhibit which is hereby incorporated by
reference into and as part of this Lease.

                                    ARTICLE I

                                  Term of Lease

     1.1       INITIAL TERM. This Lease will be for the Term as set forth on the
Lease Data Exhibit attached hereto. Lessor agrees to deliver possession of the
Premises to Lessee on or before October 16, 1992. Notwithstanding anything to
the contrary set forth in this Lease, for the period from the date of delivery
of the Premises to Lessee until the Rent Commencement Date, Lessee shall not be
obligated to pay any Rent or other charges under this Lease. In the event that
Lessor fails to complete Lessor's Work by November 15, 1992, then Lessee, at its
option, may either (a) terminate this Lease and receive a full refund of all
payments made hereunder, or (b) treat this Lease as in full force and effect;
provided, however, that the Rent Commencement Date, as otherwise stated herein,
shall be extended by two (2) days for every day that Lessor is delayed in
completing Lessor's Work beyond November 15, 1992.

               1.1.1     LESSOR'S WORK. Subject to the provisions of this Lease,
Lessor agrees to perform the work set forth in Exhibit B attached hereto and
made a part hereof ("Lessor's Work") within four (4) weeks after the
Commencement Date. Lessor shall perform Lessor's Work in a good and workmanlike
manner, in compliance with all applicable laws, rules, regulations and
requirements of public authorities having jurisdiction and in accordance with
the specifications therefor set forth in Exhibit B. Lessor agrees that it will
perform Lessor's Work in a manner so as not to unreasonably interfere with the
performance by Lessee of Lessee's Work. Lessor

                                       -4-
<Page>

shall notify Lessee when Lessor shall have substantially completed Lessor's Work
and promptly thereafter, Lessor and Lessee shall meet to inspect the same and to
agree upon a punch list of items to be completed by Lessor within the following
thirty (30) days. Any such inspection by Lessee pursuant to this Section 1.1.1
shall not relieve Lessor from liability for any latent defects in Lessor's Work.
Lessor warrants Lessor's Work against defects in workmanship for a period of one
(1) year from completion of same.

               1.1.2     LESSEE'S WORK. Subject to the provisions of this Lease,
Lessee agrees to perform the work set forth in Exhibit C attached hereto and
made a part hereof ("Lessee's Work") prior to the Rent Commencement Date. In
connection with the performance of Lessee's Work, Lessor shall pay to Lessee no
later than January 2, 1993 a non-refundable construction allowance equal to ten
thousand four hundred (10,400) dollars (the "Construction Allowance"). If Lessor
shall not pay the Construction Allowance to Lessee on or before January 2, 1993,
Lessee may set off the amount of such Construction Allowance against future Rent
and other charges due under this Lease. Lessee agrees to perform Lessee's Work
in a good and workmanlike manner, in compliance with all applicable laws, rules,
regulations and requirements of public authorities having jurisdiction and in
accordance with the specifications therefor set forth in Exhibit C. Any failure
by Lessee to complete Lessee's Work prior to the Rent Commencement Date shall
not relieve Lessor of its obligations under this Lease.

     1.2       EXTENSION TERM. On the condition that Lessee is not in default
beyond applicable grace periods of any of its material covenants or obligations
under this Lease, Lessee shall have the option to extend the Term of this Lease
for the Extension Term set forth in the Lease Data Exhibit by giving Lessor
notice as set forth in such Lease Data Exhibit. Upon the receipt of such notice
by Lessor, the Term shall be extended upon all of the terms and conditions of
this Lease, except as herein otherwise specifically provided to the contrary. If
Lessee either fails to exercise such option or exercises such option, Lessee
shall thereafter have no further extension right or option.

                                    ARTICLE 2

                                      Rent

     2.1       PAYMENT OF RENT. Rent shall be paid to Lessor in legal tender of
the United States of America at the address of Lessor set forth in the Lease
Data Exhibit, or such other address as Lessor may, from time to time, inform
Lessee in writing. Lessee shall pay Rent as set forth in the Lease Data Exhibit
in monthly installments without prior demand.

                                       -5-
<Page>

                                    ARTICLE 3

                       Appurtenant Rights and Reservations

     3.1       COMMON AREAS. Lessee, and its employees, agents, contractors,
business invitees, customers and other invitees, shall have, as appurtenant to
the Premises, the non-exclusive right in common with other tenants and their
employees, agents, contractors, business invitees, customers and other invitees
to use parking areas, roadways, and all other common areas shown on Exhibit A,
but such rights shall always be subject to (a) reasonable rules and regulations
from time to time established by Lessor by suitable notice; provided that such
rules and regulations are uniformly applicable to all other tenants and are
enforced in a non-discriminatory manner, and (b) to the right of Lessor to
designate and change from time to time areas and facilities so to be used;
provided that such changes shall not adversely affect access to or egress from
the Premises, the visibility of the Premises or its signs or reduce the number
of parking spaces in the common areas.

     Excepted and excluded from the Premises are all perimeter walls (except the
inner surfaces thereof), the roof or ceiling thereof (except the inner surface
thereof) and the floor (except the inner surface thereof), but the store front
and any exits or openings required from time to time by applicable law solely
as a result of Lessee's specific use of the Premises as provided in the Lease
Data Exhibit are not excluded from the Premises and are a part thereof for all
purposes. Lessee agrees that Lessor shall have the right to place in the
building of which the Premises are a part (but in such manner so as to reduce to
a minimum interference with Lessee's use of the Premises) utility lines, pipes
and the like, to serve the Premises or premises other than the Premises, and to
replace and maintain and repair such utility lines, pipes, and the like, in,
over and upon such building. Lessor reserves the right to use the roof and
exterior walls of the Premises to construct above or adjacent to the Premises;
provided that such construction does not materially adversely affect access to
or egress from the Premises, the visibility of the Premises or its signs or
reduce the number of parking spaces in the common areas. Lessee shall install
and maintain proper access panels in any special ceiling installed by Lessee in
the Premises to provide access to any such facilities above the ceiling. Lessee
shall have no right to use the roof for any purpose, except the placement of
signs. The respective responsibilities of the parties for repairs are set forth
in Article 7 hereof.

                                    ARTICLE 4

                                 Use of Premises

     4.1       GENERALLY. The Premises shall be used and occupied only (and for
no other purpose) for the use set forth on the Lease Data

                                       -6-
<Page>

Exhibit, except that Lessee may maintain on the Premises storage facilities and
administrative offices incidental to the conduct of its business.

     4.2       COMPLIANCE WITH LAWS. Lessee shall, at its sole cost and expense,
comply with all federal, state and municipal statutes, ordinances and
regulations and all reasonable requirements of Lessor's insurers in force during
the Term and affecting the Premises; provided, however, that Lessee shall not be
responsible for the structural repairs or capital improvements to the Premises
required by such statutes, ordinances, regulations and requirements if the same
shall not be necessitated by Lessee's specific use of the Premises or set forth
in the Lease Data Exhibit. Further, Lessee shall not make, commit or suffer any
waste of or to the Premises.

     4.3       LESSOR'S REPRESENTATIONS AND WARRANTIES. Lessor warrants and
represents that it owns the Premises and the common areas free and clear of any
mortgages and all other liens or encumbrances which would materially adversely
interfere with Lessee's conduct of business at the Premises for the uses
permitted herein. Lessor further warrants and represents that (a) the uses set
forth in the Lease Data Exhibit are permitted under applicable building and
zoning laws, (b) to the best of Lessor's knowledge and belief, there is no
asbestos in the Premises, except that there may be asbestos in the floor tiles
of the Premises, and (c) as of the Commencement Date, the Premises and the
buildings in which the Premises are situated are in compliance with all
applicable laws, rules, regulations and requirements of public authorities
having jurisdiction. Lessee acknowledges that except as otherwise set forth in
this Lease, neither Lessor nor any representative or agent thereof has made any
representation or warranty to Lessee as to the suitability of the Premises for
the conduct of Lessee's business.

     4.4       FLOOR LOADS. Lessee shall not place any load upon any floor of
the Premises which exceeds the floor load capacity of the Premises calculated on
a square foot basis. If Lessee shall install business machines or mechanical
equipment, such installation shall be at Lessee's sole expense. The moving and
installation of such machines and equipment shall be at the sole risk and hazard
of Lessee, and Lessee agrees to indemnify and save Lessor harmless against and
from all liability, loss, injury, claim or suit resulting directly or indirectly
from the installation or maintenance of such machines and equipment.

     4.5       RADIUS RESTRICTIONS. Lessor, from and after the date of execution
and delivery of this Lease, and for so long as this Lease remains in full force
and effect, agrees not to enter into any leases of space within one-half (1/2)
mile of the Premises which grants to any tenant the right to use such leased
space for the primary purpose of selling paper goods or party goods.

                                       -7-
<Page>

                                    ARTICLE 5

                              Rules and Regulations

     5.1       GENERALLY. Lessee further agrees to conform to the following
provisions during the entire Term of this Lease:

               (a)  No auction, fire, distress or bankruptcy sales may be
conducted within the Premises without the prior consent of Lessor, such consent
not to be unreasonably withheld, delayed or conditioned;

               (b)  Until removal is effected, Lessee shall keep all garbage or
refuse in the Premises suitably covered in an exterior container so that the
same is not visible to the public. Lessee shall be responsible for the removal
of all rubbish and similar waste generated at the Premises; and

               (c)  Except as provided in Section 16.1 and Exhibit C, Lessee
will not place on the exterior of exterior walls (including both interior and
exterior surfaces of windows and doors), or the roof of the Premises, any signs
or any symbol, advertisement, neon light, other light or other object or thing
within public view outside of the Premises without the prior consent of Lessor,
except that Lessee may, without Lessor's consent, place professionally printed
signs and displays on the doors and in the windows of the Premises. Where
Lessor's consent shall be required, such consent shall not be unreasonably
withheld, delayed or conditioned.

                                    ARTICLE 6

                     Assignment, Subletting and Encumbrances

     6.1       GENERALLY. Lessee shall not assign or sublet the Lease or any
portion of the Premises without the express written consent of Lessor, such
consent not to be unreasonably withheld, delayed or conditioned. No such consent
by Lessor or any assignment or subletting pursuant to such consent by Lessor
shall operate to release or discharge the obligations of Lessee under this
Lease.

     6.2       EXCEPTIONS. Lessee acknowledges that a transfer of more than a
majority of the stock owned in the Lessee's corporation or the issuance of
additional shares of stock in the corporation which would result in the current
stockholders' interests in the corporation to be reduced to less than fifty (50)
percent, shall be considered to be an assignment of this Lease requiring
Lessor's written consent, such consent not to be unreasonably withheld, delayed
or conditioned. Notwithstanding anything to the contrary set forth herein,
Lessor's consent shall not be required in the event of any assignment or
subletting to any parent, subsidiary or affiliate of Lessee or any successor to
Lessee's business, whether by merger, consolidation or acquisition of
substantially all of the

                                       -8-
<Page>

assets of Lessee. Furthermore, the provisions of Section 6.2 above shall no
longer be applicable in conjunction with, and from and after, the effective date
of a registration statement filed by Lessee under the Securities Act of 1933 in
conjunction with a public offering of shares of stock of Lessee.

                                    ARTICLE 7

                       Maintenance, Repair and Alteration

     7.1       SURRENDER OF THE PREMISES. Lessee shall, upon the expiration or
sooner termination of this Lease, surrender the Premises to Lessor broom clean
and in good order and condition, ordinary wear and tear, damage by fire or other
casualty not required to be restored by Lessee, eminent domain and the willful
or negligent acts or omissions of Lessor or Lessor's employees, agents or
contractors excepted.

     7.2       GENERALLY. Except when the same is the responsibility of Lessor
as elsewhere in this Lease provided (e.g., in the event of fire, casualty,
eminent domain or damage due to the willful or negligent acts or omissions of
Lessor, its employees, agents or contractors), throughout the Term, Lessee
shall, at its sole cost and expense, maintain, the Premises and every part
thereof (including, without limitation, heating, air conditioning and
ventilating systems; lighting; non-structural storefronts; window casements;
plate glass; ceilings; stairways and corridors; doors; glazings; plumbing;
electrical wiring and conduits) in order that the Premises shall at all times
during the Term be in good and sanitary condition and repair. Lessor represents
and warrants to Lessee that on the date of delivery of possession of the
Premises to Lessee, the Premises and every part thereof (including, without
limitation, those items specified in the immediately preceding sentence) shall
be in good and sanitary condition and repair. The Lessor shall replace and/or
repair any such property or fixture in the event the same shall fail to operate
properly due to normal wear and tear or the negligent acts or omissions of
Lessor or Lessor's employees, agents, contractors or invitees. Notwithstanding
the foregoing language, Lessor agrees to perform any and all repairs to the HVAC
system for a period of ninety (90) days after delivery of possession of the
Premises to Lessee.

     7.3       ALTERATIONS, ADDITIONS AND IMPROVEMENTS. Lessee may (but shall
not be required to), from time to time during the Term and the Extended Term,
make alterations, additions or improvements to the interior, non-structural
portions of the Premises, including, but not limited to, the relocation of
Lessee's trade fixtures and interior decorating of the Premises (provided the
same do not affect the structural integrity of the Premises). Except as may be
permitted by the terms of Exhibit C, Lessee shall not make any structural
alterations, additions or repairs to the Premises (or which would or might
affect the structure or integrity of the

                                       -9-
<Page>

Premises or mechanical or electrical systems serving the Premises or which would
void any guarantee or warranty (i.e., roof bond)) without Lessor's prior written
consent, such consent not to be unreasonably withheld, delayed or conditioned.

               7.3.1     Except as set forth in Section 1.1.2, each such item of
work, construction, addition or alteration, accomplished by Lessee shall be at
its sole cost and expense.

     7.4       LESSOR'S RESPONSIBILITIES. Notwithstanding the provisions above,
Lessor shall maintain and promptly make all necessary repairs to the exterior
walls, foundation, slab floors, utility conduits and roof of the Premises and
all common areas described in Section 3.1, unless such repairs are caused by the
willful or negligent acts or omissions of Lessee, its agents, employees or
contractors, in which case Lessee shall pay to Lessor the reasonable cost of
such maintenance and repair as additional rent.

     7.5       SELF-HELP. If any repair, replacement or maintenance is required
to be made by a party hereunder, the other party may demand by written notice
that such defaulting party make the same forthwith; and if such party fails or
neglects to commence such repair, replacement or maintenance and complete the
same within thirty (30) days after such demand, the other party may (but shall
not be required to) make or perform such repairs, replacements, or maintenance
for the account and at the expense of such defaulting party. Lessor or its
representative may enter the Premises (forcibly, if necessary) at any time after
the expiration of such thirty (30) day period to take such measures as may be
needed. The performance by Lessor of any of the same shall not be construed as
an eviction of Lessee, nor work an abatement of rent, nor release Lessee from
prompt fulfillment of any of the covenants under this Lease. Notwithstanding the
foregoing, if a party reasonably believes an emergency to exist, such party may
elect to act hereunder immediately and without notice to the other party or with
expiration of such thirty (30) day period.

     7.6       COMMON AREAS. Lessor shall be responsible for repairs and
replacements and all repavings of the parking areas, including striping when
necessary. Lessee shall be responsible, together with any occupant of the
adjacent building, for the removal of snow and ice from the common parking areas
and for keeping the same in clean order. Lessee acknowledges that as of the date
hereof, the parking area is in satisfactory condition.

                                    ARTICLE 8

                                    Utilities

     8.1       PAYMENT OF UTILITIES. Lessee shall pay when due all bills for
gas, electricity, water, sewer and other utilities used

                                      -10-
<Page>

on the Premises on and after the Commencement Date until the expiration of the
Term or the Extension Term, as the case may be. Lessor represents that the
Premises are served by separate meters for the utilities used in said Premises,
in compliance with the outline specifications and requirements of the utility
suppliers.

                                    ARTICLE 9

                                Real Estate Taxes

     9.1       GENERALLY. As additional and further rent, Lessee agrees to pay
all real estate taxes (except all income or profit, franchise, corporate,
personal property, capital levy, capital stock, excess profits, transfer,
revenue, estate, inheritance, gift and devolution or succession taxes) and
future betterment assessments, if any; which may be assessed with respect to the
Premises during the Term and Extension Term (if any) of this Lease with an
appropriate adjustment in the event that the Rent Commencement Date begins on
other than the first day of a tax year, and an appropriate adjustment in the
event that the Term or the Extension Term, as the case may be, ends in other
than the last day of a tax year. All betterments assessments shall be paid over
the longest period allowed by a applicable law.

     Lessor and Lessee agree that the pertinent real estate tax bill for the
Premises issued by the City of Boston has as a reference Parcel No. 10637-000
(the "Taxed Parcel"). Lessee agrees to pay one-twelfth (1/12) of ninety-five
(95) percent ("Lessee's Portion") of the amount of the current bill for said
real estate taxes to Lessor on the first day of each month, together with the
Rent due for such month. Lessor represents and warrants to Lessee on the date
hereof that Lessee's Portion of such taxes equals approximately forty thousand
(40,000) dollars and that Lessor is currently pursuing a tax rebate from the
City of Boston in the amount of ten thousand (10,000) dollars, which rebate will
be credited toward Lessee's Portion of such taxes for the same period as herein
provided. If, during the Term or the Extension Term, as the case may be, the
balance of the Taxed Parcel shall be improved, altered, rehabilitated or in any
other manner changed so as to increase the taxable value of such portion of the
Taxed Parcel, Lessee's Portion shall be equitably adjusted by the parties. All
payments of taxes shall be based upon the most recent tax bill and Lessor and
Lessee shall make an appropriate adjustment within thirty (30) days of receipt
by Lessee of a copy of the applicable bill for any difference between the
estimated payments made hereunder and the actual taxes due for any such period.
Lessor shall make timely payment of all real estate taxes to the City of Boston.
Lessee's Portion of the proceeds of any abatement received by Lessor, net of
Lessee's pro rata share of reasonable costs and expenses incurred in obtaining
the same, shall be paid to Lessee. Lessee may, in the name of Lessor, seek and
apply for an abatement of taxes for any tax period included in the Term and the
Extension

                                      -11-
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Term (if any). Lessor will use reasonable efforts to assist and cooperate with
Lessee in applying for and seeking any such abatement.

     If Lessee shall fail to pay Lessee's Portion of such taxes as herein
provided, beyond the applicable grace period therefor, Lessor shall have the
right to pay any and all such unpaid taxes without being obligated to inquire
into the validity thereof, and to treat the sums so paid as additional rent for
said Premises and the same shall become due and payable forthwith from Lessee to
Lessor.

                                   ARTICLE 10

                 Indemnification and Public Liability Insurance

     10.1      INDEMNIFICATION OF LESSOR. Lessee will save Lessor harmless, and
will exonerate and indemnify Lessor, its officers, directors, shareholders,
partners, trustees, beneficiaries, agents and employees from and against (a) any
and all claims, liabilities or penalties asserted by or on behalf of any person,
firm, corporation or public authority arising from Lessee's breach of this Lease
or on account of or based upon any injury to person or loss of or damage to
property sustained, occurring or emanating from the Premises resulting from
willful or negligent acts or omissions by Lessee or Lessee's employees, agents
or contractors, and (b) any and all costs, expenses (including reasonable
attorneys' fees), and liabilities incurred in or in connection with any such
claim, or any action or proceeding brought thereon; and in case any action or
proceeding shall be brought against Lessor by reason of any such claim, Lessee,
upon notice from Lessor, shall, at Lessee's expense, resist or defend such
action or proceeding and employ counsel therefor reasonably satisfactory to
Lessor. Lessee's obligations under this Section 10.1 shall be insured either
under the Comprehensive General Liability Insurance required under Section 10.3
below, or by a contractual insurance rider or other coverage; and certificates
of insurance in respect thereof complying with the provisions of Article 10
shall be provided to Lessor by Lessee.

     10.2      INDEMNIFICATION OF LESSEE. Lessor will indemnify, defend and save
Lessee and Lessee's officers, directors, shareholder, partners, trustees,
beneficiaries, employees and agents harmless from and against (a) any and all
claims, liabilities, damages or penalties asserted by or on behalf of any
person, firm corporation, public authority or other entity arising from Lessor's
breach of this Lease or on account of or based upon any injury to person(s) or
loss of or damage to property sustained, or occurring or emanating from the
common areas which are the result of or related to the willful or negligent acts
or omissions of Lessor or Lessor's employees, agents, contractors and, (b) any
and all costs, expenses (including reasonable attorneys' fees) and liabilities
incurred in

                                      -12-
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connection with any such claim or action brought with respect to the foregoing;
and in case any action or proceeding shall be brought against Lessee by reason
of any such claim, Lessor, upon notice from Lessee, shall, at Lessor's expense,
resist or defend such action or proceeding and employ counsel therefor
reasonably satisfactory to Lessee.

     10.3      INSURANCE. Lessee agrees to maintain in full force from the date
upon which Lessee first enters the Premises as provided in Section 1.1.1
throughout the Term of this Lease, and thereafter so long as Lessee is in
occupancy of any part of the Premises, policies of public liability and property
damage (to third party's property) insurance under which Lessor (and Lessor's
mortgagee and such other persons as are in privity of estate with Lessor as may
be set out by notice from time to time) and Lessee are named as insureds, and
under which the insurer agrees to indemnify and hold Lessor and those in privity
of estate with Lessor harmless from and against all cost, expense and/or
liability arising out of or based upon any and all claims, accidents, injuries
and damages mentioned in Article 10, including, without limitation, those
arising out of the provisions of Section 10.1 hereof, in the broadest form of
such coverage from time to time available in the jurisdiction in which the
Premises are located. Each such policy may be in the form of a blanket policy
and shall be non-cancellable and non-amendable with respect to Lessor and
Lessor's said mortgagee without ten (10) days' prior notice to Lessor, and a
duplicate original or certificate thereof shall be delivered to Lessor. The
minimum limits of liability of such insurance shall be one million (1,000,000)
dollars for bodily injury (or death) to any one person, two million (2,000,000)
dollars for bodily injury (or death) to more than one person, and five hundred
thousand (500,000) dollars with respect to damage to property.

     10.4      LESSEE'S RISK. To the maximum extent this agreement may be made
effective according to law, Lessee agrees to use and occupy the Premises at
Lessee's own risk; and Lessor shall have no responsibility or liability for any
loss of or damage to fixtures or other personal property of Lessee except when
caused by the willful or negligent acts or omissions of Lessor or Lessor's
employees, agents, contractors or invitees, or when caused by Lessor's failure
to perform its obligations under this Lease. The provisions of this Section
shall be applicable from and after the execution of this Lease until the end of
the Term of this Lease and during such further period as Lessee may use or be in
occupancy of any part of the Premises, including the Extension Term (if any).

     10.5      INJURY CAUSED BY THIRD PARTIES. To the maximum extent this
agreement may be made effective according to law, Lessee agrees that Lessor
shall not be responsible or liable to Lessee, or to those claiming by, through
or under Lessee, for any loss or damage that may be occasioned by or through the
acts or omissions

                                      -13-
<Page>

of persons occupying adjoining premises or any part of the premises adjacent to
or connecting with the Premises, or otherwise, or for any loss or damage
resulting to Lessor or those claiming by, through or under Lessee, or its or
their property, from the breaking, bursting, stopping or leaking of electric
cables and wires, and water, gas, sewer or steam pipes.

     10.6      HAZARDOUS WASTE. Anything in this Lease to the contrary
notwithstanding, Lessee shall not use or occupy, nor permit or suffer the
Premises or any part thereof to be used or occupied for any unlawful or illegal
business, use or purpose, nor in such manner as to constitute a nuisance of any
kind, nor for any use which is noxious or offensive because of emissions of
noise, smoke, dust or odors, nor permit the emission or release of any
objectionable chemical substance in violation of any applicable law or
regulation nor for any purpose or in any way in violation of the certificate of
occupancy or of any applicable laws, ordinances, rules or regulations (the
"Requirements"). Lessee shall not suffer any act to be done by it, or by anyone
claiming by, through or under Lessee, or any condition to exist on the Premises
or any part thereof (other than conditions existing on the Commencement Date or
caused by Lessor, its agents, employers or contractors) or any articles or
substances to be brought, generated, stored or released thereon in a manner
which violates M.G.L. c. 21E, the Comprehensive Environmental Response and
Liability Act of 1980, as amended, or any regulations adopted thereunder.

     10.7      INDEMNIFICATION OF LESSEE. Lessor shall indemnify and hold Lessee
harmless from and against (a) any claims for injury to person or property
arising or occurring on the Common Areas, except for claims arising from the
negligent acts or omissions of Lessee or Lessee's employees, agents or
contractors, and (b) any claims or liability relating to existing environmental
conditions at the Premises on the Commencement Date, and (c) any claims for
injury to person or property due any failure of Lessor, its agents, employees or
contractors, to perform any of its obligations set forth in this Lease.

     10.8      INDEMNIFICATION OF LESSOR. Lessee shall indemnify and hold Lessor
harmless from and against any claims for injury to person or property arising
from (a) the willful or negligent acts or omissions of Lessee or Lessee's
employees, agents or contractors, and (b) Lessee's failure to perform any of its
obligations set forth in this Lease.

                                   ARTICLE 11

                                   Casualties

     11.1      CASUALTY INSURANCE AND EXTENDED COVERAGE. Lessor shall maintain
in full force and effect throughout the term, a policy (or policies) of fire,
casualty and extended coverage insurance

                                      -14-
<Page>

insuring the premises located at 1455-1457 VFW Parkway, West Roxbury, MA,
including the Premises and the buildings in which the Premises are situated,
against loss by or damage due to risks covered by the broad form policy (such
coverage shall include the risks of fire, lighting, extended coverage, vandalism
and malicious mischief and such other risks as Lessor may deem appropriate).
Lessee shall reimburse Lessor for sixty-seven (67) percent ("Lessee's Share") of
the reasonable cost of such insurance.

               11.1.1    Nothing herein shall preclude any such policy from
bearing loss payee endorsements in favor of the holders of any mortgage or deed
of trust encumbering the interests of Lessor hereunder; provided that the
proceeds of such insurance shall be available for the restoration of the
Premises and the buildings in which the Premises are situated as provided below.

               11.1.2    Proceeds from said fire and casualty insurance policy
shall be payable to Lessor, subject to the prior rights of Lessor's mortgagee to
hold such proceeds subject only to reasonable regulation regarding conditions to
the disbursement and application thereof for restoration of the Premises and the
buildings in which they are situated, or in the case of a termination of this
Lease, to apply such proceeds in accordance with the terms of such mortgage.

     11.2      MINOR DAMAGE. If, after commencement of the Term of this Lease,
and prior to the expiration or earlier termination hereof, the Premises shall be
partially damaged (as distinguished from "substantially damaged", as that term
is hereinafter defined) by fire or casualty, Lessor shall promptly proceed to
restore the damaged portion of the Premises to the condition in which that such
portion of the Premises was in at the time of such damage, but Lessor shall not
be responsible for any delay which may result from causes beyond the reasonable
control of Lessor; provided, however, that Lessee may terminate this Lease by
notice to Lessor if such restoration is or cannot be completed within six (6)
months after the occurrence of the fire or casualty.

     11.3      SUBSTANTIAL DAMAGE. If, after the commencement of the Term of
this Lease and prior to the expiration or earlier termination hereof, the
Premises or the buildings in which the Premises are situated shall be
substantially damaged (as that term is hereinafter defined) by fire or casualty,
the risk of which is covered by Lessor's insurance, Lessor shall, promptly after
such damage and collection of the insurance proceeds therefor, expend so much as
may be necessary to restore (consistent, however, with zoning laws and building
codes then in existence), the Premises and the buildings in which the Premises
are situated to the condition in which the Premises were in at the time of such
fire or casualty; but Lessor shall not be responsible for any delay which may
result from causes beyond the reasonable control of Lessor; provided, however,
that Lessee may terminate this Lease by notice to Lessor

                                      -15-
<Page>

if such restoration is not or cannot be completed within six (6) months after
the occurrence of the fire or casualty. In the event that Lessor shall terminate
the Lease as herein provided, Lessor shall, promptly after such termination,
reimburse Lessee for the unamortized value of Lessee's leasehold improvements
and fixtures. If Lessor shall restore the Premises as provided herein or in
Section 11.2 hereof, Lessee shall not be required to open for business and pay
Rent until thirty (30) days after Lessor delivers possession of the restored
Premises to Lessee.

     In the event that the Premises are substantially damaged by reason of a
casualty for which insurance is not required to be maintained hereunder, Lessor
shall have the right, at its election, to terminate this Lease by notice to
Lessee given within thirty (30) days after the date of any such damage or
destruction.

     Lessor covenants that it shall, in any event, maintain insurance against
fire or other casualties in an amount equal to one hundred (100) percent of the
replacement value of the buildings in which the Premises are situated.

     11.4      SUBSTANTIAL DAMAGE DEFINED. The term "substantial damage" and
"substantially damaged", as used herein, shall refer to damage of such a
character that the same cannot, in ordinary course, reasonably be expected to be
repaired within one hundred twenty (120) days from the time that such work would
commence. Such term shall also include a substantial diminution in parking
facilities serving the Premises.

     11.5      DAMAGES DURING LAST YEAR OF TERM OR EXTENDED TERM, IF EXERCISED.
If the Premises shall be substantially damaged by fire or casualty within the
last year of the Term of this Lease, or the last year of the Extension Term if
so exercised by Lessee, either party shall have the right, by giving notice to
the other not later than sixty (60) days after such fire or casualty, to
terminate this Lease, whereupon this Lease shall terminate as of the date of
such notice with the same force and effect as if such date were the date
originally established as the expiration date hereof; provided, however, that
Lessor may not terminate this Lease during the last year of the Term of this
Lease if Lessee has then elected, or within thirty (30) days of such damage or
destruction, elects to extend the term hereof, in which event, Lessor shall
proceed diligently to restore the Premises as provided above.

     11.6      ABATEMENT OF RENT. If the Premises shall be damaged by fire or
casualty, Rent and other charges payable by Lessee shall abate for the period
during which by reason of such damage, there shall be substantial interference
with the operation of Lessee's business at the Premises or access thereto,
having regard to the extent to which Lessee may be required to discontinue or
limit Lessee's business at the Premises.

                                      -16-
<Page>

     11.7      LESSEE'S SHARE OF INSURANCE PREMIUMS. In addition to all other
payments herein provided to be made by Lessee to Lessor, Lessee shall pay Lessor
Lessee's Share of any insurance premiums payable by Lessor on account of hazard
and liability insurance coverage on the Premises; provided, however, that Lessee
shall not be responsible for paying any portion of such premiums to extent that
the same is increased over the cost of insurance for general retail uses (e.g.,
flammable uses, restaurant use or other more dangerous uses).

     The cost of insurance premiums shall be payable by Lessee thirty (30) days
after notice from Lessor of the amount thereof, such notice to be accompanied by
a statement of the amount from the insurer. Lessor shall have the same rights
and remedies for the non-payment by Lessee of insurance premiums as for
non-payment of Rent.

                                   ARTICLE 12

                           Lessor's Access to Premises

     12.1      GENERALLY. Lessor shall have the right to enter the Premises at
all reasonable hours for the purpose of inspecting or of making repairs to the
same, provided that, except in the case of an emergency, Lessor shall give
Lessee reasonable advance written matter of its intent to enter the Premises and
shall not interfere with the conduct of Lessee's business on the Premises.

                                   ARTICLE 13

                   Exhibition of Space to Prospective Tenants

     13.1      GENERALLY. For a period commencing eight (8) months prior to the
expiration of the Term of this Lease, Lessor may have reasonable access to the
Premises at all reasonable hours as provided in Section 12.1 for the purpose of
exhibiting the same to prospective tenants.

                                   ARTICLE 14

                                 Eminent Domain

     14.1      RIGHTS OF TERMINATION FOR TAKING. If (a) the Premises, or such
portion thereof as to render the balance (if reconstructed to the maximum extent
practicable under the circumstances) unsuitable for Lessee's purposes, shall be
taken by condemnation or right of eminent domain, then Lessor and Lessee shall
each have the right to terminate this Lease by notice to the other of its desire
to do so, or (b) a substantial portion of the parking facilities servicing the
Premises, or convenient access from a public way to the buildings in which the
Premises are situated, shall be taken by condemnation or right of eminent domain
then Lessee shall have the

                                      -17-
<Page>

right to terminate this Lease by notice to Lessor, provided that any such notice
shall be given no later than thirty (30) days after the occurrence of such
taking or act of eminent domain.

     Should any part of the Premises be so taken or condemned and such taking or
condemnation occurs after the commencement of the Term or Extension Term of this
Lease, and should this Lease not be terminated in accordance with the foregoing
provision, Lessor agrees promptly after such taking or condemnation and the
determination of Lessor's award on account thereof to expend so much as may be
necessary of the net amount which may be awarded to Lessor in such condemnation
proceedings to restore (consistent, however, with zoning laws and building codes
then in existence) the Premises to an architectural unit as nearly like their
condition prior to such taking as shall be practicable or to restore the parking
facilities or access to the buildings in which the Premises are situated, as the
case may be. Should the net amount so awarded to Lessor be insufficient to cover
the cost of such restoration, Lessor or Lessee may, but shall have no obligation
to, supply the amount of such insufficiency and proceed with such restoration
with all reasonable diligence, or Lessor may terminate this Lease by giving
notice to Lessee not later than a reasonable time after Lessor has determined
the estimated net amount which may be awarded to Lessor and the estimated cost
of such restoration.

     In the event that Lessor shall terminate the Lease as provided in this
Section 14.1, Lessor shall, promptly after such termination, reimburse Lessee
for the unamortized value of Lessee's leasehold improvements and fixtures. If
Lessor shall restore the Premises as provided in this Section 14.1, Lessee shall
not be required to open for business and pay Rent until thirty (30) days after
Lessor delivers possession of the restored Premises to Lessee.

     14.2      PAYMENT OF AWARD. Lessor shall have and hereby reserves and
excepts, and Lessee hereby grants and assigns to Lessor, all rights to recover
for damages to the Premises and the leasehold interest hereby created, and to
compensation accrued or hereafter to accrue by reason of such taking, damage or
destruction, as aforesaid, and by way of conforming the foregoing, Lessee hereby
grants and assigns and covenants with Lessor to grant and assign, to Lessor all
rights to such damages or compensation. Nothing contained herein shall be
construed to prevent Lessee from prosecuting in any condemnation proceedings a
claim at Lessee's expense for the value of any of Lessee's usual trade fixtures
installed in the Premises by Lessee and for relocation expenses; provided that
such action shall not affect the amount of compensation otherwise recoverable by
Lessor from the taking authority.

     14.3      ABATEMENT OF RENT. In the event of any such taking of the
Premises, Rent and all other charges, including Lessee's

                                      -18-
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Portion of taxes and Lessee's Share of insurance premiums according to the
nature and extent of the damage sustained, shall be abated in an amount
proportionate to the Lessee's loss in use of the Premises or the parking areas
and means of access thereto.

                                   ARTICLE 15

                                 Non-Subrogation

     15.1      GENERALLY. Insofar as, and to the extent that, the following
provisions may be effective without invalidating or making it impossible to
secure insurance coverage from responsible companies doing business in the
locality in which the Premises are located (even though extra premium may result
therefrom), Lessor and Lessee mutually agree that, with respect to any hazard
which is covered by insurance then being carried by them, respectively, the
party carrying such insurance and suffering such loss releases the other of and
from any and all claims with respect to such loss. The parties further mutually
agree that their respective insurance companies shall have no right of
subrogation against the other on account of any such loss. If, at the request of
one party, this release and non-subrogation provision is waived, then the
obligation of reimbursement shall cease for such period of time as such waiver
shall be effective, but nothing contained in this Section 15.1 shall derogate
from or otherwise affect releases elsewhere herein contained of either party for
claims.

                                   ARTICLE 16

                                    Sign Use

     16.1      LESSOR'S CONSENT REQUIRED. Lessee shall not affix, attach or
otherwise place any sign on the roof, exterior or interior portions of the
windows (except as may be permitted by Section 5.1(a) and Exhibit C hereof),
exterior walls, corridors or any other area of the Premises without the prior
written consent of Lessor, such consent not to be unreasonably withheld, delayed
or conditioned. Subject to compliance with all applicable legal and reasonable
insurance requirements, Lessee may affix a sign bearing its trade name on the
front of the Premises and on the roof of the Premises where the existing sign is
located.

     16.2      PYLON SIGN. Lessor shall also afford Lessee the use of the pylon
sign that identifies the occupants at the entranceway to the area of which the
Premises are a part. Lessee acknowledges that such use is in common with the
other tenants of such area and that the Lessor's decision as to the location of
Lessee's sign thereon shall be final; provided, however, that Lessee's sign
shall be equal in size to that of other tenants and shall be given equal
prominence by Lessor.

                                      -19-
<Page>

                                   ARTICLE 17

                                LESSEE'S DEFAULT

     17.1      DEFAULTS; REMEDIES. If Lessee shall (a) default in the payment of
rent, monies, or charges required to be paid or caused to be paid to Lessor and
such default shall continue for more than ten (10) days after written notice
from Lessor that such payments are due and payable, (b) default in the
observance and/or performance of any of the other terms, obligations or
conditions this Lease and any such default shall continue for more than thirty
(30) days after Lessor has given Lessee written notice of such default;
provided, however, there shall be no such default if Lessee has, within such
thirty (30) day period, commenced to cure such default and shall thereafter
diligently pursue such cure, or (c) there shall be any execution or other
judicial levy upon the leasehold estate hereunder and the same shall not be
removed within one hundred twenty (120) days, (d) there shall be any assignment
of said leasehold estate for the direct or indirect benefit of creditors of
Lessee, (e) there shall be executed any agreement whereby Lessee loses control
of its business to a committee of its creditors, (f) there shall be judicial
appointment of a receiver or similar officer to take possession of said
leasehold estate or the Premises and such receiver or other officer is not
dismissed within ninety (90) days after appointment, or (g) there shall be a
filing of any petition by, for or against Lessee under any chapter of the
Federal Bankruptcy Act which is not dismissed within ninety (90) days after
filing, Lessor may, at any time thereafter, and without demand or notice, enter
into and upon the Premises or any part thereof in the name of the whole and
repossess the same as of Lessor's former estate, and expel Lessee and those
claiming through or under Lessee and remove its or their effects (forcibly, if
necessary) without being guilty in any manner of trespass, and without prejudice
to any remedies which might otherwise be used for arrears of Rent or preceding
breach of covenant, and upon entry as aforesaid, Lessee shall have the right by
notice to Lessee of Lessor's desire so to do, forthwith to terminate this Lease.

     In the event of any such termination, Lessee will indemnify Lessor on a
monthly basis against all loss of Rent and other payments provided herein to be
paid by Lessee to Lessor between the time of termination and the expiration of
the Term of this Lease. It is understood and agreed that (a) at the time of the
termination or at any time thereafter, Lessor may rent the Premises for a term
which may expire after the expiration of the Term of this Lease without
releasing Lessee from any liability whatsoever, (b) Lessee shall be liable for
any reasonable expenses incurred by Lessor in connection with obtaining
possession of the Premises and in connection with any reletting, including, but
without limitation, reasonable attorneys' fees and reasonable brokers' fees, and
(c) any monies collected from reletting shall be applied first to the foregoing
expenses and then to payment of Rent.

                                      -20-
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                                   ARTICLE 18

                                Default by Lessor

     18.1      DEFAULTS; REMEDIES. If Lessor shall fail to observe and/or
perform any of the terms, obligations or conditions of this Lease to be observed
and/or performed by Lessor, and such default shall continue for more than thirty
(30) days after written notice of such default by Lessee to Lessor, Lessee may,
at its sole and absolute discretion, (a) perform such obligations and set off
the cost thereof against future Rent, or (b) terminate this Lease upon notice to
Lessor thereof; provided, however, that if the nature of Lessor's obligation is
such that more than thirty (30) days are required for performance, Lessor shall
not be in default if Lessor has commenced performance within such thirty (30)
day period and thereafter diligently prosecutes the same to completion.

                                   ARTICLE 19

                                     Waiver

     19.1      GENERALLY. Failure on the part of Lessor or Lessee to complain of
any action or non-action on the part of the other, no matter how long the same
may continue, shall never constitute a waiver by such party of any of their
respective rights hereunder. Further, no waiver at any time of any of the
provisions hereof by Lessor or Lessee shall be construed as a waiver of any of
the other provisions hereof, and a waiver at any time of any of the provisions
hereof shall not be construed as a waiver of any subsequent time of the same
provisions. The consent or approval of Lessor or Lessee to or of any action by
the other requiring such consent or approval shall not be construed to waive or
render unnecessary such party's consent or approval to or of any subsequent
similar act by the other.

     No payment by Lessee, or acceptance by Lessor, of a lesser amount than
shall be due from Lessee to Lessor shall be treated otherwise than as a payment
on account. The acceptance by Lessor of a check for a lesser amount with an
endorsement or statement thereon, or upon any letter accompanying such check,
that such lesser amount is payment in full, shall be given no effect, and Lessor
may accept such check without prejudice to any other rights or remedies which
Lessor may have against Lessee.

                                   ARTICLE 20

                                  Subordination

     20.1      GENERALLY. Lessee further covenants and agrees to subordinate its
interest in this Lease to any present or future mortgage which may be placed
against the land of which the Premises are a part and to execute and deliver
upon demand to Lessor, but at

                                      -21-
<Page>

Lessor's sole cost and expense, such instrument or instruments to effect such
subordination; provided, however, that the holder of each such mortgage to which
this Lease is to be subordinated, shall consent in writing to this Lease and
agree that Lessee shall not be disturbed in the possession of the Premises for
any reason other than one which would entitle Lessor to terminate this Lease in
accordance with the provisions hereof. Lessor shall enter into, and shall cause
the holder of each such mortgagee to enter into, a non-disturbance agreement in
form and substance satisfactory to Lessee.

                                   ARTICLE 21

                           Mechanic's and Other Liens

     21.1      DISCHARGE OF LIENS. Lessor and Lessee each agree immediately to
discharge (either by payment or by filing the necessary bond, or otherwise) any
mechanics' materialmen's or other lien against the Premises and/or Lessee's or
Lessor's interest therein, as the case may be, which liens may arise out of any
payments due for, or purported to be due for, any labor, services, materials,
supplies or equipment alleged to have been furnished to or for Lessor or Lessee
in, upon or about the Premises.

                                   ARTICLE 22

                                 Quiet Enjoyment

     22.1      QUIET ENJOYMENT OF THE PREMISES. Provided that Lessee shall not
be in material default of any terms, covenants and conditions on Lessee's part
to be observed and performed under this Lease, Lessee shall peaceably and
quietly have and hold the Premises, without hindrance or molestation by any
person or persons lawfully claiming by, through or under Lessor.

                                   ARTICLE 23

                       Invalidity of Particular Provisions

     23.1      SEVERABILITY. If any term or provision of this Lease, or the
application thereof to any person or circumstances, shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Lease shall be valid and enforced to the fullest
extent permitted by law.

                                      -22-
<Page>

                                   ARTICLE 24

                            Provisions Binding, Etc.

     24.1      SUCCESSORS AND ASSIGNS. Except as herein otherwise expressly
provided, the terms hereof shall be binding upon and shall inure to the benefit
of the successors and assigns, respectively, of Lessor and Lessee and, if Lessee
shall be an individual, upon and to his heirs, executors, administrators,
successors and assigns. Each term and each provision of this Lease to be
performed by Lessee shall be construed to be both a covenant and a condition.
The reference contained to successors and assigns of Lessee is not intended to
constitute a consent to assignment by Lessee, but has reference only to those
instances in which Lessor may later give consent to a particular assignment as
required by those provisions of Article 6 hereof.

                                   ARTICLE 25

                                    Recording

     25.1      NOTICE OF LEASE. Lessee agrees not to record this Lease, but each
party hereto agrees upon the execution of this Lease to execute a Notice of
Lease in form recordable and complying with applicable law and reasonably
satisfactory to Lessor's and Lessee's attorneys. In no event shall such document
set forth the rental or other charges payable by Lessee. Any such Notice of
Lease shall expressly state that it is being executed pursuant to the provisions
contained in this Lease, and is not intended to vary the terms and conditions
hereof.

                                   ARTICLE 26

                                     Notices

     26.1      ADDRESSES; METHOD OF DELIVERY. Whenever, by the terms of this
Lease, notice shall or may be given either to Lessor or to Lessee, such notice
shall be in writing and shall be sent by registered or certified mail, postage
prepaid, return receipt requested.

     If intended for Lessor, addressed to Lessor at the address set forth on the
first page of this Lease, with a copy to Lessor in care of Murphy and Pinta, 36
Commerce Way, Woburn, MA 01801 (or to such other address or addresses as may
from time to time hereafter be designated by Lessor by like notice).

     If intended for Lessee, addressed to Lessee at the address set forth on the
first page of this Lease (or to such other address or addresses as may from time
to time be designated by Lessee) with a copy to Donald Siegel, P.C., Posternak,
Blankstein & Lund, 100 Charles River Plaza, Boston, MA 02114.

                                      -23-
<Page>

     All such notices shall be effective three (3) days after being deposited in
the United States mail within the continental United States and six (6) days if
sent outside the continental United States.

                                   ARTICLE 27

                               Paragraph Headings

     27.1      GENERALLY. The paragraph headings throughout this Lease are for
convenience and reference only, and the words contained therein shall in no way
be held to explain, modify, amplify or aid in the interpretation, construction
or meaning of the provisions of this Lease.

                                   ARTICLE 28

                              Surrender of Premises

     28.1      CONDITION OF THE PREMISES. Upon the expiration or earlier
termination of the Term of this Lease or the Extension Term (if any), Lessee
shall quit and surrender the Premises in neat and clean condition and in good
order and repair, reasonable wear and tear, damage by fire, casualty or eminent
domain or damage resulting from the willful or negligent acts or omissions of
Lessor or Lessor's employees, agents, contractors or invitees excepted, together
with all work, alterations and additions (including, without limitation, all
heating, ventilating, air-conditioning, lighting and plumbing equipment and
fixtures which may have been made or installed in, on or to the Premises prior
to or during the term of this Lease, but excluding trade fixtures, equipment and
furniture brought into the Premises prior to or during the Term or Extension
Term of this Lease, which Tenant may remove upon the expiration of the Term or
Extension Term of this Lease, as the case may be. Lessee agrees to repair any
and all material damages to the Premises resulting from such removal. Further,
any or all of the property to be removed by Lessee from the Premises on or
before the expiration of the Term or Extension Term of this Lease, as the case
may be, which is not so removed shall become the exclusive property of Lessor.

                                   ARTICLE 29

                                    Self Help

     29.1      LESSOR'S RIGHT. Lessor shall have the right, but shall not be
required to do so, to pay such sums or do any act which requires the expenditure
of monies which may be necessary or appropriate by reason of the failure or
neglect of Lessee to perform any of the provisions of this Lease (such right
(other than performance requiring the payment of monies) to be exercised upon
the expiration of applicable grace periods, except when caused by

                                      -24-
<Page>

an emergency), and in the event of the exercise of such right by Lessor, Lessee
agrees to pay to Lessor forthwith upon demand such sums; and if Lessee shall
default in such payment, Lessor shall have the same rights and remedies as
Lessor has hereunder for the failure of Lessee to pay Rent.

                                   ARTICLE 30

                                  Holding Over

     30.1      GENERALLY. Any holding-over by Lessee after the expiration of the
term of this Lease shall be treated as a tenancy at sufferance and the Rent and
other charges specified herein shall be on the terms and conditions set forth in
this Lease, so far as applicable.

                                   ARTICLE 31

                                  Governing Law

     31.1      CHOICE OF LAW. This Lease shall be governed exclusively by the
provisions hereof and by the laws of the Commonwealth of Massachusetts.

                                   ARTICLE 32

                        Miscellaneous Lessor Obligations

     32.1      SHOWROOM LIGHT CANISTERS. Lessor shall use its best efforts to
obtain from the current lessee of the Premises, for and on behalf of Lessee, at
Lessor's sole cost and expense, light canisters currently installed in the
"showroom" area of the Premises.

     32.2      AIR CONDITIONING UNIT. Lessor shall use its best efforts to
obtain from the current lessee of the Premises, for and on behalf of Lessee, at
Lessor's sole cost and expense, the air conditioning unit currently installed on
the roof of the Premises toward the rear thereof.

                                      -25-
<Page>

     IN WITNESS WHEREOF, said Lessor and said Lessee have duly executed this
Lease to take effect as a sealed instrument. This instrument may be executed in
any number of counterpart copies each of which counterpart copies shall be
deemed as an original for all purposes.

                                        LESSOR:

                                        E & D REALTY TRUST

                                        By: /s/ Ernest L. Fisher
                                            ------------------------------
                                            Ernest L. Fisher, Trustee and
                                            not individually

                                        LESSEE:

                                        THE BIG PARTY, INC.

                                        By: /s/ Sal V. Perisano
                                            ------------------------------
                                            Sal V. Perisano, Its President

                                      -26-
<Page>

                                    EXHIBIT A

                                 Leased Premises

                                      -27-
<Page>

[GRAPHIC]

<Page>

                                    EXHIBIT B

                                  Lessor's Work

     Lessor will perform the following, at Lessor's sole cost and expense, in a
manner and using methods reasonable acceptable to Lessee:

1.   Construction and equipping of a handicap accessible toilet in the Premises.

2.   Repairs and improvements to the canopy over the exterior portion of the
     buildings of which the Premises are a part.

3.   Repairs or maintenance to and, if necessary, replacement of all heating,
     ventilating and air conditioning equipment servicing the Premises in order
     to render the same in good working order and condition on and as of the
     Rent Commencement Date, including, but not limited to repair or, as
     necessary, replacement of the air conditioning unit in the 2,800 square
     foot "side room" of the Premises. Lessor shall provide Lessee with a
     warranty with respect to the work performed by Lessor thereon and the good
     working order and condition of such heating, ventilating and air
     conditioning systems for a period of ninety (90) days after the date on
     which Lessee opens for business at the Premises.

4.   Inspection of and, if necessary, repairs to or replacement of the roof of
     the Premises to prevent possible leaks.

5.   Removal of refuse from the Premises and cleaning of the same to broom clean
     condition by the Rent Commencement Date.

6.   Removal of floor platforms in the main "showroom" of the Premises.

                                      -28-
<Page>

                                    EXHIBIT C

                                  Lessee's Work

     Lessee will perform the following in a manner and using methods reasonably
acceptable to Lessor:

1.   Construction of a handicap access ramp at the entranceways to the Premises
     pursuant to Lessee's plans and specifications therefor.

2.   Interior construction installations and improvements to Lessee's
     specifications; provided, however, that Lessor shall be responsible for the
     installation of a handicap accessible toilet in the Premises as provided in
     Exhibit B.

3.   Erection and placement of all exterior signs at the Premises, except the
     pylon referenced in Section 16.2 of this Lease.

                                      -29-
<Page>

                                 NOTICE OF LEASE

     Notice is hereby given pursuant to Massachusetts General Laws, Chapter 183,
section 4, of a lease containing, inter alia, the following terms and
conditions:

LANDLORD:                             Ernest L. Fisher, Trustee of E & D
                                      Realty Trust under Declaration of Trust
                                      filed with the Suffolk County Registry
                                      District of the Land Court as Instrument
                                      No. 387181, having an address c/o Ernest
                                      L. Fisher, 23 Rainbow Pond Drive,
                                      Walpole, Massachusetts 02081.

TENANT:                               The Big Party, Inc., a Massachusetts
                                      corporation, having an address c/o Sal
                                      Perisano, 288 Huron Avenue, Cambridge,
                                      Massachusetts 02138.

DATE
OF LEASE:                             October 9, 1992.

DEMISED PREMISES:                     A portion of the premises situated at
                                      1455-1457 VFW Parkway, West Roxbury,
                                      Massachusetts being shown as Buildings 2
                                      and 3 on Exhibit A attached to the
                                      Lease, such premises being more
                                      particularly described in Schedule A
                                      attached hereto and made a part hereof.

TERM
OF LEASE:                             The term commences on October 16, 1992
                                      and expires on December 31, 2002,
                                      subject to the right of Tenant, pursuant
                                      to certain conditions contained in the
                                      lease, to extend such term for an
                                      additional period of five (5) years from
                                      January 1, 2003 to December 31, 2007.

     EXECUTED as an instrument under seal this 9th day of October, 1992.

LANDLORD:                               /s/ Ernest L. Fisher
                                        ----------------------------------------
                                        Ernest L. Fisher Trustee as
                                        aforesaid and not individually

TENANT:                                 THE BIG PARTY, INC.

                                        By: /s/ Sal V. Perisano
                                            ------------------------------------
                                            Sal V. Perisano, its President
                                            and Treasurer

[SEAL]

<Page>

                          COMMONWEALTH OF MASSACHUSETTS

Suffolk,  ss.                                                    October 9, 1992

     Then personally appeared the above-named Ernest L. Fisher, Trustee of E & D
Realty Trust, and acknowledged the foregoing instrument to be his free act and
deed, as Trustee as aforesaid, before me,

                                        /s/ [ILLEGIBLE]
                                        ----------------------------------------
                                        Notary Public
                                        My commission expires:  1/28/94

                          COMMONWEALTH OF MASSACHUSETTS

Suffolk, ss.                                                     October 9, 1992

     Then personally appeared the above-named Sal V. Perisano, the President and
Treasurer of The Big Party, Inc., and acknowledged the foregoing instrument to
be the free act and deed of said corporation, before me,

                                        /s/ [ILLEGIBLE]
                                        ----------------------------------------
                                        Notary Public
                                        My commission expires:  1/28/94

                                        2
<Page>

                                   SCHEDULE A

                                Legal Description

That certain parcel of land with the buildings thereon situated in that part of
Boston formerly West Roxbury, in the County of Suffolk and Commonwealth of
Massachusetts, bounded and described as follows:

EASTERLY            by the westerly line of Veterans of Foreign Wars Parkway,
                    eighty five and 19/100 (85.19) feet;

SOUTHWESTERLY       by land now or formerly of Daniel F. Cunningham and of
                    Boston Caledonian Club, ninety-five and 96/100 (95.96) feet;
                    and

NORTHERLY           by lot C-3 as shown on the plan hereinafter mentioned,
                    forty-four and 16/100 (44.16) feet.

Said land is shown as lots C-4 and C-5 on a subdivision plan No. 5921-F drawn by
H. M. Fletcher, Surveyor for the Land Court, dated September 11, 1948, as
approved by the Court, filed with certificate of title No. 53490.

The above described land is subject to a sewer easement as set forth in a taking
by the Board of Metropolitan Sewerage Commissioners, dated June 5, 1897 recorded
with Suffolk Deeds Book 2448, Page 6, so far as the same may be applicable.

The above described land is also subject to a taking by the Commonwealth of
Massachusetts, Department of Public Works, for the laying out of a State
Highway, dated December 18, 1934, filed and registered as Document No. 123575,
and subject also to a taking by said Common-wealth of Massachusetts, Department
of Public Works, for slope easement for state highway dated May 14, 1935, filed
and registered as Document No. 125066, so far as the same may be applicable.

The above described land is also subject to rights in the way as shown on said
plan as set forth in deed from Barbara E. Thomas, Trustee of the Calgrove Trust
to Americo Priore et al, dated June 11, 1954, filed and registered as Document
No. 212131.

For title see Certificate of Title No. 85468, Book 423, Page 68 for the Registry
District of Suffolk County.

ALSO, another parcel of land with the buildings thereon in that part of Boston,
Suffolk County, Massachusetts, called West Roxbury, being shown as Lot marked
"22,810 sq. ft." on a plan entitled "Plan of Land, Boston, Mass. (West Roxbury
District)" dated Sept. 11, 1948, H. M. Fletcher, Sur., duly recorded with
Suffolk Deeds Book 6968, Page 8, and bounded and described as follows:

NORTHEASTERLY       by Veterans of Foreign Wars Parkway, as shown on said plan,
                    ninety-four and 65/100 (94.65) feet more or less;

<Page>

                                       -2-

SOUTHEASTERLY       by other land now or formerly of Ernest L. Fisher, Trustee,
                    by a straight line running along the outside of the
                    southeasterly wall of the building now on the mortgaged
                    premises, so as to include the said building, one hundred
                    forty (140) feet more or less;

SOUTHWESTERLY       by land now or formerly of B. E. Thomas, Tr., thirty-five
                    (35) feet more or less;

WESTERLY            by the Charles River, one hundred fifty (150) feet more or
                    less;

NORTHWESTERLY       by the northerly line of a fifteen-foot way, shown on said
                    plan, sixty (60) feet, more or less; and

NORTHERLY           by Lots C-4 and C-5, as shown on said plan, ninety-five and
                    96/100 (95.96) feet.

Subject to the rights of the Quineboquin Camping Club in and over the parcel
marked "15-foot way" on said plan, for all purposes for which ways may be used
in the City of Boston, in common with all others thereto entitled.

ALSO another parcel of land with the buildings thereon in the West Roxbury
District of said Boston, bounded and described as follows:

EASTERLY            by Veterans of Foreign Wars Parkway, Seventy-five (75) feet;

SOUTHERLY           by Lot 1A as shown on a plan entitled "Plan of Land, Boston,
                    Mass. (West Roxbury District)" dated April 7, 1956 and
                    recorded with Suffolk Deeds in Book 7147, Page 596, Two
                    Hundred Fifty (250) feet;

NORTHWESTERLY       by Charles River as shown on said plan, One Hundred Fifty
                    (150) feet more or less;

EASTERLY            by land now or formerly of Ernest L. Fisher, Trustee of
                    Parkway Trust, Thirty-four and 90/100 (34.90) feet, more or
                    less;

NORTHERLY           by said land now or formerly of Ernest L. Fisher, Trustee,
                    One Hundred Forty (140) feet.

For the grantors' title to the two preceding parcels see deed of Parkway
Furniture Shops, Inc., dated March 29, 1974, recorded with Suffolk Deeds, Book
8702, Page 576.

<Page>

                            FIRST AMENDMENT TO LEASE

     Reference is made to a Lease dated October 9, 1992 by and between
Ernest L. Fisher, Trustee of E & D Realty Trust, under a Declaration of Trust
filed with the Suffolk County Registry District of the Land Court as Instrument
No. 387181, whose address is 23 Rainbow Pond Drive, Walpole, Massachusetts
("Lessor") and iParty Retail Stores, Inc., a Delaware corporation having an
address at 1457 VFW Parkway, West Roxbury, Massachusetts 02132 ("iParty").
iParty succeeded to the interest of the original Lessee, The Big Party, Inc.,
pursuant to an Order of the Bankruptcy Court dated August 16, 2000.

     For One Dollar ($1.00) and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree to amend the Lease as follows:

     1.   The Lease Data Exhibit, comprised of pages 1 through 3 of the Lease,
is hereby deleted and replaced with the Amended and Restated Lease Data Exhibit
attached hereto as Schedule A. The parties hereto acknowledge that the guaranty
referenced in the original Lease Data Exhibit is no longer in force or effect.

     2.   Paragraph 7.2 of the Lease is hereby deleted, and the following new
Paragraph 7.2 is hereby inserted in lieu thereof: "7.2 GENERALLY. Except where
the same is the responsibility of Lessor as elsewhere provided in this Lease,
throughout the term, Lessee shall, at its sole cost and expense, maintain the
Premises including, without limitation, lighting, window casements, plate glass,
ceilings, stairways and corridors, doors, heating, air conditioning and
ventilation systems, in order that the Premises shall at all times during the
term be in good and sanitary condition and repair. The Lessor shall replace
and/or repair any property or fixture otherwise to be maintained by Lessee if
the same shall fail to operate properly due to normal wear and tear or the
negligent acts or omissions of Lessor or Lessor's employees, agents,
contractors, or invitees."

     3.   The Lease is hereby further amended by inserting the following new
Article 33 at the end of Article 32 thereof:

     Article 33. Option on Adjacent Space.

          33.1   If during the term of this Lease, the adjacent premises
presently occupied by a furniture store (the "Expansion Space") become available
due to the expiration or termination of the current Lease, the Lessor shall
offer to lease to Lessee said adjoining premises upon the same terms and
conditions set forth herein, for the balance of the term of this Lease, except
that Rent payable by Tenant to Landlord shall be equal to the amount established
by Landlord equal to the then fair market annual rent for leases with a
comparable term in comparable retail buildings in the town or city in which the
building is located. Lessee may accept such offer by written notice to Lessor,
delivered within ten days of Lessee's receipt of Lessor's offer. Upon acceptance
of the offer, Lessor and Lessee shall enter into an amendment of the Lease to
incorporate the additional premises.

<Page>

          33.2   Landlord shall establish the Rent for the Expansion Space (and,
if there is one, for the Extension Term) by giving Tenant prompt written notice
of the amount of Rent. If Tenant disputes the amount of Rent so established by
Landlord, Tenant shall notify Landlord of Tenant's objection to said amount
within ten (10) days from the receipt of Landlord's notice to Tenant. Such
notice shall include the name of an M.A.I. appraiser, selected by Tenant, who
has consented to participate in determination of fair market rent. If Tenant so
notifies Landlord, then the amount of Rent shall be decided by two M.A.I.
appraisers, one selected by Landlord and the one selected by Tenant, based on
the then fair market annual rent for leases with a comparable term in comparable
retail buildings in the town or city in which the Building is located. Within
ten (10) days of Landlord's receipt of Tenant's objection notice, Landlord shall
notify the Tenant of the name of an M.A.I. appraiser, selected by Landlord, who
has consented to participate in determination of fair market rent. Unless the
two appraisers shall have reached a decision with ten (10) days after their
selection and acceptance, they shall select an impartial third M.A.I. appraiser
and notify Landlord and Tenant of such selection. The three appraisers shall
render their decision within ten (10) days following the selection of the third
appraiser and shall notify Landlord and Tenant thereof. The unanimous written
decision of the two first chosen (without selection and participation of a third
appraiser), or otherwise the written decision of a majority of the three
appraisers chosen as herein provided shall be conclusive and binding upon
Landlord and Tenant. Landlord and Tenant shall divide equally all costs of this
appraisal.

     4.   Each party hereto agrees upon the execution of this Lease Amendment to
execute a Notice of Amendment to Lease in recordable form and complying with
applicable law and reasonably satisfactory to Lessor's and Lessee's attorneys.
In no event shall such document set forth the rental or other charges payable by
Lessee. The Notice of Amended Lease shall expressly state that it is being
executed pursuant to the provisions contained in the Lease, and is not intended
to vary the terms and conditions hereof.

     5.   Except as hereby amended, the Lease shall remain in full force and
effect as originally written. The agreements of the parties herein shall be
binding upon and enure to the benefit of the parties and their respective
heirs, legal representatives, and assigns. This First Amendment may be executed
in any number of counterparts, each of which shall be deemed an original and all
of which together shall comprise but a single document.

<Page>

     IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals as of the 5th day of June, 2002.

                                        LESSOR: E & D Realty Trust

                                        By: /s/ Ernest L. Fisher
                                            ------------------------------------
                                            Ernest L. Fisher, Trustee and not
                                               Individually

                                        LESSEE: iParty Retail Stores, Inc.

                                        By: /s/ Sal V. Perisano
                                            ------------------------------------
                                            Sal V. Perisano, its CEO

<Page>

                                   SCHEDULE A

                     AMENDED AND RESTATED LEASE DATA EXHIBIT

EXECUTION DATE:                         As of June 05, 2002

LESSOR:                                 E & D Realty Trust
and Original                            c/o Ernest L. Fisher
Address                                 23 Rainbow Pond Drive
                                        Walpole, MA 02081

LESSEE:                                 iParty Retail Stores, Inc.
and Address                             1457 VFW Parkway
                                        West Roxbury, MA 02134

PREMISES:                               Approximately 20,521 square feet in
                                        Buildings 2 and 3 located at 1457 VFW
                                        Parkway, West Roxbury, Massachusetts as
                                        shown on the plan annexed to the Lease
                                        as Exhibit A together with the right to
                                        use in common with others entitled
                                        thereto the parking and other common
                                        areas shown on Exhibit A.

TERM:                                   The period commencing October 16, 1992
                                        (the "Commencement Date") and ending on
                                        December 31, 2012.

EXTENSION TERM:                         One (1) five (5) year option to extend
                                        the Lease to be exercised by notice from
                                        Lessee to Lessor no later than eight (8)
                                        months prior to the expiration of the
                                        Term.

RENT:
Lease Year 10 (which Lease Year shall   $147,735.00 per annum; payable in equal
include the additional period, if any,  monthly installments of $12,311.00 on
ending December 31, 2002)               the first day of each month and pro rata
                                        at such rate for any fraction of a
                                        month.

Lease Year 11                           $205,210.00 per annum; payable in equal
                                        monthly installments of $17,100.83 on
                                        the first day of each month.

Lease Years 12 through 20               In each Lease Year commencing with Lease
                                        Year 12, annual rent shall equal the
                                        lesser of (i) 1.05 times the prior Lease
                                        Year's annual rent, or (ii) an amount
                                        equal to the prior Lease Year's annual
                                        rent, multiplied by a fraction, the
                                        numerator of which is the Consumer Price
                                        Index for December 1 of the

<Page>

                                        just completed Lease Year, and the
                                        denominator of which (or "Base CPI") is
                                        the Consumer Price Index for the date
                                        exactly one year prior thereto. The term
                                        "Consumer Price Index" or "CPI" shall
                                        mean the Consumer Price Index for All
                                        Urban Consumers and
                                        Boston-Brockton-Nashua, All Items
                                        (1982-84=100) as published by the Bureau
                                        of Labor Statistics of the United States
                                        Department of Labor. In the event that
                                        the CPI is not then in existence, the
                                        parties shall use such equivalent price
                                        index as is published by any successor
                                        governmental agency then in existence,
                                        or, if none, then by such
                                        non-governmental agency as may then be
                                        publishing such an equivalent price
                                        index, in lieu of and adjusted to the
                                        CPI. If the CPI shall cease to use the
                                        1982-84 average of 100 as the basis of
                                        calculation or if a substantial change
                                        is made in the terms or numbers of items
                                        contained in the CPI, the Base CPI shall
                                        be adjusted to conform to such change,
                                        using such computation thereof, if
                                        available, as shall be employed by the
                                        United States Department of Labor in
                                        computing same.

EXTENSION TERM RENT:                    In accordance with Article 33.2 of the
                                        Lease, Rent for the Extension Term shall
                                        be determined by market conditions at
                                        such time for comparable premises but in
                                        no event shall Rent be less than the
                                        rent payable in Lease Year 20, payable
                                        in equal monthly installments on the
                                        first day of each month.

USE:                                    Lessee agrees that the Premises shall be
                                        used for the purpose of a party goods
                                        and paper goods store, other retail
                                        uses, and uses related thereto,
                                        including offices and storage.

LESSOR:                                     LESSEE:
E & D Realty Trust                          iParty Retail Stores, Inc.

By: /s/ Ernest L. Fisher                    By: /s/ Sal V. Perisano
    -------------------------------             --------------------------------
    Ernest L. Fisher, Trustee                   Sal V. Perisano, its CEO
    and not individually

<Page>

                            SECOND AMENDMENT TO LEASE

     Reference is made to a Lease dated October 9, 1992 by and between Ernest L.
Fisher, Trustee of E & D Realty Trust, under a Declaration of Trust filed with
the Suffolk County Registry District of the Land Court as Instrument No. 387181,
whose address is 321 Hemlock Circle, Lincoln, Massachusetts 01773 ("Lessor") and
iParty Retail Stores Corp., a Delaware corporation having an address at 1457 VFW
Parkway, West Roxbury, Massachusetts 02132 ("iParty"). iParty succeeded to the
interest of the original Lessee pursuant to an Order of the Bankruptcy Court
dated August 16, 2000. The Lessor and iParty entered into a First Amendment of
Lease dated June 5, 2002.

     For One Dollar ($1.00) and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree to amend the Lease as follows:

     1.   Article 33, Option on Adjacent Space, as added to the Lease by said
First Amendment of Lease, is hereby deleted in its entirety, thereby terminating
iParty's option to lease the adjacent space as described in said Article.

     2.   Except as hereby amended, the Lease, as amended, shall remain in full
force and effect as originally written. The agreements of the parties herein
shall be binding upon and enure to the benefit of the parties and their
respective heirs, legal representatives, and assigns. This Second Amendment may
be executed in any number of counterparts, each of which shall be deemed an
original and all of which together shall comprise but a single document.

<Page>

     IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals as of the 31st day of December, 2002.

                                        LESSOR: E & D Realty Trust

                                        By: /s/ Ernest L. Fisher
                                            ------------------------------------
                                            Ernest L. Fisher, Trustee and not
                                               Individually

                                        LESSEE: iParty Retail Stores Corp.

                                        By: /s/ Sal V. Perisano
                                            ------------------------------------
                                            Sal V. Perisano, its CEO

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